A to Z of Forex Trading

With the rapidly changing face of Trading, new terminology is created daily.
If there is a term that you are looking for that doesn’t appear below, please feel free to contact us.

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A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Appreciation

An increase in the value of currency due to a favourable market reaction or an increase in the value of a general asset.

Arbitrage

The act of taking two equal and opposite positions on the same currency pair at the same time to benefit from small price variations between related markets.  Because these variations are very small, this is generally only beneficial if you have a large amount of money in the trade.

Ascending Trend Channel

A basic chart pattern used in technical analysis to predict overall changes in trend.

The channel is formed with higher forming “swing highs” and higher forming “swing lows”.

Price moving within an ascending trend channel indicates a continuation in the upward trend.

Some traders consider price breaching either line forming the channel a strong signal either to enter a buy or sell position. A break through the upper trendline to buy, whilst a break through the lower trendline to sell.

The LIFT Trading Method will generate an earlier trade entry opportunity – maximising your profit from each trade.

Ascending Trend Line

A Bullish pattern created by connecting two or more successively higher swing lows. This creates an upward sloping trend line that acts as Support in a Rising Market.

The LIFT Trading Method uses these Trend Lines to identify strong Trading Zones.

Ascending Triangle

A Bullish Chart Pattern that indicates a strong upper resistance to price movement with increasingly higher support swing lows.

The theory behind this chart pattern is that; with the strong upper resistance at a particular price point (a double zero number – e.g. 1.3300, a Pivot Point or a Fibonacci Retracement Point) and increasingly higher swing lows, giving increasingly higher Bullish Pressure.

 

once the upper resistance to price movement is breached, price action is likely to continue upwards beyond the resistance price by the same amount as in the first swing “mouth” of the pattern

Ask Price

The price at which the market sells a currency. The trader can BUY the base currency at this price.  This is the right hand side figure in price window

Asset

An item that has exchange value.

Asset Purchases

An unconventional measure used by a central bank to stimulate an economy.  Most recent examples are the purchasing of government bonds to lower interest rates, inject capital into the economy or both. Otherwise known as “quantitative easing”.

At Best

The instruction given to a dealer to buy or sell at the best possible rate.

At Or Better

The instruction given to a dealer to deal at a specific rate or better. Hence-“at or better.”

Austerity

Measures implemented by a government to reduce spending in order to lower their deficit.  Usually involve wage cuts and tax increases – a political attempt to reassure creditors that they will be able to pay back outstanding loans.

Australian Dollar

The currency of Australia. Currency code (AUD) The Australian dollar is one of the top 6 traded currencies.  Also known as “The Aussie”

B

Balance Of Trade

The difference in value between a country’s imports and its exports.

A leading economic strength indicator used by Fundamental Traders.

Bar Chart

(Also known as the Western Bar Chart) A type of chart used by some traders in trading forex.

It has four major points- the high and low prices which form the vertical bar, the opening price is marked as a small horizontal line on the left side of the bar, and the closing price is marked as a horizontal line on the right.

Base Currency

The first currency in a currency pair (on the left).

Always set to a default value of 1.

As such, this indicates in the price how many of the other currency in the pair is 1 of the base currency worth.

Base Rate

A term used in the UK and Australia for the rate used by the banks to calculate the Interest rate to borrowers.

Top quality borrowers will pay a small amount over base.

This amount is set by the country’s Reserve Bank and is determined by the overall strength of the currency.

Basis Point

Equivalent to one percent of one percent of the currency.

Also known as a “point” or a “pip”

Bear (Bear Trader)

A Trader who believes that prices will decline (go down).

Depending on how the Trader trades, they can be “bearish” for the short, medium or long term.

Bear Market

A market in which prices are noticeably falling.

Also called a “short market”.

Bearish

Used to describe that a person’s, or group’s, outlook on an asset is “negative” (i.e., that the asset will fall in value).

For example, Joanne is “bearish” on the Swiss Franc, which means she thinks its value will go down in price.

Bearish Candlestick Pattern

There are more than 14 recognised Bullish Reversal Candlestick Patterns.

These include the Bullish Engulfing, the Piercing Pattern, the Harami, the Hammer, the Inverted Hammer, the Morning Star, the Bullish Railway Tracks and the Abandoned Baby.

To use Bullish Reversal Candlestick Patterns successfully, look for the pattern in a downtrend and use Bullish Confirmation as reinforcement of the pattern.

Use as part of your basic trend recognition procedures when completing your “Top Down Analysis” – see the LIFT Investor Trader Program for more information.

Bullish Engulfing Pattern

A Japanese Candlestick Pattern which identifies the potential of a price trend changing from Bearish to Bullish.

The market must currently be in clearly defined price downtrend.

The first candle is bearish.

The second candle is bullish.

The body of the bullish candle “engulfs” the previous candle’s body (completely covers the open and close of the previous candle).

The size of the candle being engulfed doesn’t matter.

We only look at the “real body” of the candle – ignore the wicks.

An even stronger signal occurs when the bullish candle engulfs the bodies of two or three previous candles.

Bid Price

The price at which The Market will BUY a currency.

This is the price that The Trader may SELL the base currency.

This is the left hand side figure in price window.

To enter a Short Trade, the Trader clicks the SELL (BID) Button.

Bid/Ask Spread

The difference between the BID and ASK price.

This indicates the broker’s commission (including their costs of entry).

e.g. if the GBP USD Bid Price is 1.2345 and the Ask Price is 1.2346, the Bid / Ask Spread is 1 Pip.

Also known as a “pip spread”

Broker

An agent or company who executes orders to buy and sell currencies and related instruments for their clients.

Brokers typically make money on either the commission or on a “spread” (the difference between the Bid and Ask Prices).

Some Brokers also charge a monthly fee.

Brokers are agents working on commission and not principals or agents acting on their own account.

In the foreign exchange market, brokers tend to act as intermediaries between banks bringing buyers and sellers together for a commission paid by the initiator or by both parties.

There are four or five Global Brokers operating through subsidiaries, affiliates, and partners in many countries.

Most Traders operate accounts through “Retail Brokers”.

Bull (Bull Trader)

A person who believes that an asset will rise in value.

Depending on how the Trader trades, they can be “bullish” for the short, medium or long term.

Bull Market

A Market characterized by rising prices.

Also called a “Long Market”.

Bullish

The term “Bullish” is used to describe that a person’s, or group’s, outlook that an asset will rise in value.

For example, John is “bullish” on the British Pound, which means he thinks its value will go up in price.

Buy

The Icon to Click if you want to Enter a Long Trade or Exit a Short Trade.

Buy Stop

Buying at a specified price above the market.

C

Candlestick Chart

Type of chart used to indicate the trading range for the day and opening/closing prices.

Also known as a Japanese Candlestick Chart, as this is where this style of charting method originated.

More information about Candlestick Charts that specifically relate to forex trading can be found in the Candlestick Module of The LIFT Investor Trader Program.

Carry Trade

Placing an order to take an advantage of position swap rates and also the positive movement in the currency pair

Cash Market

The market on which a futures or an options contract is based.

The forex market is also known as the Spot Cash Market.

CFD

Contract For Difference.

Typically used by traders to take leveraged short term investment positions in highly volatile markets.

Allows Traders to take short term positions with other Traders as to whether the price of an commodity will rise or fall.

One of the Serious Risks for Trading CFDs

The increased leverage involved with CFD’s increases the rate at which losses can be realised.

Compounding

Described by Albert Einstein as “The Most Powerful Force in The Universe”, this is the act of reinvesting a percentage of profits made into the next investment.

By doing this, your profits will generate a higher level of profit for you and; therefore, leverage your results.

All successful Traders and Investors consistently reinvest a percentage of their profits because they know that this allows them to produce greater results, by taking the same effort.

The LIFT Investor Trader Program teaches members how to use this and many other strategies to increase the rewards from your actions.

Contract

An agreement of trade between traders – each Contract executed has a BUY and SELL price indicated.

Traders who believe the currency pair price will RISE (Bullish Trade), set their BUY Price on Entry into the Contract and their Sell Price on Exit to close the Contract.

