শব্দকোষ

Account history is a record of all the activity in the trading account, including completed transactions and non-trading operations.

Balance is a cumulative financial result of all completed transactions and deposits/withdrawals of funds to/from the trading account.

Base currency is the first currency appearing in a currency pair. Its value is determined by the price of the currency quoted against it. For example, if the EUR/USD currency pair rate is 1.3525, then the euro is the base currency and it is worth $1.3525.

Broker is a professional market participant that carries out transactions with a particular set of tools either on behalf of and on account of the client, or in its own name and on the client's account on the basis of commutative contracts with the client.

A broker is a person or a legal entity licensed to conduct operations in the securities market on behalf of clients. Brokers are divided into three groups. The first group includes brokers who charge higher commissions and render the full range of services (full service brokers), including participation in IPOs and providing reports on the companies. The second group refers to brokers that offer a limited range of services (discount brokers or simply discounters) and charge average commissions, but do not provide all the services. For example, they do not provide recommendations on the purchase/sale of certain types of securities. And finally, there are deep discount brokers which basically only execute orders of clients who do not need additional services.

The distance between the candlestick body and the maximum day price in the form of a vertical line is called the candlestick upper shadow (uwakage). The distance between the candlestick body and the minimum price is also depicted as a line and called the candlestick's lower shadow (shitakage).

The Japanese candlestick body is the difference between the opening and closing prices, and the Japanese candlestick shadows point to the highest and lowest prices in the given trading period. If the shadows are short, then the price range of a certain security will be located near the opening and closing prices of that period. If the shadows are long, it means that trading was active on this time frame, and prices moved away from the opening price and returned to the closing one afterwards.

If a candlestick has a long upper shadow and a short lower shadow, it indicates that bulls (buyers) dominated the market during this period and pushed the price to its highest level. Then, bears (sellers) sent it to the level of the closing price.

If a candlestick has a long lower shadow and a short upper shadow, bears pushed the price down, and then bulls brought it to the closing level. In both cases, the candlestick colour does not matter.

Contract for difference (CFD) is the contract enabling one of the parties to conduct a speculative operation with a certain financial asset without physical delivery.

Contract specifications are the basic trading terms such as spread, lot size, minimal transfer amount, minimum possible change in the trade volume, initial margin, margin for locking positions, etc. for each instrument.

Conversion arbitrage operations are buying/selling transactions with a currency or CFD between the company and the customer, which implies making at least two opposite buy/sell trades of equal volumes.

Cross rates are often used during the operations in the world market. What is it?

Cross rate is the exchange rate between two currencies which results from their rate in relation to the rate of a third currency. As a rule, cross rates with the US dollar as the third currency are used in the world market. The reason is that the American dollar is not only the major reserve currency but also the currency of transaction in most foreign exchange operations. Cross rates include CHF/JPY, GBP/CHF, EUR/GBP, EUR/CHF, and EUR/JPY.

The calculations on the GBP/JPY, GBP/CHF, EUR/CHF, and EUR/JPY crosses are based on multiplication:
GBP/JPY = GBP/USD x USD/JPY
GBP/CHF = GBP/USD x USD/CHF
EUR/CHF = EUR/USD x USD/CHF
EUR/JPY = EUR/USD x USD/JPY.

For example, if the EUR/USD rate is 1.0100 and the USD/JPY rate is 123.50, then EUR/JPY will correspond to 1.0100 x 123.50 = 124.73.

The calculations on the EUR/GBP and CHF/JPY crosses are determined by division: EUR/GBP = EUR/USD / GBP/USD
CHF/JPY = USD/CHF / USD/JPY.

For example, if the EUR/USD rate is 1.0100 and the GBP/USD rate is 1.5720, then the EUR/GBP rate will correspond to 1.0100 / 1.5720 = 0.6425.

Equity is the secure part of the customer account that includes open positions. It is calculated by the following formula: Balance + Floating profit/Floating loss + Swap. Equity is the funds in the customer sub-account minus the current loss on the open positions and plus the current profit on the open positions.

