TRADER'S DICTIONARY - E

Easing

Refers to the use of monetary policy to expand the money supply, either by lowering interest rates or through open market operations.

Econometrics

A branch of economics which seeks to develop and apply quantitative or statistical methods to the study and elucidation of economic/financial principles.

Economic Calendar

Type of calendar that is intended to inform financiers and traders about the scheduled major economic indicators, government reports and speeches by influential people.

Economic Indicator

Statistic that seeks to proxy current economic growth and stability. Economic indicators fall into three categories: leading, lagging and coincident.

Effective Exchange Rate

Use of trade/current account balance to derive a country’s "fair" exchange rate

Efficient Market Theory

Notion that financial markets are "informationally efficient", or that prices on traded assets already reflect all known information and past prices, and instantly change to reflect new information.

EFT

Electronic Funds Transfer.

Elliot Wave Theory

Principle that collective investor psychology (or crowd psychology) moves from optimism to pessimism and back again. These swings create patterns, as evidenced in the price movements of a market at every degree of trend, over durations that range from minutes to decades.

Envelopes

While Bollinger Bands place boundary lines based on standard deviations, envelopes place lines at fixed percentage points above and below a moving average line, designating entry and exit points for trades.

End of the Day (Mark to Market)

Type of accounting process, whereby the value of asset(s) are recorded at the end of each trading day based on the closing rate/price.

Equilibrium

Price level/range that seems to represent a balance between demand and supply for a given currency pair.

Escrow Account

Segregated account which seeks to separate customer deposits from dealer operating funds.

Euro

Official currency of 16 of the 27 member states of the European Union. The states, known collectively as the Eurozone, are Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The euro is the second largest reserve currency and the second most traded currency in the world after the US Dollar.

Euro Interbank Offered Rate (Euribor)

Rate at which euro interbank term deposits within the euro zone are offered by one prime bank to another prime bank.

Eurobond

Bond in US dollars or other currency that is sold to investors who don’t reside in the country whose currency is used.

Eurocurrency

Currency that is deposited in a financial institution located outside the region where the currency is primarily used.

Eurodollar Bonds

Type of Eurobond that pays both interest and principal in euros, whose most salient feature is that they are not regulated by the SEC.

European Central Bank (ECB)

Central Bank for the new European Monetary Union.

European-style Option

An option or covered warrant that may be exercised only on the date of expiration.

European Union

Economic and political union of 27 member states, located primarily in Western Europe.

Excess Margin Deposits

Deposited funds in a trading account above and beyond basic margin requirements.

Execution

Completion of a trade.

Exercise

Action by a holder taking advantage of a privilege or right (to buy a security/asset) offered by a company or other financial institution. This includes warrants, options, and other financial instruments.

Exotics

Currencies that are not actively traded; used in contradistinction to "major currencies."

Exotic Option

Derivative which has features making it more complex than commonly traded products (vanilla options). These products are usually traded over-the-counter (OTC), or are embedded in structured notes.

Expiration Date

Date after which a financial contract or derivative is no longer valid.

Exponential Moving Average (EMA)

Compared to a simple moving average, which distributes weight equally across a data series, exponential moving averages afford greater weight to recent prices/data.

Exposure

Net of all long and short positions for a particular currency (pair).

Money sayings

If little money does not go out, great money will not come in.

Chinese Proverb

Fun facts about money

1. If you have three quarters, four dimes and four pennies, you have $1.19. You also have the largest amount of money in coins possible without being able to make change for a dollar.
2. Did you know that a quarter has 119 grooves around the edge, and a dime has 118? Do you know the purpose of the ridges on the edges of coins? Without ridges, it is possible to scrape metal off coins without it being obvious. In the days when coins were made of silver or gold, a person could have made a good, but illegal, living from shaving coins and selling the precious metal.
3. During much of the 17th and 18th centuries, the Spanish dollar coin was the unofficial national currency of the American colonies. To make change, the dollar was actually cut into eight pieces or "bits." Thus, came the terms "pieces of eight" from these early times and "two bits" (a quarter) from recent times.
4. The bison on the Buffalo Nickel was from New York City. Named Black Diamond, this bison lived around the turn of the 20th century in the Central Park Zoo.
5. How long do bills last?
The Federal Reserve System lists the following life spans:
$ 1 22 months
$ 5 2 years
$ 10 3 years
$ 20 4 years
$ 50 9 years
$100 9 years
6. Coins usually survive in circulation for about 30 years.
7. Why are U.S. notes green? No one is really sure. However, in 1929, when the Bureau of Printing and Engraving began making smaller size currency, green was continued because pigment of that color was readily available in large quantities. The color was relatively high in its resistance to chemical and physical changes, and green has been psychologically identified with the strong and stable credit of the government.
8. The origin of the dollar sign —$ — has various explanations. Perhaps the most widely accepted is that it is the result of the evolution of the Mexican or Spanish "P's" for pesos. This theory, derived from a study of old manuscripts, explains that the S gradually came to be written over the P, developing a close equivalent to the $ mark. It was widely used even before the adoption of the United States dollar in 1785.

