|Glossary of Financial Terms
Glossary of Forex Terms
Glossary of Technical Analysis Terms
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down spiral we short. It's that easy, and it applies to any time frame, so if you are a
daytrader or swing trader the rules are the same.Our research team has developed
both the Fibvortex and the Fibonacci Fork. These indicators are like no other you have
seen applied to a chart. The Fibvortex is used to predict future price movements, you
will find it amazing how the price movement follows the contour of the spirals or moves
along the spokes. The Fibonacci Fork is used for low risk entry levels.
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|GLOSSARY OF FOREX TERMS
A dealer who is willing to make a market in a currency pair, by providing liquidity and displaying a two-way
price quote. A market maker takes the opposite side of your trade.
A firm that matches buyers and sellers for a fee or a commission.
One of the participants in a transaction.
The quote on the left. The price at which you can sell currency to the dealer. (Market maker's bid price). e.g.
For EUR/USD 1.3200/03, you can sell 1 Euro for US$1.3200.
The quote on the right. The price at which you can buy currency from the dealer. (Market maker's ask/offer
price). e.g. For EUR/USD 1.3200/03, you can buy 1 Euro for US$1.3203.
The difference between the sell quote and the buy quote. If EUR/USD is quoting 1.3200/03, the spread is 3
pips. In order to break even, the currency must shift in your direction by an amount equal to the spread.
Price Increase Point. The smallest price increment a currency can make. Also known as points. 1 pip =
0.0001 for EUR/USD, or 0.01 for USD/JPY.
The value of a pip. Fixed for EUR/USD, GBP/USD, AUD/USD & NZD/USD (1 pip = $10 for standard 100k lots,
or $1 for mini 10k lots). Variable for others. For a pip-value calculator, click here.
Minimum change in price
The standard unit size of a transaction. Typically, one standard lot is equal to 100,000 units of the base
currency, or 10,000 units if it's a mini.
Trading with standard lot sizes
Trading with mini lot sizes
The deposit required to open a position. A 1% margin requirement allows you to open a $100,000 position
with a $1,000 deposit.
The amount of gearing you can get from your investment expressed in terms of a ratio. e.g. 100:1 leverage
implies a 1% margin requirement.
A position whereby the trader profits from an increase in price. The idea is to buy low and sell high.
A position whereby the trader profits from a decrease in price. The idea is to sell high and buy low.
An order at the current market price
An order to enter a position at a pre-specified level
An order to take profits at a pre-specified level
Limit Entry Order
An order to buy below the market or sell above the market at a pre-specified level, believing that the price
will reverse direction at that point.
The difference in pips between the order price and the price the order is filled at.
An order to buy above the market or sell below the market at a pre-specified level, believing that the price
will continue in the same direction.
An order to limit losses at a pre-specified level
One Cancels Other. Two orders whereby if one is executed, the other is cancelled.
The order is executed by a human dealer.
The order is executed automatically by computer without human intervention or involvement.
|GLOSSARY OF TECHNICAL ANALYSIS TERMS
Used to describe a base pattern on a chart where strong long term holders buy under-valued securities to
hold for a subsequent mark up phase. Strong holders are mainly professionals and weak holders are
generally the public.
A process of examining the detailed composition of a situation in order to identify the condition of the market.
The precursor to today’s sophisticated price index. The prices for a basket of financial instruments is totalled
and divided by the number of instruments. The earliest one — the Dow Jones Average — is still in popular
use today. See also moving average.
A market participant who believes prices are likely to fall and is looking to sell financial instruments. Is
interchangeable with seller.
A pessimistic outlook for prices held by bears/sellers.
A price move one tick above the last high or above the boundary of a congestion area or pattern. Also below
the last low or below the boundary of a congestion area or pattern.
A market participant who believes prices are likely to rise and is looking to buy financial instruments. Is
interchangeable with buyer.
An optimistic outlook for prices held by bulls/buyers.
A market participant who looks to purchase a financial instrument. Their motivation will be to profit from an
appreciation in the price, take profits on a short trade or to cut loses on a short trade.
