Absolute Returns - A measure of the gain or loss on an investment portfolio expressed as a percentage of invested capital.

ADP (National Employment Report) - a monthly report measuring the change in non-farm private employment in the US. It’s based on the payroll data from about 400,000 US businesses. The NFP report covers both public and private sector jobs. It is released two days before the government’s NFP report and it is not a good early proxy for the NFP report as the two reports can sometimes diverge significantly.

Aggregator - Absorbs prices per instrument from liquidity providers and merges them into an aggregated order book. It can process both order book and banned quotes type received from LPs.

Algos - Algorithmic trading (or algos) use a computer program that follows a defined set of instructions (an algorithm) to place a trade.

Arbitrage Trading - A technique used to take advantage of fluctuations of financial assets in one environment, before they materialise in another. A trader in this form of trading is known as an arbitrageur. Arbitrage trading can take various forms, depending upon the market being traded, some of these forms can look down upon as unethical or are illegal. Arbitrage trading does not involve technical or fundamental analysis.

Artificial Intelligence —Artificial Intelligence (AI) is defined as the automation of robotics and its influence and/or adoption within existing technologies. One of the main benefits of AI is the ability to process wide swaths of data, that normal humans cannot profitably or potentially assess. For example, AI is very helpful in terms of financial bookkeeping and records. As this information is data driven, scanning through these records gives AI the ability to make a recommendation of loan and credit offerings which make historical sense. Another area for AI to shine is fraud detection and management. It can analyse past spending behaviours on different transaction instruments to point out odd behaviour or fraud. Machine learning also holds tremendous potential, which is defined as an application of AI that looks to automatically learn and improve from experience without being explicitly programmed. Machine learning is a rapidly growing field that also focuses on the development of computer programs that can access data and use it to learn for themselves.

Asset Classes - A group of financial instruments that have similar financial characteristics and behave similarly in the marketplace/ E.g. Commodities | FX, Equities | Cash | Property

AUD - Short for the Australian dollar it is the official currency of Australia, which is also used in Christmas Island, Cocos (Keeling) Islands, Norfolk Island, as well as independent pacific states. It was introduced in 1966, the AUD is currently the fifth most traded currency in the world, behind the US dollar, Euro, Japanese Yen, and British Pound. The currency is very important to forex markets and is routinely used as a carry trade against other majors. The Reserve Bank of Australia (RBA) is the central banking authority tasked with the management and issuance of AUD banknotes. The AUD is more susceptible than other currencies to macroeconomic factors. Monetary policy is the largest mover of the currency, including interest rate differentials.

AUD/CAD — The AUD/CAD is the currency pair encompassing the Australian dollar of the Commonwealth of Australia (symbol $, code AUD), and the Canadian dollar of Canada (symbol $, code CAD). The pair’s rate indicates how many Canadian dollars are needed to purchase one Australian dollar. The Australian dollar (AUD) is the world’s fifth most-traded currency, whilst the Canadian dollar (CAD) is the world’s seventh most-traded currency. Collectively, this results in a pair with moderate liquidity, for which spreads generally range between 2 and 5 pips on most forex brokers. The price often ranges daily between 60 and 150 pips. In terms of factors that impact the AUD/CAD, there are several key economic releases for the AUD/CAD cross. This includes, among others, Building Approvals for Australia, which measures the change in the number of new building approvals issued each month. Core retail sales for Canada are also noteworthy, as they measure the change in the total sales value at the retail level, minus automobiles. A higher actual forecast would be bullish for the Canadian dollar, indicated by a southern direction on the AUD/CAD.

AUD/JPY —The pair’s rate indicates how many Japanese yen are needed to purchase one Australian dollar. The Australian Dollar (AUD) is the world’s fifth most traded currency, whilst the Japanese yen (JPY) is the world’s third most traded currency, resulting in a rather liquid pair. Whilst the spreads of currency pairs vary from broker to broker, generally speaking the AUD/JPY often stays within the 1 pip to 3 pip spread range. Important news announcements for this pair include the Westpac Leading Index for Australia. This tracks the growth of a combined index that considers nine barometers of economic activity, and the Jobless Rate for Japan, which measures the percentage of unemployed in the country.

Bank of England - Central bank of the UK. Established in 1694. The 8th oldest bank in the world. It is sometimes known as The Old Lady of Threadneedle Street, a name taken from a satirical cartoon by James Gillray in 1797. It’s independent in setting monetary policy from the government. There are 440 thousand bars of gold, worth over £200 billion. That makes the Bank of England the second largest keeper of gold in the world (the New York Federal Reserve tops the list).

Bollinger Bands - Developed by John Bollinger, Bollinger Bands function as a type of price envelope, which define the upper and lower price range levels. Bollinger Bands are plotted at a standard deviation level both above and below a simple moving average of the price because the distance of the bands is based on standard deviation, these adjust to volatility swings in the underlying price.

Brent Crude - This is the leading global price benchmark for Atlantic basin crude oils. It is used to set the price of two-thirds of the world's internationally traded crude oil supplies. It is one of the two main benchmark prices for purchases of oil worldwide, the other being West Texas Intermediate (WTI).

Candlestick Charting – Japanese method of illustrating price movements in markets. Red/Filled Candles indicate that the open is higher than the close in the given time period, and thus the price has moved downwards. The ‘Real Body’ is the coloured portion, which indicates the spread between the open & close. The ‘Shadow’ is the thin line that extends from the ‘real body’ that indicates the spread between the high and low within the specified time period. Green/Open Candles indicate that the close is higher than the open, thus the price has moved upwards.

Carry Trading - Carry trading is a trading strategy where investors can borrow at low-interest rates, simultaneously investing in an asset that provides a higher rate of return. This is commonly done with currencies and forex trading but can also be done with other commodities.

CFDs - Short for Contract for Difference. It is a contract between two parties, usually with a buyer and seller, specifying that the buyer will pay the seller the difference between the current value of an asset and its value at contract time.

CLS (Continuous Linked Settlement) – A simultaneous payment-versus-payment settlement system, that reduces settlement risk and offers efficient liquidity by netting payments in advance, so CLS is not required to put up such a quantity of funding, and customers only receive/send the net amount of their trades.

CRB Index - Short for the Commodity Research Bureau Index; is a representative indicator of today's global commodity markets. It measures the aggregated price direction of various commodity sectors.

Credit Default Swap (CDS) - A credit default swap (CDS) is a financial derivative that allows an investor to swap or offset their credit risk with that of another investor. A protection buyer buys a CDS from a protection seller, who agrees to reimburse them if the borrower defaults.

Most CDS contracts are maintained via an ongoing premium payment, similar to the regular premiums due on an insurance policy. A lender who is worried about a borrower defaulting on a loan often uses a CDS to offset or swap that risk. Credit default swaps can be used for speculation, hedging, or as a form of arbitrage and they played a role in both the 2008 Great Recession and the 2010 European Sovereign Debt Crisis. In the first quarter of 2025, the estimated size of the U.S. CDS market was nearly $4.2 trillion, making up 82% of the credit derivatives market.

Cross Currency Pair - This forex pair does not include the US dollar as the base or quote currency. Crosses weigh two currencies against each other without bringing the USD into the equation. By adding cross-currency pairs to their forex trading portfolio, FX traders attempt to hedge against market fluctuations. For instance, by trading the GBP/EUR pair in 2024, traders can manage risks associated with volatility in the US dollar due to the presidential election and Fed rate cuts.

There are two types of crosses to choose from:

• Minor FX Pairs: These are the quintessential cross-currency pairs, consisting of currencies from developed economies, excluding the USD. Some of the most popular minor pairs include the EUR/JPY (Euro/Japanese Yen), GBP/AUD (Great British Pound/Australian Dollar), EUR/AUD (Euro/Australian Dollar), and GBP/JPY (Great British Pound/Japanese Yen).

• Exotic FX Pairs: These pairs comprise one major and one emerging market currency. However, for them to be cross-currency pairs, they cannot include the USD. Also, exotic pairs tend to witness low liquidity and high volatility. Some of the most traded exotic pairs that do not include the greenback are the EUR/TRY (Euro/Turkish Lira), EUR/MXN (Euro/Mexican Peso), GBP/SGD (British Pound/Singapore Dollar), TRY/JPY (Turkish Lira/Japanese Yen) and GBP/PLN (British Pound/Polish Zloty).

Derivatives - A contract between two or more parties whose value is based on an agreed-upon underlying financial asset. E.g. Bonds, commodities, stocks etc.

DJIA - The Dow Jones Industrial Average (DJIA) is a stock market index that measures the stock performance of thirty large companies listed on stock exchanges across the United States. Like the S&P 500, it is one of the most recognizable and influential stock market indices globally. However, it is somewhat limited in its scope, which does not capture a large enough snapshot as the S&P 500 or Russell 3000. 

The DJIA features thirty large-cap companies that are not weighted by market capitalization and does not use a weighted arithmetic mean. The value of the index is the sum of the stock prices of the companies included in the index, divided by a factor which is currently. 

Ultimately, the composition of its stocks and consequently the value of the index itself are affected by the performance of the respective companies as well as other macroeconomic factors. 

How to Invest in the DJIA?   

There are multiple ways to invest in the DJIA. This includes index funds as well as through the availability of derivatives such as option contracts and futures contracts. Most investors who track the index rely on mutual and exchange-traded funds (ETFs), which track its movement. Both a mutual fund or an ETF can effectively replicate the performance of the index by holding the same stocks as the index, in the same proportions.  

Futures and options contracts are also popular methods for exposure to the DJIA. Despite its limitations in assessing the overall state of the US economy, the DJIA remains one of the most referenced in finance. 

Dovish - looser monetary policy, keeping interest rates low with the aim of boosting economic growth. This should increase spending, benefit the economy, and increase employment, but it could come with the risk of rising inflation.

Euribor - is short for Euro Interbank Offered Rate.  The Euribor rates are based on the average interest rates at which a large panel (18) of European banks borrow funds from one another. There are different maturities, ranging from one week to one year. Moreover, it is often structured to maintain banks’ liquidity and provide excess cash stability when needed. Also, the rates are published daily at 11 am Central European Time by the European Money Market institution.

Eurodollar Futures – The first cash-settled futures contract, which has a principal value of $1 million, a 3-month maturity, and varies according to the LIBOR (London Inter-Bank Offered Rate). It is traded on the Chicago Mercantile Exchange and is denominated in ($100 – LIBOR), thus a price of $95.00 implies the market expects a LIBOR of 5% in three months.

Example: A firm knows in January that it will need to borrow $10m to fund an expansion in April. It may short sell 10 ED contracts (=$10m) to hedge against any movement in interest rates. It short sells the 10 contracts at $95.00 in January, implying a LIBOR of 5%. In April, the closing price is $94.00, implying an increased LIBOR of 6%. The firm stands to gain 100 basis points on each contract, with each basis point equalling $25, so $25 x 100 x 10 = $ $25,000, which is the return once it covers the short position. This insulates the firm from the loss incurred by the rising interest rates.

EUR/AUD — The EUR/AUD is the currency pair encompassing the European Union’s single currency, the euro (symbol €, code EUR and the Australian dollar of the Commonwealth of Australia (symbol $, code AUD). The pair’s rate indicates how many Australian dollars are needed to purchase one euro. The euro (EUR) is the world’s second most-traded currency, while the Australian dollar (AUD) is the world’s fifth most-traded currency, resulting in a moderately liquid pair. Overall, the majority of forex brokers maintain spreads between 1.5 to 4 pips. Even though the range of the EUR/AUD can seem fairly subdued at times, it can and does provide lots of volatility, with daily ranges often exceeding 300 pips.