Traders who believe the price will FALL (Bearish Trade) set their SELL Price on Entry into the Contract and their Buy Price on Exit to close the Contract. 

Conversion Rate

A rate used to convert one currency into the value of another currency.

This is used in actual currency transfers when one currency asset from one country (e.g. British Pound) is converted into another (e.g. Australian Dollar)

Cross Currency Pair

The coupling of 2 currencies in which one currency is traded against the other.

Also known as a Currency Pair.

Currency

Any form of money a government endorses and is used for trade.

Currency Code

The act of artificially changing a currency’s value against other currencies instead of leaving it free to fluctuate based on market dynamics.

This can be done by fixing the exchange rate or deliberately increasing or decreasing its value.

This practice is illegal in the United States and frowned upon internationally, as creates an artificial distortion in currency prices.

This could also give way to unfair trade advantages since artificially devaluing a country’s currency could make its exports relatively cheaper and more attractive.

In the long run, this could eventually result to a global trade imbalance.

The governments of some countries are known to use this method, making their currency more difficult to trade consistently based upon technical analysis or fundamental analysis.

Currency Manipulation

An increase in the value of currency due to a favourable market reaction or an increase in the value of a general asset.

Currency Pair

These pairs are how the Spot Forex Market is traded by displaying and pricing one currency against another to be used to make a trade.

The pairs are traded in set formats, as specified by the International Monetary Fund.

Currency pairs are normally shown as two abbreviated currency names, separated by a slash or side by side.

These are the BASE currency (on the left) and a QUOTE currency (or COUNTER currency) on the right hand side.

The most traded currency pairs in the world are called The Majors.

They include the currencies euro, US dollar, British Pound Sterling, Swiss Franc, Japanese Yen, and Australian Dollar.

The Majors make up the largest share of the foreign exchange market and are considered by The Trading Coach to be the Strongest Currency Pairs to trade, because of their strong fundamental value, their trade volume and that they are traded by the large banks and investment funds.

Currency Risk

The potential negative effect involved in exchange rates.

D

Daily Chart

A graph that shows the past price movement of a security in which each bar or candlestick represents one day’s worth of data.

This day is most commonly the midnight to midnight period of the country in which the trader is based.

Some charts can show the daily candle as the midnight to midnight period GMT (Greenwich Mean Time) or New Your Time (ET).

Always be aware which your broker shows you on your charts – it may impact various tools, especially Pivot Points.

Day Trader

A person who makes and closes trades within the same trading day, or “flat” (no open positions) at the end of the session.

Those Traders who execute multiple trades within a day are known as Intra Day Traders.

The LIFT Investor Trader Program teaches intra day trading techniques as a way to mitigate risk and ensure that the trader is always aware of their financial position and has the ability to enter and exit trades while minimising risk.

Day Trading

Day trading on the foreign exchange market is recognised as one of the most active forms of trading.

The ability to enter and exit trades in a short time frame to take advantage of the smaller fluctuations in price is not for every trader.

Only those looking to minimise risk by using lower “stop losses” and maximise profit by trading shorter term price runs should consider Day Trading.

Should decide that day trading is for you, the LIFT Investor Trader Program can teach you our proprietary LIFT trading method that is used by all of our active LIFT Traders to trade Intra Day.

Please be aware that here are many different styles and variations of day trading with the currency market outside this program.

The LIFT Method has been developed over 14 years to help Day Traders minimise risk and maximise profit and has very clear trade entry and exit parameters that can help traders create a high percentage of profitable trades and keep them out of low probability “risky” trades.  

Doji

The doji is a type of candlestick where the “real body” is non-existent with varying lengths of upper and lower “wicks” or “shadows”.

This candlestick looks like a cross, inverted cross or plus sign.

The lack of a real body with equal open and close prices indicates indecision between buyers and sellers – with a potential shift in the current buying or selling pressure.

E

Evening Doji Star

A three candle bearish reversal pattern similar to the Evening Star.
# The uptrend continues with a large white / green body.
# The next candle opens higher, trades in a small range, then closes at the same price as its open (Doji).
# The next candle closes below the midpoint of the body of the first candle.

Evening Star

A bearish reversal pattern that has the potential to take an upwards price movement into a bearish retracement or trend reversal.

Pattern starts with a long white / green body candle followed by a gapped up small body candle, then a down close with the close below the midpoint of the first candle.

The LIFT Trading Method uses candlestick chart patterns as added confirmation of Price Trend Retracements or Reversals.

Exchange

A physical location where commodities and futures are traded.

The foreign exchange is not a physical exchange – it is a trading “platform” where trades occur.

Exchange Rate

The current rate at which a Trader can Buy or Sell a currency in a Trade.

These rates can change every microsecond.

Forex Trading Successfully is about making PROFIT when transacting into and out of a currency contract.

In all transactions, this means having a BUY Price which is LOWER than Your SELL Price.

Exchange Rate Risk

The potential loss that could be incurred from an adverse movement in exchange rates.

Exhaustion

Also Known as Market Exhaustion.

A situation in which a majority of participants trading in the same asset are either long or short, leaving few investors to take the other side of the transaction when participants wish to close their positions

F

Fibonacci

Leonardo Fibonacci de Pisa was a 12th century mathematician who explained the Fibonacci sequence – a mathematical progression of numbers based upon adding the current number in the series with the previous to find the next.

The sequence starts off 0, 1, 1, 2, 3, 5, 8, 13, 21, 34 and continues.  As the values increase, the difference between each number in the sequence calculates at 61.8% larger than the previous.

Numbers in the sequence are a universal constant and appear consistently in nature, from the dimensions of the nautilus shell to the dimensions of the human face.

There is an inherent psychology to the numbers which affects (according to proponents of Fibonacci) the way traders enter and exit trades, based upon price movement and price cycling.

Fibonacci can be utilised in many different strategies to varying benefits – More on this topic is covered in this guide and in the LIFT Investor Trader Program.  We have found that an uncomplicated approach to Fibonacci use often produces the most consistent result…

Fibonacci Channel

Human behaviour is not only reflected in chart patterns as large swings, small swings or trend formations.

Human behaviour is also expressed in peak-valley formation. Fibonacci channels make use of peak and valley formations in the market and lead to conclusions on how to safely forecast major changes in trend directions.

The secret of Fibonacci channels is to identify the correct valleys and peaks to work with. Support and resistance lines can be drawn weeks and months into the future, once the appropriate tops and bottoms in the market have been detected. Only major tops and bottoms should be considered for a base line of a Channel with one or more prominent side swings. The widest swing within a time frame of the base line is used for a trigger line.

Fibonacci channels are a method of predicting levels of support and resistance for a given market. Although Fibonacci channels fall under the general category of Fibonacci studies for technical analysis, the channels aren’t among the most popular tools used by traders today.

Fibonacci channels are variants of the more-popular Fibonacci retracement strategy, with retracement lines running diagonally rather than horizontally.

To generate Fibonacci channels for a chart, a trader first creates a base channel by drawing parallel lines through a price top and price bottom.

The slope of the Fibonacci channel is determined by connecting either two bottoms or two tops, depending on the overall trend: in a downward trend two bottoms are connected, while in an upward trend the slope is generated from two tops. Once the base channel is drawn, additional parallel lines are drawn above or below it, with the distance between lines determined by Fibonacci numbers: 0.618 times the width of the original channel, then the width of the original channel, then 1.618 times to the width and so on, multiplying each number by the golden ratio 1.618 to determine each successive width.

These Fibonacci channels determine the support and resistance levels for the market within the overall trend.

When used, Fibonacci channels are often drawn along with Fibonacci retracement charts. The points where the diagonal lines and horizontal lines cross are considered to be exceptionally strong levels of support or resistance for the market.

The study of Fibonacci can be all consuming and it can often times be easy to get caught up in one aspect of the study.

For this reason, simple, easy to follow techniques to use Fibonacci are covered throughout the LIFT Investor Trader Program to ensure that you are focusing on the strongest, MOST PROFITABLE use of the tool.

