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Glossary |
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A: |
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Adjustment: |
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Official action normally by either change in the internal economic policies to correct
a payment imbalance or in the official currency rate. |
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B: |
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Base Currency: |
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The first currency quoted in a currency pair on Forex. It is also typically considered
the domestic currency or accounting currency. For accounting purposes, a firm may
use the base currency to represent all profits and losses. |
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Bullion: |
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Gold and silver that is officially recognized as high quality (at least 99.5% pure),
and is in the form of bars rather than coins. |
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C: |
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Close Position: |
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The act of taking the opposite position of the current position thereby getting
out of a position in a particular stock or security. Also referred to as "Closing
Transaction." |
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Contract for Differences (CFD): |
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An arrangement made in a futures contract whereby differences in settlement are
made through cash payments, rather than the delivery of physical goods or securities. |
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Cross Currency: |
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A pair of currencies traded in forex that does not include the U.S. dollar. One
foreign currency is traded for another without having to first exchange the currencies
into American dollars. |
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Cross Rate: |
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The currency exchange rate between two currencies, both of which are not the official
currencies of the country in which the exchange rate quote is given in. This phrase
is also sometimes used to refer to currency quotes which do not involve the U.S.
dollar, regardless of which country the quote is provided in. |
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Crude Oil: |
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The name given to barrels of crude oil that meet certain content requirements, such
as low levels of sulfur and hydrogen. Sweet crude future contracts are the most
popular oil contracts traded on commodity markets. This type of oil is much easier
to refine than sour crude. |
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Currency: |
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A generally accepted form of money, including coins and paper notes, which is issued
by a government and circulated within an economy. Used as a medium of exchange for
goods and services, currency is the basis for trade. |
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Currency Pair: |
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The quotation and pricing structure of the currencies traded in the forex market:
the value of a currency is determined by its comparison to another currency. The
first currency of a currency pair is called the "base currency", and the second
currency is called the "quote currency". The currency pair shows how much of the
quote currency is needed to purchase one unit of the base currency. |
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D: |
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Dow Jones Industrial 30: |
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The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks
traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles
Dow back in 1896. It is the oldest and single most watched index in the world, and
includes companies like General Electric, Disney, Exxon and Microsoft. |
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E: |
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Equity: |
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The value of securities in a margin account minus what has been borrowed from the
brokerage. Generally, it is the ownership in any asset after all debts associated
with that asset are paid off. |
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Exchange Rate: |
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The price of one country's currency expressed in another country's currency. In
other words, the rate at which one currency can be exchanged for another. |
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F: |
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Futures Market: |
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An auction market in which participants buy and sell commodity/ future contracts
for delivery on a specified future date. Trading is carried on through open yelling
and hand signals in a trading pit. |
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Futures/ Futures Contract: |
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A financial contract obligating the buyer/ seller to purchase/ sell a physical commodity
or a financial instrument, at a predetermined future date and price. The futures
markets are characterized by the ability to use very high leverage relative to stock
markets. |
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G: |
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Gold Standard: |
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A monetary system in which a country's government allows its currency unit to be
freely converted into fixed amounts of gold and vice versa. The exchange rate under
the gold standard monetary system is determined by the economic difference for an
ounce of gold between two currencies. The gold standard was mainly used from 1875
to 1914 and also during the interwar years. |
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H: |
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Hedge: |
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Making an investment to reduce the risk of adverse price movements in an asset.
Normally, a hedge consists of taking an offsetting position in a related security,
such as a futures contract. |
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I: |
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Index: |
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A statistical measure of change in an economy or a securities market. In the case
of financial markets, an index is an imaginary portfolio of securities representing
a particular market or a portion of it. Each index has its own calculation methodology
and is usually expressed in terms of a change from a base value. Thus, the percentage
change is more important than the actual numeric value. |
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Introducing Broker (IB) : |
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A futures broker who has a direct relationship with a client, but delegates the
work of the floor operation and trade execution to another futures merchant. The
merchant firm is usually a close partner of the IB. It allows the IB to focus on
the client while the futures merchant focuses on trading floor operations. |
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J: |
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Joint Account: |
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A joint account agreement is typically needed to open such an account. This agreement
will detail whether transactions require the signatures of all parties or whether
one party can take actions on his/ her own. |
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K: |
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Kiwi: |
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Slang for the New Zealand dollar. |
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L: |
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Leverage: |
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The use of various financial instruments or borrowed capital, such as margin, to
increase the potential return of an investment. |
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Limit Order: |
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An order placed with a brokerage to buy or sell a set number of shares at a specified
price or better. Limit orders also allow an investor to limit the length of time
an order can be outstanding before being canceled. |
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Long Position: |
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The buying of a security such as a stock, commodity or currency, with the expectation
that the asset will rise in value. |
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M: |
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Margin: |
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Borrowed money that is used to purchase securities. This practice is referred to
as "trading on margin". |
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Margin Account: |
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A brokerage account in which the broker lends the customer cash to purchase securities.
