Slang used for the GBP/USD currency pair (British pound vs the US dollar), derived from when the British Pound was more dominant and the currency was continually wired between North America and Europe via transatlantic cable in the 19th Century.
A popular chart where each session is represented by a drawing that looks like a candle. The candle has wicks (called shadows) coming out of each end, with the top representing the high and bottom representing the low prices for the session. If the open price is higher than the close price, the rectangle between the open and close price is shaded; the bottom of the body is the open and the top the close, and entire candlestick represents upward movement. If the close price is higher than the open price, that area of the chart is not shaded; the bottom of the body is the close and the top the open, and the entire candlestick represents downward movement.
You borrow and pay interest on a low interest rate currency like the Yen in order to buy a higher interest currency or debt instrument, such as the Australian Dollar or Aussie government bonds. While the trade can produce a positive interest rate differential over time, the largest risk of the carry trade is that the exchange rate will move in an adverse direction, eliminating the profit from the positive interest rate differential.
A grid system that stages multiple limit orders on a carry positive currency, each order set in fixed intervals from each other, scaling in when the market travels adversely to your initial entry. The grid component can increase the odds of getting to breakeven, while the carry component can bring interest profit while it is doing so. The largest risk is that the sustained adverse move can quickly pile up the grid levels, increasing and aiming the leverage against the account.
A government or quasi-governmental organization whose responsibilities include the issue and regulation of currency, the regulation of banks under its jurisdiction, and the enactment of a sustainable monetary policy. Central banks are commonly charged with finding the balance between maintaining low inflation and high economic growth. They do this primarily by setting interest rates at which they lend to banks under its jurisdiction which, in turn, highly influences interest rates throughout the country or region. Prominent central banks include the Federal Reserve, the Bank of England, the European Central Bank, the Bank of Japan, and the People's Bank of China.
A transaction that offsets the number of units taken in a previous position so that your market exposure is zero. When 10,000 units of EURUSD are bought, the position is closed when 10,000 units are sold
Established in the 19th century, it is the largest options and futures exchange in the world, with 70% of its business takes place electronically on CME Globex, the oldest electronic futures exchange in the world with well over one billion transactions since its introduction in 1992.
A transaction fee paid to a broker to execute a trade that varies from broker to broker. For some forex brokers such as ECNs, the spread is narrower than most brokers (which makes it attractive), but it can only get away with this tighter spread by charging a commission (which makes it less attractive). When evaluating and comparing the transaction costs of brokers, one should add the spread plus commission.
An exchange where various commodities and derivatives products are traded, including wheat, barley, sugar, maize, cotton, cocoa, coffee, milk products, pork bellies, oil, metals, and so on. The Chicago Board of Trade and New York Mercantile Exchange are the largest and most well-known commodity exchanges in the world.
The United States regulatory agency for commodity futures trading (www.cftc.gov), as well as forex in recent years. It is an independent agency of the US government with the stated mission to protect market users and public from fraud, manipulation and abusive practices.
A month to month economic indicator which gauges changes in the cost of living by measuring price changes in a common basket of goods and services that most people use, such as food, clothing, transportation, and entertainment. The annual percentage change in a CPI is used as a measure of inflation. The CPI can be used to index (i.e., adjust for the effect of inflation) the real value of wages, salaries, pensions, for regulating prices and for deflating monetary magnitudes to show changes in real values.
The tendency of an economic crisis to spread from one market to another. For example, the late 2000s recession began with a large number of defaults on subprime mortgages in the US, and because investors worldwide invested in mortgage-backed securities based on subprime, the US subprime defaults turned turned into a global meltdown.
A document exchanged by counterparts to a transaction that states the terms of said transaction immediately after a trade is executed, such as settlement date, size, price, commission, terms of trade, etc.
A statistical term measuring the relationship between two seemingly variables during a period of time. In finance, correlation is the extent to which the values of different investments move in tandem with one another .For example, the EURUSD and the EURJPY on a daily time frame have over 80% correlation, that is, they move largely in the same direction. Markets with a correlation of +0.5 (or 50%) or more tend to rise or fall in value at the same time, whereas markets with a correlation of -0.5 to -1 (-50 to -100%) move in inverted directions.
Similar to currency futures markets with the difference between them being that the terms of contract between the two parties is determined solely by the parties involved and don’t have to be based on a public commodities market.
Where contracts are bought and sold based upon a standard size (much larger than spot forex) and settlement date on public commodities markets. Investors agree to buy or sell a fixed amount of a specific currency at a fixed exchange rate on a fixed date in the future.