Expert advisor is a program developed for managing a trading account written in MetaQuotes Language 4. The program sends requests and orders to a server through the client's trading platform.

Free margin is the funds which are not used for the security of the open positions. It is calculated by the following formula: Free margin = Equity – Margin.

Futures contract is an agreement or a contract to buy or sell a certain amount of a specific commodity at a predetermined price at a specified time in the future.

What is the futures contract?
Futures contract is the obligation to buy or sell the commodity at a given time in the future at the price set today.

1. The contracts are interchangeable. That is, they are standardized with respect to goods, time and place of delivery.

2. The word “commodity” has a very broad definition and includes financial instruments and stock quotations.

3. The contracts are traded at the arranged and regulated futures exchange, so the buyers and sellers can easily find each other.

Note: the futures contract is an obligation (but not the right, as with options) and this obligation should be executed. In most cases, it is executed through a reverse transaction, as a result of which the seller closes the position (sold, if it was bought; bought, if it was sold). But in a narrow sense, the seller may keep the position until the delivery date when it is carried out by the stock exchange where these commodities are traded or by cash.

A gap is a discontinuous space on the price chart which may appear during rapid price changes. On the chart, a gap looks like an area where the price moves sharply up or down, which creates a space between the closing level of one trading period and the opening of another. You can observe a gap only on the following chart modes – bars and Japanese candlesticks.
Quite often, a gap is not only a consequence of a strong trend but also a signal confirming it. For example, if the opening price is lower than the previous day's close, this may point to a possible downtrend.

Hedging is the parctice of protecting client's funds from unfavorable price fluctuations by opening a position in a contrary or opposing market.
Hedging: ensures protection from possible losses by the time of forward deal settlement; provides higher transactions flexibility and efficiency; reduces the costs related to trading real commodities; lowers the risks of losses as the changes in commodities prices are offset by the profit on futures.

As a rule, losses are limited either upon reaching the stop loss or when the price reverses and goes in the right direction. These scenarios are well-known, so there is no need to give them a closer look now. The thing is that traders who do not use money management bite off more than they can chew, while those who do not use risk management always attack but never defend.

Hedging on Forex is an essential element of protection against the risks and a guarantee of profit. Here is a simple example: you have opened a sell position on the EUR/USD pair based on the signals from the MACD indicator. Then, you got profit three times in a row. But suddenly the price has moved upwards, and your losses are growing for the past twenty four hours. This is where hedging takes place. So, how to do it correctly? A little maths and analysis will help us.

Position locking is also a popular tool, which is ineffective at best and which is often a self-deception. Moreover, it always comes with a negative swap, because the positive swap on the pair is less than the negative one. As a result, this action as such hardly differs from the position reversal based on the continuation of the movement and then on its complete return to the first position’s point.

Thus, the reason for any losses is an unexpected currency move (referring to the currency market). Note that it is the currency, not the currency pair! If you see that the reason for losses on the sell position on the EUR/USD pair lies in the falling dollar, then it is quite possible to take advantage of this situation by transferring the asset to another currency pair without the US dollar. In order to do this, it is necessary to determine the following:

1) Find the pair or pairs that correlate well with EUR/USD.

2) Make sure this instrument (-s) are more volatile than the first one(-s) so that the profit exceeds loss.

3) Open an opposite position (-s) on the US dollar. Important: positions should be opened in equal proportions.

It matters because the EUR/USD lot is not equal to the GBP/USD lot. The difference lies in the price per pip (for example, USD/JPY) and the volatility of a pair. These factors should be allowed for in order to transfer the position to another pair effectively. Otherwise, the discrepancies can become too serious. The initial balance is more important for us, then comes greater profit in relation to losses. The next goal is to achieve a swing effect after the rally ends which brings losses on the EUR/USD pair and generates profit on GBP/USD. A strong movement is followed by the consolidation phase, and at a certain moment, the losses on the first pair are reducing. At this point, you have great chances of exiting a position with profit. The total positive swaps will give you additional support. In fact, using this method, you can transfer the invested assets to the EUR/GDP pair. We took a simple example. However, more complex combinations with additional currency pairs can be used in order to achieve better results.

