TRADER'S DICTIONARY - С

Cable

Refers to the Sterling/US Dollar exchange rate.

Calendar Spread

Options strategy which involves the purchase of futures/ options of an underlying market expiring in some named month, and the simultaneous sale of other futures/options of the same underlying market and the same striking price in a different month.

Call Option

Contract in which the buyer has the right

but not the obligation

to purchase a particular security for a given strike price, on (in the case of European call options) or before (in the case of American call options) the expiration date.

Cancel

To delete a previous order before it has been executed.

Candlestick Chart

Type of chart that uses shaded bars to indicate trading range (i.e. high and low price) as well as the opening and closing prices for consecutive time periods.

Cap/Ceiling

Maximum rate of interest that can be charged under a loan. Opposite of a floor.

Capacity Utilization

Indicator of inflation released by the Federal Reserve Bank, which measures the percentage of available resources being utilized by factories, mines and utilities.

Capital

Financial assets, or the financial value of assets such as cash.

Capital Account

One of two primary components of the balance of payments, the other being the current account. It is the net result of public and private international investment flowing in and out of a country, and includes foreign direct investment, portfolio investment, and other investments.

Capital Gains

Profit made when any asset is sold; used primarily for tax purposes.

Carry Grid

A detailed trading schematic designed to profit from a carry trading strategy.

Carry Trade

A trading strategy involving the sale of low-yielding currency (funding currency) in favor of a higher-yielding (carry currency) alternative, with the goal of earning a return on the spread/differential. [This differential is known as the "carry"].

Cash on Deposit

Total funds deposited in a trading account.

Cash Market

Spot market, as opposed to the futures market.

Cash Transaction

Same day settlement for a currency transaction. Also known as Value Today.

Central Bank

A governmental or quasi-governmental organization that conducts monetary policy and manages the exchange rate for a given economy and its currency. It may also be charged with printing money.

Central Bank Intervention

Refers to a central bank buying or selling its own currency on the spot market in order to bring about a desired exchange rate.

Certificate of Deposit (CD)

Time deposit offered by banks with a specific, fixed term (often three months, six months, or one to five years), and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.

Channel

Uptrend, downtrend, or sideways trend whose boundaries can be marked clearly by two or more straight lines. A break above/below the channel signals a possible change of trend.

Chartist

One who takes a technical approach to trading, relying on charts and graphs (and their associated indicators) to discern trends and predict future price movements.

Chooser Option

Type of option where the holder can choose whether the option is a call or a put during the life of the option.

Clean Float

Exchange rate regime in which the rate is determined only by market forces, with no central bank intervention.

Cleared Funds

Settled funds that are freely available for trading.

Clearing House Automated Payment System (CHAPS)

Forex settlement system used in the UK.

Clearing House Interbank Payment System (CHIPS)

International wire transfer system used by major banks.

Closed Position

The result of closing a position, in which an equal/offsetting trade is made to eliminate one’s exposure to a given currency pair. For example a position of 100 GPB/USD can be closed by buying 100 USD/GPB.

Closing Market Rate

The market rate at the end of the day.

Clearing

The process of settling a trade.

CME Group

The world’s largest futures exchange, which includes the Chicago Mercantile Exchange (CME), Chicago Board of Trade (CBOT), and New York Mercantile Exchange (NYMEX).

Coincident Indicator

A type of economic indicator that moves in line with the general business cycle. GDP is an example of a coincident indicator.

Commitments

Denotes the total number of derivative contracts, like futures and options, that are currently active on a specific underlying security. Also known as Open Interest.

Compound Option

An option, where the underlying instrument is another option. A compound option then has two expiration dates and two strike prices.

Contagion

The phenomenon whereby an economic crisis spreads from one region/economy/market to another.

Collateral

Asset used to secure a loan.

Commission

Transaction fee charged by a broker.

Commodity Futures Trading Commission (CFTC)

Independent agency of the US government, charged with regulating commodity, currency, and financial futures and options.

Confirmation

Written correspondence that details the terms of a given trade, including date/time of execution, quantity, price, and commission.

Construction Spending

Closely watched economic indicator released monthly by the U.S. Department of Commerce’ that benchmarks spending towards new construction.

Consumer Confidence

The degree of optimism that consumers feel about the overall state of the economy and their respective personal financial situations. Consumer Confidence is indexed and gauged using surveys, the most famous of which is conducted by the University of Michigan.

Consumer Price Index (CPI)

One of the most closely watched national economic statistics, CPI measures a price change for a constant market basket of goods and services from one period to the next within the same area.

Contango

Refers to a an upward-sloping curve for forwards prices. For example, contango is said to occur when the future price of a commodity is higher than the current/spot price.