There are several factors that affect the EUR/AUD. This usually includes key economic news or reports that influence the pair. This includes releases like the Consumer Price Index (CPI) for the Eurozone, which gives an idea of changes in the price of goods and services. Additionally, the Westpac Leading Index for Australia is noteworthy as it tracks the growth of a combined index that considers nine barometers of economic activity. The AUD is also affected by commodity prices, government credit ratings, and overall sentiment and risk appetite. The EUR/AUD is one of the most difficult pairs to trade in the forex market. This is due not only to wide swings that can define the pair but also their inconsistency in frequency.Factory gate prices are the prices at which manufacturers sell their products to wholesalers, excluding any transportation costs. These prices are crucial for understanding inflation at the production level, as they indicate how much manufacturers are charging for their goods before they reach retailers and consumers. It is often measured by the Producer Price Index (PPI). Changes in factory gate inflation can influence monetary policy decisions.

Factory Gate Prices - are the prices at which manufacturers sell their products to wholesalers, excluding any transportation costs. These prices are crucial for understanding inflation at the production level, as they indicate how much manufacturers are charging for their goods before they reach retailers and consumers. It is often measured by the Producer Price Index (PPI). Changes in factory gate inflation can influence monetary policy decisions.

Fibonacci Ratios - Fibonacci ratios i.e. 61.8%, 38.2% and 23.6% often find their application on stock charts. Whenever a stock moves either upward or downward sharply, it tends to retrace its path before the next move.

French OATs — (short for Obligations Assimilables du Trésor) are France’s benchmark medium and long-term government bonds. In global fixed income and FX, they’re viewed as one of the core eurozone sovereign instruments, sitting alongside German Bunds and Italian BTPs. The maturities range from 2 to 50 years, issued by the French Treasury (Agence France Trésor) to fund national debt.

They are one step below German Bunds in terms of perceived safety and are:

• Highly liquid

• Euro-denominated

• Issued via auction and syndicated deals

• Used as benchmarks across the European curve If you’re positioned in EUR/USD, EUR/JPY, or trading cross-asset macro, OATs signal:

  • Relative value vs German Bunds

The OAT–Bund spread is a critical gauge of:

• Eurozone political stress

• French sovereign risk sentiment

• Core–periphery divergence

• Risk appetite within Europe

• Widening spreads → risk-off

• Tightening spreads → risk-on

Forward rate expectations:

• Moves in the 2Y and 10Y OAT curve feed into EUR rate expectations, which spill into EUR FX pricing.

FX Liquidity - The ability to be able to buy and sell a currency pair; the easier it is to buy and sell the currency pair, the higher the FX liquidity.

Example - Major Currency Pairs - GBP/EUR, USD/JPY, GBP/USD, USD/CHF.

Minor Currency Pairs - USD/GBP. EUR/AUD, GBP/JPY, CHF/JPY.

FX Option - FX option is an insurance policy on an exchange rate. Its pricing is determined by factors including time to expiry, strike rate, and volatility of the underlying currency pair. It is a contract that confers on the holder the right (but not the obligation) to exchange an amount of one currency for another at a pre-agreed rate (strike rate) on or before a pre-agreed date.

An FX option has four primary economic terms: the currency pair, the amount covered (the notional), the duration of the option (the term), and the level of protection (the strike rate).

• Currency pair: This is the underlying currency that the option is hedging. The holder of the option elects one currency to sell (put currency) and one currency to buy (call currency). 

• Notional: The notional is the amount covered by the option. The call (or the put) currency can be fixed and specified. 

• Term: The term of the option is the length of time before the option expires. The holder of the option has the right, but not the obligation, to exchange an amount of one currency for another at the strike rate at expiry. Delivery of the amounts will usually be two days after expiry. 

• Strike rate: The strike rate is the level of protection. It is the pre-agreed rate that the option holder has the right to exchange the currency. This is often referred to as a measurement of the spot rate or of the forward rate. If it is exactly at the spot rate, it is called ATMS (at the money spot). If it is the forward rate for the same date as the expiration date, it is called ATMF (at the money forward).

G7 - The Group of Seven is an intergovernmental forum consisting of Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

Gazprom - Gazprom is a Russian majority state-owned multinational energy corporation and it is the largest publicly-listed natural gas company in the world and the largest company in Russia by revenue.

Global Macro - The willingness to opportunistically look at every idea that comes along, from micro situations to country-specific situations, across every asset category and every country in the world. It’s the combination of a broad top-down country analysis with a bottom-up microanalysis of companies.

Gold - Gold is the most widely traded and important commodity. Prized for its historical importance and used for trading an exchange of goods, the gold market today is estimated at nearly $2.4 trillion. The value of gold fluctuates constantly, as it trades on public exchanges where it has a price that is determined by supply and demand.

Gold has historically had tremendous significance and even today is extremely sought after. Gold has been used as a currency as it doesn't corrode, and the material allows for some absorption of light, creating a yellow glow, which lends the name yellow metal.

Ultimately, institutional and retail investors buy and sell gold contracts or physical gold, thus creating the demand and supply flow. This can be pure speculation, to acquire or distribute physical gold, or as a hedge for commercial application. For day-traders, the purpose of trading gold is to profit from its daily price movements.

Hammer Formation - A hammer is a price pattern in candlestick charting that occurs when a security trades significantly lower than its opening, but rallies within the period to close near the opening price. This pattern forms a hammer-shaped candlestick, in which the lower shadow is at least twice the size of the real body.

Hawkish - refers to a stance by a Central Bank that prioritises fighting inflation and maintaining price stability, often at the expense of economic growth or employment. Favours higher interest rates to slow borrowing, spending, and demand. Sees inflation risks as a bigger threat than unemployment risks. So it uses tight monetary policy (raising rates, reducing balance sheet assets, etc.). A central Bank can signal concern about the economy “overheating".

Headline CPI - The headline Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by consumers for a basket of goods and services. Headline CPI is a term that traders use to avoid confusion with core CPI, which strips out the volatile price changes of food and energy.

It is a widely used measure of inflation and is calculated and published by statistical agencies, such as Statistics Canada and the Bureau of Labor Statistics (BLS) in the United States.

The basket of goods and services used to calculate the CPI is designed to be representative of the consumption patterns of the population. It typically includes items such as food, clothing, housing, transportation, medical care, and recreation. The prices of these items are collected periodically, usually on a monthly basis, and are used to calculate the CPI.

The headline CPI measures the overall change in the price level of the basket of goods and services. It is a broad measure of inflation that captures changes in the prices of all goods and services consumed by households. It is considered the most widely used measure of inflation, as it gives a general idea of the overall trend of the price level.

The headline CPI is used by central banks, such as the Bank of England, to make monetary policy decisions, and it is also used by governments and businesses to make economic decisions. It is also used by households as a benchmark for their spending and investment decisions.

Herd Mentality Bias - The herd mentality bias describes the behaviour of an individual who joins a group and starts following the actions of other group members with the belief that they have a thorough knowledge of the subject at hand.

It can be extrapolated to the financial sector when an investor will succumb to the group’s flow by following and copying the plays dictated by them rather than his own strategy.

Despite our individuality, people are hard-wired to follow the herd. Non-conformity, when choosing differently from what seems to be the group’s decision, is often correlated with a sense of fear. When one swims against the current, there is also a chance he will be made fun of because of that choice.

These perceived risks add emotional and psychological, paired with the fear of being on the wrong side of a trade, and pressure towards following the herd mentality.

Mentions of a herd mentality can be found in Søren Kierkegaard’s, Friedrich Nietzsche’s, Sigmund Freud’s, and Carl Jung’s works.

The thinkers at the time, however, referred to it as “the crowd”, “herd morality/instinct”, “crowd psychology”, “collective unconscious” or simply as “emulation”.

A relevant study entitled “Extraordinary Popular Delusions and the Madness of Crowds” was made in 1841 by Charles Mackay. The actual term was coined by Wilfred Totter, a surgeon, in his work entitled “Instincts of the Herd in Peace and War”.

The late 20th and early 21st century dotcom bubble is quite possibly still the leading example of demonstrating how the herd mentality bias can be applied to finance.

Investors completely disregarded the basic fundamentals of investing and gave in to the herd instincts by feverishly investing in companies that were far from financially sound.

Helicopter Money - Helicopter money is a monetary policy concept where a central bank distributes money directly to the public, usually by handing out cash or through a direct deposit into citizens' bank accounts. The term was popularized by economist Milton Friedman, who used it as a thought experiment to explain the impact of increasing the money supply on an economy.

Ben Bernanke, former chairman of the Federal Reserve, has been associated with the concept of helicopter money due to his suggestion that the central bank could use this type of policy to address economic downturns or periods of deflation. Bernanke suggested that, in a situation where traditional monetary policies are ineffective, the central bank could take aggressive measures such as distributing money directly to the public to stimulate economic growth.

In trader talk, helicopter money is also sometimes used to refer to quantitative easing.

Hindsight Bias - Also known as the “knew-it-all-along” effect or “creeping determinism”. The hindsight bias reflects the tendency to look back at certain events which at the time were unforeseeable and impossible to predict, and think that their outcome was, in fact, predictable.

Decision-making is partially made on an individual’s ability to predict consequences and by falling into this trap, said individual will overestimate his ability to foresee the possible implications of his future decisions and leading to unnecessary risks.

Looking back at past events often comes with the price of selectively remembering information which confirms what is now known to make sense and creates a story of how events transpired the way they did. It is most likely to occur when there is a negative outcome, as there is a general tendency for people to pay more attention to them.

The Hindsight Bias, even though it was not yet named at the time, emerged in psychological research during the late 20th century.

Baruch Fischhoff, a psychology graduate student in the 1970s, spearheaded the research after finding inspiration in a seminar where speaker Paul E. Meehl noted this phenomenon while doing research on how clinicians estimated the outcomes of their cases.

Fischhoff later conducted a study where he asked participants to attribute a certain probability to a set of fixed outcomes on how Richard Nixon’s visit to Beijing would go.

After the president’s return, Fischhoff asked the participants to, once again, do the same and concluded that they were in full Hindsight Bias mode. Accordingly, and suitably, the title of his paper was "I knew it would happen".

Historical Data - Historical data is a collection of key statistics pertaining to the pricing of a financial instrument over a given period of time. This often takes the form of a comprehensive database or spreadsheet, which can be used in conjunction with broker trading platforms to display the data in the form of visual charts. Historical data itself is typically composed of the opening price, highest price, lowest price, closing price and volume of an instrument for a specific timeframe. The main purpose of traders acquiring historical data is for back-testing a strategy. Without knowing how one’s strategy fared in the past, a trader is essentially assuming a large degree of risk via speculative means. The lowest level of historical data is tick data and is the most useful to a trader. Above this, the data is based on timeframes, depending on which market and with which platform one is trading. For example, in the retail foreign exchange market which is dominated by the MetaTrader platform, there are certain key timeframes that are used. This includes the one minute (M1), five minutes (M5), fifteen minutes (M15), thirty minutes (M30), one hour (H1), four hours (H4), daily, (D1), weekly (W1) and monthly, (MN). A lot of forex brokers now offer the ability to download historical data on these timeframes from their servers, (sometimes for a cost), which can then be imported to the platform itself to be ready for testing. Not only can data be imported to a platform, but it can also be exported, with most platforms offering the trader a variety of import and export formats, such as CSV, HTM, PRN, HST or TXT.