Fibonacci Extension

Fibonacci extensions are, as the name indicates, not a separate Fibonacci Studies in their own right, but rather a way to increase the utility of Fibonacci retracements over time.

Fibonacci extensions are created by first generating a Fibonacci retracement chart for a market. This is done by drawing a vertical line from a top to a bottom and then crossing the vertical with horizontal lines, each drawn through points determined by taking Fibonacci-significant percentages of the initial vertical’s length (38.2%, 50% and 61.8% of the vertical’s length being the most common values used.)

Once a basic Fibonacci retracement is created, a Fibonacci extension can be created by extending the vertical and drawing additional horizontal lines through it at higher or lower price levels, corresponding to greater Fibonacci-significant percentages: 161.8%, 261.8%, or any percentage derived by multiplying a previous percentage by the golden ratio of 1.618.

Once a Fibonacci level is met and broken through, that level becomes support, with the following Fibonacci level becoming resistance.

Fibonacci extensions are used to outline future support and resistance levels for a market once price levels exceed the initial retracement resistance or support level of 100% of the original vertical’s height.

Fibonacci extensions are thus not just a method of assessing how much the market will recover from a major price adjustment, but rather a long-term method of determining the support and resistance levels of the market once price levels have broken the original support or resistance and begun moving along a new overall trend.

The study of Fibonacci can be all consuming and it can often times be easy to get caught up in one aspect of the study.

For this reason, simple, easy to follow techniques to use Fibonacci are covered throughout the LIFT Investor Trader Program to ensure that you are focusing on the strongest, MOST PROFITABLE use of the tool.

Fibonacci Retracement

Markets move in rhythms or waves.

An rapid price movement which occurs in a price trend will generally have a following “settling” in price back to a previous point in the movement to allow opposing Traders to test a previous level of Support or Resistance to moderate rapid movements.

These retracement points often occur at a level that Traders see as a “natural” or “comfortable” level.

As human beings, we are “wired” to see symmetry and lack of symmetry in line with the Fibonacci 38.2% and 61.8% proportions.

This occurs in either bull market or bear market conditions.

Fibonacci retracements are one of the four most commonly-used Fibonacci studies for predicting levels of support and resistance for a given market.

Fibonacci retracements are used immediately after a strong price movement either up or down. An imaginary vertical line is drawn across the chart between two extreme price values, one high and one low.

Then a number of horizontal lines are drawn perpendicular to the imaginary vertical at significant Fibonacci values.

The most common number of lines is five, drawn at 0%, 38.2%, 50%, 61.8%, and 100% of the length of the line (starting from either end), but some traders have been known to use even more retracement lines than this.

Following a strong price movement in either direction, markets tend to “retrace” much of their change in price, and the levels at which this retracement reverses or pauses often correspond with the horizontal lines on the Fibonacci retracement chart.

A Fibonacci retracement isn’t useful for determining overall trends in price, but can help to predict levels of support and resistance within a large price reversal, allowing traders to anticipate medium-sized fluctuations in price and trade accordingly.

The study of Fibonacci can be all consuming and it can often times be easy to get caught up in one aspect of the study.

For this reason, simple, easy to follow techniques to use Fibonacci are covered throughout the LIFT Investor Trader Program to ensure that you are focusing on the strongest, MOST PROFITABLE use of the tool.

Fibonacci Studies

Fibonacci studies are geometrical representation of nature’s law and human behaviour that can be applied, almost without limit, to market data series, whether cash currencies/Forex, futures, index products, stocks or mutual funds. Each shape possesses unique characteristics in determining when the battle between bulls and bears is approaching a critical phase and which side is likely to win it.

Most Fibonacci studies are based on 3-wave patterns (A-B-C corrective patterns). The first impulse wave A is followed by the second corrective wave B that doesn’t.

The study of Fibonacci can be all consuming and it can often times be easy to get caught up in one aspect of the study.

For this reason, simple, easy to follow techniques to use Fibonacci are covered throughout the LIFT Investor Trader Program to ensure that you are focusing on the strongest, MOST PROFITABLE use of the tool.

Fibonacci Time Protection

Fibonacci time projection days are days on which a price event is supposed to occur. Time projection analysis is not lagging but is of forecasting value.

Trades can be entered or exited at the price change rather than after the fact. The concept is dynamic. The distance between two turning points is seldom the same, and time projection days vary, depending on larger or smaller swing sizes of the market price pattern. This base for drawing this shape is 2 critical points: two highs, two lows or a low and a high.

Fibonacci levels are projected into the future based on those points and at this time it is impossible to say whether those levels mark peaks or valleys.

If price is declining or rising approaching a given Time Projection level, it is likely this level will mark an end or a pause of a particular trend. It is always recommended to combine Time Projection with other Fibonacci tools for more dependable signals.

Fibonacci time projection is one of the four most popular Fibonacci studies for technical analysis, involving the use of Fibonacci time zones.

Fibonacci time zones are generated by dividing a chart into a number of time areas, based on the Fibonacci sequence.

As an example, if the base increment is taken to be an interval of one day, Fibonacci time zones would occur around 1.618 days after that day, then 2.618 days after that, then 4.236 and so on.

Each interval is multiplied by the golden ratio, 1.618, in order to generate the next interval. These Fibonacci time zones are used to predict large price events, whether reversals of a current price trend or sharp changes in price along with the trend.

Fibonacci time projection is accurate to a point, but in a few cases large price events occur significantly before or after the time predicted by the Fibonacci time projection. Although this only describes about 30% of cases, Fibonacci time projection should only be used in conjunction with other technical analysis tools, and as a guideline for trading rather than a sure-fire method of divining the future

The study of Fibonacci can be all consuming and it can often times be easy to get caught up in one aspect of the study.

For this reason, simple, easy to follow techniques to use Fibonacci are covered throughout the LIFT Investor Trader Program to ensure that you are focusing on the strongest, MOST PROFITABLE use of the tool.

Fibonacci Time Zones

Fibonacci Time Zones are a series of vertical lines.

They are spaced at the Fibonacci intervals of 1, 2, 3, 5, 8, 13, 21, 34, etc. The interpretation of Fibonacci Time Zones involves looking for significant changes in price near the vertical lines.

Fibonacci time zones are used in the Fibonacci time projection, one of the four most commonly used of the Fibonacci studies for technical analysis.

A Fibonacci time zone is generated by first taking some time interval on a market’s chart as a base increment of time, anywhere from one hour to one day.

The most useful Fibonacci time zones are generated by choosing a base interval described by the time between two market bottoms or tops. The base interval is then multiplied by the golden ratio, 1.618, in order to determine the length of time from the end of the base interval to the first Fibonacci time zone. Future Fibonacci time zones are generated by multiplying each successive interval between Fibonacci time zones by 1.618.

Fibonacci time zones are, in theory, the points at which large market events can be expected, from the reversal of a current price trend to a large change in price in the direction of the trend.

In practice, Fibonacci time zones do have a large measure of predictive power (something like 70%), but on occasion large price events can occur between Fibonacci time zones, even though the time zones usually still correspond with price events of some size. Because of this occasional inaccuracy, Fibonacci time zones and Fibonacci time projection should only be used as guidelines, and should also only be used in conjunction with other technical analysis tools.

The study of Fibonacci can be all consuming and it can often times be easy to get caught up in one aspect of the study.

For this reason, simple, easy to follow techniques to use Fibonacci are covered throughout the LIFT Investor Trader Program to ensure that you are focusing on the strongest, MOST PROFITABLE use of the tool.

First In First Out

The rule in which positions are closed in the order they were originally opened.

Also known as FIFO.

Foreign Currency Effects

The loss or gain on foreign investments due to a rising or falling domestic currency.

A falling domestic currency means foreign investments will result in higher returns when converted back into domestic currency.

Foreign Exchange

Foreign Exchange, or Forex trading is the simultaneous buying of one currency and the selling of another.

Currencies are traded through a broker or dealer, and are traded in pairs; for example the Euro and the US dollar (EUR/USD) or the British Pound and the US Dollar (GBP/USD).

Because you’re trading contracts and not buying anything physical, this kind of trading can appear a little confusing at first glance.

