Below is a glossary of terms that are used in the online trading industry. Select the first letter of the word you are seeking from the list above to jump to the appropriate section of the glossary.
What is the Economic Calendar?
An economic calendar is a detailed list of economic events, including financial policy statements as well as regular weekly, monthly and quarterly economic reports and economic indicators that are expected to have an effect on trading markets. The events appear on the calendar in chronological order, and are all rated on a scale of 1-3 as to how large an impact the event is expected to have on the markets. Finally, when an economic report is scheduled, the calendar includes analysts’ predictions as to what the numbers of the report will be, and whether they will represent a rise or fall from the previous report. The economic calendar can help traders predict if the markets will be bullish or bearish, active or quiet, and by doing so, enable traders to develop strong strategies based on the scheduled events and the fundamental analysis made possible by the calendar. Click here to visit the economic calendar on Fortrade.com.
How does one use the Economic Calendar?
By watching the economic calendar and having an idea what to expect from various economic reports and policy statements, traders have a very powerful tool for fundamental analysis. Of course, as with every aspect of forex trading, nothing is foolproof. Analyst predictions may be wrong, or the reaction of the markets to the events in the economic calendar may be other than anticipated, due to unforeseen, external circumstances. That being said, the economic calendar remains a very effective tool at a trader’s command, and it should be checked daily and followed closely.
A government-issued statistic (such as a country’s Gross Domestic Product (GDP), Consumer Price Index (CPI), industrial production or unemployment rate), which allows analysis of the economy’s performance as a whole.
An index calculated by averaging the percentage change of each of the listed stocks included in the group, regardless of their market cap or economic size (i.e. sales and earnings). In this sense, it is different from a cap-weighted index, in which stocks are weighted on a daily basis according to their total market value. Most of the widely used indices such as the S&P 500 offer equal weight versions in addition to their cap-weighed indices.
The amount of money in an account that is available for trading. Equivalent to the trader’s ‘Open P&L’ + ‘Account Balance’.
What is an equity market?
Equities are the value of assets that traders have at their disposal. An equity market, also known a stock market, is the place where investors meet to buy and sell stocks. Equity markets can be privately held stocks dealt via dealers on over-the-counter (OTC) markets, or can be publicly traded stocks, on regulated exchanges such as NASDAQ, New York Stock Exchange, and the Dow Jones in the United States, or stock exchanges in Europe, Asia, and the Middle East, such as the London Stock Exchange, IBEX (Spain), Hang Seng Hong Kong), and Tadawul (Saudi Arabia). Most developed countries in the world have stock exchanges. Stock exchanges are heavily regulated, as opposed to the unregulated OTC markets.
How do equity markets affect forex traders?
Besides the obvious fact that it is on equity markets that traders can keep track of how various stocks are performing, the markets are also an excellent trading asset in and of themselves. CFD trading on stock markets is especially popular, as traders determine how they believe an equity market will behave within a determined trading period.
The official currency code for the official currency of the Eurozone.
The central bank for Europe’s single currency, the euro. Its main task is to maintain the euro’s purchasing power and ensure the stability of the Eurozone.
Starts at 7:00 GMT and lasts to 16:00-17:00 GMT. Also known as the London trading session for Forex.
The carrying out of an order to purchase or sell a security or financial instrument.
What are exotic currency pairs?
Most forex trading involves the major currencies (USD vs. one of the six other major currencies – EUR, GBP, JPY, CHF, CAD, AUD, NZD) or the minor currencies (which do not involve the USD, but do include either the EUR, GBP or JPY). When the USD, or one of the other major currencies is traded against a currency with a far lower trading volume, this is referred to as an exotic trading pair. Examples of the exotics include the USD/RUB (U.S. Dollar vs. the Russian ruble), GBP/TRY (British pound vs. Turkish lira), and EUR/SEK (Euro vs. Swedish krone).
How does one use exotic currency pairs?
Traders who wish to minimize their risks (as well as their potential earnings) might choose to trade exotics because they are more illiquid than the majors and minors. Exotic pairs are affected by many of the same factors that influence currency pairs with greater liquidity, such as economic announcements, geopolitical events, and global weather, and can therefore be used as a good “training ground” for higher risk trading. The Fortrade website offers several exotic pairs from which traders can choose.
The time at which an option or future contract lapses.
The date at which a security or financial instrument expires or becomes due for settlement. Also called “maturity date”.
A type of moving average that gives more weight to recent price changes, meaning it reacts much quicker than a simple moving average.