An allocation of premiums and discounts on exchange rates which relates to the transaction of depositing a Swap (Interest rate differences) throughout the transaction duration.
Usually it involves an official action to change the internal economic policy for the purpose of correcting a distortion in the balance of payments or the official currency rate.
The total demand for products and services in the economy. This includes a demand from the private and public sector for products and services within the country and a demand for products and services from consumers and companies in other countries.
The amount of exposure a bank has to a single client in relation to Spot and Forward contracts.
A person whose role is to evaluate different companies and or different sectors in order to evaluate their investment worthiness. The analysis includes examining the company's financial status, the sector in which it works and its future projected chances.
According with the information it has, the analyst can issue a recommendation to its investors: a Buy recommendation, a Sell recommendation, a recommendation t hold the shares for a longer duration etc. Sometimes the analyst only makes a recommendation based on a real target price for that security.
Taking advantage of temporary market price differences between different markets or temporary imbalance between he underlying asset compared to options in the different exchanges for the purpose of producing profits.
Ascending Trend Channel
An ascending line that links between the lows of the lower waves and is adjacent to the trend line. The channel line that ascends and the trend line create borders in an uprising trend. This is a "Bullish" Pattern.
Ask (Offer) Price
The price in which the market is willing to sell a certain currency in a foreign exchange contract or a contract between currencies. At this price, the traders can purchase the underlying currency. At the quote, it appears at the right side of the quote. For example: At the quote USD/CHF 1.4527/32 the sell price is 1.4532, i.e. one can purchase or sell one USD for 1.4532 CHF.
The quoted price in which a client can buy a pair of currencies, also known as the offer.
Two prices that a market maker publicizes on a constant basis regarding any stock that is under his responsibility. At an Ask price he is willing to sell the share and at a Bid price he is willing to buy the share. The difference between the two prices is called a profit.
An asset relates to a positive balance sheet or in the context of foreign exchange, with the right to receive a specific currency from one party (a broker) that is derived from a Spot or Forward transaction.
A distribution of investments between different financial instruments to minimize risks.
ATR Indicator (Average True Range)
ATR is a moving average of the price range over a selected time rage, usually 14 days. The price range expresses the largest gap among the following pairs: The current daily high and daily low. The current high price and the previous day closing price or the current low price and the previous day closing price. The accepted price range is always a positive number (one must ignore negative figures that are received in the following calculations). Sharp peaks, which represent the trading peak level are usually characterized with high volatility and when the investors restlessness among the investors increases they usually rush to monetize profits.
Sharp lows are mostly more calm and are characterized with low volatility after the hopes for quick profit taking have vanished.
Signals of high ATR are usually characterized by high volatility when the prices are on the way down and a general sale is occurring. Low ATR values are characterized with low volatility when there is a pricing stabilization and there is a trading retreat prior to its reemerging upward again.
A slang expression referring to the Australian dollar
Average True Range (ATR)
A technical indicator that measures the unstableness of the financial product. High ATR values indicate a high instability and can be an indication for a fire sale or a fire buy. Low ATR values indicate a sideways movement of the financial instrument.
A test which examines trading strategies based on historical data prior to using a strategy based on updated data.
Balance of payments
A methodical documentation of economic activities during a given time period for a country. (1. Often the term is used for: (i) Balance of payments of a "Current Account"; or (ii) the current account plus certain long term capital movements (2. A combination of a trade balance, current account balance, equity account and an invisible balance sheet that together create the total balance of payments. Extended deficits in the balance of payments tend to lead to restrictions on transfer of capital and/or a decline in the currency value.
A trading band is the range in which the currency is allowed to move against a different currency in accordance with the government limitations.
A line of credit that is given by a bank to a client also known as "Line" or "Credit Line"
The rate in which the central bank is willing to lend money to the local banking system.
The currency that first appears in a currency pair. It represents the value of the base currency versus the value of the other currency.
For instance, if the USD/CHF rate equals 1.6215 then one USD equals CHF 1.6215
The last decimal point that is presented in the trade. In most currency pairs it is worth 1/10,000. The most common irregularity is in the USD/JPY in which a basis point is 1/100.
A trading strategy in which one enters into opposite positions in cash and in futures contract while expecting to profit from positive movements in the basis
An investor that believes that the prices will fall
A prolonged period in which prices are reduced.
The quoted price in which a client can buy a pair of currencies.
The price in which the market is willing to buy a certain currency in a foreign exchange contract or a contract between currencies. At this price, the traders can sell the underlying currency. At the quote, it appears at the right side of the quote. For example: At the quote USD/CHF 1.4527/32 the purchase price is 1.4532, i.e. one can sell or sell one USD for 1.4532 CHF.
A technical indicator that allows its users to compare the inconstancy and the relative price during the time duration. It is comprised of three bands that have been designed to encircle the majority of the price movement. Often the prices will encounter a resistance in the upper band and a support in the lower band.
A person whose main business is securities trading. The broker buys and sells securities on behalf of its clients in exchange for a commission that he receives. In Israel there are brokers that are exchange members and others which operate independently and without any supervision.