Think of buying a currency as buying a share in a particular country. When you buy, say, Japanese Yen, you are in effect buying a share in the Japanese economy, as the price of the currency is a direct reflection of what the market thinks about the current and future health of the Japanese economy.

The LIFT Investor Trader Program was created to introduce novice or beginner traders to all the essential aspects of the foreign exchange, in a fun and easy-to-understand manner.

Forex

An abbreviation of “foreign exchange” – also referred to as the “FOREX” or ”FX” or ”Retail forex” or “currency market”

Forex Spread

The difference between the Bid and the Ask Price of the currency pair

Forex Swap

A forex swap is the simplest type of currency swap. It is an agreement between two parties to exchange a given amount of one currency for an equal amount of another currency based on the current spot rate.

The two parties will then give back the original amounts swapped at a later date, at a specific forward rate.

The forward rate locks in the exchange rate at which the funds will be swapped in the future, while offsetting any possible changes in the interest rates of the respective currencies.

Thus, this creates a hedge for both parties against potential fluctuations in currency exchange rates.

This makes forex swaps very useful for multinational and exporting companies.

Fundamental Analysis

Fundamental analysis is a method of evaluating assets on the basis of external events and influences, as well as financial statements on the asset itself.

It is used by traders to make decisions on different assets by measuring the economic, financial and market conditions that can affect its price.

Unlike Technical Traders, who wwill derive all the information they need to trade from an asset’s charts, Fundamental Traders look at factors outside of the price movements of the asset itself.

Traders can either use fundamental or technical analysis exclusively, or a blend of the two.

Fundamental analysis involves using numerous qualitative and quantitative factors to evaluate an asset.

For Forex Traders, it can mean assessing the figures released by central banks, Employment, Interest Rates, Manufacturing, Balance of Imports and Exports, etc. that allow insight into the state of a country’s economy.

G

Going Long

The act of buying currency, commodities, and stocks for investment, with the expectation that profit will be made from a price increase.

Going Short

The Act of entering a Forex Trade with the expectation that the price will fall.  The SELL Price is entered on the opening of the contract as the Current Market Price.

If the price falls as expected, the Trader exits the Trade by Clicking the BUY Button at the now lower price.

How Does This Work??

Short Trading Relates to a trade in a binary market, where the COUNTER / COMPARISON currency, commodity or stock is expected to rise in value against the BASE.

This is the act of selling the BASE currency, commodities, or stocks to profit from the increase in value of the COUNTER / COMPARISON.

H

Hanger

This is a candlestick that forms when price moves significantly lower after the start of the candle open price, but rallies to close well above the lowest price in that timeframe.

The resulting candlestick looks like a square lollipop with a long stick.

A a low in the Market, a hammer generally indicates that the market may be attempting to find a strong low price, and that buyers (Bull Traders) are strengthening their position.

If this candlestick occurs after a significant uptrend, then it is called a Hanging Man and can indicate a short term price reversal downwards or a new Short Trend forming.  This can seem counterintuitive, as normally you would expect to see an inverted hammer with the wick at the top signifying downwards pressure.

Candlesticks and Candlestick Patterns can be open to interprestation, this is why the LIFT Investor Trader Program uses them to confirm what our LIFT Trading Method Indicators tell us.

For more information, book in to speak with one of our experienced Trading Coaches.

HERE

Hanging Man

Hanging Man candlesticks form when a currency moves significantly lower after the open price, but rallies to close well above the low of the timeframe.

The resulting candlestick looks like a square lollipop with a long stick.

If this candlestick forms at the bottom of a decline in price at a point of Support, then it is called a Hammer.

Harami

A two candle pattern that has a small bodied candle completely contained within the range of the previous body, and is the opposite colour.

Harami is the Japanese word for pregnant, a descriptive term for this pattern because it looks like a profile view of a pregnant woman.

Coming after a strong trend, this pattern indicates a decrease in momentum and possibly the end of the trend.

Harami Cross

Harami crosses are reversal signals and are formed when a long candle is followed by a doji.

For the pattern to be a valid harami cross, the doji should be completely located within the top and bottom of the first candle

I

Interest Rate Risk

The potential for losses arising from changes in interest rates.

Interest Rates

A rate which a borrower pays for holding a loan with lender.

International Monetary Fund

The International Monetary Fund (IMF) is an organization of 186 countries, working to encourage global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

It oversees the global financial systems of its member countries by monitoring policies that have an impact on exchange rates and the balance of payments. It also offers highly leveraged loans to underdeveloped countries.

The IMF was formed in July 1944 during the UN Monetary and Financial Conference when the delegates agreed on a framework for international economic cooperation. This took place after the infamous Great Depression when countries attempted to save their economies by raising barriers to foreign trade and devaluing their own currencies. As these measures proved to be self-defeating, it became necessary to form an institution that would ensure exchange rate stability and encourage member countries to eliminate trade restrictions.

The IMF came into formal existence after its first 29 member countries signed the Articles of Agreement.

From then on, the number of IMF member countries have more than quadrupled to 186 countries today.

This strength of policy and cooperation gives strength to the Forex Market and the ability to consistently trade it.

Intraday Position

Open positions that are usually closed by the end of the trading day.

This indicates that the trader has no active trades at the end of the trading day.

Inverted Hammer

A one candle bullish price reversal pattern.

In a downtrend, the open is lower, then it trades higher, but closes near its open.

Inverted Head And Shoulders

An Inverted Head and Shoulders is a Bullish reversal candlestick chart pattern consisting of three low swing points with the central low being the lowest trough forming the “Head” of the pattern and the higher troughs on either side as the “Shoulders”.

The inverted head and shoulders represents the end of a Down Trend and entry into a new Up Trend.

Learn more about this strong Bullish Chart Pattern in The Chart Pattern Module of the LIFT Investor Trader Program.

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K

L

Leading Indicators

So-called “Leading indicators” are used by traders to predict imminent changes in a market.

All indicators are based upon previous price movement, so the term “leading” indicator can be a little MISLeading.

Fundamental traders use fundamental leading indicators, such as economic growth, interest rates, employment figures, export and manufacturing / primary production figures as “leading indicators of the strength of a currency”

Strong Technical Analysis Trading Methods, such as the LIFT Trading Method, used exclusively by members of the LIFT Investor Trader Program, use a combination of high probability responsive indicators that, through their movement and analysis of the upwards and downwards pressure of price movement, give the trader an insight of POTENTIAL trade entry positions.

This allows us to project strength and weakness forward into the next trading period to see possible areas where price may move from and to.  This can lead to stronger trade entry and exit points.

A robust Trading Method like the LIFT Trading Method uses active and passive strategies and, when applied consistently, can produce a high percentage of profitable trades, not possible by purely following “price action” (i.e. rapid unpredictable volatile movements in price).

As professional Investors and Traders, we always suggest being educated in how and why a Trading Method works and to be coached by traders who have successfully followed the Method.

Leverage

The use of borrowed capital, such as margin, to increase the potential gains or losses of a trade.

Most retail brokers will allow Traders to leverage the value of their account by 1:100 – allowing them to access profits made in the smaller movements of the market.

This is done via a Margin Loan facility.

Brokers will in turn charge Traders an annual commission for the Margin Loan Facility.

Included in this is an agreement that the Trader must keep an additional amount in their trading Account – not in trades to cover this margin.  This is called a Margin Requirement.

These brokers will “Margin Call” (exit Traders from Trades) if the amount in the trading account drops below that agreed percentage, to protect the capital of the Trader in case the market turns against them significantly.

Limit Order

An order with specified boundaries.

Can be used to control how much profit and how much loss a trader is willing to handle.

Often set by a trader to exit a position where they are not actively watching the trade.

Can be required by some brokers to attempt to control the risk and profit of a Trader.

Not recommended by the Trading Coach, as it takes the control of entry and exit out of the trader’s hands, and therefore the responsibility…

More about Financial Control and Financial Responsibility is covered in the LIFT Investor Trader Program.

Liquidity

In the Forex market, liquidity relates to a currency pair’s ability to be bought and sold without causing significant change in its exchange rate.