In order to determine the degree of correlation, the algorithm based on the formula of linear correlation is usually used, which is attached to the MT4 indicator. It is also worth noting that hedging methods are quite diverse. Thus, the given example could also use the pairs without common currencies. However, in this case,  the profit/loss spread could be higher. The key to hedging is achieving the needed balance by diversifying your funds.

Types of hedging:

Classical hedging

Classical hedging implies holding the opposite positions in the market. This hedging method was used by the dealers of the farm products in Chicago, USA.

Full and partial hedging

Full hedging involves the protection against risks for the whole sum of the transaction. This type of hedging completely eliminates possible losses related to price risks. Partial hedging insures only a part of the actual transaction.

Anticipatory hedging

Anticipatory hedging involves buying or selling well before a deal is coplated in the physical market. In the period between the conclusion of a deal in the futures market and the conclusion of a deal in the physical market, a futures contract serves as a substitute for a real contract for the supply of goods. Also anticipatory hedging can be applied through the purchase or sale of an urgent commodity and its subsequent execution via the stock exchange. This type of hedging is the most common in the stock market.

Selective hedging

In selective hedging, the deals in the futures market and spot market vary in the volume and time of order execution.

Cross hedging

Cross hedging is characterized by the fact that the operation in the futures market involves a contract not on the underlying asset in the physical market, but on another financial instrument. For example, on the real market there are operations with shares, while the futures market trades futures using stock indices.

Index, or a stock index, is a composite indicator of prices of assets belonging to a particular group (securities, commodities, derivatives), a so-called stock basket.
As a rule, the readings of indices are not as important as the index changes with the course of time, because these changes provide insight into the general direction of the market movement, even in those cases when the shares inside the stock basket show mixed trading. Depending on the selected indicators, the stock index may reflect the behavior of a group of securities (or other assets) or the entire market (a market sector).
According to the data of Dow Jones & Co. Inc., there were 2,315 stock indices in the world as of the end of 2003.
At the end of a stock index name, there can be a figure, reflecting the number of shares, on the basis of which the index is calculated: CAC 40, Nikkei 225, S&P 500.

Day trading is a market strategy which has been increasingly popular due to advancements in the computer network technology. It involves speculation on short-term fluctuations of market prices. Positions are frequently opened and closed, sometimes within several minutes. As a rule, brokers do not allow their clients engaged in this type of trading to carry over losing positions to the next day.

Liquidity is the state of the market or the degree to which a definite security can be quickly bought or sold without significant losses in the price. In the banking sector, this term describes the ability of a bank to execute current payments and meet its obligations.

Margin is a sum of money which is to be available in the account in order to open a trade.

Margin call is the broker's requirement for the client to deposit additional funds or securities for a short sale or a "purchase with leverage" type of transactions which were carried out using the broker's credit and led to current losses. As a rule, in such situations, the client is required to provide additional collateral within one day, and he/she is deemed responsible for all potential losses of the broker.

Market opening is the time when markets open for trading after the weekend, holidays or after the interval between trading sessions.

Normal market conditions meet each of the following requirements: absence of noticeable breaks in quotes supply on the trading platform, absence of rushing price dynamics, and absence of essential price gaps.

An obvious mistake occurs when a dealer is opening/closing a client’s position or executing a client’s order at a price that significantly differs from the one quoted at this particular moment. This term also refers to some other dealer’s activity or inactivity that leads to the wrong determination of the market prices at a certain moment.

Open position is a result of the first part of a fully completed transaction. Opening a position, a client accepts the following obligations: to execute the opposite deal of the same volume and to keep the equity level no lower than 10% of the required margin.

