Glossary

Unsure of the meanings of any specialist terms related to trading? Please consult our handy list.

A

Accelerator/Decelerator Oscillator (AC)
A technical indicator that measures the direction and strength of a trend. When it is above the zero line it shows a rising trend and when it is below the zero line it shows a falling trend. When the colour changes, it indicates a change in the direction of the driving force, implying a possible reversal.
Accumulation/Distribution (A/D)
A momentum indicator that measures "accumulating" (buying) and "distributing" (selling) to identify the timing of reversals. Such reversals may be signified by instances of divergence: when the price rises but the A/D line falls, or when the price falls but the A/D line rises.
Alligator
A technical indicator consisting of three Smoothed Moving Averages (representing the jaw, teeth and lips of the alligator) overlaid on a pricing chart. Traders pay particular attention to convergences and divergences of these lines. After a convergence, it is considered best to follow the indicated trend, either long or short. If the lines then converge again, it is considered best to be out of the market.
Aroon
The Aroon indicator can be used to indicate the strength of the current trend and consists of two lines "Aroon Up" and "Aroon Down". These measure the number of periods since the high and low prices, respectively, over a preset number of days.
Auto-Closeout
A situation where your open position will be offset and closed by the broker to reduce exposure and prevent further losses.
Average Directional Movement Index (ADX)
The Average Directional Index (ADX) measures the strength of the current trend, without indicating its direction. A strong trend is indicated by a rising ADX, whereas a consolidating or sideways market is evident with a falling ADX.
Average Directional Movement Index Rating (ADXR)
A technical analysis tool that takes an average of that day's Average Directional Index (ADX) and the ADX from two weeks prior. This extra smoothing step means the ADXR will fluctuate less than the ADX.
Awesome Oscillator (AO)
The Awesome Oscillator (AO) is a technical indicator that takes attempts to gauge the momentum of an asset's price by taking the difference between a 34- and a 5-period simple moving average.

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B

Back Month Contract
A futures contract that has an expiration date that is farthest beyond the next approaching expiration date of the front month futures contract. A "back month contract" is also known as the "far month contract."
Balance of Power (BoP)
An indicator that measures whether the bulls or the bears display greater ability to push prices up or down, respectively. It is calculated by dividing the difference between the opening and closing prices by the difference between the high and low prices.
Base Currency
The first currency in a currency pair. In Forex, the exchange rate is quoted as the units of one currency in terms of a single unit of a base currency. For example, in a currency exchange of US Dollars for Japanese Yen, the base currency is the US Dollar.
Bear Market
A market distinguished by falling prices.
Bears Power
An indicator of the strength of the bears (traders who are selling and thus pushing prices down). It is calculated by subtracting the 13-day exponential moving average from the lowest price of the day - the greater the difference between the two figures, the greater the strength of the bears. If the indicator is below zero, they are strong; if it is above zero, they are weak.
Bollinger Bands
A technical indicator consisting of three bands, the middle one being a Simple Moving Average. The upper and lower bands are shifted up and down from this by a series of standard deviations. Contractions of these bands indicate lower volatility and expansion indicates higher volatility.
Broker
An individual or firm that acts as an intermediary, to match buyers and sellers for a fee or commission.

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C

Candlestick Chart
A price chart that displays the high, low, open, and close price over a specified period of time. There are many trading strategies based upon patterns in candlestick charting.
Carry Trade
A situation where an investor sells a certain currency with a relatively low interest rate and uses the funds to buy a different currency yielding a higher interest rate.
Cash Market
The marketplace for immediate settlement.
Commodity Channel Index (CCI)
The Commodity Channel Index (CCI) is an unbounded oscillator that normally fluctuates between +100 and -100. When the reading is in excess of +100, the instrument is considered overbought (sell signal) and when it drops below -100 it is considered oversold (buy signal).
Contract For Differences (CFDs)
An arrangement made in a derivative contract whereby difference between the opening price and the closing price is cash settled, without having to own the underlying asset.
Consumer Price Index (CPI)
An economic indicator which uses price changes in a basket of everyday consumer goods and services to measure changes in the cost of living.
Cross Rate
The exchange rate between any two currencies that are considered non-standard in the country where the currency pair is quoted.

