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Forex Trader's GlossaryA glossary of forex jargon, nicknames, slang, terms and origins of expressions used in forex trading. Forex traders have their own vocabulary. To help you speak the language, here are the most commonly used terms, acronyms, and abbreviations. Bookmark this page for future reference! # 10 Yr - US 10 year Note 30 Yr - US 30 year Bond A Aggressive - Traders and/or price action are acting with conviction Analyst - A financial professional who has expertise in evaluating investments and puts together buy, sell and hold recommendations Asian Session - 5:00 PM EST - 2:00 AM EST Asian Central Banks - Refers to the central banks or monetary authorities of Asian countries. These institutions have been increasingly active in major currencies as they manage growing pools of foreign currency reserves arising from trade surpluses. Their market interest can be substantial and influence currency direction in the short-term. Aussie - Also, "Oz" or "Ozzie", refers to the AUD/USD pair B Barrier Level - A certain price of great importance included in the structure of a Barrier Option that calls for series of events to occur if achieved. Barrier Option - Any number of different option structures (such as knock-in, knock-out, no touch, double- no-touch-DNT) that attaches great importance to a specific price trading. In a no-touch barrier, a large defined payout is awarded to the buyer of the option by the seller if the strike price is not 'touched' before expiry. This creates an incentive for the option seller to drive prices through the strike level and creates an incentive for the option buyer to defend the strike level. Bearish - Negative for price direction; favoring a declining market. For example "We are bearish EURUSD". This means we think the Euro will weaken against the dollar. Bears - Traders who expect prices to decline and may be holding short positions Bernanke - US Federal Reserve Chairman Ben Bernanke. Bid - The price at which a buyer will pay. A bid is left side of a 2- way price, or opposite the "Offer". On-line traders can sell at the bid price. A 'bid' market refers to an overall buying bias, or an accumulation of bids. Big figure - refers to the first 3 digits of a currency quote, such as 117 USD/JPY or 1.26 in EUR/USD. If the price moves by 1.5 big figures, it has moved 150 pips. BIS - Bank for International Settlements located in Basel, Switzerland is the central bank for central banks. The BIS frequently acts as the market intermediary between national central banks and the market. The BIS has become increasingly active as central banks have increased their currency reserve management. When the BIS is reported to be buying or selling at a level, it is usually for a central bank and thus the amounts can be large. The BIS is used to avoid markets mistaking the interest for official intervention. Black Box - The term used for systematic, model-based or technical traders Blow off - The upside equivalent of capitulation. When shorts throw in the towel and cover any remaining short positions. BOC - Bank of Canada, the central bank of Canada. BOE - Bank of England, the central bank of the UK. BOJ - Bank of Japan, the central bank of Japan Bps - Basis Points are 1/100 of a percent, or 0.01% If the Fed hiked rates 25 bps, they increased the overnight lending rate 0.25% Buck- Market slang for 1 million units of a dollar based currency pair or for the US dollar in general. Bullish - Favoring a strengthening market and higher prices. For example "We are bullish EURUSD". This means we think the Euro will strengthen against the dollar. Bulls - Traders who expect prices to rise and who may be holding long positions. Buy Dips - Look to buy 20-30 pip pullbacks in the course of an intra-day trend. C CAD - The Canadian dollar, also known as Loonie or Funds. Cable - The GBP/USD pair, also called Sterling. So called because the rate was originally transmitted via a transatlantic cable beginning in the mid 1800's when the GBP was the currency of international trade. Capitulation - A point at the end of an extreme trend when traders who are holding losing positions just throw in the towel to exit those positions. This usually signals that the expected reversal is just around the corner. Carry Trade - A trade strategy that captures the difference in the interest rates earned from being long a currency that pays a relatively high interest rate, and short another currency that pays a lower interest rate. "Unwinding The Carry Trade" - refers to any prolonged movement of a currency pair in the direction opposite of that taken by those who positioned to benefit from the interest rate differential. Example: NZDJPY has been a famous carry trade for some time. NZD is the high yielder and JPY is the low yielder. Traders looking to take advantage of this interest rate differential would buy NZD and sell JPY, or be long NZD /JPY. So if NZD /JPY is trending up, traders are piling into the carry trade. When NZD /JPY begins to downtrend for an extended period time, most likely due to a change in interest rates, the carry trade is said to be unwinding. CB's - abbreviation referring to central