Continuation

Extension of the existing trend.

Continuous Linked Settlement (CLS)

System for settling foreign exchange transactions between major banks that purports to to eliminate settlement risk.

Contract (Lot)

Trading unit. A standard lot in the forex market is $100,000. A mini lot is $10,000.

Contract for difference (CFD)

Agreement between a client and a provider to exchange the difference between the opening and the closing value of the contract.

Conversion Rate

Another term for exchange rate.

Convertible Currency

Any currency that can be exchanged for another without special permission. Almost all of the world’s major currencies are fully convertible, with the notable exception of the Chinese Yuan.

Co-Owner

Secondary account holder.

Copey

Slang term for the Danish Krone.

Correction

Partial reversal in the existing trend, or a pullback after a sudden, large move to compensate for an overreaction.

Correlation

Measure of the degree to which changes in two variables/assets are related. The standard measure of correlation is the correlation coefficient, a number between -1 and one that indicates the strength and direction of a linear relationship between two variables. A correlation coefficient of -1 indicates that they are perfectly negatively correlated. A correlation coefficient of one means that they are perfectly correlated.

Correspondent Bank

Foreign bank that performs services for another bank that has no branch in the foreign location.

Counter Currency

Currency listed second in a Currency Pair. For example, in USD/GPB, Pound Sterling is the counter currency. Also known as Quote Currency.

Counterparty

One of the participants in a financial transaction.

Countervalue

Value of the counter currency in a forex trade. For example, in a trade involving the purchase of a currency against the US Dollar, the countervalue is the total USD amount of the transaction.

Country Risk

Refers to the likelihood that changes in the business environment adversely affect operating profits or the value of assets in a specific country. These changes could be the result of financial or political factors.

Covariance

A measure of how two random variables behave in relation to each other. It differs from correlation in that it incorporates measurements of the magnitude of the variations, as opposed to the correlation coefficient which is dimensionless.

Cover on Approach

Recommendation to close a trade based on a predicted approach off an important support level.

Cover on a Bounce

Recommendation to close a trade based on a predicted "bounce" off an important resistance level.

Covered Call

An options strategy in which the seller of call options owns the corresponding amount of the underlying instrument, such as shares of a stock or other securities.

Crawling Peg

A type of exchange rate regime in which the rate is fixed/pegged, but adjusted periodically.

Credit Default Swap

Financial contract in which the seller of risk pays a periodic fee on the notional amount of a reference obligation, in return for a payment in the event of default.

Credit Risk

Risk that a borrower will not repay a loan on time. Often referred to as "Default Risk."

Credit Spread

Interest margin over the relevant benchmark representing the additional interest paid by the issuer to account for the incremental risk of the issuer over the risk-free rate.

Cross-Rate

Exchange rate derived by "triangulating" two separate exchange rates, used when two currencies cannot exchanged directly, but only through a third-party currency, such as the US Dollar. Also refers to any exchange rate/pair that does not include one’s home currency.

Cup with Handle

Technical pattern used to predict the beginning of an upward trend. A pattern that begins to curve upward and reaches the "cup line" is believed to indicate bullishness.

Currency Basket

Refers to a weighted group of currencies purchased together, usually by a Central Bank for the purpose of fixing an exchanging rate.

Currency Symbol

Three-Letter code used to abbreviate/designate a currency.

Currency Pair

Two currencies used to create an exchange rate.

Currency Risk

Possibility that currency depreciation will negatively affect the value of one’s assets, especially those denominated in foreign currency.

Currency Swap

Agreement between two parties to exchange principal and fixed rate interest payments on a loan in one currency for principal and fixed rate interest payments on an equal loan in another currency.

Current Account

One of the two primary components of the balance of payments, the other being the capital account. It is the sum of the balance of trade (exports minus imports of goods and services), net factor income (such as interest and dividends) and net transfer payments (such as foreign aid).

Custodian

Bank, individual, or other organization responsible for safeguarding an individual’s financial assets or specific account.

Cyclical

Stocks/Securities that move with the economy, gaining if the economy booms and losing if the economy weakens.

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We thank you for being with us!

Best regards,
IAFT Administration

Morning motivation

Good morning, dear friends! I wish you good mood and profitable trading!


Every morning is a chance at a new day.

~Marjorie Hinckley

Lose an hour in the morning, and you will be all day hunting for it.

~Richard Whately

He, who every morning plans the transactions of the day, and follows that plan, carries a thread that will guide him through a labyrinth of the most busy life.

~Victor Hugo

TRADER'S DICTIONARY - B

Back Office

The departments and processes related to the settlement of financial transactions.