Hyperinflation - Hyperinflation is the worst type of inflation characterised by rapid and out-of-control price increases. The monthly inflation rate generally surpasses 50%. The main cause of hyperinflation is an excessive and prolonged increase in the money supply. The central bank can increase the money supply in response to different problems like servicing debt or increasing economic output, but if it’s done without addressing the main causes of the problems it can lead to just an inflation spiral. Zimbabwe had recently experienced hyperinflation with an inflation rate that reached 79,600,000,000% in 2008. Prices were doubling every day and the unemployment rate reached 80%. This is just one example of how hyperinflation destroys an economy. There are also developed economies that experienced hyperinflation like Germany in 1923 or Yugoslavia in 1993. Hyperinflation can lead to such a big loss of confidence in the monetary system that people can switch to a barter economy.

ICO - Initial Coin Offerings (ICO) are a kind of crypto token sale that is used as a method of fundraising. These are commonly associated with Initial Public Offering (IPO), in which stocks are sold to raise money for a company, though ultimately have several differences. For example, in order to launch an ICO, a company simply needs to create a website, issue a token, and set a time and date for the sale. Investors can purchase ICO tokens in exchange for another cryptocurrency, such as Bitcoin or Ethereum. After a set amount of time, investors receive the tokens they purchased in the sale. One construct that accompanies nearly every ICO has been the prevalence of a whitepaper. A whitepaper operates as both a persuasive sales pitch and an in-depth report on a specific topic, which presents a problem and provides a solution that the project seeks to solve. Most marketers also rely on whitepapers to educate their respective audiences about a particular issue. Additionally, markets use these resources to explain and promote a particular methodology that an ICO could potentially solve. However, the information enclosed in whitepapers have historically been met with scepticism.

Indices - Stock market indices represents an index that measures a particular stock market or a segment of the stock market. These instruments are important investors as they help compare current price levels with past prices to calculate market performance. The main two parameters for indices are that they are both investable and transparent. For example, investors can invest in a stock market index by buying an index fund, which is structured as either a mutual fund or an exchange-traded fund, and track an index. The difference between an index fund's performance and the index, if any, is called tracking error. Most major countries boast multiple indices. Commonly traded indices include the S&P 500, NASDAQ-100, Dow Jones Industrial Average (DIJA), EURO STOXX 50, Hang Seng Index, and many more. Stock market indices can be characterized or segmented by the index coverage set of stocks. The overall coverage of an index constitutes an underlying group of stocks, most commonly grouped together by underlying investor demand. Retail brokers offer indices exposure through the use of contracts-for-difference (CFDs) or exchange-traded funds (ETFs). Each are popular ways to trade specific markets and are almost always on offer at most brokers. Investors can choose between multiple types of indices that traditionally fall within several categories. This includes country coverage, regional coverage, global coverage, exchange-based coverage, and sector-based coverage. All indices are ultimately weighted in a number of different ways. The most common mechanisms include market-capitalization weighting, free-float adjusted market capitalization weighting, volatility weighting, price weighting, and others.

Inflation - Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods. In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.

How Does Inflation Affect Forex?

The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.

ISM - Short for the Institute for Supply Management, this manufacturing index shows business conditions in the US manufacturing sector, taking into account expectations for future production, new orders, inventories, employment and deliveries. It is a significant indicator of the overall economic condition in the US. The ISM Prices Paid represents business sentiment regarding future inflation. A high reading is seen as positive for the USD, while a low reading is seen as negative.

Insider Trading - Insider trading is the practice of trading company stocks or securities based on material obtained from nonpublic information regarding the aforementioned company. This is a form of market abuse and many countries have regulations and laws in place that are designed to curb this practice. Insider trading is illegal for obvious reasons, giving specific investors access to information that the rest of the public does not have. Any publicly traded company adheres to regulations that no individuals are privy to insider information that govern their decision-making. Utilizing this information is simply not fair to other investors who lack such resources, which of course opens the potential for sizable investments from parties with more information. Insider trading varies in frequency, regulations, and penalties based on country. In the United States and Europe, there are numerous laws against this practice. Insider trading covers not only insiders themselves but also any persons related to them, such as brokers, associates, and even family members. Many jurisdictions require that such trading be reported so that the transactions can be monitored. In the US and many other jurisdictions, trading conducted by corporate officers, key employees, directors, or significant shareholders must be reported to the regulator or publicly disclosed. In the US and Europe, not all trading using non-public information is considered insider trading. It is impossible to prevent basic types of information from being transmitted, and for the most part, small slips in information are not seen as problematic. This does not pertain to more complex forms of information such as mergers, acquisitions, etc. which are held to higher standards by regulators.

International Emergency Economic Powers Act (IEEPA) - is a 1977 U.S. federal law that grants the President broad authority to regulate economic transactions and declare a national emergency to deal with unusual and extraordinary threats to the nation's security, foreign policy, or economy originating from outside the U.S. This foundational law underpins much of the U.S. sanctions regime, administered by the Office of Foreign Assets Control (OFAC), and allows the President to impose restrictions on trade and other economic activities. 

The act generally requires the President to consult with Congress before invoking these powers, though the specifics of this consultation are often discussed in the context of practical implementation. 

Interbank Market - The interbank market is the financial market where banks trade currencies. It is the wholesale market for forex trading and comprises the largest commercial and investment banks. These banks will trade currencies with each other at an agreed-upon rate, and the trading is done over the counter (OTC) which means there is no centralized exchange. The interbank market is the most liquid and efficient part of the forex market, and the rates at which currencies trade in the interbank market serve as a benchmark for the rest of the market and are incredibly tight.

The Japanese Yen - The Japanese yen (JPY) is the official currency of Japan and at the time of writing is the third most-traded currency in the world behind only the US dollar and euro. The JPY is used extensively as a reserve currency and is relied upon by forex traders as a safe haven currency.

Originally implemented in 1871, the JPY has had a long history and has survived multiple world wars and other events. This was followed by the creation of the Bank of Japan (BoJ) in 1882 and the Japanese government's full oversight of the JPY only in 1971. Japan has historically maintained a policy of currency intervention, which continues to this day. The BoJ also adheres to a policy of zero to near-zero interest rates and the Japanese government has previously had a strict anti-inflation policy

What Factors Affect the JPY?

The aforementioned role of the BoJ has dramatically shaped the JPY in forex markets. Forex traders closely watch any further changes in monetary policy by the central bank. Additionally, the Overnight Call Rate is the key short-term inter-bank rate. The BoJ utilizes the call rate to signal monetary policy changes, impacting the JPY. The BoJ also purchases both 10- and 20-year Japanese government bonds (JGBs) monthly in order to inject liquidity into the monetary system. The consequent yield on the benchmark 10-year JGBs helps serve as a key indicator of long-term interest rates.

Jobless Claims - Jobless claims are a weekly statistic reported in the United States that represents a key barometer for domestic employment. As one of the most closely watched US indicators, jobless claims carry a lot of weight in financial markets, namely forex and the stock market. Jobless claims are reported on a weekly basis by the Department of Labor. While painting a picture of the overall health of the economy, jobless claims can be broken down into two types.

This includes initial jobless claims or persons filing for unemployment for the first time.

Additionally, this also entails continuing jobless claims, indicating unemployed people who have been receiving unemployment benefits previously.

Jobless claims can give an important snapshot of the US economy, which has impactful consequences on the US dollar. During times of economic stress, a surge in jobless claims is likely to signal the US economy is performing badly. This was on full display in early 2020 due to the outbreak of Covid-19. Such scenarios reduce risk appetite by investors who traditionally look to the US economy for broader signals.

History is full of examples of both expanding and contracting labour markets.

By extension, reduced jobless claims traditionally are seen as a strength that can power recoveries or rallies in US markets.

It should be noted that initial jobless claims and continuing jobless claims often do not yield the same market impact.

This is because initial jobless claims measure emerging unemployment, which is released one week before continuing jobless claims. As such, the initial claims typically have a higher impact on the markets.

Kiwi Bond - A kiwi bond is a fixed-income security offered by the government of New Zealand. The name kiwi is derived from a native bird found in New Zealand much like the Canadian coin called loonie after the loon, a common bird found in Canada. Kiwi bonds are available only to New Zealand residents and cannot be purchased by foreigners even if they are New Zealand citizens. They can be bought only in New Zealand dollars with a minimum investment of NZ$1000 up to a maximum of NZ$500,000. The interests on the bonds are paid quarterly and the maturities of the bonds range from 6 months to 4 years. Kiwi bonds are considered one of the safest investments for residents since the New Zealand government fully backs them and with an AA+ rating, they hold the second-highest credit rating in the world.

Know Your Customer - Know Your Customer (KYC) is defined as the process by which a broker is verifying the true identity of its clients. This is done in order to comply with multiple regulations that have now become commonplace in several jurisdictions worldwide. KYC provides a lot of uses and is typically utilized to assess the suitability of customers when it comes to anti-money laundering regulations. Additionally, these measures help curb any type of financial fraud and determine whether a client is potentially risky for the brokerage. KYC guidelines in financial services dictate that individuals make a concerted effort to verify the identity, suitability, and risks involved with maintaining a business relationship. This has obvious benefits for both parties. KYC processes are also performed by companies for the purpose of ensuring their proposed customers, agents, consultants, or distributors are anti-bribery compliant.

Korea Stock Exchange - The Korea Stock Exchange is part of the Korea Exchange with the ticker (KRX). The Korea Exchange has markets in different securities like equities and bonds and it’s the only operator in South Korea. The Korea Exchange lists more than 2,400 companies with a total market cap of $2.6 trillion. The trading sessions are much like the other stock markets in the world with an opening at 9 am in the morning and a closing at 3:30 pm in the afternoon from Monday to Friday. As for the US, we have the S&P500 index, and the Korea Exchange has the KOSPI index that comprises all the common stocks traded on the Stock Market division, and it’s calculated based on market capitalisation like the S&P500. The biggest companies in the index by market cap are Samsung, LG Energy Solution, SK Hynix, Samsung Biologics, LG Chem and Hyundai.

Kusama (KSM) - Kusama is the current pre-production environment for the well-known Polkadot, where developers can experiment and test their newly made blockchains or apps before their actual release.

Kusama is known for being the grounds for the early testing stages of Polkadot’s projects and upgrades, or a developer’s sandbox, but with actual cryptocurrency being traded. Flexibility is greatly enhanced as the primary goal of Kusama is to facilitate testing as much as possible. As such, Kusama will mimic all of Polkadot’s main design features while having much less strict rules.

Kusama has two types of blockchains:

1. The relay chain: which acts as the main network and where transactions are permanent

2. Parachains: These are user-generated networks, customized for any use. They employ the relay chain’s computing resources in order to attest to accuracy in transactions

As new projects start out on the Kusama network, developers can galvanize users before officially releasing them. Kusama was created in 2016 by Gavin Wood, Robert Habermeier, and Peter Czaban, the men behind Polkadot.