The graphical representation of market action.
One who studies charts. Now generally replaced by ‘technical analyst’.
The last price at which a market trades in a period. In a futures market, the settlement price is often used in
place of the actual last trade.
Two or more chart signals with the same implication.
Price action over a period that is confined to a relatively narrow range. Also known as a trading range.
(pattern) A configuration on a price chart that, on the balance of probabilities, leads to the resumption of the
prior trend. Its classification is confirmed when price breaks out of the pattern in the direction of the prior
The aggregate of bids by buyers at a given price.
A tradeable instrument which derives its value from some other instrument. Futures, options and warrants
are all derivatives. Derivative markets are usually highly leveraged.
Used to describe a top pattern on a chart where strong long term holders sell to weak short term holders
over valued securities that they have held through the mark up phase. Strong holders are mainly
professionals and weak holders are generally the public.
A theory developed by Charles Dow, first editor of The Wall Street Journal, the principles of which underlie
most of modern technical analysis. Dow’s theory was further enunciated by William Hamilton, who followed
him as editor of The Wall Street Journal and finally by Robert Rhea in his book The Dow Theory.
A jargon term meaning to take the opposite side of a trading situation.
A tradeable written undertaking which establishes ownership and payment rights between parties.
Describes a trader who has no position in the market, i.e. neither long nor short. See square.
Relating to factors that determine prices.
The study of the factors that determine prices of financial instruments.
A gap occurs when the price opens above the high of the previous period and trades higher or when the
price opens below the low of the previous period and trades lower.
he highest price at which a security traded during a time period or the highest value for an index for a time
A numerical measure of the way the prices of a weighted or unweighted basket of financial instruments has
changed over some base period.
A period in which the range of the latest period is entirely within the range of the previous period.
Where used in relation to charting prices it means that the time period is less than a day. Common intra-day
time intervals are five minutes and hourly. Where used in relation to trading it refers to traders who open and
close trades within the one day, not generally holding positions overnight.
An estimate of the objective current value of a financial instrument, determined by fundamental analysis.
The exchanging of money for a financial instrument in the expectation of an income stream and/or a capital
gain. Essentially identical to trading, except the emphasis will tend to be on a longer time frame and the
income stream will tend to be the prime component of total return.
The relationship between the trader’s equity in a position and the amount of debt funding it. The higher the
proportion of debt, the higher the leverage. High leverage allows very high gains from small moves in price,
but also places equity at risk from small price movements. Is the same as gearing.
In some futures market, there are limits placed on how far price can rise or fall in a given day. This means
that trading can completely cease on that day if there are neither buyers nor sellers within the limit range.
To buy a financial instrument with a view to selling it later at a higher price.
The lowest price at which a security traded during a time period or the lowest value for an index for a time
A trend following indicator which smoothes the price to show the direction of the underlying trend.
Where a trader holds no position. See also flat and square.
Refers to the result of measuring an aspect of price action with a view to predicting the extent of a likely price
move. Same as target.
Those parts of analysis that can be demonstrated logically by reference to facts — the opposite of
subjective, where the analysis relies on the opinion or judgement of the analyst.
The price of the first trade of a time period. If a price index is being charted, it may be the value of the index
at the end of the first of the regular periods for which the index is calculated.
interest The sum total of all open contracts in a futures market.
A period in which the range of the latest period is entirely outside the range of the previous period.
A level of price coinciding with extreme levels of a momentum oscillator above the centre line.
A level of price coinciding with extreme levels of a momentum oscillator below the centre line.
The Parabolic Time/Price System is a trading system based on:
The assumption of trading a trend and the expectation of price to move — stops generated are driven by an
acceleration factor based on the time elapsed. The acceleration factor means the stops generated trace a
pattern like a parabola.
A term used generally in all areas of technical analysis to describe any configuration on a price chart from
one period to many periods. See also continuation pattern and reversal pattern.