Back to Back

Transaction where a loan is made in one currency against a loan denominated in another currency.

Balance sheet

Financial statement showing a company’s assets, liabilities, and shareholders’ equity on a given date.

Balance of Payments

A systematic record of the economic transactions during a given period for a country. Can refer to either current account (which takes trade into account), capital account, or a combination thereof. Prolonged balance of payment deficits theoretically lead to currency depreciation.

Balance of Trade

Calculated by subtracting imports from exports. A negative balance of trade (when imports exceed exports) is called a "deficit," while a positive balance is known as a "surplus." The balance of trade is inversely related to the difference between savings and investment.

Bank of England

Central Bank for the UK, whose actions directly weigh on the value of the Pound Sterling.

Bank Line

A Line of credit provided by a bank.

Bank Notes

Issued as legal tender; while they can sometimes be converted into currencies, they are generally excluded from the forex market.

Bar Chart

A chart type consisting of four points: high price and low price (represented by a vertical bar), opening price (represented by a small horizontal line to the left of the bar), and closing price (represented by small horizontal line to the right of the bar).

Barrier Option

A type of option whose value/survival depends on whether the underlying security.currency breaks a predetermined price level at any time during the life of the option. Depending on market conditions, it is variously referred to as Down and Out call/put, Down and in call/put, Up and out call/put, and/or Up and in call/put.

Base Currency

Currency in which the operating results of the bank or institution is reported.

Basis

Difference between the cash price and futures price.

Basis Convergence

The process whereby the basis tends towards zero as the contract expiration date nears.

Basis Point

One per cent of one per cent. For example, 25 basis points is equal to .25%.

Basis Price

The price expressed in terms of yield-to-maturity or rate of return, rather than the actual unit price.

Basis Trading

The practice of taking opposing positions in the spot and futures markets with the goal of profiting from favorable changes between the two.

Basket

Group of currencies (as opposed to one single currency) normally used to peg/manage the exchange rate of another currency.

Bear Market

While precise standards vary, refers generally to prolonged period of falling asset prices.

Bear(ish)

Describes an an investor who believes that asset prices will fall.

Bear Put Spread

An options strategy that seeks to capitalize on a depreciating currency by buying a put option with a high strike price and selling one with a low strike price.

Bid Price

The price at which specific currency or contract can be sold. In practice, this can be understood as the number on the left side of the quote, which is usually the lower price. For example, in the quote EUR/USD 1.4122/26, the bid price is 1.4122; meaning you can sell one Euro for 1.4122 US dollars. Opposite of Ask/Offer price.

Big Figure

Refers to the first three digits of an exchange rate, such as the 2.30 in 2.3025. The big figure is often omitted in dealer quotes, such that a quote of "25/30" on dollar mark would indicate a price of 2.3025/2.3030.

Bilateral Clearing

In a system of limited foreign currency, payments are usually routed through the central bank, which is also charged with clearing the balance of payments.

Black-Scholes Model

The most common option pricing formula, which is based on a set of ideal assumptions that pertain mostly to the underlying security/currency.

Bollinger Bands

Technical analysis tool used to measure the highness or lowness of the price relative to previous trades, consisting of three bands: middle band (simple moving average), upper band (given number of standard deviations above the middle band), and lower band (given number of standard deviations below the middle band)

Book

Summary of a (professional) trader’s total positions; may also include gains and losses.

Booked

Refers to the location where the transaction is recorded, which may differ from the location/country of negotiation.

Break Even Point

The price at which the option buyer recovers the necessary premium paid, resulting in neither loss nor gain. With a call option, the break even point is simply the premium plus the strike price.

Break of Which (BOW)

Based on a series of predetermined levels, this describes the belief that if a price breaks a specific level, it will move towards the next level, and continue (upwards or downwards) if it then breaks through that level.

Break Out

Describes a technical scenario in which a currency/security is seen to have exited a pre-existing pattern, such as a range or other trend.

Breakaway Gap

Price gap that forms following breakout which often represents a (temporary) pricing inefficiency following a long period of consolidation.

Bretton Woods

1944 agreement that used the price of gold to fix exchange rates for major currencies. It was replaced in 1971 by a floating exchange rate system that remains in place today.

Broken Dates/Period

Describes deals involving non-standard periods.

Broker

An agent who executes orders to buy and sell currencies either for a commission or based on a bid/ask spread. In the foreign exchange market, brokers essentially serve as intermediaries between banks. This commission is known as the brokerage fee.

Bull Market

While precise standards vary, refers generally to prolonged period of rising asset prices.

Bull(ish)

Describes an an investor who believes that asset prices will rise.