Leverage - In terms of trading, leverage can be characterized as a loan, supplied by a broker, which allows a trader to be able to control a relatively large amount of money with a significantly lesser initial investment. As such, leverage effectively allows traders to make a much higher return on investment compared to trading without any leverage. Traders use leverage to make a profit from smaller movements in certain assets, such as stocks and foreign exchange. Given such small movements in these instruments at times, trading without any leverage could potentially diminish profits. As a result, traders routinely rely on leverage to make financial trading viable. As a rule of thumb, the higher the fluctuation of an instrument, the larger the potential leverage offered by brokers. The most common market where leverage is utilized is in the forex market, as most currency fluctuations are relatively tiny and encompass fractions of units. There is also a lot of variation with trading leverage in each account, which can often vary from 1:50 to 1:200 on most forex brokers. However, many brokers can offer up to 1:500 leverage, meaning for every 1 unit of currency deposited by the trader, they can control up to 500 units of that same currency. As an example, if a trader was to deposit $1000 into a forex broker offering 500:1 leverage, it would mean the trader could control up to five hundred times their initial outlay, i.e. half a million dollars. By extension, if an investor using a 1:200 leveraged account, was trading with $2000, it means they would be actually controlling $400,000, i.e. borrowing an additional $398,000 from the broker. Assuming this investment rises to $402,000 and the trader closes their trade, it means they would have achieved a 100% ROI by pocketing $2000. Using leverage, the potential for profit is clear to see. However, leverage also opens up the possibility of losing a much greater amount of their capital. If the value of the asset turned against the trader, they could have lost their entire investment and more.

Liquidity - Liquidity refers to the extent of a financial instrument’s ability to be bought or sold without causing price fluctuations. Thus, if an asset is extremely liquid, it means one can trade that asset in the knowledge that one’s specific dealing won’t create significant movements in the market. This is because there exists such a large number of traders going both long and short, generating huge volume for that particular asset. Take the example of the foreign exchange market – it is the world’s most liquid market, since numerous banks, hedge funds and individual traders partake in the buying and selling of vast cumulative amounts currencies every single day. In fact, over $5 trillion is exchanged daily, as mentioned by the Bank of International Settlements. If a trader wants to go long on the currency pair EUR/USD, they will have no trouble in finding traders wanting to go the opposite way, due to such ample liquidity. The EUR/USD is the world’s most liquid trading instrument, in any market. It is extremely easily bought or sold, with an immense quantity of trading activity for the pair. Liquidity reflects the quantity and the frequency of the asset that’s being traded, i.e. the more an asset is traded, the more liquid that asset is, making it virtually effortless for the asset to be bought and sold. Likewise, the less an asset is traded, generally the less liquid the asset is, making it more difficult for that asset to be bought or sold. It goes without saying that liquidity is one of the key attributes a trader looks for, when deciding on whether to pursue trading an instrument, since it tells the trader how stable a market is despite masses of trades being undertaken. This is exactly why the forex market is so enticing, since its liquid environment allows massive trading volumes to occur without much effect on the currency pairs’ exchange rates.

MACD - Moving Average Convergence/Divergence (MACD) is a technical analysis indicator used for trading financial instruments, such as stocks, commodities, and foreign exchange. Created by Gerald Appel in the 1970s, its purpose is to provide information to the trader with regard to an instrument’s current movement and potential behaviour. Traders typically use the MACD to assist them in making decisions on whether to buy or sell a given asset. At the heart of it, the MACD indicator is essentially a couple of moving averages with a very simple formula. For example, this can include the difference between a 12-period exponential moving average (EMA) and a 26-period EMA, which gives the MACD main line. The signal line is then generated by 9-period EMA of the MACD. In some broker platforms, the default MACD indicator doesn’t have the main MACD line but rather is displayed as a histogram. Despite the fact the MACD is merely an EMA crossover indicator, it does often give reliable signals, especially when combined with other technical indicators and tools. Although it is a lagging indicator, the MACD helps to eliminate market noise. Most traders use the default values for the MACD period settings, which are 26, 12, and 9, although these can be changed to whatever values suit the trader’s style. MACD can also be used for divergence trading – meaning, when the price of an instrument is diverging away from the MACD itself, this insinuates a potential for the trend to come to a halt. In addition, traders often observe the MACD moving above or below the centre zero line, which can signify momentum.

Majors - There are hundreds of different currency pairs and crosses that can be traded. Major currency pairs or majors represent the most liquid pairs and are widely traded. These include EUR/USD, USD/JPY, GBP/USD, and USD/CHF. The reason for the popularity of these trading pairs is obvious, given they include currencies of some of the world’s most important economic centres. Additionally, these currencies comprising majors also constitute a significant share of global economic transactions. The US dollar, euro, Japanese yen, British pound, and Swiss franc are all among the top traded currencies worldwide. The EUR/USD alone is the world's most widely traded currency pair, representing approximately 20% of all foreign exchange transactions.

Margin Call - A margin call is a situation in which the value of a trader’s margin account falls below a broker's required amount, triggering safeguards. In this instance, investors must deposit more money in the account or sell some of the assets held in their account to compensate for losses and raise collateral. Margin calls can occur across virtually any asset in which leverage is used. Most commonly this includes stock and foreign exchange. Brokers can make margin calls to reduce the risk of an investor defaulting on the loan they got under a buying-on-margin agreement. In isolated situations, retail brokers can also sell investors’ securities, or even take legal action, if they don’t comply with margin requirements. A margin requirement can be summed up as the minimum equity sum investors must keep in their margin account preceding a trading transaction. While 25% is the minimum industry requirement, trading brokerages sometimes require between 30% to 40% of the total securities value as a margin requirement as a way to reduce the risk of an investor potentially defaulting on the loan. To understand margin calls is to understand margin trading. For example, an investor's margin account contains assets bought with borrowed money. While margin trading offers the potential for more significant returns, it also increases the risk of losses, including running the risk of a negative balance.

Market Sentiment - Market sentiment is a psychological attitude that captures the mood and attitude of investors, usually towards a specific security or asset. This sentiment can be segregated into a bullish or bearish mood in the market. As such, certain trading activity or price behaviour will also impact market sentiment. For example, bullish sentiment indicates a growth in the price of securities, whereas a bearish sentiment sees falling prices. Many traders use broader market sentiment or sentiment data to help identify trends that may not seem apparent to many other investors. This can give way to investor sentiment indices or contrarian signals surrounding assets, which helps inform investors to make more educated decisions. Market sentiment is not always grounded in fundamentals and for this reason is seen as inferior to other methods trading. This form of investing instead deals with emotion and feelings of traders. However, many traders, specifically shorter-term investors, will rely on market sentiment. Sentiment traders put a lot of merit into these trends, just as other investors look for specific signals or fundamental barometers to inform their decision making. This is due to the powerful impact of sentiment on short-term indicators or attitudes. Many investors also prefer taking contrarian views and positions, actively trading against an engrained market consensus. In this instance, if the broader market is buying a security, a contrarian investor would instead sell, and vice versa. This is a popular technique in the stock market, which can characterize stocks as either over or undervalued, based in large part by market sentiment.

Merger - A merger can be defined as the absorption of the interest of another company or entity. This process can include an estate, contract, or other elements of the business. There are no specific rules or formats for a union in general both in the United States and other countries. Mergers are purely a method of combining two or more organizations, business concerns, or other related interests. The terms of a merger are generally orchestrated by the agreement of the parties involved. In the financial space, a merger refers to an agreement between two or more companies or corporations, public and private, to merge into one entity. Mergers differ from acquisitions, in which the buyer absorbs all the assets and liabilities of another. A purchase does not necessarily have to be friendly and can be hostile. One business or venture could simply buy up enough shares of a corporation to control it without the consent of its previous controllers, whereas a merger is typically achieved by an understanding. A merger is typically a decision by two companies to combine all operations, officers, structure, and other functions of the business. Mergers are meant to be mutually beneficial for the parties involved. In the case of two publicly-traded companies, a merger usually involves one company giving shareholders in the other its stock in exchange for surrendering the stock of the first company. Mergers can have both abrupt and sizable implications on share prices. Following a merger, the acquiring company continues to function, while the acquired company ceases to exist. This does not mean that the brand disappears, however.

MetaTrader 4 - MT4 operates as a multi-asset trading platform for not only FX, but equities and commodities as well. The platform is also utilized for analyzing various financial markets, and using expert advisors, making it highly versatile for users. While MT4 has been the de-facto trading platform since 2015, many brokers have now migrated to a newer variant, the MT5 platform. Even with the emergence of MT5, MT4 is widely used in the online retail foreign exchange space by traders since its inception by MetaQuotes Software. This software is licensed to FX brokers that offer the software to their clients and consists of both a client and server component. Additionally, the server component is run by the broker and the client software is provided to the broker’s customers. Users can use it to see live streaming prices and charts, to place orders, and to manage their accounts. This includes mobile trading capabilities and advanced trading signals. MT4 has retained its popularity due to the ability to bolster traders’ experiences with the platform. MT4 has also dominated the field of FX traders due in large part to its ability for end users to write their own trading scripts and robots that could automate trading. This has been a large advantage for brokers, who have made this platform the industry standard for over a decade. Currently, millions of traders use MT4 globally for their trading needs making it one of the most successful platforms of all time. MT4 also caters to a broad spectrum of traders of all skill levels, adding to its flexibility amongst brokers. The platform leverages advanced technical analysis, flexible trading system, algorithmic trading and expert advisors, as well as mobile trading applications. At the time of writing, MetaTrader supports over 30 languages while the installation takes no more than a few minutes to complete. MT4 is also a versatile program for brokers, given its availability on Windows, MacOS, and Linux.

Mirror Trading - Mirror trading is a popular method of trading in forex markets that allows investors to select a trading strategy and effectively mirror executed trades. While common in the forex space, mirror trading can also take place across equities or other asset classes. Many brokerage accounts offer access to mirror trading, which can be selected based on personal trading preferences and tailored approaches. Mirror trading in the forex space relies on matched preferences, ranging from risk tolerance, volatility, profits, etc. This process involves the use of trading signals, which will be sent out by a strategy and automatically be applied to a client’s brokerage account. Trading signals are delivered and executed automatically with both exit and entry points across many commonly traded currency pairs. Mirror trading is popular for its hands-off approach by investors who do not need to intervene at all to execute even complex trading strategies. Furthermore, clients can also engage in multiple strategies simultaneously, which makes this a particular draw. Such methods are helpful in diversifying a trader’s portfolio, while also managing the level of risk. Mirror trading differs notably from copy trading. The methods differ by virtue of how accounts are synchronized. For example, in copy trading, traders directly copy the moves of individual traders. By extension, mirror trading decisions are based on algorithms from trading patterns from multiple traders or entities.

Moving Average Crossovers - The moving average crossover is a technique used by traders of financial markets to assist in making trading decisions. Typically, two moving averages are plotted on the chart, one of them a faster moving average, the other one a slower moving average. A faster moving average intersecting above the slower moving average is known as a bullish crossover. Additionally, a faster moving average intersecting below the slower moving average is known as a bearish crossover. The moving average crossover is a popular method used in technical analysis, for two main reasons, it’s simplicity and its effectiveness. Traditionally, a single moving average is used by traders to help gauge the overall trend. For example, in forex trading, many traders will use the 200 SMA (simple moving average) which is often a good support and resistance indicator. However, by using two moving averages, it gives traders the ability to pick out specific turning points in the market. The usefulness of the moving average crossover is that it can be used on any timeframe and in any market. The faster moving average is a shorter period MA, meaning it only considers the market over a shorter period of time. Consequently, it’s much more prone to changing scope and direction. However, the slower moving averages are a longer period MA, meaning it considers the market over a longer time period. This results in a MA which is less reactive to rapid fluctuations in price, giving it a visually smoother look on the charts. There are a number of different ways to trade the moving average crossover, but without a doubt the most popular way is the classic two MA crossover. This helps traders, depending on the period settings of both MAs, either get in near the beginning of a trend, or enter as the trend gets established.

Month-end Flows - Usually a time when big investors, like pension funds and mutual funds, might adjust or rebalance their portfolios at the end of each month.

Corporate Month-end Flows - Financial activities from corporates which can include things like hedging, converting foreign profits back into their home currency, paying dividends, or settling bills in other jurisdictions.