A length of time over which prices are recorded and used for analysis. Common periods are a day, a week or
The value at which a trade takes place on a financial market. In this subject, it also refers to the value of an
index or a market average.
A term used to describe the way prices sometimes reach a peak or trough and then immediately recoil from
A level on the chart where the security has traded before and which will tend to interrupt or reverse a
subsequent up trend.
The idea that swings in a trend retrace the previous swing in full or in part.
The object of trading or investing. Total return comprises any income stream and any capital gain.
A general term to describe a change in direction of price movement.
In bar charting, a configuration on a price chart that, on the balance of probabilities, leads to a change in the
direction of the prior trend. Its classification is confirmed when price breaks out of the pattern in the direction
opposite to the prior trend.
Any financial instrument.
A market participant who looks to sell a financial instrument. Their motivation will be to profit from a fall in the
price, take profits on a long position or to cut losses on a long position.
To sell a financial instrument that is not already owned with a view to buying it back later at a lower price.
A position where a trader is neither long nor short, i.e. not in the market. Also known as being flat or having a
The name of an indicator that measures momentum of price change with reference to how near the market
closes to the high or low of the recent range.
An order placed in a futures market to buy or sell if the market trades at a specified price. In stock markets,
and any other market where stop orders are not accepted, ‘stop’ is used to denote the level at which a trader
intends to give a buy or sell order if the market trades at that level. Stops are most commonly used to limit
losses on an open position and, in this case, are often referred to as a ‘’. However, stops may also be used
to close a profitable trade (take-profit stop) at a target level or to initiate a trade, say on a price break out
from a pattern.A stop order may also be used to enter a trade if an instrument trades at the level specified.
A bull or rising market.
Those parts of analysis that rely upon the opinion or judgement of the analyst — the opposite of objective.
The aggregate of offerings by sellers at a given price.
A level on the chart where the security has traded before and which will tend to interrupt or reverse a
subsequent down trend.
A general term for a price movement in one direction — essentially a short-term trend.
The result of measuring an aspect of price action with a view to predicting the extent of a likely price move.
Same as objective.
Measurements of market activity, principally price, volume and open interest.
The smallest change permitted in the price of a futures contract. However, the term is used more widely for
prices recorded on any market trade by trade. This may derive from the sound made by pre-electronic quote
machines (ticker tape machines, or just tickers) whenever a trade came through.
A measure of time used in analysis, e.g. one minute, hourly, daily, weekly, monthly and yearly. Can also be
used more generally as in short medium or long term.
A time limit on the holding of a position, after which it is intended to be closed, either automatically or by
action of the trader.
A transaction, either buying or selling, on a financial market.
A person who buys or sells with the objective of making a capital gain.
The exchanging of money for a financial instrument in the expectation of an income stream and/or a capital
gain. Essentially identical to investment, except the emphasis will tend to be on a shorter time frame and
capital gain will tend to be the prime component of total return.
Price action over a period that is confined to a relatively narrow range. Also called a congestion area.
A succession of either higher highs and higher lows (an up trend) or lower highs and lower lows (a down
trend). The trend is determined by the price action.
A line connecting lows in an up trend or highs in a down trend.
The total number of financial instruments traded in a period. Sometimes proxies are used when data is
A bear or falling market
Rapid reversal of trading signals—usually at a loss.
|GLOSSARY OF FINANCIAL TERMS
|Adjusted gross income
Amount of income that is subject to federal income tax. In addition to any other tax credits, contributions to
IRAs and 401(k) plans are subtracted from the total.
Relating or referring to an investment philosophy that seeks above-average returns by accepting above-
American Stock Exchange (AMEX)
Specializes in small-to-medium-size companies.
Annual percentage rate (APR)
A standardized method of calculating interest rates. It permits the comparison of different interest rates just
as unit pricing enables comparison shopping at the supermarket.
Contract issued by a life insurance company that promises to make periodic payments to the buyer over a
set period of time. Payments are made to individuals, referred to as annuitants.
An increase in value of an asset.
The purchase of assets, such as securities, on one market for immediate resale on another market to take
advantage of price differences.