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D

Day Trading
This refers to positions which are opened and closed on the same trading day.
DeMarker
The DeMarker technical indicator shows the difference between the high price for the current and previous periods, and can be used to help traders to decide entry and exit points. The indicator falling below 0.3 may indicate that a bullish price reversal is about to occur. When it rises above 0.7, this may signify an impending bearish price reversal.
Directional Movement Index (DMI)
The Directional Movement Index (DMI) compares an instrument's trading range for one day to that of the previous day. Positive directional movement occurs When today's high is greater than yesterday's, directional movement is positive (+DM). Conversely, when today's low is less than yesterday's, directional movement is negative (-DM). Based on the average of positive and negative directional movement over a certain time period, Two lines, +DI and -DI are plotted as averages of positive and negative directional movement over the defined time period. The +DI crossing the -DI is considered a buy signal when the +DI crosses in an upward direction and a sell signal when it crosses in a downward direction.

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E

Eastern Daylight Time (EDT)
This is the daylight savings period for states in the Eastern part of the US, starting from the second Sunday in March at 2:00am EST when the clocks are moved forward one hour, and ending on the first Sunday in November at 2:00am EDT when the clocks are moved back one hour.
Eastern Standard Time (EST)
This is the standard time period for states in the Eastern part of the US, starting from the first Sunday in November at 2:00am EDT when the clocks are moved back one hour, and ending on the second Sunday in March at 2:00am EST when the clocks are moved forward one hour.
Economic Indicator
Statistics issued by governmental and non-governmental bodies that indicates current economic growth and stability. Common indicators include employment rates, unemployment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.
End Of Day Order (EOD)
An order to buy or sell at a specified price. This order remains open until the end of the trading day which is typically 17:00 NY time.
Envelopes
A technical indicator consisting of lines shifted up and down from a moving average at preset deviations. An envelope identifies extreme overbought and oversold conditions, and thus can help to indicate trading ranges.
Estrangement
The Estrangement indicator gives the difference between the current price and a Simple Moving Average.
Expiry Date
The roll date that takes place prior to the last trading day on which you may trade on the front month contract of the particular market available on our platform. Once the front month contract has expired, the back month contract (following new contract) eventually becomes a front month contract. Any open positions held past the expiry date will be automatically rolled to the next underlying contract.
Expiration Rollover
Expiration Rollover refers to the adjustment of price difference in the last quoted sell and buy prices between the front month contract and the back month contract of a particular market, in respect to the position held opened at the close of the expiry date.
Exponential Moving Average (EMA)
A variation of the Simple Moving Average whereby more weight is given to more recent data. Also known as "exponentially weighted moving average", it reacts faster to recent price changes than a simple moving average. The 12- and 26-day EMAs are used as signals of short-term trends, whereas the 50- and 200-day EMAs are used as signals of longer-term ones.

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F

Floating Profit/Loss
Unrealised profit or loss on open positions calculated at marked-to-market value.
Foreign Exchange (Forex, FX)
Buying of one currency against the selling of another.
Front Month
A futures contract that has an expiration date that is closest to the current date. This would also be the underlying contract with the shortest duration that can be traded for the particular market.
Fundamental Analysis
An analysis of economic and political information (macro factors) with the objective of determining future movements in a financial market.

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H

Hedging
Hedging refers to any number of strategies employed to reduce the risk of one position by taking out another.
Heikin-Ashi (Average Bar)
A version of the candlestick chart that eliminates price fluctuations so that trends may be isolated more easily. The Heikin-Ashi displays averages of the four elements of the candlestick chart: high, low, open, and close price.
High/Low Bands
A technical indicator consisting of three bands. A High Band and Low Bands are plotted by joining together the highs and lows over a set past period. The average of these two lines forms the middle line, which can be seen as a trend line. The high band can be thought of as a resistance level and the low band as a support level.