banks Choppy - Short-lived price moves with limited follow through. Not conducive to aggressive trading. Commodity Currencies - Currencies from economies whose exports are heavily based in natural resources and refers to Canada, New Zealand, and Australia. Components - The dollar pairs that make up the crosses (i.e. EURUSD + USDJPY are the components of EURJPY). Selling the cross through the components refers to selling the dollar pairs in alternating fashion to create a cross position. Consolidation - A period of range-bound activity after an extended price move. Convergence of M.A.'s - A technical observation that describes moving averages of different periods moving towards each other. This generally forecasts a price consolidation. Corporates - refers to corporations in the market for hedging or financial management purposes. Corporates are not always as price sensitive as speculative funds and their interest can be very long-term in nature, making corporate interest less valuable to short-term trading. Crater - the market is ready to sell-off hard. Crown Currencies - Refers to Cad, Aussie, Sterling, and Kiwi. Cross (i.e. Yen cross) - A pair of currencies that does not include the US Dollar. CTA's - refers to commodity trade advisers, speculative traders that can resemble hedge funds and are active short-term traders; frequently refers to the Chicago-based or futures-based traders. D Deal - An FX term that denotes a trade done at the current market price. It is a live trade as opposed to an order. Defend a level - Action taken by a trader, or group of traders, to prevent a certain price or price zone from trading because they likely hold a vested interest to do so, such as a barrier option. Devaluation - when a pegged currency is allowed to weaken or depreciate based on official actions; the opposite of a revaluation. Divergence - In technical analysis, a situation where price and momentum move in opposite directions, such as prices rising while momentum is falling. Divergence is considered either positive (bullish) or negative (bearish), both of which are signals of major shifts in the direction of the price. Positive/bullish divergence occurs when the price of a security makes a new low while the momentum indicator starts to climb upward. Negative/bearish divergence happens when the price of the security makes a new high, but the indicator fails to do the same and instead moves lower. Divergences frequently occur in extended price moves and frequently resolve with the price reversing direction to follow the momentum indicator. Divergence of M.A.'s - A technical observation that describes moving averages of different periods moving away from each other. This generally forecasts a price trend. Downtrend - Price action consisting of lower-lows, and lower-highs. Dove - dovish-refers to data or a policy view that suggests easier monetary policy or lower interest rates. The opposite of hawkish. DJIA or Dow - Abbreviation for the Dow Jones Industrial Average. E ECB - European Central Bank, the central bank for the 12 countries using the Euro. English, Bill (William) - the Finance Minister of New Zealand; also deputy prime minister. EST/EDT - Eastern Standard Time/Eastern Daylight time. The time zone of New York City. European Session - 2:00 AM EST - 12:00 PM EST Expiry - The precise date and time when an option will expire. The two most common option expiries are 1000 NY time (NY cut) and 1500 Tokyo time (Tokyo cut) and these time periods frequently see an increase in activity as option hedges are unwound in the spot market. Exporters - Corporations who sell goods internationally, which in turn makes them sellers of foreign currency and buyers of their domestic currency. Frequently refers to major Japanese corporations such as Sony and Toyota, who will be natural sellers of USD/JPY, exchanging dollars received from commercial sales abroad. Extended - A market that is thought to have traveled too far, too fast. F Fed - The Federal Reserve Bank, the central bank of the United States, or the FOMC (Federal Open Market Committee), the policy setting committee of the Federal Reserve Fed Officials - refers to members of the Board of Governors of the Federal Reserve or regional Federal Reserve Bank Presidents. Figure / The Figure - Refers to the price quotation of '00' in a price such as 00-03 (1.2600-03) and would be read as 'figure-three'. If someone sells at 1.2600, traders would say 'the figure was given' or 'the figure was hit.' Fin Min - abbreviation for Finance Minister Fix - One of the approximately 5 times during the FX day when a large amount of currency must be bought or sold to fill a commercial customers' orders. Typically these times are associated with market volatility. The regular fixes are (all times NY)
Follow through - Fresh buying or selling interest after a directional break of a particular price level. The lack of follow through usually indicates a directional move will not be sustained and may reverse. FOMC - Federal Open Market Committee, the policy setting committee of the US Federal Reserve. 2009 voting members are:
Funds - refers to hedge fund types active in the market, also used as another term for USD/CAD pair. G G7 - Group of 7 Nations - United States, Japan, Germany, United Kingdom, France, Italy, and Canada. G8 - Group of 8 - G7 including Russia. Gap - A quick market move that finds price skipping over several levels without any trades occurring. Gaps usually follow economic data or news announcements. Geithner, Timothy - Secretary of the US Treasury, which has responsibility for the US dollar in currency markets. Given - Refers to a bid being hit or selling interest. Giving it up - A technical level succumbs to a hard-fought battle. GMT - Greenwich Mean Time - The most commonly referred to time zone in the FOREX markets. GMT does not change during the year, as opposed to daylight savings/summer time. Gold ('s Relationship) - Commonly accepted that gold moves in the opposite direction of the US dollar. There is a long-term correlation coefficient of bout -0.75, but shorter-term correlations are less reliable. Greg Ipp - Economics reporter for the Wall Street Journal Greenback - Nickname for the US dollar Gunning, Gunned - refers to traders pushing to trigger known stops or technical levels in the market. H Handle - Every 100 pips in the FX market staring with 000. Hawk - Hawkish - A country's monetary policy-makers are referred to as "hawkish" when they believe that higher interest rates are needed, usually to combat inflation or restrain rapid economic growth, or both. Hildebrand - Philipp Hildebrand, Member of the policy-setting Directorate of the Swiss National Bank (SNB) "Hit the bid" - To sell at the current market bid. I Illiquid - Little volume being traded in the market that often creates choppy market conditions. IMM - International Monetary Market-the Chicago-based currency futures market, part of the Chicago Mercantile Exchange. IMM Futures - A traditional futures contract based on major currencies against the US dollar traded in the pits of the Chicago Mercantile Exchange. IMM Session - 8:00 AM EST - 3:00 PM EST INDU - Abbreviation for the Dow Jones Industrial Average. J Jenkins, Paul - Paul Jenkins, Senior Deputy Governor of the Bank of Canada. Juncker - Jean Claude Juncker, the Prime minister and Finance minister of Luxembourg, currently the head of the EU's group of finance ministers, ECOFIN. K Keep the powder dry - To limit your trades due to inclement trading conditions; either choppy or extremely narrow markets, where it may be better to stay on the sidelines until an opportunity is more clear. Kiwi - Nickname for NZD/USD Knock Ins - Option strategy that requires the underlying product to trade at a certain price before a previously bought option becomes active. Knock-ins are used to reduce premium costs of the underlying option and can trigger hedging activities once an option is activated. Knock Outs - Option that nullifies a previously bought option if the underlying product trades a certain level. When a knock-out level is traded, the underlying option ceases to exist and any hedging may have to be unwound. L Level - A price zone, or particular price that is significant technically or based on reported orders/option interest. Leveraged Names - Short-term traders, referring largely to the hedge fund community. LIBOR - The London Inter-Bank Offered Rate. Banks use LIBOR as a base rate for international lending. Limits - An order that seeks to buy at lower levels than the current market or sell at higher levels than the current market. An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 117.00/05, then a limit order to buy USD would be at a price below the current market, e.g. 116.50. Longs - Traders who are have bought a particular pair Loonie - Nickname for USD/CAD London Session - 3:00 AM EST - 12:00 AM EST L/T - long term, usually refer to daily or several days. M Macro - The longest term trader who bases trade decisions on fundamental analysis. A trade holding period can last anywhere from around 6 months to multiple years. Medley Report - refers to Medley Global Advisors, a market consultancy that maintains close contacts with central bank and government officials around the world. Their reports can frequently move the currency market as they purport to have inside information from policy makers. The accuracy of the reports has fluctuated over time, but the market still pays attention to them in the short-run. Models - Synonymous with black box. Systems that automatically buy and sell based on technical analysis or other quantitative algorithms. MoM - Abbreviation for month over month, the change in a data series relative to the prior month's level. Momentum - Any of a series of technical studies (e.g. RSI, MACD, Stochastics, Momentum) that assess the rate of change in prices. Momentum Players - Traders who align themselves with an intra-day trend that attempt to grab 50-100 pips. M/T - medium term N New York Session - 8:00 AM EST - 5:00 PM EST No touch - An option that pays a fixed amount to the holder if the market never touches the predetermined Barrier Level. O Offered - If a market is said to be trading "offered", it means a pair is attracting heavy selling interest, or offers. "On top" - Attempting to sell at the current market order price. One touch - An option that pays a fixed amount to