A currency pair is said to have high level of liquidity when it is easily bought or sold and there is a significant amount of trading activity for that pair.

A currency pair can have low liquidity when there is a rapidly moving price, or when there is low activity (lower volume of trades)

Long Candle

A long candle represents a upwards move from open to close in a single period in a time frame..

e.g. On the daily chart, each candle represents the price movement from midnight to midnight and on the 1 hour candle, each candle represents the price movement over one full hour (X.00.01 to X.59.59)

Gwenerally; depending on the settings of your charts, the colour of the Long Candle will either be Green or White.

Long-Legged Doji

This candlestick has long upper and lower shadows or wicks with the Doji in the middle of the candle’s trading range, clearly demonstrating significant indecision of traders.

Long Position

A position (Trade) that becomes profitable as the market price rises.

A trade on a pair in which the base currency is bought is said to be a long position.

Also known as a Bullish Position.

Long Term Trading

Long term trading, also known as Position Trading, refers to a trading style in which the trader will enter a trade and hold on to a position for an extended period of time.

A position trade can last anywhere from a few weeks to a couple of years.

Most long term trading Traders rely heavily on fundamental analysis – where they analyse the socio economic factors of a price movement in a currency pair.

This type of trader is mostly interested with the long term future outlook of the market they are trading. They are not as concerned with the intraday ups and downs and instead focus on the fundamental factors driving the longer term price trend.

Because of their longer term outlook, long-term traders will normally look at daily, weekly and even monthly charts for their analysis.

As a result, Traders hope to make profit of a large pool of funds, often letting the market move significantly against them before they make any profit.

The LIFT Investor Trader Program focuses on intra day trading, where the risk can be managed more strategically and short term, consistent profits with a smaller investment can multiply your trading funds quicker by taking advantage of smaller, more predictable trades and compounding profits.

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MACD

An Acronym for Moving Average Convergence/Divergence – an indicator used in technical analysis that was invented in the 1970s as a means of showing the differences between both the fast and slow EMAs (Exponential Moving Average) of closing prices.

Since 1986 the graph has been produced as a histogram, which most traders use as a replacement for a volume indicator in forex trading.

The moving average as expressed by the MACD is essentially the average of a price over 2 set amounts of time (blue line is 12 candles and red line is 26 candles).

The MACD gives a quick and easy view of the strength of both the short term and long term average price.

The direction of the blue line and whether it is above or below the red line gives traders the most current bullish or bearish pressure of the average price.

The blue line crossing up through the red line is often used as a buying signal and the blue line crossing down through the red line is often used as a selling signal.

More detailed strategies, specifically for success trading forex using MACD are taught in the LIFT Investor Trader Program.

Margin Call

When an investors free equity falls below the Margin Requirement for the Broker to allow the Trader to hold a Position, resulting in a demand to reduce the position or deposit more funds.

Margin Requirement

The amount of equity required by a customer as a percentage of the market value of the position held.

This is a term of the Broker to allow the Trader to Margin Loan and use Leverage on their account.

Margin Exhaustion

Also Known as Exhaustion.

A situation in which a majority of participants trading in the same asset are either long or short, leaving few investors to take the other side of the transaction when participants wish to close their positions

Market Maker

A person or broker who normally quotes both the BUY and SELL prices.  In other words, their trades are executed and covered internally, without appearing on the Open Market.

Because of the potential for such brokers to artificially enter and exit traders from trades and potentially tamper with traders funds, in Australia, any organisation caught acting as a Market Makers is de-registered and may face criminal charges.

Be careful when choosing your broker – an overseas broker is not necessarily subject to this control and you may have no recourse if this should happen to you.

For this reason, we highly recommend that Australian Traders use only ASIC registered brokers to execute trades.

Promises of high returns from foreign brokers do not come with the promise of fair trade.

Market Order

An order to make a transaction at the current market price.

Momentum

Momentum, in technical analysis, refers to the overall rate of change and strength of that movement in the price of an asset.

Traders often take momentum as a measure of the volume of a market.

If prices are changing rapidly in a market (meaning that momentum is high), it’s likely that a large number of traders are buying or selling the asset to push the price change in either direction.

As such, extremely high or extremely low values for momentum are looked at as signs that an asset is either overbought or oversold.

If momentum reaches an extreme high, the asset is overbought; if momentum reaches an extreme low, the asset is oversold.

Buy signals are generated when momentum reaches an extreme low and then rapidly advances back upward across the zero line.

Conversely, sell signals are generated when momentum reaches an extreme high and then rapidly falls below the zero line.

This approach has some historical strength, but The LIFT Trading Method uses the combined momentum of several strong indicators that “smooth out” potential contradicting momentum signals that can be found in one single indicator.

This allows LIFT Method Traders to find stronger entry points where price is less likely to reverse against your position and more likely to produce profit.

Monetary Policy

Monetary policy refers to the process by which a monetary authority controls the money supply in the economy.

Usually it is the central bank that is responsible, adjusting the amount of money available in order to generate economic growth, stabilize prices and exchange rates, and promote employment.

Primary Techniques To Control Monetary Policy:
One common technique is by ”increasing/decreasing the country’s monetary base”.

Usually central banks do this by buying or selling bonds in exchange for money to be deposited in the central bank. In this process, the liquidity in the economy is increased.

Another way to control money supply is to limit the amount of assets that banks must leave with the central bank as reserves.

By increasing the ”reserve ratio requirement”, banks have less liquid assets available for loans and more illiquid assets such as mortgages.

”Discount window lending” is also another way to control monetary policy.

The central bank allows commercial banks to borrow reserves in exchange for collateral, making liquidity available for them in times of emergencies.

The fourth way in which money supply can be controlled is by adjusting ”interest rates”.

When the central bank raises interest rates, the money supply contracts because there is more money used to pay for borrowing costs and less money to go around the economy.

Morning Doji Star

A three candle bullish reversal candlestick pattern that is very similar to the Morning Star.

– The first candle is in a downtrend with a long black / red body.

– The next candle opens lower with a Doji that has a small trading range.

– The last candle closes above the midpoint of the first candle

Morning Star

This is a bullish candlestick pattern signifying a potential bottom.

A three candle bullish reversal pattern consisting of three candlesticks:

– A long-bodied black / red candle extending the current downtrend

– A short middle candle that gapped down on the open

– A long-bodied white / green candle that gapped up on the open and closed above the midpoint of the body of the first candle.

The star can be a bullish or a bearish candle.

Moving Average

The average (middle point) of price of a commodity over a given time.  Calculated by adding the price at a regular interval over a time trame and dividing by the number of points.

E.g. a 5 Moving average on a 1 hour chart is calculated by adding the close price of each 1 hour candle for 5 candles and dividing by 5.  The resulting number is the MA5 for that period.

Can be used as a trading tool. 

Moving Averages

A moving average is one of the basic common tools of technical analysis. The two most popular types are the simple moving average and the exponential moving average.

The simple moving average is calculated by averaging market prices over a given period. For example, the 20 moving average would average price levels for the last 20 candles on the chart. On the next candle, the SMA would include that candle in the Moving Average and drop the first candle.  The lower the value of the SMA, the more the line of the indicator moves.

Traders use several Moving Averages overlaid to show the difference in current price average, compared with a larger timeframe.  This can indicate current upwards or downwards pressure, with line crosses as potential trade entry points.

The LIFT Trading Method can be modified to use specific value Moving Averages to add value to the strength of a Trade Entry or Trade Exit Point.

 

The exponential moving average is more complicated, being calculated by taking the difference between the current price and the previous EMA.

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Offer

The price a dealer is willing to sell a currency.

Offered Market

Situation in which the offers are greater than the bids.

Open Order

An order that will be executed when a specified market price is reached.

This results in opening an active trade.

Open Position

An active trade that has yet to be closed.

Order

A request for a trade to be executed.

Oscillator

An oscillator is a technical analysis tool used by technical analysts to determine whether a commodity has the potential to move up in price or down in price.

The oscillator is a moving line chart with an upper and lower limit.

Based upon variables specified by the Trader, the line of the oscillator will plot higher or lower within these two extremes.