A type of mutual fund that spreads its investments among stocks and bonds. Essentially, a balanced fund is
a middle-of-the-road fund that balances its portfolio to achieve both moderate income and moderate capital
An extended period of general price declines in the securities market.
A stock whose performance is indicative of the overall market direction.
A very high-quality investment involving a lower-than-average risk of loss of principal or reduction in income.
A long-term promissory note that obligates the borrower to make specified payments over a set period of
An extended period of general price increases in the securities market.
The excess by which proceeds from the sale of a capital asset exceeds the cost.
The company's stock price per share multiplied by the total number of shares outstanding. Small-cap: less
than $1.5 billion. Mid-cap: between $1.5 billion and $10 billion. Large-cap: over $10 billion.
Certificate of deposit (CD)
A receipt for a deposit of funds in a financial institution that permits the holder to receive interest plus the
deposit at maturity.
Assets used as security for a loan.
A short-term unsecured promissory note issued by a finance company or a large industrial firm. Commonly
found in money-market funds.
A class of stock that has no preference as to dividends or any distribution of assets.
Interest paid on interest from previous periods in addition to principal.
Consumer price index (CPI)
A measure of the average change over time in the prices paid by urban consumers for a fixed “market
basket” of day-to-day expenses.
Reverse movement in the price of an individual stock, bond, commodity, or index after any long-term move.
Can be a movement up or down, but usually refers to a fall in the price.
The decrease in value of a tangible asset because of age, wear, or market conditions. Corporations can
choose between several types of depreciation, which affects the value of assets and corporate earnings.
Minimizing risk by investing in a wide range of securities invested in many industries.
A share of a company's net profits distributed to a class of its stockholders.
Dividend Reinvestment Plan (DRIP)
Automatic plan allowing stockholders to use their dividends to buy additional shares of stock.
Investment of an equal amount of money at regular intervals resulting in the purchase of more shares during
market downturns and fewer shares during market upturns.
Dow Jones Industrial Average (DJIA)
A widely quoted measure of stock market price movements of 30 large, seasoned industrial firms.
Income of a business, typically after-tax income, but it may refer to before-tax income or revenues.
Earnings per share
The amount a stock will pay in income or dividends.
Emerging growth stock
The common stock of a relatively young firm operating in an industry with very good growth prospects. This
kind of stock offers unusually high returns and a high risk.
Market in a country that does not have a fully developed economy. Investments in these markets are usually
characterized by a high level of risk and possibility of a high return.
Reserve balances above those required that are maintained by commercial banks in the Federal Reserve
Federal Reserve Board
The seven governing members of the Federal Reserve System who determine the country's monetary policy.
Federal Reserve System
The independent central bank that influences the U.S.'s supply of money and credit through its control of
Annuity that guarantees fixed payments to the annuitant, either for life or for a set period of time.
Plan in which employees elect to contribute pretax dollars to a qualified, tax-deferred investment plan.
A pact in which a buyer and seller agree to exchange a specific commodity on a certain date.
The place where futures contracts are traded, such as the Commodity Exchange in New York, which handles
metals, and the Chicago Board of Trade, which deals in grain futures. Other exchanges handle sugar,
cotton, and other commodities.
A mutual fund that includes at least 25% foreign securities in its portfolio.
Gross national product (GNP)
The dollar output of final goods and services in the economy during a period of time.
The stock of a firm that is expected to have above-average increases in revenues and earnings. These
firms normally retain most of their earnings for reinvestment and therefore pay small dividends.
A very specialized, volatile investment company (mutual fund) that permits the manager to use a variety of
investment techniques normally prohibited in other types of funds.
An investment company (mutual fund) whose main objective is to achieve current income for its owners;
typically, the fund purchases bonds, preferred stocks, and common stocks paying high dividends.
Statistical composite that measures changes in the economy or in financial markets and that can be
expressed in percent changes from a base year or from the previous month. Most common are the S&P and
the Dow Jones Industrial Average.