The loan in the account is collateralized by the securities and cash. If the value
of the stock drops sufficiently, the account holder will be required to deposit
more cash or sell a portion of the stock. |
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Margin Call: |
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A broker's demand on an investor using margin to deposit additional money or securities
so that the margin account is brought up to the minimum maintenance margin. If the
investor fails to do so, he/ she is forced to sell off "Close Positions" some of
the securities. |
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N: |
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Nasdaq 100 (NDX): |
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A volatility index on the Chicago Board Options Exchange, known by its ticker symbol
VXN. The VXN is a measure of implied volatility for the NASDAQ 100 (NDX). |
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O: |
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Order: |
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The instruction, by a customer to a brokerage, for the purchase or sale of a security
with specific conditions. |
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Over-The-Counter (OTC): |
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It refers to stocks that trade via a dealer network as opposed to on a centralized
exchange. It also refers to debt securities and other financial instruments such
as derivatives, which are traded through a dealer network. |
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P: |
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Pip: |
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The smallest price change that a given exchange rate can make. Since most major
currency pairs are priced to four decimal places, the smallest change is that of
the last decimal point - for most pairs this is the equivalent of 1/100th of one
percent, or one basis point. |
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Position: |
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The amount of a security either owned (which constitutes a long position) or borrowed
(which constitutes a short position) by an individual or by a dealer. In other words,
it's a trade an investor currently holds open. |
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Precious Metals: |
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A classification of metals that are considered to be rare and/or have a high economic
value. The higher relative values of these metals are driven by various factors
including their rarity, uses in industrial processes and use as an investment commodity.
They include gold, silver, platinum, iridium, rhodium, palladium and other. |
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Q: |
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Quote Currency: |
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The second currency quoted in a currency pair in forex. In a direct quote, the quote
currency is the foreign currency. In an indirect quote, the quote currency is the
domestic currency. |
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R: |
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Rate: |
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The price of one currency in terms of another, typically used for dealing purposes. |
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Resistance: |
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A term used in technical analysis indicating a specific price level at which analysis
concludes people will sell. |
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S: |
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Short Position: |
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The sale of a borrowed security, commodity or currency with the expectation that
the asset will fall in value. |
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Standard & Poor's 500 Index (S&P 500): |
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An index consisting of 500 stocks chosen for market size, liquidity and industry
grouping, among other factors. The S&P 500 is designed to be a leading indicator
of U.S. equities and is meant to reflect the risk/ return characteristics of the
large-cap universe. Companies included in the index are selected by the S&P
Index Committee, a team of analysts and economists at Standard & Poor's. The
S&P 500 is a market-value weighted index - each stock's weight in the index
is proportionate to its market value. |
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Stop Order (S/L): |
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An order to buy or sell a security when its price surpasses a particular point,
thus ensuring a greater probability of achieving a predetermined entry or exit price,
limiting the investor's loss or locking in his or her profit. Once the price surpasses
the predefined entry/ exit point, the stop order becomes a market order. It also
referred to as "stop-loss order". |
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T: |
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Take-Profit Order (T/P): |
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An order used by currency traders specifying the exact rate or number of pips from
the current price point where to close out their current position for a profit.
The rate deemed to be the level where the trader wants to take a profit is sometimes
referred to as the "take-profit point". Take-Profit Orders are used to lock in profits
in the event the rate moves in a favorable direction. |
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U: |
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US Prime Rate: |
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The interest rate at which US banks will lend to their prime corporate customers. |
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V: |
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Value Date: |
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The date on which counterparts to a financial transaction agree to settle their
respective obligations, i.e., exchanging payments. For spot currency transactions,
the value date is normally two business days forward.
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W: |
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Wall Street: |
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A street in lower Manhattan that is the original home of the New York Stock Exchange.
The street is the historic headquarters of the largest U.S. brokerages and investment
banks. Many have since relocated to other areas of Manhattan and the United States.
Wall Street was named after the wooden wall Dutch colonists built in this area in
1653 to defend themselves from the British and Native Americans |
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Y: |
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Yard: |
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Slang for one billion units in currency. |
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