Your opinion

What do you expect from today's speech Ben Bernanke at the University of Michigan?

Weekly Horoscope (14.01—20.01)

Aries (21.03 - 20.04) 

Week promises to be successful for those Aries who decide to seek for new sources of income. In this context, stars advise you to take part in Forex tournament or some kind of a contest your dealing center offers - it's possible that this is where you'll get a handsome profit. In trading, look for pairs with exotic currencies - this week deals on them, can be successful.

Taurus (21.04 - 21.05)
In the first half of this period, Tauruses will have the opportunity to show their creativity – they probably will have to find creative solutions to difficult situations. Choosing a trading strategy, trust intuition - it will help you find the right option. Heavenly bodies recommend Tauruses to focus on GBP/USD currency pair and commodity assets. The second half of the week will present you a pleasant surprise.

Gemini (22.05 - 21.06)
The upcoming week for Geminis is going to be favorable for new projects and ideas. Those representatives of the sign, who have long hesitated to put their interesting ideas into practie, it's time to act now. Besides that this week will be successfully accomplished long-term investments in real estate or securities. On weekends stars advise you drop your affairs and get relaxed in the fresh air - you need strength.

Cancer (22.06 - 22.07)
Week will be good for those cancers who are working on the asset management program, as well as for those who are planning to start such cooperation in the first half of the period. Towards to the end of the week representatives of this sign, that trade on their own, are better to refrain from entering the market: there is a high risk of incurring losses. You'd better draw up plans for the next five days trading this time .

Leo (23.07 - 23.08)
Leo traders this week could benefit from the improvement of their trading strategy. Especially it will be useful to those members of the sign, who noted that in recent years, their trade has become not as profitable as before. Learn the latest trends on the Forex market to optimize your trading methods. Also, invest in stock markets these days, it is expected to be successful.

Virgo (24.08 - 23.09)
The first half of the week will be extremely successful for Virgos, but only if you put maximum effort and not sit on your hands. There will be enough opportunities to open profitable positions, you just need to be able to use them. If you want to make your trading more efficient, start mastering your trading skills - for example, practice on a demo account with new currency pair.

Libra (24.09 - 23.10)
Libras this week are better to plan the work ahead. New projects should be postponed or risk to stuck in the work, which will really be up to one's neck. Moreover, in the second half of the week you will be discomforted by people around you, so if you plan to open positions on the Forex market, try to ensure that your workplace is maximum isolated from external factors.

Scorpio (24.10 - 22.11)
Scorpios this week will have a great opportunity to show off their best talent and to succeed in trading on financial markets. Now, you will need as never your innate analytical abilities, but do not forget to listen to what intuition says too. In addition, stars promise success to Scorpios trading oil futures.

Sagittarius (23.11 - 21.12) 
Sagittarius traders are gonna have quite a hectic week, stars say that the outcome of many complex situations will depend to a large extent on you. Only your actions will determine: whether you get more profit or lose a significant amount of money, so be careful in making decisions when trading. In particular, set carefully stop-losses and take-profits. The most auspicious day for trading is - Thursday.

Capricorn (22.12 - 20.01) 
Week will be favorable for those Capricorn traders, who came to an end of some of their projects. Now it will be useful for you to review your work and do some home work to determine which direction to go next. And it will be better if you do this very seriously: in the future, you will be able to avoid repeating old mistakes. On Friday, get ready to make an important decision.

Aquarius (21.01 - 19.02)
In the first half of the week Aquariuses will have a good luck in almost all financial matters. However, traders of that mark, who plan to start working with commodity futures, should be very careful - it's not the best solution for a given period. But what really should do is to make new professional contacts: stars say, soon you might need expert advice.

Рisces (20.02 - 20.03) 
Many Pisces traders this week will find trading very difficult, so it is better to avoid some financial troubles. For example, you can pass them on the managing trader - entrust your account to professionals. Of course, you can just stay out of the market, but you are in the risk of missing the chance to earn: this week stars predict you to get a good profit.