Mutual Fund - A mutual fund is defined as a professionally managed investment fund, combining money from multiple investors to purchase a basket of securities. These can include stocks, bonds, currencies, etc. Mutual funds are extremely popular in the United States amongst both retail investors and corporates. They differ notably from hedge funds, which cannot be sold to the public and are typically reserved for institutional investors and high net-worth traders. These funds are most utilized in the US and Canada. Europe relies on similar funds, known as investment companies with variable capital. Mutual funds adopt a portfolio-style approach to investing, making them popular amongst traders. Their popularity is attributed to diversified strategies, liquidity, professional management, and overall economies of scale given the access of pooled funds. By extension, these advantages come at a cost, since mutual funds charge fees and expenses for their curation and management. There are several attributes that differentiate mutual funds. This includes the composition of funds and reliance on certain instruments skewing them as high or low-risk. Additionally, mutual funds can be composed of assets in specific proportions or weighted more heavily towards certain instruments such as fixed income, equities, or bonds. Mutual funds can also be referred to as index fund, which operate as more passively managed funds, tethered to the performance of a specific index. Some of the best examples of this include funds mirroring the S&P 500 index or other indices in the US stock market. These funds are also popular components of retirement accounts in the US as large fund managers are better able to appropriate investor funds in diversified strategies.

NASDAQ - The Nasdaq Stock Market or NASDAQ is an American stock exchange. It trails only the New York Stock Exchange (NYSE) in market capitalization and is part of a network of stock markets and options exchanges. Launched back in 1971, NASDAQ is the acronym for the National Association of Securities Dealers Automated Quotations. Since then, it is known simply as NASDAQ and has become one of the most influential exchanges worldwide. Along with the Dow Jones Industrial Average (DIJA) and S&P 500 Index, this is one of the three most-followed stock market indices in the United States. The NASDAQ was the world’s first electronic stock market, and has since assumed the majority of major trades that had been executed by the over-the-counter (OTC) system of trading. In particular, the exchange also features the NASDAQ Composite, which includes almost all stocks listed on the NASDAQ stock market. Overall, the NASDAQ stock market has three different market tiers. This includes the Capital Market, or an equity market for companies that have relatively small levels of market capitalization. The listing requirements for small cap companies are less stringent than for other Nasdaq markets that list larger companies with significantly higher market capitalization. Additionally, the Global Market is made up of stocks that represent the Nasdaq Global Market. The Global Market consists of 1,450 stocks that meet the exchange’s financial and liquidity requirements, and corporate governance standards. Finally, the Global Select Market is a market capitalization-weighted index made up of 1,200 US-based and international stocks that represent the Global Select Market Composite.

Non-deliverable forward - A non-deliverable forward (NDF) is a two-party currency derivatives contract to exchange cash flows between the NDF and prevailing spot rates. One party will pay the other the difference resulting from this exchange. The notional amount is never exchanged.

Cash flow = (NDF rate - Spot rate) * Notional amount Currency examples - INR, KRW, CLP, IDR, MYR, CNY

Nonfarm Payrolls - Nonfarm Payrolls (NFP) is the single biggest monthly economic news indicator released out of the United States, usually on the first Friday of every month. Reported by the US Bureau of Labor Statistics, the NFP measures the increase or decrease in the number of people employed during the previous month, except for those working in the farming and agriculture industry. The NFP can also be referred to as an Employment Change, and is the most anticipated monthly report. As it's released at the beginning of each month, it typically causes huge movements in the financial markets, especially in the foreign exchange market. Traders care about the NFP because the creation of jobs itself is one of the most important indicators of consumer spending, a vital barometer that underpins the country’s economy. NFP does not include farming jobs, primarily because these jobs are markedly seasonal, which can cause inconsistent reporting. Essentially, it represents all business employees (excluding general government employees), private household employees, and employees of non-profit organizations, accounting for about 80% of the workers who contribute to the GDP. Prior to the actual figure being released, industry experts make an educated guess as to what the figure will turn out to be, known as the “expected figure” or “forecasted figure”. Thus, if the actual figure released is greater than what’s expected, then there are more people employed than initially thought, which is great news for the economy. Such an outcome results in traders investing in the US dollar, giving it strength. Likewise, if the actual figure is lower than the forecast, the US dollar typically weakens. However, this is by no means a hard and fast rule, as there are other news reports coming out at the same time, plus revisions can make things extremely haphazard.

OFZs – Russian Acronym for Federal Loan Obligations, a coupon-bearing loan bond issued by the Russian Government. First introduced in 1995 as a medium- and long-term instrument to finance the federal budget and occasionally bailouts. Now held by 27% international investors as of Sep 2018, having been entirely domestic before 2006. Was connected to Euroclear in 2012.

Options - Options represent a contract that enables investors to buy or sell underlying instruments such as security, exchange-traded funds (ETFs) or indices at a certain price over a certain period of time. Buying and selling options can be done on the options market, which trades contracts based on securities. When trading options, the price of the option is thus a percentage of the underlying asset or security. Investors who purchase an option are able to buy shares at a later time and are known as a call option, while buying an option that allows you to sell shares at a later time is called a put option. Notably, options differ from stock trading because they do not represent ownership in a company. Additionally, futures utilize contracts much in the same way as options, though options are considered a much lower risk due to the fact that you can withdraw or close an options contract at any point. When buying or selling options, traders retain the right to decide how to exercise that option at any point up until the expiration date. As such, buying or selling an option doesn't mean you actually have to exercise it at the buy/sell point. This flexibility with options is a notable distinction from futures and are considered derivative securities.

Overbought/Oversold Indicators - Overbought/oversold indicators are a category of technical analysis visual tools which allow traders of financial markets to identify potential peaks and troughs of a particular asset. Overbought and oversold are actually very vague expressions. The term overbought refers to the point at which the price of an asset has been increasing continuously for a prolonged period of time without a reversal. By extension, oversold refers to the point at which the price of an asset has been declining continuously for a prolonged period of time without a reversal. Thus, overbought/oversold indicators incorporate the notion that the price of an asset cannot continue in the same direction indefinitely. Despite the relative ambiguity of the exact definition of the terms overbought and oversold, that didn’t stop mathematicians in developing indicators that attempt to pick out overbought and oversold zones. Indicators such as the Stochastic Oscillator, the Relative Strength Indicator (RSI), Williams’ Percent Range (WPR) the Commodity Channel Index (CCI) are just a few of the commonly used overbought/oversold indicators used by traders worldwide. The Stochastic and the RSI both share similar overbought and oversold zones, with anything over 80 considered overbought and anything below 20 considered oversold for the Stochastic, and 70/30 for the RSI, with both of their maximum and minimum ranges fixed from 0 to 100. Other oscillators like the CCI do not have a fixed minimum or maximum, while others can be placed directly overlying the candlesticks themselves. The common disadvantage shared by all of them is something unavoidable, which is no single indicator alone can predict the turning point of the market. What often happens is a price will remain in an overbought or oversold state for a long period of time, rendering any attempts at picking out reversals as fruitless. However, when used together, a lot of the false signals are eliminated, giving the trader much more confidence in determining the end of a trend.

Parabolic Stop and Reverse - The Parabolic Stop and Reverse (SAR) is an indicator used in technical analysis in financial markets. Developed by Welles Wilder, the Parabolic SAR gauges the market’s momentum and is used to identify trends, producing a series of dots above or below the candlesticks of a particular instrument. The primary function of the Parabolic SAR is to chart and identify potential reversals in the market price direction of traded goods such as securities or currency exchanges such as forex. Whilst the mathematics behind the Parabolic SAR might be complex, the basic use of the indicator is exceedingly simple. Namely, it signals to buy when the Parabolic dot appears below the price, and sell when the dot appears above the price. The indicator also informs the trader where to place one’s stop loss, based on how far the dot is below or above the price. The Parabolic SAR is a lagging indicator, as opposed to a leading indicator, meaning it generally follows price. Consequently, it can only really be used in trending market conditions. A trader attempting to use the indicator during a sideways market will very likely suffer losses. Hence, the creator of the indicator, Welles Wilder stressed the importance of using complementary indicators in determining the strength of a trend.

The Parabolic SAR has two main parameters:

A setting of 0.02 for its step.

A setting of 0.2 for its limit.

By adjusting these values, a trader can make the indicator more or less sensitive. A higher setting will result in more sensitivity and a lower setting will result in a higher sensitivity.

Pips – is one-hundredth of one per cent, in other words, the fourth decimal place (0.0001), of an exchange rate, except for Japanese Yen (JPY) pairs, which are quoted using two decimal places (0.01). These are used to assess the bid/ask spread and profitability of a trade.

Pivot Points - In trading, a pivot point is a tool used in technical analysis to determine key support and resistance levels. This is done by calculating the average prices of the high, the low and the close of the preceding trading period, often over a 24-hour period. When using pivot points, a trader typically observes price action related to these pivot levels. Thus, if price action occurs above the pivot point, the market is considered as bullish for that period, and if price action occurs below the pivot point, the market is considered bearish for that period. Although the main pivot point is the most important line, traders utilize surrounding support and resistance levels derived from the main pivot, called Support 1, Support 2, Support 3 (shortened to S1, S2, S3), and Resistance 1, Resistance 2, Resistance 3 (R1, R2, R3). These additional levels are calculated by subtracting or adding price differences from the prior trading ranges.

Quantitative Easing - Quantitative easing (QE) is a monetary policy in which a central bank buys government bonds or other financial assets in order to inject money into the economy to expand economic activity. One of the by-products if not the goal of QE is to help drive down the value of a currency, thereby making one’s exports, equities, and other products more affordable on a global stage. QE is considered an unconventional form of monetary policy and is usually used when inflation is very low or negative or when standard expansionary monetary policy has become ineffective. A central bank implements quantitative easing by buying financial assets from commercial banks and other financial institutions. This in turn raises the prices of those financial assets and lowers their yield, while simultaneously increasing the money supply. This differs from the more usual policy of buying or selling short-term government bonds to keep interbank interest rates at a specified target value. The two most common examples of QE in recent years include Japan and the United States. Even before the Great Financial Crisis, the US Federal Reserve had held between $700-800 billion of Treasury Notes. Starting in late 2008, the Federal Reserve began buying upwards of $600 billion in mortgage-backed securities, eventually increasing its stake to $1.75 trillion in treasury notes and securities. This eventually increased to a peak of $2.1 trillion by 2010. Purchases were eventually halted and slowed as the US economy rebounded and improved. QE was again adopted in 2010 to help kindle the recovery of the economy. QE policy was reversed starting in 2013 by then Fed Chairman Ben Bernanke, who advocated a ‘tapering’ policy, which led to the scaling back of bond purchases from $85 billion to $65 billion a month. More recently, in September 2019, the Federal Reserve also embarked on another QE operation, purchasing approximately $700 billion in asset purchases to support US liquidity in response to the outbreak of COVID-19. The results of QE have proven to be controversial. While seen as a driver of income equality, QE generally has led to the decreased value of the US Dollar, by virtue of an increased money supply.

Quantitative Tightening - QT means the central bank is shrinking its balance sheet—selling bonds or letting them mature without reinvestment. This withdraws money from the financial system, tightening monetary conditions.

Higher yields: With the central bank no longer a major buyer of bonds, yields tend to rise. Higher yields make a country’s assets more attractive to global investors, increasing demand for the currency.

Policy normalization: QT often happens alongside (or after) rate hikes. It signals that the central bank sees the economy as strong enough to stand on its own—another vote of confidence that can support the currency.