A mutual fund that keeps a portfolio of securities designed to match the performance of a certain market as
Individual Retirement Account (IRA)
A custodial account or trust in which individuals may set aside earned income in a tax-deferred retirement
Initial Public Offering (IPO)
The first sale of a corporation's stock to the investing public.
A mutual fund that invests only outside the country in which it is located.
Debt issued by a company whose credit rating is below investment grade (BBB for S&P and Baa for
Moody's). Because there is a considerable risk, the company must offer a high coupon to make the bond
attractive to an investor.
A federally approved retirement program that permits self-employed people to set aside for savings up to
$30,000 or 25% of their income, whichever is lower.
The stock of a big company that has considerable retained earnings and a large amount of common stock
outstanding, typically a market capitalization of over $3 billion.
A security that can easily be sold for cash.
The sales fee that the buyer pays in order to acquire a security, typically a mutual fund.
Debt securities with maturities of 10 to 30 years. The benchmark for this asset class is the Lehman
Government Long Bond Index.
The total value of all of a firm's outstanding shares, calculated by multiplying the market price per share
times the total number of shares outstanding.
Money market fund
A mutual fund that purchases short-term, high-quality securities, such as treasury bills, negotiable CDs, and
Money market securities
Low-risk, very liquid securities with maturities of one year or less. Other short-term debt that is scheduled to
mature within one year may also be classified as money-market securities.
A company rating service issuing ratings denoting the relative investment quality of corporate and municipal
An investment company that continually offers new shares and stands ready to redeem existing shares from
the owners. Also an investment company.
Net Asset Value (NAV)
The market value of an investment company's (mutual fund) asset less any liabilities divided by the number
of shares outstanding. This is the value of each share if the fund sold all of its assets at their current market
value and paid off any outstanding debts.
Income after all expenses and taxes have been deducted.
New York Stock Exchange
The oldest stock exchange in the U.S., located at 11 Wall Street in New York City. Companies traded on the
NYSE are typically the largest in the U.S.
Nikkei Stock Average
Compilation of prices of 225 companies listed on the Tokyo Stock Exchange.
An open-end investment company (mutual fund), shares of which are sold without a sales charge.
A contract that permits the owner, depending on the contract, to purchase or sell a security at a fixed price
until a specific date.
Stock that is traded outside of an organized exchange, usually through telephone or electronic connections.
A security that shows ownership in a corporation and gives the holder a claim prior to the claim of common
stockholders on earnings and also generally on assets in the event of liquidation.
Price of a stock divided by its earnings per share.
The interest rate banks charge on loans to their biggest and best customers.
An agreement that allows employees to share in the corporation's profit. The company makes annual
contributions to a profit-sharing fund, which is invested in stocks, bonds, or cash, and generally accumulate
tax-free until the employee retires or leaves the company. Do not confuse this plan with investments of 401
(k) money in a company's stock.
A formally written document containing information necessary to make an educated decision to purchase a
security or not.
A short, but often significant, surge in securities prices following a stagnant or declining market.
Standard unit for trading a particular security, generally 100 shares for stock, $1,000 or $5,000 par value for
Real estate investment trust (REIT)
A trust that either finances or owns and manages income-producing real estate, passing profits on to
An investment company that concentrates its holdings among securities or other assets sharing a common
An instrument indicating ownership, in the case of stocks, or representing the debt of a corporation or
government agency, in the case of bonds.
The stock of a relatively small firm with little equity and few shares of common stock outstanding. Small-
capitalization stocks tend to be subject to large fluctuations; therefore, the potential for short-term gains and
losses is great.
Standard & Poor's 500 (S&P 500)
An inclusive index of 500 stocks, including 400 industrial stocks, 40 utilities, 20 transportation stocks, and 40
An ownership share(s) in a corporation; also equity, common stock.
All bonds backed by the U.S. government that are issued through the Department of the Treasury.
A short-term debt security of the U.S. government that is sold in minimum amounts of $10,000 increments
and multiples of $5,000 above this.
Yield to maturity
The total return an investor will get by holding a long-term, interest