TRADER'S DICTIONARY - D

Daily Charts

Charts that encapsulate daily price movements for a given currency pair.

Daily Cut-Off

The designated time of day chosen by a dealer to demarcate the end of one trading day and the beginning of the next, necessary because forex markets operate 24 hours per day.

Day Order

Buy or sell order that automatically expires at the end of the current trading day.

Day Trading

An approach to trading which involves entering and closing trades on the same day or trading session.

Deal Blotter

List of all transactions completed on a given trading day.

Deal Ticket

Dealer record of the basic details of a transaction, differing slightly from the statement received by the customer.

Dealer

Individual or firm that acts as a principal in a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast to brokers, which serve as mere intermediaries, dealers are exposed to some risk.

Default

Failure of an issuer to make timely payments of both interest and principal when due.

Deficit

Describes an excess of liabilities over assets, of losses over profits, or of expenditure over income.

Deflator

An adjustment which turns nominal GDP into real GDP, by taking inflation into account.

Deflation

A decrease in the general price level of goods and services, whereby the inflation rate falls below zero percent, resulting in an increase in the real value of money.

Delivery

Refers to the (physical or electronic) exchange by buyer and seller of two given currencies.

Delta

Rate of change of an option price with respect to changes in the underlying asset value.

Demo Account

Free forex practice account that allow beginners (or veterans) to measure the profits from hypothetical trades.

Depreciation

Decline in the value of an asset, currency, or security.

Depth of Market

The volume of buy and sell orders waiting to be transacted for a particular currency pair at a particular point in time.

Details

The information necessary to execute a forex transaction, including currency pair, rate, time/date, and size.

Derivative

Financial instrument (forwards, futures, options, swaps) whose value is derived from an underlying security.

Descending Triangles

Trading pattern consisting of two or more comparable lows forming a horizontal line at the bottom. When support on the lower rung of the triangle is broken, it is believed to signal bearishness.

Deutschmark

Former currency of Germany, phased out (and replaced by the Euro) when Germany joined the European Union.

Devaluation

A deliberate depreciation of a currency (relative to one or more other currencies), usually affected by the Central Bank.

Direct Quote

A quote that indicates variable units of domestic currency per fixed units of foreign currency.

Dirty Float (Managed Float)

Exchange rate regime in which the currency is not pegged outright, but is instead "managed" by the Central Bank with the professed goal of preventing wild fluctuations in the exchange rate.

Discount Rate

Interest rate that an eligible depository institution is charged to borrow short-term funds directly from the Federal Reserve Bank.

Discount Spread

Refers to the situation whereby the bid price of a forward spread rate is less than the ask price.

Discretionary Account

Type of account whereby a customer allows an institution to make trading decisions on his or her behalf.

Disinflation

Slow-down in the inflation rate (i.e. when the inflation decreases, but still remains positive).

Divergence

Describes the phenomenon whereby a technical indicator and corresponding price chart don’t yield the same peaks/bottoms. It usually indicates trend "exhaustion."

Diversified Carry Basket

Type of trading strategy in which several carry trades are made/held simultaneously, in order to limit losses/risk from one particular carry trade position.

Double Barrier Option

A type of option incorporating two knock out or knock in levels, one either side of spot, used by participants that have strong views on both a support and a resistance level.

Double Top and Bottom

Trading pattern consisting of upper and lower limits that have been touched twice, but never breached. It is usually interpreted as a sign of uncertainty. However, when the currency breaks out of the range, the movement is expected to be significant.

Dow Theory

One of the ideas underpinning the field of technical analysis, positing that all major trends can be sub-divided into three phases: entrance, acceleration, and consolidation.

Drawdown

A drop in the value of an account, calculated by subtracting the low from the peak.

Dual Currency Service

Foreign exchange instruments that let investors place funds into a product that speculates on the movement of the exchange rate between two major currencies.

Dual Currency Swap

Type of swap used to hedge dual currency bonds in which the issuer has the option to repay principal and coupon in either the base currency or an alternative currency at a pre-agreed exchange rate.

Dual Exchange Rate

Situation in which there is an official exchange rate and an parallel "black market" rate. Also known as Two-Tier Market.

Durable Goods Orders

Monthly government report which measures consumer spending on long-term purchases, products that are expected to last more than three years. It is designed to gauge the health of the manufacturing industry.

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.