An investor that believes that market prices will increase
A market in which price increase
A status that signifies a good time to buy a financial instrument, the exact circumstances of the mark will be determined by the indicator which is used by the analyst. For example: When the MACD crosses its mark line – this is considered a buy signal
The rate of which a dealer is willing to buy a currency.
An illustration that demonstrates the trading range at a certain day as well as the opening price and closing price. If the opening price is higher then the closing price then the rectangle between the opening price and the closing price is shadowed. If the closing price is higher then the opening price that area in the illustration is not shadowed.
CFD (Contract for Differences)
A bi-lateral contract in which one party sells an underlying. The contract terms are standard information that is costumed in that exchange and the execution date is at the end of the quarter or at the end of the month.
A future contract is traded in the exchange, similar to a stock. The buyer and seller of a future contract agree between them, at the present, on the essence and price of a certain contract and on the date of transaction execution.
An example of a futures contract: The buyer buys a call option at a price equivalent to the MAOF indices at the beginning date and the writes a put option at an identical exercise date. This combination creates an obligation to buy the MAOF Indices at the termination date – at its initial price.
If the price has descended then the buyer will pay to the seller the decline amount difference, if the price has risen then the seller will pay to the buyer the increase in the difference amount.
Futures contracts are made and traded for a large spectrum of products, starting with agricultural commodities and followed with financial instruments as exchange rates of a foreign currency or indices prices of a group of equities.
The tendency of an economic crises to expend from one market to the next. At 1997, political instability in Indonesia has caused significant instability in the local currency, the Rupia. From that point, the weakness expanded to additional Asian currencies and from there to Latin America and for that reason it is called "The Asian Expansion".
A bond which is issued with terms that entitle its owner with an additional right to exchange it for another security of the issuing company. The conversion is usually made into regular portions under a predetermined conversion rate at one or more redemption date.
The currency that appears in a second in the currency pair, its value is determined versus the base currency (example: in the currency pair EURO/USD, the counter currency is USD).
The risk attributed to an international deal, including, but not limited to, legal and political conditions.
Any type of money that is issued by the government or a central bank that is used as a legal payment instrument and the basis for monetizing commerce.
A trader that opens trades and closes them at the same business day.
Refers to the opening and closing of the same position or positions during one trading day.
A person or company that operates as a main partner or as an active party in a transaction. The main counterparty takes one side of the position in hopes to gain from the closing of the position in a transaction that is being made with the other counterpart.
The difference between the nominal national product compared with the real national product that equals to the total inflation rate.
A descending correction of one currency versus the currency bands or fixed currencies that are linked to it, devaluation is usually declared in a formal notice.
A quotation of fixed units of foreign currencies against a variable sum of an internal currency.
Directional Index ADX Average
A technical indicator and part of the directional indicator that was developed by J. Welles Wilder, the ADX line is based on the spread between the (DI+) and (DI-) lines in the same system.
The flotation of a currency when the rate is controlled by the intervention of the monetary authorities
A candle shape which shows that when the candle body is very small then the opening and closing prices are very close to each other. Doji happens when the opening and closing prices are very close to each other.
A reverse tabular pattern that presents two distinctive peaks. The complete opposite when the support breaks. The double dip is a mirror picture of the peak.
A statistical measure that is published by the government that points to economic growth and current stability. Common indices include employment rates, GD (Gross Domestic Product) – Inflation level, retail sales etc.
The physical location in which buyers and sellers are met to conduct transactions in securities, commodities, foreign exchange, insurance etc. Since it is a matter of negotiable commodities there is no need for the commodities to be physically placed in the market and it is possible to trade the documents that represent them.
The activity in the exchange is made between the exchange members only or by people that have received a special permission for that purpose. Each exchange has its own article of association which determines its organizational structure, the composition of its management and its establishments and the scope of its activity and prices. The Israeli exchange is a registered company.
FCM (Futures Commission Merchant)
A person or entity that receives trading orders ( sell or buy) of future contracts or options on future contracts.
The role requires receiving a license from the CFTC (Commodities and Futures Trading Commission). The role of the FCM is parallel to that of a securities broker. Besides handling sell and Buy orders an FCM also holds in his possession the money and collateral that the client has deposited in the trading account in accordance with the trading roles that they have determined. A broker may sometimes take on the role of an FCM.
Floating exchange rate
An exchange rate whose value is determined by the market forces. Even floating currencies are subject to the intervention of the monetary authorities. When such activity is made frequently it is called a dirty float.
Forex, FX, relates to the trading in foreign currency, a exchange of one currency for another. Forex trading is considered as "Over the Counter" in the inter-banking system (a network of a few thousands banks) in spite of the fact that most of the trade is only conducted by a few hundred institutions of that kind. According to a tri-annual survey of the bank of international settlements that was conducted at 2004, the average daily volume in the Forex markets totals in 1.9 trillion USD. The Forex market which was originally only accessible to large banks and multinational corporations is now open to large and small speculators. When trading in Fore, the investors bet that one currency will strengthen (increase) versus the other currency and they will receive the price difference when they will return to their original currency in which the position was opened.