Order is a command to execute a certain operation in the account. The types of orders vary, depending on the market and the instrument. Moreover, different brokers offer different sets of available order types. These sets may include (especially in the futures market) rather exotic commands. Do not set an order of a type which is unclear to you.

A pending order is placed when opening a trading position. A pending order is an instruction to the broker to buy or sell a currency pair when the price reaches the pre-defined level mentioned in the order.

There are four types of pending orders:

Buy Limit is an instruction to buy when the future ask price gets equal to the specified value. Herewith, the current price is higher than the value of the set order. Orders of this type are usually placed in anticipation that the instrument price, having declined to a certain level, will increase. It is impossible to set Buy Limit above the current ask price. For this, you have to use Buy Stop orders.

Buy Stop is an instruction to buy when the future ask price gets equal to the specified value. The current price level is lower than the value of the set order. Typically, the orders of this type are set in anticipation that the instrument price will reach a certain level and continues to grow. It is impossible to set Buy Stop orders below the current ask price. You have to use Buy Limit orders for this.

Sell Limit is a request to sell provided that the future bid price gets equal to the specified value. In this case, the current price level is lower than the value of the set order. These orders are usually set in anticipation that the instrument price, having risen to a certain level, will stop its uptrend and starts to decline. It is impossible to set Sell Limit orders below the current bid price. For this, you have to use Sell Stop orders. 

Sell Stop is a request to sell when the future bid price gets equal to the specified value. Inthis case, the current price level is higher than the value of the set order. Orders of this type are set in anticipation that the instrument price, having dropped to a certain level, will continue to decline. It is impossible to set Sell Stop orders above the current bid price. You have to use Sell Limit orders for this.

To set a pending order, you have to click on the New Order window and change the order type from Immediate Execution to Pending Order.

Right after you choose the Pending Order option, some fields will appear for you to specify the order execution conditions: the currency pair, the volume and rate of the position you open, the order type as well as stop loss and take profit. You may also leave a comment on the order and set the expiration date, upon which the pending order will be automatically removed.
After setting the required parameters, click on the Set Order button to place the order with the specified execution conditions. You can check the order you set in the Terminal field in the Trade tab. To change the conditions of the pending order or delete it, you need to right-click on it and select Modify or Remove the Order in the pop-up menu.

A pip (point) is the smallest change in the price. For example, if the price was 1.1244 and became 1.1245, the price changed by 1 pip (point).

Point (pip) is the smallest change in the currency price in the last digit of a quote (i.e. the last digit of a decimal).

The term “to quote” is most likely to have come from the French verb "coter" which means to mark/label with numbers. The quote is the value of one currency unit denominated in terms of another currency.

For example, the EUR/USD rate is 1.2750. It means that one euro is worth 1.2750 dollars. The currency, which is sold or bought, is the base one. The quoted currency is the one in which the base currency price is denominated. So, in the EUR/USD pair, the euro is the base currency, while the US dollar is the the quoted one. The base currency is always the first in the pair. All transactions are carried out with the base currency. The euro (EUR) always acts as the base currency. The British pound (GBP) is also the base currency in all pairs, except for the euro pair. The Japanese yen (JPY) can only be the quoted currency.

Quotes may be direct or indirect. The direct quote shows the quantity of national currency per foreign unit: USD/JPY, USD/CHF, USD/CAD, etc. The indirect quote reflects the amount of foreign currency per national unit: EUR/USD, GBP/USD, AUD/USD, and others.

There are two readings in the quote. For instance, the EUR/USD rate is 1.2750-1.2750. The first reading is the selling price of the base currency (Bid). Consequently, the second reading – Ask – is the price of buying the base currency for the quoted one. The difference between these rates is called a spread. The spread size depends on a currency pair, the trade's sum, and the market behaviour. Quotes reflect the market environment as well as the demand to supply ratio.

Quotes feed is the sequence of quotes for each trading instrument on the trading platform.