When the line is above a particular level on the chart, this indicates to the Trader that the commodity may be “overbought” (unsustainably high in price) and has the potential for price to move down.

When the line is below a particular level on the chart, this indicates to the Trader that the commodity may be “oversold” (unsustainably low in price) and has the potential for price to move up.

The Trader can use this information, in combination with other indicators to look for Trade Entry or Trade Exit Points.

Overbought

This is a defined area in a specific technical indicator that demonstrates the potential of price hitting a high point in the market.

Once the indicator plots in the Overbought area, the Trader can expect Bullish pressure of price movement to ease.

The balance of pressure into Bearish is generally indicated when the indicator subsequently starts plotting below this Overbought area.

Two of the most common indicators of overbought or oversold conditions are the relative strength index (RSI), range expansion index (REI) and the stochastic indicators… 

Oversold

This is a defined area in a specific technical indicator that demonstrates the potential of price hitting a low point in the market.

Once the indicator plots in the Oversold area, the Trader can expect Bearish pressure of price movement to ease.

The balance of pressure into Bullish is generally indicated when the indicator subsequently starts plotting above this Oversold area.

Two of the most common indicators of overbought or oversold conditions are the relative strength index (RSI), range expansion index (REI) and the stochastic indicators… 

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Pip

The most common increment of currencies is known as a “pip.” It is the smallest value change in a currency pair exchange rate.

For instance, if the EUR/USD moves from 1.2250 to 1.2251, that is ONE pip. A pip is the last decimal place of a quotation.

A positive or negative pip value is how you measure your profit or loss.

Pivot Points

Pivot points are common tools used in technical analysis. A pivot point represents the point at which the overall trend in price changes from Support to Resistance or vice versa.

The positions of Pivot Points are determined using a recognized formula that takes into account the Opening, Closing, High and Low prices of the currency in the previous trading period.

Intra Day Traders (including those who use the LIFT Trading Method) use daily Pivot Points which are calculated over the previous trading day (some use the midnight to midnight GMT (Greenwich Mean time) and others use their strongest local market (US Traders may use the New York Midnight to Midnight timeframe)

 

All Profitable Traders look to capitalise on the start of new price trends as much as possible in order to maximise their profit.

Price reversing at a Pivot Point (combined with other strong momentum indicators) can trigger a trade entry point.

In the contra, when in a trade, price approaching an opposite Pivot Point can indicate the end of a price run and the trade exit point.

The LIFT Trading Method uses these points (in combination with other signals) to identify potential stronger trade entry and exit zones.

Position

The net total exposure in a given currency.

A position can be either flat or square (no exposure), long (more currency bought than sold), or short (more currency sold than bought).

Position Trading

A trading style that is based upon long term general price trends.

This is the closest thing to “passive” trading – where traders with large sums of money buy and hold in a General Long Trend and Sell and Hold in a General Short Trend.

Position Traders “ride out” market corrections, often letting their position become unprofitable for a long period of time before it can return profit.

This type of trading is usually done by cashed up “Fundamental Traders” who have a large bank of money, access to detailed market analysis of the strength or weakness of a currency and the capacity to sit on a trade for a long time before exiting.

As a “risk managed” trade, Position Trading can produce long term profits, but in comparison to intra day trading, misses a lot of “within the trend” profit opportunities.

If you are looking to build a trading fund and use compounding to maximise profit, this trading style may not be recommended.

It is commonly recognised that the most profitable traders let their profits run and cut their losses short, but this is often the opposite of what can occur in this trading style.

We suggest a balanced portfolio of short term profit generating trades and long term, capital growth trades, especially once you have developed the experience and financial position to make the most of these types of trades.

Price Action

Price Action refers to a security’s price movement.

It can be represented in terms of charts, graphs and tables.

The study of price action is often promoted as a responsive way to make quick money, but the LIFT Trading Method uses the added strength of recognised momentum, moving average and support and resistance indicators to manage risk, improve trade probability and profitability than just price action allows.

Price Swing

See the entry under Swings / Swing Points

Price Transparency

A description of quotes in which everybody in the market has equal access.

As a highly regulated investment instrument, forex is revered amongst professional traders for its transparency.

Other newer investment instruments, such as cryptocurrency, don’t have the same transparency, as the way in which price is determined in those markets can be significantly more abstract and less open.

Principal Value

Original amount invested by an individual.

Profit/Loss

The actual gain or loss due to transactions and market activities.

Phsychology

Psychology in Forex is almost as important as the money that traders invest in the market. Without the proper mind-set, trading can be intimidating and confusing.

Those who lose the most money in the market are those who don’t grasp this fundamental truth.

Thought is reality here. Emotions have to be identified, structures built to manage them and concerted effort made to control them in order to become a consistently successful, profitable Forex trader.

As human beings, it is easy for traders to say that they can control their impulses, but when potential profit is staring them in the face, it can be hard to deny the strong desire for a better life.

But it is just as important to be consistent in the trading “game” as it is to take a quick profit.

To guarantee a future in the Forex market, traders must be educated and supported to learn how to recognise and control their impulses, remain motivated and persistent even when a potential loss stares them in the face, and develop a self-awareness that will intuitively point them in the direction to success.

Scientists are only now beginning to realize the effect of emotions on a person’s thought process.

The LIFT Investor Trader Program dedicates a large percentage of our education, coaching and support structures to help traders develop the mindset of a successful, profitable trader.

The program includes material, videos, events by thought and mindset leaders, developed to help you create long term, consistent profit as a LIFT Investor Trader.

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Quote

Informs every market trader and stakeholder of current market prices.

Quote Currency

The second currency in a currency pair. Also known as the Counter or Comparison currency.

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Rally

An period of increase in upwards price movement after a period of declining prices.

Range

The difference of the highest and lowest price in a given trading period.

Rate

The price of one currency in relationship to another currency.

Relative Strength Index

Relative Strength Index, sometimes shortened to RSI, is a price oscillator used in technical analysis to show changes in the strength of price movement.

The Relative Strength Index is considered a popular tool and is a relatively easy one to interpret. This price following oscillator is shown as a basic graph which ranges from zero at the bottom to one hundred at the top.

By far one of the most popular methods of analysing the Relative Strength Index is to look for an area on the graph that shows a divergence away from the current trend, in particular seeking an area of divergence in which the currency price seems to be aiming to create a new high, but where the Relative Strength Index has as yet failed to reach a level on par with its previous price high.

This sort of divergence can often be considered a good indication of an upcoming price reversal to the current trend.

The LIFT Trading Method uses particular values of overlaid multiple RSI’s to strengthen Trade Entry and Trade Exit points.

Resistance

An estimated upper price level at which price is likely to stall and Bullish Traders are more likely to sell out of their position or Bearish Traders are likely to enter a Short Trade.

Retracement

A Price Retracement or retracement” is a temporary reversal in the direction of a Commodity’s price that goes against the prevailing trend.

For example, a retracement in an uptrend is a brief period of selling before the uptrend continues, also known as a dip.

Reversal

A Price Reversal or “reversal” is where the price of a particular commodity hits a high or low point in the Market and the opposite pressure takes over, causing price to move in the opposite direction.

Reversals are relatively long term opposite movements in price.

This is not to be confused with a Retracement which is a short term period of sideways or opposite price movement during a Price Trend.

If the price has been in an Up Trend and price hits a Peak where there is no continuing Bullish pressure, that commodity can turn into a period of Bearish Reversal.

If the price has been in a Down Trend and price hits a Trough where there is no continuing Bearish pressure, that commodity can turn into a period of Bullish Reversal.  

Reward-To-Risk Ratio

The reward-to-risk ratio measures your trade’s expected returns against its predetermined risk of loss.

The ratio is computed by dividing the profit that a trade is expected to yield by the loss that the trade may incur.

For instance, let’s say that trader ABC expects to make $100 by buying EUR/USD. If he determines his potential worst case trade exit stop loss price in such a way that he stands to lose just $5, the trade’s reward to risk ratio is 20:1 (100 / 5).