Investor sentiment: A central bank moving toward QT is often viewed as being ahead of the curve on inflation, which can boost investor confidence in the currency’s stability and value.

If QT tightens conditions too much and hurts growth, it can later turn bearish for the currency. It also depends on what other central banks are doing—relative policy matters in FX. If the BOJ tightens while others ease, that’s more bullish for the yen. If everyone’s tightening, the impact is more muted.

Real Money - Real money is another term for a “long-only” traditional asset manager who typically owns (long) instruments and does not short. Money is managed on an unleveraged basis, as opposed to hedge funds, which manage money using borrowed money.

Example - A corporate pension fund, a university endowment, a mutual fund, or a public pension fund.

Reflation - is a policy that is enacted after a period of economic slowdown or contraction. The goal is to expand output, stimulate spending and curb the effects of deflation. Policies include tax cuts, infrastructure spending, increasing the money supply, and lowering interest rates. In short, reflationary measures aim to lift demand for goods by giving people and companies more money and motivation to spend more.

Relative Strength Index - The RSI is a momentum indicator, designed to measure both the velocity and magnitude of price by oscillating on a scale between 0 and 100. Developed by Wells Wilder as a technical analysis indicator, RSI was featured in his book “New Concepts in Technical Trading Systems” in 1978. Upon release, a number of industry experts and magazines praised Wilder and his indicator, claiming it to be one of the best technical indicators ever developed. Presently, traders still consider the RSI to be extremely powerful, using it to determine both trends and reversals. The default setting for the RSI is a period of 14. The RSI is most commonly used on a 14-day timeframe, measured on a scale from 0 to 100, with high and low levels marked at 70 and 30, respectively. Additionally, shorter, or longer time frames are used for alternately shorter or longer outlooks. More extreme high and low levels, 80 and 20, or 90 and 10 occur less frequently but indicate stronger momentum. RSI is considered overbought when above 70 and oversold when below 30. These traditional levels can also be adjusted when necessary to better fit the specific asset being traded. For example, during an uptrend or bull market, the RSI will often remain in the 40 to 90 range with the 40-50 zone acting as support. By extension, during a downtrend or bear market, the RSI tends to stay between the 10 to 60 range with the 50-60 zone acting as resistance. These ranges are dependent on the RSI settings and the strength of the securities or market’s underlying trend. If underlying prices make a new high or low that isn't confirmed by the RSI, this divergence can signal a price reversal. However, if the RSI makes a lower high and then follows with a downside move below a previous low, a Top Swing Failure has occurred. If the RSI makes a higher low and then follows with an upside move above a previous high, a Bottom Swing Failure has occurred.

Relative Value - Relative value is a method of determining an asset's worth that takes into account the value of similar assets.

Reserve Requirement Ratio – The Reserve Requirement Ratio (RRR) is the portion of reservable liabilities that commercial banks must hold onto, rather than lend out or invest. This is a requirement determined by the country’s central bank, which in the United States is the Federal Reserve. It is also known as the cash reserve ratio. For financial institutions in China was recently cut to 6.6.%, effective September 27, 2024. This follows a trend of the People’s Bank of China (PBoC) lowering the RRR to inject liquidity into the financial market and stimulate economic growth. The cut was announced by PBoC governor Pan Gongsheng, who also suggested further cuts within the year, depending on market conditions. 

Resistance Level - A trading resistance or resistance level reflects a given price that acts as a temporary ceiling for an asset. In its most basic form, this level pressures an asset’s price from rising above it, either acting as an outright barrier or exerting pressure in doing so. This pressure is due to a growing number of sellers who wish to sell at a particular price at a defined resistance level. Resistance levels can either be temporary constructs, longer-lasting ones, or purely psychological. As a result, several factors can control resistance levels or cause these to change over time. In terms of technical analysis, a simple resistance level can be calculated by drawing a line along the highest highs for the period being considered. Resistance levels do not have to only be flat lines but can also represent slanted pricing levels relative to trend lines. There are both simplistic and advanced ways to calculate resistance levels and doing so forms the foundation of technical analysis. Any asset trader can map out their strategies or place stop-loss orders in line with resistance levels. A resistance level equates to the price at which enough traders intend to sell the particular asset, thereby outnumbering the buyers in terms of volume. As soon as the price reaches this potential resistance, the number of sellers increases, preventing the price from increasing further. Resistance presents itself across all timeframes the higher the timeframe, the stronger these levels manage to hold.

Risk Aversion - Risk aversion is a term used by investors in financial markets, to describe the behaviour of traders to avoid exposure to uncertainty or risk. Risk aversion is a common trait of investors, who seek to hesitate towards investments with an unknown payoff or outcome. These traders will opt for safer forms of investments that are either less volatile, have a more predictable outcome, and/or a lower expected payoff. For example, a risk-averse investor may opt for a certificate of deposit or bank account with a fixed but low-interest rate, rather than investing in the stock or forex market. Volatility is another factor impacting investors’ decisions. When there is greater market volatility or uncertainty, many investors move towards safe-haven assets such as gold. This is due to their stability as assets even in the face of high market volatility and uncertainty. Risk aversion can have widespread effects on markets. A risk-averse or risk-off investor will also look to sell assets that are deemed less predictable. This can include assets in emerging markets, volatile stocks, or specific currency pairs such as the NZD/USD and AUD/USD, among others. Currencies that have relatively higher interest rates are regarded as higher-yielding currencies. In the forex market, traders will actively unload their positions in higher-yielding assets and move their capital in favour of safe-haven currencies. Safe haven currencies that are most popular in times of uncertainty are the US dollar, Japanese yen, and the Swiss franc. These currencies are all considered safer due to the size of their large capital markets and liquidity.

Risk premia - Risk premia refers to the amount by which the return of a risky asset is expected to outperform the known return on a risk-free asset. Equity market exposure is the best-known risk premium, rewarding investors for taking exposure to long-only equity investments.

Risk/Reward Ratio - In financial trading, the risk to reward is a ratio comparing a trade’s potential risk to its potential reward. It is used by traders to determine the long-term viability of a trading system. First and foremost, it’s important to note that there is a universally adopted risk/reward ratio. Remember, even though when trading there are also inherent transaction costs such as spread and commission. Longer-term traders aren’t really affected by this, due to the expenses being almost negligible compared to the actual profit targets stop losses. Meanwhile, a trader scalping the lower timeframes on the one-minute chart is much more affected by the spread. For example, a scalper might be seeking a buy on the GBP/USD aiming for a quick 6 pip profit target, with a 3 pip stop loss. In this case, we have an initial reward risk ratio of 2:1.The problem is, if the forex broker quotes the GBP/USD spread as just a couple of pips, in real terms, the trader would need 8 pips, thereby approaching a reward risk ratio of 3:1, and considerably more arduous to achieve. Whatever one’s reward risk ratio, the question the trader needs to ask is, are the percentage of losses reaching such a level so as to wipe out the gains generated by the system? However, traders need not set fixed immovable stops and targets, since market conditions are constantly changing, which often demands adjustments.

Rosstat – The Russian Federal State Statistics Service, responsible for the collection, analysis and distribution of economic, social and population data in Russia. First established in the USSR as Goskomstat in 1987

Russell 2000 Index - The Russell 2000 index is a market index composed of 2,000 small-cap companies. The index was launched in 1984 by the Frank Russell Company and is now managed by FTSE Russell. The index is frequently used as a benchmark for measuring the performance of small-cap mutual funds. 

Many investors see the index's breadth as giving it an edge over narrower indexes of small-cap stocks. Investors can replicate the returns of the Russell 2000 Index by investing in a fund that tracks the index.  

RVI - RVI measures the market's expectation of the 30-day volatility, calculated from real prices of near- and next-series RTS Index options.

Safe Haven - Safe haven is a term for financial assets that investors turn to in order to better protect themselves, or sometimes even profit from during market turmoil. Safe-haven assets most commonly are considered government securities in the United States, the US dollar, precious metals such as gold or silver, low-yielding stocks, or cash, among others. These assets are the most likely destination in times of political or economic crises or unstable market conditions. Investors who prefer these types of assets are known as risk-averse or risk-off, given their avoidance of less predictable options for investing. In terms of forex, the most common safe-haven currencies are considered the US dollar, the Japanese yen, and the Swiss franc. In the result of any calamity or market stress, each of these currencies are likely to rise due to a flight to safety by investors for more predictable and stable rates of return. In particular, safe-haven currencies are all considered less risky due to the size of their large capital markets and liquidity.

Scalping - Scalping refers to a method of trading in which the trader executes quick, short-term trades. It is the quickest form of trading and the one who trades in this manner is known as a scalper. Scalping is considered to be the most difficult form of trading, primarily due to a relatively poor risk-reward ratio. Whilst there is no exact agreed-upon definition of scalping, this form of trading can be characterized as utilizing either one or both of the following attributes: a) holding a position for a short period of time, i.e. from a few seconds to a few minutes, b) trading with the intention of profiting with a small number of pips, usually not more than ten pips per trade. Most forex scalpers tend to focus on the major currency pairs such as the EUR/USD, which, because of their higher liquidity, carry lower spreads. In reality, when scalping, the spread is one of the key determining factors as to whether a trade is successful or not.

Securities and Exchange Commission - The Securities and Exchange Commission (SEC) is an independent agency in the United States operating under the Federal government's authority. In particular, the SEC has a large mandate domestically, helping oversee and monitor markets and acting as a deterrent against fraud or abuse. This includes enforcing federal securities laws, proposing securities rules, and regulating the US stock and options exchanges. As one of the primary regulatory authorities in the US along with the Commodity Futures Trading Commission (CFTC), the SEC is responsible for the oversight of public companies. The SEC enforces statutory requirements that public companies and other regulated companies submit quarterly and annual reports. Quarterly and semi-annual reports from public companies are important for investors to make sound decisions when investing in the capital markets. The SEC is composed of five divisions: Corporate Finance, Trading and Markets, Investment Management, Enforcement, and Economic and Risk Analysis. With 11 regional offices in the US, the SEC helps police markets nationwide.

Share Buyback - A share buyback or repurchase involves a company re-acquiring its own shares. This is a common and flexible way of helping return to shareholders. Share buybacks have developed into popular techniques, alongside stock dividends, by companies that are looking to inject funds directly to shareholders. Listed companies are able to simply repurchase their own stock, for a small sum of their outstanding equity, thereby reducing the number of outstanding shares. In doing so, these shares are available for re-issuance. There are however rules that must be adhered to depending on the jurisdiction. In the United States, for example, there are six available stock repurchasing methods, with an open-market method constituting over 95% of these. This technique entails a given company announcing a buyback program and then repurchasing shares on a stock exchange. Stock repurchasing has become more popular over time, and has now developed into a typical engagement with shareholders across worldwide markets. This practice does present an inherent loophole for insider trading, namely amongst company executives. Insider trading is defined as the illegal trading of a company’s public stock based on non-public information about a company. However, within the context of stock repurchasing, this is technically legal and not a sizable risk for the purposes of regulatory authorities.

Silver - Silver is a precious metal that is commonly traded on exchanges or through brokers. It is much more affordable than gold and thanks to its importance as an industrial metal as well as volatility, is widely traded. Central banks will buy gold, not silver, as a reserve asset to diversify their currency exposure. Instead, silver functions more heavily as a commodity than a currency. Silver, also known as the white metal, is commonly linked with gold and the relationship between the two often dictates its price. The entire silver market is worth about only $540 billion currently, which makes it much smaller than other markets. The supply of silver grows only by only 1 to 3% each year, and about half the market is consumed through industrial use (unlike gold, which is more limited in how it’s used). As of August 2020, there are 19.2 billion ounces of silver reserves globally (meeting certain purity standards) against 1.83 billion ounces of gold reserves. The most common way for retail traders to get exposure to silver is through exchange-traded funds (ETFs) or contracts-for-difference (CFDs). Both are typical offerings at retail brokerages. Investing in silver CFDs saves you the inconvenience of paying for silver storage. Moreover, CFDs give you the opportunity to trade silver in both directions.