Scalping is a differential trading method designed to profit form small price changes. It can be applied in any market, but it is especially effective on Forex as the most liquid and dynamic market.

Scalping is a trading strategy that involves multiple (frequent) transactions with the purpose of getting a large amount of nominal profits. It is focused on monotonous trend ranges when the first derived function of the trend does not change its sign, but not on short time frames, as many believe. In this case, the time frame depends on what a trader considers a monotonous range. However, monotony does not depend on volatility (dynamics), as it is determined only by the preferences of market participants. Consequently, you can scalp the profit within 3-5 seconds or 3-5 minutes or even within longer time periods.

Server log file is created by the server. It records all requests and orders the dealer receives from the client as well as the processing results with pinpoint accuracy.

Spam is aggressive advertising by means of mass mailing to electronic addresses. Because this mailing is very cheap, unfair advertisers have the opportunity to send their messages to hundreds of thousands and even millions of emails. Naturally, such emails are highly unwelcome. A person engaged in such kind of activity is called a spammer.

Spike - see Non-market quote

Spread is the current difference between the buy price and the sell price of a currency pair or CFD.

Stop loss, or safety order, is an order placed with a broker to automatically close a position when the price reaches a certain level. You can set the safety order to minimize losses in case of unexpected market moves.

Stop loss is an order to restrict the risks rather than gain profit. Unfortunately, not everyone knows how to use this risk-limiting order and excludes it from their strategies which can lead to disastrous results.

One of the money management rules reads: “Restrict losses for every deal to no more than 5% of the balance.” In other words, a stop loss can go no further than a dedicated number of points depending on the volume of an order for each deal. But this rule is not suitable for every situation. According to long-term charts, a lower stop level is needed to take noises into consideration and a higher one is necessary to fulfill the stop/profit 1:3 principle. Setting a high stop loss level on the 15-minute chart means insufficient profit, while setting it higher means catching noise. For aggressive speculators, such prospects are unacceptable, as when the order volume increases, the stop size reduces. So, where should it be placed?

At first, you need to decide where it is safe to put the stop loss in this particular situation. If you use channels, the stop is usually placed outside the channel boundaries. If you use support/resistance levels, then it should be placed below/above the levels. Thus, in case of a breakout of channels or boundaries, the trend is likely to reverse, and your money will be saved. If there are neither channels nor boundaries around, then the best option for setting a stop loss is above or below the previous sell or buy candlestick. There are several standard indicators that help define exit points - Bollinger and Parabolic. With Parabolic, everything is simple: the stop is placed at the indicator points, and the Bollinger works according to the channel rule.

After defining all the “above” and “below,” you should measure the interval between the expected entry point and the stop loss. If possible losses are less than 5% and the profit is quite obtainable, then you can safely enter the market.

Quite often, these details are not enough to determine whether the exit from the position is set correctly or not. If possible losses are more than 5% and the profit grows sky-high, it is better to wait for a more favorable moment. If the stop level is too low, it is better to give it more room.

As soon as the price has reached a certain positive distance from the entry point, the stop loss may start moving after it. According to the “above/under the previous candlestick” rule, it can catch up with the price at the point where it loses momentum and prepares for a pullback. For these purposes, a floating stop loss was designed, but it is not effective due to the restrictions on points.

Such ways of risks limitation can make it difficult to test strategies and calculate monthly return. However, they are more flexible than a specified size of a stop loss.

Swap is the money either deducted from or credited to the customer account for keeping an open position overnight.

Take profit is meant for closing a position as soon as the price of a financial instrument starts moving in the right direction. The order is always connected with a specific open position or a pending order.

Tick is a minimum value of a price change. At present, depending on the security type and cost, the tick can amount to 1/16, 1/32, 1/64 of the USD, etc., although the decimalization is expected in the future when the tick will be 1/100 of the USD. When transmitting information about price movements, the terms “uptick” (one tick upwards) and “downtick” (one tick downwards) are also used.

Volume of trading operation is the number of lots multiplied by the lot size.

test