Bull Spread

An options strategy that seeks to capitalize on a (moderate) rise in exchange rates, executed typically by buying a call option with a low strike price and selling one with a high strike price. Also known as Buying the Spread.

Bulldogs

Bonds issued in the UK by foreign institutions, denominated in British Pounds.

Bullion

Refers to gold bars, as opposed to coins or indirect ownership of gold.

Bundesbank (BUBA)

Central bank of Germany and most influential member of the European System of Central Banks (ESCB).

Butterfly Spread

An options strategy in which options with different expiration dates and strike prices are bought and sold simultaneously against each other.

Buyer/Taker

Refers to the buyer/holder of an option, who has the right

but not the obligation, to purchase the underlying security.

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IAFT Administration

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• Apply to partner@tradersunion.com about receiving account number
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• Go to the create account page and choose: Account Type – Dynamic STP. Reply - “Yes” on “Are you referred by a BI (Business Introducer)?” question.
• In the account number field enter the account number received from the support service. Finish the application form.
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If any questions arise please do not hesitate to contact our support service, we will be happy to assist you!

Best regards,
IAFT Administration

Proverbs

· Buy low, sell high.
· Buy high, sell higher.
· Don’t fight the Fed.
· Don’t fight the tape.
· Pigs get fat, hogs get slaughtered. Or: Pigs get FED, hogs get slaughtered.
· Bulls make money. Bears make money. Pigs get slaughtered.
· Trade in the direction of the trend.
· The trend is your friend.
· The trend is not your friend when it ends.
· The crowd is right during the trends but wrong at both ends. (Humphrey B. Neill)
· Buy the dips, sell the rallies.
· Buy the rumor, sell the fact.
· Buy into bad news and sell into good news.
· Buy the panic, sell the greed.
· Buy strength, sell weakness.
· Never short a dull market.
· Cut losses short, let profits run.
· When in doubt, stay out.
· It’s easier to stay out than to get out.
· Get out when you can, not when you have to.
· Minimize losses.
· Never let a winner turn into a loser.
· Never let a small loss turn into a big loss.
· Lose your opinion, not your money.
· Trade what you see, not what you think.
· When in doubt, sell. You will usually get another chance in something else.
· Quickly exit losing trades and move on to the next opportunity.
· Date them, don’t marry them.
· You can’t go broke taking profits.
· A profitable trade is a good trade.
· Take profits relentlessly.
· Profits aren’t as important as preserving your capital.
· Manage the risk and the profits will take care of themselves.
· It’s better to own too few shares than too many.
· There are more fools among buyers than among sellers.
· The open belongs to the amateurs and the close belongs to the professionals.
· Plan your trades. Trade your plan.
· Always sell what shows you a loss and keep what shows you a profit. (Reminiscences of a Stock Operator)
· There are few if any chronic bears, as pessimists have a hard time making a living in America. (John Rothchild)
· There’s nothing wrong with cash. It gives you time to think. (Robert Pretcher, Jr.)
· Predetermine the exit strategy for all trades. Always have a plan for selling, as well as for buying.
· Know the fundamentals. Trade the technicals.
· Volume precedes price.
· Price has memory.
· Bottoms take longer to form than tops.
· Buy at support, sell at resistance.
· Sell on the stall before the fall.
· Buy ‘em when they’re sleepin’, hold ‘em when they’re creepin’, sell ‘em when they’re leapin’.
· The best time to buy is when blood is running in the streets. (Nathan M. Rothschild)
· Buy when most people are selling, and sell when most people are buying.
· Buy from the scared, sell to the greedy.
· Buy their pain, not their gain.
· Beat the crowd in and out the door. You have to take their money before they take yours, period.
· Successful traders are quick to change their minds and have little pride of opinion. (Don Worden)
· The most profitable traders spend 80 percent of their time finding a fast-moving market, and 20 percent of their time trading it. (David Bowden)
· There’s only one indicator that counts: The Check-Book Indicator. (David Bowden)
· Risk varies inversely with knowledge. (Irving Fisher)
· I made my money because I always got out too soon. (Bernard Baruch)
· Don’t try to buy at the bottom and sell at the top. It can’t be done except by liars. (Bernard Baruch)
· Even being right three or four times out of 10 should yield a person a fortune if they have the sense to cut losses quickly. (Bernard Baruch)
· Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting. (Jesse Livermore)
· The faster a stock has climbed, the quicker it will fall. (Menschel)
· The easier information arrives, the less valuable it is. (Menschel)
· The more certain the crowd is, the surer it is to be wrong. (Menschel)
· It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong. (George Soros)
· My approach works not by making valid predictions but by allowing me to correct false ones. (George Soros)