Slippage - In terms of trading, slippage refers to the difference in price between the price an order was intended or expected to be filled with the actual price an order was filled. For example, when trading forex, if a trader places a trade intending to enter a buy on the EUR/USD at 1.1160, but they only get into the market at a price of 1.1158, the slippage here would be two pips. Ultimately, there will always be a time delay between the trader buying or selling any asset. The time that the broker is able to execute the order, even if it’s only a few milliseconds, will ensure a delay is still there. This is made worse with certain assets such as the forex, as prices can and do change within milliseconds, causing the order to be executed at a different price to what was originally requested. Slippage can take one of two different forms. Negative slippage occurs when a trader enters the market at an inferior position to what they requested. By contrast, positive slippage happens if a trader enters the market at a superior position to what they requested, which theoretically can happen. For example, if a forex trader places a trade on their broker for buying the USD/JPY at 113.05, but the broker fills the order at 113.08, it means the slippage here is a positive slippage of 3 pips. Overall, slippage is much more common in forex trading during economic news releases.

Stablecoin - Stablecoins are cryptocurrencies that have been designed to keep a stable value. These differ from other cryptocurrencies like Bitcoin and Ethereum, which are freely traded assets. Stablecoins have several inherent advantages in their structure. This includes a greater emphasis on stability over volatility, which is a huge draw for risk-averse investors looking for exposure to cryptocurrencies. Indeed, many individuals can be turned off from large swings and uncertainty presented by cryptos relative to other traditional assets. As such, Stablecoins control this volatility by being pegged to another cryptocurrency, fiat money, or exchange-traded commodities such as gold, silver, or others. There are several advantages of asset-backed crypto. For example, these coins are stabilized by assets that fluctuate outside of the crypto space, that is. This can help mitigate the financial risk associated with these assets.

Stochastic Oscillator - The Stochastic Oscillator is an indicator used in technical analysis of financial markets, developed by Dr. George Lane in the late 1950’s. It functions as a momentum-based indicator, which aims to determine support and resistance levels by way of oversold and overbought zones. This indicator also compares to an instrument’s price closed in relation to its price range over a specific period of time. The Stochastic Oscillator consists of two lines – the main line, referred to as %K and a second derived line, known as the signal line, and referred to as %D, which is basically a moving average of the first main line. These two lines, the %K and %D oscillate up and down within a fixed range, from 0 to 100. Most traders use the default oversold and overbought levels of 20 and 80 respectively, and the most basic use is as follows. If the Stochastic Oscillator’s two lines are below the 20 level, then the instrument is considered to be oversold and look for possible bullish movement. By extension, if the two lines are above the 80 level, then the instrument is considered to be overbought, so look for possible bearish movement. As a result, traders often use the Stochastic Oscillator to predict turning points before they happen. Indeed, the developer of the indicator, Dr. George Lane himself explained, "Stochastics measures the momentum of price.

Stock Dividend - A stock dividend is a payment to shareholders that is your share of a company’s profits. This payment is made in shares rather than in cash. In doing so, this provides several advantages to companies, which can reward loyal shareholders without limiting their cash balance. Most commonly, companies issue stock dividends as a fractional payment per existing share. For example, if a company issues a stock dividend of 2.5%, this would require it to issue 0.025 shares for every share owned by existing shareholders. As such, equates to 2.5 additional shares per 100 shares owned. Stock dividends vary by company. Some companies do not even have stock dividends, while others see different levels of dividends paid out. Typically, dividends are paid out quarterly with the payment dates known ahead of time. In less common situations such as certain companies in the United Kingdom, dividends are paid out on an annual basis. Dividend stocks are advantageous for investors as they represent seemingly guaranteed payouts for owning shares. The most attractive dividend stocks are commonly older and more established companies. Stock dividends also boast a tax advantage for the investor, especially in the United States. A dividend, like any stock share, is not taxed until an investor sells it. Many companies opt not to offer stock dividends at all, which is hardly surprising. For example, high-growth companies such as fintech or technology stocks avoid dividends, instead choosing to reinvest spare cash into research and development. This can yield benefits for shareholders in other ways, such as enhancing existing products or creating new products that generate big sales, which by extension raise share prices.

Stock Exchange - A stock exchange, or securities exchange is defined as a facility where stock brokers and traders can buy and sell securities. This includes shares of company stocks, bonds, exchange-traded funds (ETFs), or other financial instruments. Stock exchanges can also provide facilities for the issue and redemption of such securities and instruments and capital events. This commonly includes the payment of income and dividends. Stock exchanges have developed into a permanent fixture in the financial market and some of the most visible entities in the entire industry. The largest stock exchanges in the world are the New York Stock Exchange (NYSE), NASDAQ, Tokyo Stock Exchange, Hong Kong Stock Exchange, London Stock Exchange, EURONEXT, and Shenzhen Stock Exchange. Stock exchanges are among some of the most recognizable constructs in the global financial system and provide a variety of utility to specific markets. Stock exchanges are also responsible for initial public offerings (IPOs) of company stocks and bonds to investors. This is performed in both the primary market and subsequent trading in the secondary market. It is important to note that not every company or entity can be included on a stock exchange. To be able to trade a security on a certain exchange requires the listing of specific securities.

Stock Market - A stock or equity market is defined as the aggregation of buyers and sellers of stocks, which reflect ownership claims on businesses. These may also include securities listed on a public stock exchange and stock that is only traded privately. Common examples include shares of private companies that are sold to investors through equity crowdfunding platforms. Unlike in the past, the stock market has grown to include a more mature retail market, though nearly all investment is still made through brokers and electronic trading platforms. The stock market itself consists of a global network of stock exchanges, which most developed countries have access to. Presently there are over 60 such exchanges with a total market capitalization of over $70 trillion. The largest stock markets are the United States, Japan, and Great Britain, with numerous other exchanges worldwide following behind.

Stop Loss Order - A stop loss order is an order placed by the trader, to be triggered automatically at a specific price or time. The purpose is to avert any further equity losses, should the value of the financial instrument move in an unwanted direction. Traders typically use stop losses as part of a trading strategy, where they have clearly defined profit targets and exit methods. Thus, there are no fixed rules on how, where or when to apply for a stop loss order; it is up to the trader to find what stop loss suits their style of trading. For example, day traders might use tight stop losses, while swing traders may be more flexible with their stop loss. There are several benefits of using stop loss orders. First, the trader doesn’t need to constantly monitor the price of their instrument, since they know if things turn bad, their stop loss would deal with the situation. Moreover, during quick moving price action, since a predefined stop loss gets triggered automatically, and usually with delay, stop loss orders eliminate the trader from having to manually execute a market order. These may or may not get filled in time, or at the right price. There are a number of ways in which a stop loss can be employed. The main types are based upon a) the percentage of one’s equity, b) a fixed time to exit, or c) technical analysis. An example of a stop loss is the following. A trader wants to buy GBP/USD in the morning during the London session because they think it will rise in price over the next few hours. The current exchange rate is 1.5540, so the trader buys at this price, aiming to exit for a profit at 1.5590. However, just in case the bears take control, the trader sets a stop loss order at 1.5510. This is a stop loss of 30 pips. If the price then drops during the day, the stop loss order will be instantly executed at 1.5510, and the trader would have taken a loss of 30 pips.

Support Level - A trading support or support level represents a given price that acts as a temporary barrier for an asset. This level ensures an asset’s price will not fall below it or will encounter difficulty in doing so. All assets can utilize supports, be it forex, equities, commodities, etc. A given asset's support level is created by buyers that enter the market whenever the asset falls to a lower price. Basic support levels can be calculated and charted by identifying the lowest lows for a time period being considered. This can occur over any period, be it daily, hourly, etc. A support line can be either flat or skewed up or down relative to the overall price trend. When the price of an asset falls towards a defined support level, the asset can either hold at this level or fall further. In this case, additional supports must be identified to compensate for a breach or decline. Support levels in many assets can be created by limit orders or simply the market action of traders and investors. Traders can rely on support levels to plan either entry and exit points for trades, as well as craft more detailed trading strategies. For example, if the price action on a chart falls below a support level, it is seen as an opportunity to buy or take a short position. Additionally, if this breach of the support level occurs during an uptrend, it may possibly be a sign of a reversal and strength.

Swaps - Swaps are derivative contracts composed of two parties that exchange the cash flow value between two separate financial instruments. These are commonly divided into two categories. This includes contingent (options) and forward claims, where forward contracts, swaps, and exchange-traded funds (ETFs) are exchanged. Additionally, commodity price, equity price, interest rate, and forex rates are also variables used as one of the cash flows in swaps upon initiation. Common types of swaps include interest rate swaps, commodity swaps, currency swaps, and debt-equity swaps. Interest rate swaps are used to hedge against interest rate risk and involve cash flows exchanged between two parties that are composed of a notional principal amount. For example, a financial intermediary or a bank is used for swaps, however, these are dependent upon both parties’ comparative advantage. Commodity swaps use the exchange of a floating commodity price, with a predetermined set price for a specific period while crude oil is the most heavily swapped commodity. Currency swaps typically involve the exchange of principal payments of debt and interest that are denominated in different currencies. An example of a currency swap would be when the United States’ Federal Reserve conducted a swap with central banks of Europe during the 2010 European financial crisis. Used to reallocate capital structure or refinance debt, a debt-equity swap deal with the exchange of debt for equity. For instance, a public traded company would issue bonds for stocks. Swaps are not exchange-traded instruments, but rather customized contracts traded in an over-the-counter market between parties. While firms and financial institutions primarily use the swaps industry, retail traders have been known to participate, although there is always a risk of counterparties defaulting on agreed-upon swaps.

S&P 500 - The S&P 500 is a stock market index that measures the performance of 500 large companies listed on stock exchanges in the United States.

In particular, the S&P 500 index is capitalization-weighted. The ten largest companies in the index account for approximately 26% of the market capitalization of the index. At the time of writing, the S&P 500 has a market cap of $30.5 trillion.

These companies in the index include Apple Inc., Microsoft, Amazon.com, Alphabet Inc., Facebook, Johnson & Johnson, Berkshire Hathaway, Visa Inc., Procter & Gamble and JPMorgan Chase. The index is one of the most followed globally and is a key factor in the calculation of other indices such as the Conference Board Leading Economic Index, which is utilized to forecast the direction of the US economy.

There are a variety of ways to invest in the S&P 500, which has traditionally been a popular tactic. The most popular way to invest in the S&P 500 is to purchase an index fund, either a mutual fund or an exchange-traded fund that replicates the performance of the index by holding the same stocks as the index, in the same proportions.

Furthermore, the S&P 500 is also reflected in the derivatives market, namely by the Chicago Mercantile Exchange (CME). The CME offers futures contracts that track the index and trade on its exchange floor.

Take Profit - In financial trading, a “take profit” (TP) is an order made by the trader via their broker platform. More specifically, this order identifies the amount of profit at which a trader wants their current position to exit, should the instrument happen to reach that level. The take profit is pre-determined either by setting the number of points or by setting the price at which the trade will automatically exit for a profit. A take-profit order should or is usually placed at the start of a trade, just after a trader has entered the market. Naturally, a take-profit level can be above or below the entry price, depending on whether the trader is long or short.