The Forex market benefits from several advantages versus other traditional markets as the capital markets, futures and derivatives.
Similar to futures, forex is traded by using collateral that is based on a "trust deposit" and not a loan. Such leverage magnifies the market exposure and increases the potential profits and losses.
Additionally, since the trading in securities is being made in exchange for international currencies, the forex markets are open 24 hours a day and seven days a week (in spite of the fact that the liquidity may change in certain times). An additional important aspect of forex trading is interest rate differences.
Although it is not usually taken into consideration, money has a return (profit) that is paid via deposits and loans. When the interest rate is linked to a country's currency is higer then that of a different country, a person that has purchased the money with the highest profit and sold the money with the lowest profit will be entitled for the difference this gap is called: Carry and it is collected on a daily basis.
A predefined exchange rate for a foreign currency contract that ends at a predetermined future date. The contract is based on the interest rate difference between two relevant currencies.
A transaction in which two currencies are exchanged for a future delivery, under a predetermined rate and date. The rate in which the transaction is being made is comprised of the current spot rate and the interest rate differences of the currency pairs for the time duration until the agreed date.
A commitment to trade a product or an instrument at a fixed price and at a future rate. The main difference between a Future and a forward is that at the first one, the trading is usually made in the stock exchange (contracts that are traded in the exchange = ETC ) while forward transactions are traded over the counter (OTC). An OTC contract is any contract that is not traded in any exchange.
A number that represents in percentage the relative differences that occur in a specific economic phenomenon – example: prices. The index is used as a statistical tool to measure phenomenon or changes in the economy and compare its effect or its change in dates or different places.
An information regarding the development in the company, on its status change, on the development or expected changes, or other information on the company that is not known to the public and that if it was known to the public would have caused a significant change in the company's security price.
Exploiting inside information in order to earn profits on the company shares, whether personally or by receiving the information to others constitutes a breach of the securities law.
According to the law, any person that is making a transaction by using inside information, or that delivers inside information or an opinion on a company's security, while having inside information, to another person, that can be reasonably assumed, who will use that information for transaction purposes, is in breach of the law. So does an executive or an employee that is employed by the corporation.
An organization or an institution that have large financial resources of their own or of their clients that buy and sell large blocks of securities.
Among the institutional investors are included bans, insurance companies, pension funds, mutual funds etc. Theses institutions hold the majority of the securities that are traded in the exchange although they are fewer in number compared to the amount of small retail investors.
The investment in securities is their premier occupation and the main purpose of the institutional investors and they also recruit funds form the public for investment purposes. Usually the financial resources of institutional investors generate from 500 investors at the minimum.
An action which is being taken by a central bank in order to influence on its currency value via the entrance to the market. A combined intervention constitutes an action of several central banks in order to control the exchange rates.
A holding of more then one security under the ownership of an investor (or in its name). the investment portfolio can include common shares, bonds, cash substitutions and the remaining is a cash balance.
The purpose of the portfolio is to reduce the risk by diversifying the investments.
The composition of the portfolio will be determined according to the investors purposes as growth, speculation, receiving tax benefits or a combination of them both and according to market conditions in the different investment channels.
The investor must take into account several principals when he is choosing his investment class, including risk diversification, the information related with the investment, the possibility for flexibility, quick response and liquidity.
The portfolio can be managed by the investor or by consultation with other parties or to deposit its funds at a portfolio manager that will do that work for him.
The ratio between the amount used to execute a trade and depositing the required collateral. (Example: Leverage of 1:100 will enable you to buy or sell 20,000 $ with only $ 200).
An order which is defined with a limit of the highest price that will be paid or the minimal price that will be received. Example, if the current price of USD/YEN is 117.00/05 then the limit order to purchase the USD will be at a price which is lower then 102 (i.e 116.50).
The ability of a securities market to absorb large quantities of the trading volume without significant changes in the current prices. Liquidity is one of the main criteria that indicate the existence of a mature financial market.
A unit used for measuring the transaction amount. The value of the trade always relates to a specific number of portions.
A market maker is the entity that constitutes the counterparty of a trade versus a client. The market maker does not act as a middle man or a trustee of the client. The client's transaction covering is made by the market maker according to its own policy that is determined from time to time whether by netting transactions of different clients or whether by initiating transactions under its sole judgment. Thus, the market maker is a dealer that provides buy and sell prices and is willing to make a two sided market for every financial instrument.
The price of a product, asset, security or service that the buyer pays to the seller and that has been determined by the powers of supply and demand that operate in the market.
The market value of a company can be calculated if we calculate its registered traded capital in the share price. Thus, for instance, if the company has 1 million shares at a price of 5 shekels a share then the market value of the company will be 5 million shares.
A policy that is taken by the central bank in order to influence the economic activity in the market. This activity is made by reducing and expanding the quantity of money in the market by determining the interest rate for central bank loans made to commercial banks or either selling and buying securities and foreign exchange in the free market.