The LIFT Trading Method includes a strong managed Risk Reward requirement that limits potential losses of valid trades to no more than 5.5% to maintain this 20 : 1 ratio.

Rising Wedge

A rising wedge is a common candlestick chart pattern in technical analysis.

The rising wedge is formed by drawing two ascending trendlines, one representing high prices and one representing low prices for a currency.

The slope of the trendline representing the highs is lower than the slope of the trendline representing the lows, indicating that low prices are increasing more rapidly than high prices are.

The resulting shape forms a gradually narrowing wedge, giving this pattern its name.

Because the trendlines that describe the rising wedge are ascending, rising wedges are occasionally falsely thought of as continuation patterns for an overall upward trend.

The seeming upward trend in asset prices invites bullish traders to begin investing in the asset, while bearish traders continue selling off their holdings and maintaining the strong upper line of resistance. (This is reflected in the smaller slope of the upper trendline in the pattern.)

Since prices refuse to break the upper level of resistance, buying pressure gradually decreases, the lower level of support is broken, and the asset usually enters a strong downward trend.

Thus a rising wedge should be taken as a strong sell signal and an indication that a market reversal is most likely.

Risk

A chance in which an effect will occur.

Mainly used to evaluate a potentially negative effect.

Risk Appetite

Risk appetite is an indicator of how “risk-hungry” traders are.

If risk sentiment is up and times are good, risk appetite picks up and trader are more willing to invest in higher-yielding and/or potentially more volatile assets.

In the forex market, this normally means that traders are more willing to invest in currencies that have higher interest rates (i.e. Australian dollar, British pound), equities and commodities.

Risk Aversion

Risk aversion refers to the period when traders unload their positions in higher-yielding assets and move their funds in favour of “safe-haven” or major currencies.

This normally happens in times of uncertainty and high volatility.

In the forex market, currencies who have relatively higher interest rates are regarded as higher-yielding currencies. These are seen as “riskier” assets. Therefore, in times of risk aversion, traders tend to exit their positions in these currencies.

In turn, traders end up parking their assets in less risky, “safer” currencies, like the U.S. dollar or the Japanese yen. These currencies are regarded to be safer because of the size of their capital markets and liquidity.

Risk Capital

Amount of money a person is willing to lose on a trade or series of trades.

Professional Traders will always be aware of potential losses and make strategic investment decisions to balance their risk and accept or review trade opportunities.

Risk Management

The process and ability to limit and reduce various types of risk, whilst improving Reward.

The LIFT Investor Trader Program includes Handbooks, Videos, Workshop Modules, Exercises as well as group and individual conversations to help educate and coach Members to manage risk in their trading and moving into developing their multiple investment incomes.

RSI

Relative Strength Index, or RSI, is an oscillator used by some Traders to determine whether a commodity is Oversold or Overbought.

The indicator compares the Relative Strength of movement in price over a time frame to identify if the commodity has the potential to ease or reverse.

You can overlay multiple RSI lines with different values on a chart to determine whether there is more pressure in the shorter term in one direction compared with a longer timeframe. 

Run

A Price Run or “run” is series of consecutive price movements that occur in the same direction for a particular commodity.

These price movements form a large individual movement in price over a period of time.

A Run that results in an upwards movement in price is called a Bull Run.

A Run that results in a downwards movement in price is called a Bear Run.

The LIFT Trading Method primarily helps LIFT Traders find Trade Entry Points at the start of these price runs and a Trade Exit just before the price starts to Retrace or Reverse.

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Sell

The Icon to Click if you want to Enter a Short Trade or Exit a Long Trade.

Sell Stop

Selling at a specified price below the market.

Shooting Star

A single candle pattern that can appear in an uptrend.

It opens higher, trades much higher, then closes near its open.

It looks just like the Inverted Hammer except that it is bearish.

A shooting star can mark a top of a peak in price, but is often retested.

Short Candle

A short candle represents a downwards movement in price from open to close in a time frame..

Depending on your chart settings, the colour of the real body of the candle would generally either be red or black.

Short Position

A position in which the base currency in a currency pair is sold.

It is the focus of Traders looking to profit from the decline in value of a base currency / increase in the value of the comparison currency.

Short Squeeze

A short squeeze happens when there is excess demand and a lack of supply for a particular financial security.

What happens is that due to the excess demand, prices continue to rise rapidly.

Traders holding short positions try to cover their positions (i.e. close their positions), which can only be done by buying.

With more and more Traders looking to buy, we normally see an extended rally as prices go higher and higher. In this sense, all the “shorts” are squeezed.

In the forex market, a short squeeze normally happens after a strong sharp move and we see a reversal.

For example, EUR/USD went on a long term down trend. At a certain point, some Traders may feel that the euro is undervalued, making it a good investment.

As more and more buyers enter the market, Traders holding short euro positions decide it would be best to close out their positions or potentially suffer losses.

This leads to more and more traders buying the euro, and all the short positions getting squeezed out of the market.

Slippage

The difference between the requested price of a trade or pending order and the price and the price at which the order was executed or filled.

This generally occurs in a highly volatile market where the time taken to fill the trade by applying a contra position from another trader is too long and too far away from the original requested price.

More likely to occur when the Trader is trading a large contract size (e.g. $50,000 USD plus) or when the market is in a significant price run where there are no other traders looking to take a contra position.

Also known as a Requote.

Speculating

In the financial world, speculating can be described as the act of making an investment in a financial asset, looking to make a profit when the asset appreciates (or depreciates, when short selling) over time.

In layman’s terms, a speculator will aim to “buy low and sell high (or sell high and buy back at a lower price when shorting!).

In the forex markets, retail Traders are speculating when they try to make profit when one currency appreciates versus another currency.

Spinning Top

Candlesticks that have small bodies with upper and lower shadows /wicks that exceed the length of the body.

A very good reversal signal and can be any colour.

Spinning tops demonstrate indecision.

The smaller the body, the less direction the market has.

Stop Order

An order sent to a broker which becomes a market order when the market reaches the specific price stated.

In volatile (or fast) markets, “slippage” (when an order does not execute because the price has moved rapidly beyond the trigger price) may occur.

Stop orders are normally used to take the trader out of a trade in the event the market goes against his/her position.

The LIFT Investor Trader Program does not recommend the use of these types of automated orders.

To be a responsible, professional investor who accepts risk and the responsible for their results, we recommend that traders physically click to enter and click to exit trades.

This also ensures that slippage does not occur and you have definitely exited a trade.

Stop-Loss Order

A limit order in which a trade is closed when a specified price is reached causing a loss.

Used to limit amount of losses in trades.

The LIFT Investor Trader Program does not recommend the use of these types of automated orders.

To be a responsible, professional investor who accepts risk and the responsible for their results, we recommend that traders physically click to enter and click to exit trades.

This also ensures that slippage does not occur and you have definitely exited a trade

Support

A lower level of price at which a currency may pause or reverse.

Particularly important when looking for potential Long Trade Entry Points or Short Trade Exit Points.

Support Level

A price level at which Buying (Entering Long Trades or Exiting Short Trades) is likely to occur.

Swings/Swing Points

Defined peaks and troughs in price which are represented by a 3 or 4 candle pattern where the middle candle (or 2 candles) indicate a distinct point at which price has tested a new high or low and the next candle reverses at that point.

See Swing High and Swing Low for more information.

Swing High

A Swing High point will form when a candle with a high is followed by a higher high (at least one pip higher) and the following candle’s high is at least one pip lower than the high of the middle candle.

This indicates a potential point of Price Upper Resistance in the market.

We join Lower Swing Highs in a Down Trending Market to identify a Tom DeMark Down Trend Resistance Trend Line.

The LIFT Investor Trader Program covers this in greater detail, also showing how we use these Trend Lines to identify potential Short Trade Entry Zones.

Swing Low

A Swing Low point will form when a candle with a low is followed by a lower low (at least one pip lower) and the following candle’s low is again at least one pip higher than the low of the middle candle.

This indicates a potential point of Price Lower Support in the market.

We join Higher Swing Lows in an Up Trending market to identify a Tom DeMark Up Trend Support Trend Line.