Tankan Survey - The Tankan Survey is a quarterly poll of business confidence reported by the Central Bank of Japan showing the status of the Japanese economy (has considerable influence on stock prices and the currency rate).

Technical Analysis - In financial trading, technical analysis refers to the method of studying the previous history and price movements of an instrument, such as foreign exchange, stocks, commodities, etc. Key determinants include an asset’s historical price action, chart patterns, volume, and other mathematical-based visual tools, in order to predict future movements of that instrument. Traders who utilize various means of technical analysis are known by a variety of terms, such as technical traders, technical analysts, or technicians. The crux behind technical analysis is the notion that the past performance of a financial asset is potential evidence for future activity. Unlike fundamental analysis, technical analysis does not bother with the causes of price fluctuations; it only deals with its effects. Therefore, technical traders diligently observe historical charts of the instrument they’re interested in trading. By applying a number of techniques, technical analysis ultimately helps forecast how prices will act, sometimes in relation to time as well. There is a multitude of visual tools available for the technical trader, with the most popular of them included in all of the major broker platforms today.

TradingPlatforms - A trading platform is defined as a software application, traditionally run on a computer or smartphone that allows the trading of financial instruments and securities. This can include currencies, stocks, indices, and commodities. Speculators and investors are able to view charts of their instrument of choice, and buy, sell and manage their trades using an online trading platform. Since the advent of the Internet in the 1990s, and more powerful home computing in the 2000s, the use of retail trading platforms has become very popular in recent years. This in turn has led to the proliferation of retail trading as brokers have made this form of investing available to ordinary individuals. Traders can now open and close trades in literally milliseconds, a stark contrast to telephone-based trading in recent decades. Online trading platforms have also given birth to automated trading. No longer does a trader need to monitor their charts before manually placing a trade. One can now merely develop software to follow a specific trading system’s rules, and the software, (often called a trading robot), will execute trades and manage positions autonomously. In theory, this can eliminate a trader missing a setup or opportunity to enter whilst asleep or unavailable. This is instrumental when trading certain assets such as FX, which is a 24/5 market. Generally speaking, a trading platform is offered by banks or brokers to traders. The most prominent trading platform includes MetaTrader 4 (MT4) and MetaTrader 5 (MT5). In addition, trading platforms are now no longer limited to computers. In recent years smartphones have allowed the trader to install basic versions of their desktop counterparts, in the form of trading apps, such as for iOS or Android. The advantage of trading platforms is also its disadvantage. The fact that almost anyone can get into online trading, means that a lot of traders are indulging in financial markets extremely unprepared, hence suffering significant financial losses.

Treasury International Capital (TIC) - data measures flows of portfolio capital into and out of the U.S., and the resultant positions between U.S. and foreign residents. The data is compiled and published by the U.S. Treasury and is also used by the Bureau of Economic Analysis as an input into the U.S. Balance of Payments data. The monthly reports can function as economic indicators, helping to predict the direction of the U.S. dollar and interest rates. U.S. residents include U.S. branches of foreign banks, while foreign residents include offshore branches of U.S. banks.

TWAP - TWAP (Time-Weighted Average Price) is an algorithmic trade execution strategy that aims to achieve an average execution price close to the time-weighted average price of the user-specified period. TWAP can be used as it reduces market impact. Typically calculated for large trade orders enabling you to disperse a larger order into a few small orders valued at the TWAP price since it’s the most beneficial value

US Dollar - The US dollar, (symbol $, code USD) is the fiat currency of the United States of America (USD) and the most widely traded currency globally. It was introduced into the US in the late 18th Century, with paper notes not being distributed until the following century. The US dollar, also informally known as the greenback, is the world’s foremost reserve currency, due in large part to the importance of the US economy on the world stage. Once backed by gold (in the 1900s), the USD is now a purely fiat currency, i.e. not backed by a physical commodity. This means the US dollar has become the world’s number one reserve currency. This means foreign nations possess large amounts of their cash reserves in USD, accounting for approximately 65% of the world’s foreign exchange reserves

US Dollar Index (DXY) - is a measure of the value of the U.S. dollar relative to a basket of foreign currencies. The DXY was established by the U.S. Federal Reserve in 1973 after the dissolution of the Bretton Woods Agreement. It is now maintained by ICE Data Indices, a subsidiary of the Intercontinental Exchange (ICE). The six currencies included in the DXY are often referred to as America's most significant trading partners. The index has only been updated once, in 1999, when the newly-created euro replaced the German mark, French franc, Italian lira, Dutch guilder, and Belgian franc. Consequently, the index does not fully reflect present-day U.S. trade.

The USDX can provide investors and consumers with insight into the relative strength of the dollar and how it might affect prices for goods and services as well as demand for imports and exports. It can also shed light on reasons for the state of the economy.

The U.S. dollar index is currently calculated by factoring in the exchange rates of six foreign currencies, which include the euro (EUR), Japanese yen (JPY), Canadian dollar (CAD), British pound (GBP), Swedish krona (SEK), and Swiss franc (CHF).

The euro is, by far, the largest component of the index, making up 57.6% of the basket. The weights of the rest of the currencies in the index are JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%), and CHF (3.6%).

The index has risen and fallen sharply over time. It reached an all-time high in 1984 at nearly 165, and an all-time low of around 70 in 2007. In the years since then, the U.S. dollar index has been relatively range bound, fluctuating between 90 and 110. As of October 2024, USDX is trading around 102.3

The index is affected by macroeconomic factors, including inflation/deflation in the dollar and foreign currencies in the basket, as well as recessions and economic growth in those countries.

The index began in 1973 with a base of 100, and all subsequent values are relative to this base. It was established shortly after the Bretton Woods Agreement was dissolved.

As part of the agreement, participating countries settled their balances in U.S. dollars (which was established as the reserve currency), while the USD was fully convertible to gold at a rate of $35/ounce.

An overvaluation of the USD led to concerns over exchange rates and their link to the way in which gold was priced. President Richard Nixon decided to temporarily suspend the gold standard.

At that point, other countries were able to choose any exchange agreement other than the price of gold. In 1973, many foreign governments chose to let their currency rates float, putting an end to the agreement.

US Stimulus Package - The US Stimulus Package of 2020, also known as the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act, represents a historic $2.2 trillion economic stimulus bill in the United States. The bill was an emergency measure signed into law by then President Donald Trump on March 27, 2020. This was a direct response to the economic fallout of the Covid-19 pandemic, having convulsed the US economy. The level of aid given out was unprecedented, involving spending of $300 billion in one-time cash payments for qualified Americans, $340 billion to state and local governments, $260 billion in unemployment benefits, and the rest in bailouts to small business and large corporations. The bill was the largest in US history, amounting to 10% of its annualized Gross domestic product (GDP).

US Treasuries - US Treasuries represent securities in the form of government debt instruments issued by the United States Department of the Treasury to finance government spending as an alternative to taxation. US Treasuries actually comprise four different types of marketable treasury securities. This includes Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation Protected Securities (TIPS). The US government sells these securities in auctions conducted by the Federal Reserve Bank of New York, after which they can be traded in secondary markets. These instruments are extremely liquid and are backed by the full faith and credit of the US. This means that the government promises to raise money by any legally available means to repay them. Consequently, Treasuries reflect some of the world’s lowest-risk investments. The most prominent of these is the 10-year yield for US Treasuries, which helps give a snapshot of the US economy and investor sentiment. Several factors can impact US Treasury yields, ranging from interest rates, economic growth metrics, and inflation. Overall, the prices and yields of US Treasuries move in opposite directions and are dependent on investor sentiment in relation to economic performance. For example, if investors are feeling optimistic about the state of the US economy, then they are less likely to invest their money in low-risk Treasuries.

Volatility - In terms of trading, volatility refers to the amount of change in the rate of an index or asset, such as forex, commodities, stocks, over a given time period. For example, a highly volatile currency equates to large fluctuations in price, whereas a low volatile currency equates to tepid fluctuations in price. Volatility can be an important determinant in developing trading systems, protocols, or regulations. In the forex space, lower levels of volatile across currency pairs offer less surprises, movements, and are suited to certain types of individuals such as position traders. There can be periods when even highly volatile instruments show signs of flatness, with price not really making headway in either direction. For example, certain months in the summer are associated with low trading volatility. Too little volatility is just as problematic for markets as too much. Too much volatility can instill panic and create its own issues, such as liquidity constraints.

VWAP - (Volume-Weighted Average Price) It averages the closing prices in a given time period. It emphasises periods with higher volume. (A lagging indicator because based on previous data). Calculated by the sum of price * volume / total volume. Can be used for shares, foreign exchange

Wall Street - is part of the Financial District in New York City and one of the most iconic streets in the world. It is synonymous with US financial markets, and home to the world’s two largest stock exchanges by market capitalization – the New York Stock Exchange and NASDAQ. The area is also home, be it presently or historically to many other key exchanges. This includes the New York Mercantile Exchange, the New York Board of Trade, the New York Futures Exchange (NYFE), and the former American Stock Exchange, all of which at one time were headquartered on Wall Street.

West Texas Intermediate - WTI is a type of petroleum crude oil that serves as a benchmark in oil pricing. It is a light, sweet crude oil extracted from the West Texas area in the United States, including the Permian Basin. WTI crude oil is considered to be a high-quality oil due to its low sulfur content and high yields of gasoline and diesel fuel when refined. Used as a benchmark for pricing other types of crude oil, the price of WTI crude oil is closely watched by traders and investors in the global oil markets.

After Brent, it's the most liquid and active oil trading market in the world. Note though that there are dozens of crude grades and trading hubs, each with particular dynamics. In general, they all move together with spread to WTI and Brent varying.

WTI futures trade at the Chicago Mercantile Exchange.

Whitepaper - A whitepaper can be characterized as a prospectus or pitch that is persuasive, authoritative, or in-depth detailing a specific project that presents a problem along with a solution. Some whitepapers can contain information about a business plan behind a cryptocurrency and the organization that created it. Whitepapers are closely intertwined with Initial Coin Offerings (ICOs), as these documents seek to provide a roadmap for a business plan for the company.

Xetra - the name of an international securities trading venue that is operated by the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse). Extremely important for the German domestic trading industry, as the majority of turnover on German exchanges goes through Xetra. It operates as the reference market for exchange trading in German shares and exchange-traded funds (ETFs). Beyond the German market, Xetra represents an important international trading venue, with over 50% of trading participants located outside of Germany.

Yield - A yield represents the earnings generated by an investment or security over a certain time period. Yields are typically displayed in percentage terms and are in the form of interest or dividends received from it.

Yield Curve - A yield curve is a line used to help determine interest rates of interest rates for a specific bond, differentiated by contract lengths. Yield curves help underscore the relationship between interest rates or borrowing costs and the time to maturity.

The best examples of this are US Treasury Securities, which are among some of the most observed worldwide by traders.

Yield Curve Control - Yield curve control (YCC) is a monetary policy tool that central banks use to influence the shape of the yield curve.

YCC is a way for central banks to target specific yield levels on government bonds. It involves the central bank buying or selling government bonds to control the interest rates on those bonds. By buying longer-term bonds, the central bank can push down their yields, and by selling them, it can push them up.

The main objective of YCC is to guide the economy towards the central bank's inflation target. By controlling the long-term interest rates, the central bank can influence the borrowing costs for businesses and households, which can affect spending and investment decisions, and ultimately, the inflation rate.