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I

Ichimoku Kinko Hyo
An indicator that can be used independently of any other technical indicator to determine trend and momentum, as well as anticipate future areas of support and resistance.
If Done (IFD)
A two-legged order whereby on execution of the first leg, the second leg is activated. Either leg can be a stop or a limit.
If-Done, then One-Cancels-the-Other (IFD-OCO)
An If-Done order accompanied by a One-Cancels-the-Other order.

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K

Kagi-Ashi (Step Chart)
The Kagi-Ashi (Step Chart) consists of a single line that alternates between "Bullish" and "Bearish", ignoring the factor of time. Only if prices reverse by a preset "reversal" amount is a new line drawn in a new column. This reduces market noise and provides a clearer signal.
Keltner Channel
A volatility based 'envelope' indicator that measures the movement of an instrument in relation to an upper and lower moving-average band. When the price exceeds the upper band it indicates that it is gaining momentum and can be seen as a buy signal. Conversely, when the price is below the lower band it can be seen as a signal to sell.

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L

Leverage
Depositing a certain percentage of the total contract value as collateral for entering into a contract. The purpose is to gear up the investment portfolio to maximise the profit opportunity.
Limit Order
An order to buy or sell an instrument at a determined price level.
Linear Regression Line
A statistical measure that attempts to determine the strength of the relationship between one dependent variable and a series of other changing variables.
Liquidity
A market's ability to accept large transaction with minimal to no impact on price stability.
Long Position
Long position is when the bought quantity is more than the sold quantity. A long position appreciates in value if market prices increase.

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M

Marked-to-Market
Process of re-evaluating all open positions at current market prices. These new values then determine margin requirements.
Market Order
An order made to open or close a position immediately, at the best available price. Market orders can only be made during trading hours.
Momentum Indicator
An indicator that compares current and previous prices and can be used to determine short-term price movements. It can be seen as a buy or sell signal when the Momentum Indicator crosses the zero line in an upwards or downwards direction, respectively.
Moving Average Convergence/Divergence (MACD)
Moving Average Convergence/Divergence (MACD) gives the cross-over of the Exponential Moving Averages (EMA) of two selected time periods - "n1" and "n2" with the EMA line of a selected third time period "n3" overlaid on top. The default settings for "n1", "n2" and "n3" are 12, 26 and 9.

When the MACD is above zero, it means the 12-day moving average is higher than the 26-day moving average, which can be seen as a buy signal as it indicates that current expectations are more previous than previous ones. When the MACD falls below zero, it means that the 12-day moving average is less than the 26-day moving average, implying a possible bearish tendency.

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O

One-Cancels-the-Other (OCO)
A simultaneously placed limit and stop order whereby the triggering and execution of one automatically cancels the other. An OCO order can be placed both during and outside trading hours.
Open Position
A position that has not yet been offset or closed.
Overnight Rollover
Positions not closed at day end are extended to the next trade day, calculated from the interest differential between the two currencies.
Over The Counter (OTC)
A transaction that is not conducted over an exchange.

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P

Parabolic SAR
Displayed as a series of dots overlaid on a price chart, the Parabolic SAR signifies the direction of an instrument's momentum and likely points of reversal. When the dots appear below price it is generally seen as a buy signal and when they appear above it can be seen as a signal to sell.
Pending Order
An order that is still valid and will be triggered once the price reaches a specified level.
Pip
A pip refers to the smallest price movement a tradable instrument can make.
Point and Figure
A chart that displays columns 'X' and 'O' to represent rising and falling prices respectively. It filters out minor price movements so that support and resistance levels are more easily identifiable. Point and Figure charts do not take the factor of time into consideration.
Position
The net holding of an instrument.
Psychological Line
An indicator used to gauge the sentiment of the market, which is calculated by dividing the number of rising periods by the total number of periods. When the Psychological Line is above 50%, it demonstrates that buyers are in control and when it is below 50%, it demonstrates that the sellers are in control.