The LIFT Investor Trader Program covers this in greater detail, also showing how we use these Trend Lines to identify potential Long Trade Entry Zones.

Swing Trading

A trading style / strategy that is based upon a trader identifying and entering trades at the start of a new price Trend and exiting at the end of that Trend.

Intra Day Traders take advantage of smaller, more frequent trends that occur during a trading day and “Swing Traders” may do the same over daily part weekly and weekly trends – holding trades for between 3 and 10 days.

In fact, Swing Trading sits right in the middle between Intra Day Trading and Trend (Position) Trading in terms of the length of time invested in a position.

These Traders stick around just long enough to see how the short term trends form before deciding to stay and see a trend through or go on to other positions.

T

Take Profit Order

An order used by some currency traders to automatically close their position once a certain profit has been made.

Although it halts any further advance in profit, it guarantees a specific profit after a level has been hit.

We don’t generally recommend the use of automated take profit orders as intra day traders as price volatility and range could mean that you are exited unnecessarily earlier from potentially profitable trades without the ability to exit strategically.

The LIFT Investor Trader Program covers in detail advanced, profit maximising and loss minimising exit strategies that increase your trading profitability. 

Tear

A Price Tear or “tear” refers to a dramatic rapid rise or fall in price of a commodity.

Can also be called a “run”.

Technical Analysis

Technical analysis is a method of projecting the future direction of a market’s price, by studying historical chart patterns and formations of that market.

In its truest form, technical analysis disregards any fundamental information on an asset than cannot be found on its price chart. Instead, a set of tools known as technical indicators are overlaid onto a chart to identify recognisable price patterns.

A technical analyst believes that those price patterns will tend to repeat themselves in the future. So they’ll analyse a market’s previous price movements, and use those to decide when to open and close trades to maximise their profits.

The LIFT Investor Trader Program combines the strongest aspects of Technical Analysis in Forex Trading with an awareness of Fundamental Analysis influences to gain a clearer insight into the upcoming movements of the market, and the Sentiment of the Larger Traders.

Three Black Crows

A bearish reversalJapanese candlestick pattern consisting of three consecutive black bodies where each candle closes near below the previous low, and opens within the range of the body of the previous candle.

Three White Soldiers

A bullish reversal Japanese candlestick pattern consisting of three consecutive white / green bodies, each with a higher close.

The opposite of Three Black Crows.

Each should open within the range of the previous body and the close should be near the high of the candle.

Tick

A minimum change in price, up or down.

Trading Styles

There are many different styles of trading that may be used in Foreign Exchange trading. Forex trading styles do tend to differ from those used in the share / stock markets because of the sheer volume of trade.

As a new trader, it is recommended that you consider using an established proven profitable trading method whilst you develop your own.

There are several factors to consider when choosing a trading method, including whether you intend to trade intra-day, swing (between one price trend and another), or position (longer term trades).

Not all trading methods suit every traders personality or skill level.

The best person to consult with is your Forex coach.

The LIFT Trading Method, developed by The Trading Coach International is specifically designed for Traders who prefer to trade intra-day, with the peace of mind that they are not at the whims of market forces when they are not actively looking at the market.

The LIFT Method is a very structured trading method with very clear signals that indicate the strongest potential trade entry and exit in both Bullish and Bearish markets.

All members of the LIFT Investor Trader Program use the same trading method, providing consistent high probability profitable trades that members can discuss and peer mentor with clarity.

Trailing Stop

A type of stop loss order that moves relative to price fluctuations.

In example, setting a 20-pip trailing stop on EUR/USD after buying it at 1.2580 would mean that if price rose to 1.2600, your stop would also rise by from its initial level of 1.2560 to 1.2580 (20 pips).

Your stop will then stay at 1.2580 unless price moves another 20 pips in your favour. This means that your trade will remain open for as long as price doesn’t go against you by 20 pips.

Position Traders often makes use of trailing stops to lock in profits while minimizing their risk.

A Trailing Stop Order is ALL of the Following:

An order that moves as the price progresses in the direction that you are trading.  If the trade moves back towards the order, the order will stay stationary until hit

An order that sits below the current market price and when it opens a new position with the intention of benefitting from an upward price movement.

An order that sits above the current market price and when it opens a new position with the intention of benefitting from a downward price movement.

We don’t generally recommend the use of automated trailing stops as intra day traders as price volatility and range could mean that you are stopped out of potentially profitable trades without the ability to exit strategically.

The LIFT Investor Trader Program covers in detail advanced, profit maximising and loss minimising exit strategies that increase your trading profitability.  

Transaction Cost

The cost of buying or selling a financial instrument (in forex this is the currency).

Transaction Date

The date a transaction is executed

Trend

The general movement in price over a specified period of time.

A rising price trend is called a Bullish or Long Trend.

A falling price trend is called a Bearish or Short Trend – see entries on each for explanations.

Traders will either trade “with the Trend” or “against the Trend”, depending on their strategy.

Although, most traders will tell you that the stronger, more profitable trades are generally with the trend.

Trend Channel

Trend channels are very useful to help Traders correctly determine where their trade entry or exit point is strongest.

Although regular trend lines are able to demonstrate the direction that the price is moving, trend channels allow you to clearly see where the currency is forming equal, increasing or decreasing price range to identify potential trade price projections.

We do this by joining swing highs with higher previous swing highs and swing lows with lower previous swing lows with straight lines over a given timeframe.

When these Swing Highs and Swing Lows are moving upwards to the right, we call this an Up Trend Channel.  When they are moving downwards to the right, we call this a Down Trend Channel.

The vertical distance between the lines represents the number of pips in the range of the channel.

When in a trade, it is useful to note the opposite line of the channel, as this may be the point where price may reverse against your position.

This would be considered a potential trade exit point.

Trend Line

A trend line is one of the basic components of most technical analysis patterns.

Trendlines have a variety of uses in technical analysis, most fundamentally for their ability to predict levels of price support and resistance.

Trendlines are also used as components in a variety of specialized technical analysis charts, including trend channels and patterns.

The LIFT Investor Trader Program uses specific types of Trend Lines with several key Technical Analysis Strategies that use trend lines to identify strong “Trading Zones” to allow LIFT Traders to minimise losses and maximise profits when trading.

Triple Bottom

A less common Bullish reversal pattern that consists of three consecutive or nearby candles with equal lows of price.

They can include candles with either real bodies or shadows / wicks at the low.

Often indicates the end of a bearish trend and possible commencement of a new strong bullish trend.

Generally occur at a strong point of Support, such as a Pivot Point, Fiobonacci Retracement Point or a 00 /000 Price Level.

It is generally recognised that the longer a particular trend takes to fully develop, the stronger the significant change in price once breakout occurs.

Triple Top

A less common bearish reversal pattern that consists of three consecutive or nearby candles with equal highs of price.

They can include candles with either real bodies or shadows / wicks at the high.

Often indicates the end of a bullish trend and possible commencement of a new strong bearish trend.

Generally occur at a strong point of Resistance, such as a Pivot Point, Fiobonacci Retracement Point or a 00 /000 Price Level.

As with a triple bottom, it is generally recognised that the longer a particular trend takes to fully develop, the stronger the significant change in price once breakout occurs.

Tweezer Bottom

Two or more candlesticks with matching lows in price.  Usually close together – stronger if they are side by side.

They can include candles with either real bodies or shadows at the low.

Often indicates the end of a bearish trend when touching a strong point of support with increasing Bullish Pressure demonstrated in your indicators.  

Tweezer Tops

Two or more candlesticks with matching highs in price.

Usually close together – stronger if they are side by side.

They can include candles with either real bodies or shadows at the high.

Often indicates the end of a bullish trend when touching a strong point of resistance with increasing Bearish Pressure demonstrated in your indicators.  

Two-way Price

Occurs when a buying and selling price is quoted for a transaction.

Two-way Quote

A quote in which the buy and sell price are given.

U

V

Volatility

A measure for variation of price of a financial instrument over time.

A Market where price is moving rapidly is called a Highly Volatile Market.

A Market in which price is moving slowly is considered Low Volatility.

W

X

Y

Z