the holder if the market touches the predetermined Barrier Level. Order - An order to execute a trade at a specified rate. It is the opposite of a deal. P Paid - Refers to the offer side of the market dealing. Pair - The Forex quoting convention of matching one currency against the other. Paneled - A very heavy round of selling. Parabolic - A market that moves a great distance in a very short period of time, frequently moving in an accelerating fashion that resembles one half of a parabola. Parabolic moves can be either up or down. Patient - Waiting for certain levels, or news events to hit the market before entering a position. Pound - Nickname for the GBP/USD Profit - taking-After a price increase, traders who earlier went long (bought) begin selling to 'take their profit'. Pullback - The tendency of a trending market to retrace a portion of the gains before continuing in the same direction. Q R Range - The opposite of a trend. No net change in price, or equal highs and equal lows. RBA -Reserve Bank of Australia, the central bank of Australia. RBNZ - Reserve Bank of New Zealand, the central bank of New Zealand Real Money - Traders of significant size including pension funds, asset managers, insurance companies, etc. They are viewed as indicators of major long-term interest market interest, as opposed to shorter-term, intraday speculators. Resistance - A price that might act as a ceiling. The opposite of support. Revaluation - When a pegged currency is allowed to strengthen or rise as a result of official actions; the opposite of a devaluation. S Shorts - Traders who have sold, or shorted, a currency pair, or those who are bearish on the market. Short-covering - After a decline, traders who earlier went short begin buying back. Short squeeze - When traders are heavily positioned on the short side and a market catalyst causes them to cover (buy) in a hurry causing a sharp price increase. Sidelines, sit on hands - Traders are encouraged to stay out of the markets due to directionless, choppy, unclear market conditions. Slippery - simply a term used when the market feels like it is ready for a quick move in any direction Sloppy - Choppy trading conditions that lack any meaningful trend, and or follow through. SOTD - Our Todd Gordon's technical report "Strategy of the Day " Sovereign names - refers to Central Banks active in the spot market Strikes - The specific spot price that is the basis for a currency option contract. Option A 1.2500 strike call option holder can buy the previously agreed upon number of EURUSD if the spot price is above 1.2500 Support - A price that might act as a floor Swissy - The nickname for USD/CHF SNB - Swiss National Bank, the central bank of Switzerland S/T - Short term Sterling - Nickname for GBP/USD Stops - refers to 'stop-loss' orders. Order type whereby an open position is closed at a specific price. Often used to minimize exposure to losses if the market moves against an investor's position. As an example, if an investor is long USD/JPY at 119.50, they might wish to put in a stop loss order at 119.20, which would limit losses should the dollar move lower. Stop loss hunting - When a market seems to be reaching for a certain level that is believed heavy with stops. If stops are triggered, then the price will often jump through the level as a flood of stop loss orders are triggered. Stops building - refers to stop loss orders building up; the accumulation of stop loss orders to buy above the market in an upmove, or to sell below the market in a downmove.. T Technicals - Short for technical analysis, the process by which past price patterns are studied for clues as to the direction of future price movements. Technicians, or "Techs" - Traders who base their trading decisions on Technical Analysis. Thin - Illiquid - slippery - Choppy; A light volume market that produces erratic trading conditions. Tokyo Session - 7:00 PM EST - 4:00 AM EST Trading Bid - A pair is acting strong and/or moving higher; bids keep entering the market and pushing prices up. Trading Heavy - a market that feels like it wants to move lower, usually associated with an offered market that will not rally despite buying attempts. Trading Offered - A pair is acting weak and/or moving lower, and offers to sell keep coming into the market. Trend - The opposite of a range. Price movement that produces a net change in value. An uptrend is identified by higher-highs and higher-lows. A downtrend is identified by lower-highs and lower-lows. Trichet - Jean Claude Trichet; the president of the European Central Bank (ECB). T/P - Take profit. Refers to a limit orders that look to sell above the level that was bought, or buy back below the level that was sold. U Ugly - Describing unforgiving conditions that can be violent and quick. V Volatility - Referring to active markets that often presents trading opportunities. W WSJ - Wall Street Journal Y Yard- A billion units YoY - Abbreviation for year over year Yuan - The Chinese currency that has been a source of contention between the US and China. Yuan - Flexible - China's recent economic policy to allow the Yuan to appreciate against the USD. Z |
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