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R

Rank Correlation Index (RCI)
Rank Correlation Index (RCI) is an oscillator which evaluates the correlation between the rank of the price and the rank of the date within a certain period. "RCI Above" is a trigger which occurs when the RCI exceeds the given threshold. "RCI Below" is a trigger which occurs when the RCI is lower than the given threshold.
Rate Of Change (ROC)
A momentum indicator that displays the percentage of change for an instrument over a specified period.
Relative Strength Index (RSI)
Relative Strength Index (RSI) is a momentum oscillator ranging between 0 and 100. Values in excess of 70 indicate that the instrument may be overbought, and those under 30 indicate that it may be oversold.
Relative Vigor Index (RVI)
An oscillator that measures the strength of a recent price movement and the likelihood of it continuing, on the principle that in a bullish market the closing price will usually be above the opening price while in a bearish market the opposite is more likely. The RVI determines these movements in price and smoothes the result with an exponential moving average
Required Margin
The amount of margin needed to open and maintain any pending orders and outstanding positions.
Resistance
A term used in technical analysis indicating a specific price level that analysis predicts the product will not break through.
Risk Management
A system control policy to mitigate or control various types of risk.

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S

Sell/Buy Spread
The difference between the sell price and the buy price of a particular instrument.
Settlement Date
The date on which counterparties to a financial transaction agree to settle their respective obligations.
Simple Moving Average (SMA)
A Simple Moving Average (SMA) is calculated by adding prices for the most recent "n" time periods and dividing by "n". Moving averages represent the consensus of expectations over a specific time span (e.g. 20 days). Traders typically buy when price exceeds its moving average and sell when it drops below.
Shin-Ne-Ashi (Trident Chart)
The Shin-Ne-Ashi (Trident Chart) shows price fluctuations, without taking the factor of time into consideration. It is useful for evaluating major trends rather than small price movements.
Short Position
The net sold quantity of an instrument. Short Positions benefit from a decline in market price.
Slippage
The difference between the projected cost and the actual cost at which a transaction is executed. Slippage is particularly likely during times of high market volatility when the broker cannot fulfil the expected price of a trade.
Stochastic Oscillator
A momentum indicator that shows the location of the close of a period in relation to the high-low range over a number of periods. It can be used to identify overbought or oversold conditions and thus anticipate reversals.
Stop Order
An order to buy or sell an instrument when it reaches a predefined price. Stop orders to buy may be placed above the current buy price and those to sell may be placed below the current sell price.
Stop Loss Order
An order to close a position by buying or selling an instrument at a predefined point, when the price moves against you.
Support Levels
A term used in technical analysis referring to a specific price level below which analysis predicts the product will not drop.
Swap
A currency swap is the simultaneous sale and purchase of the same amount of a given currency at agreed spot rate and forward rate between two parties.

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T

Technical Analysis
An effort to forecast prices by analysing market data, i.e. historical price trends and averages, volumes, open interest, etc.
Two-Way Price
The Sell and Buy price quoted on a particular market.

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W

Williams’ Percent Range (%R)
A dynamic technical indicator, similar to the Stochastic Oscillator, which determines whether the market is overbought or oversold. Values of 0% to 20% indicate the former, while values of 80% to 100% indicate the latter.

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Z

Zigzag
A trend following indicator that is used to predict if the momentum is on the reversal. This indicator filters out small fluctuations so that broader trends may be observed. The Zigzag tool is often used in wave analysis to establish the positioning of the asset in the overall cycle.

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Risk Warning
Trading in leveraged products carries a high level of risk. Your losses may exceed your initial investment requiring you to make further payments. These products are not suitable for everyone and you should seek independent advice if you are in any doubt. Please ensure that you fully understand the risks.

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