ized foreign exchange(forex) account and apply the trading signal to that market. This is a niftyidea for those who are beginners and still have day jobs. The markets trade24 hours a day, you can afford to hold positions overnight, and you havemoney on the line so that you will be more realistic in execution of yourtrading plan. You can trade at night and execute trading signals in an extremely liquid market. If you have a system that works reasonably wellbased on statistical back-testing studies, the only confidence that should bein question is your ability to execute the signals. That is what trading amini-forex account can do for you. It will exercise your emotional intellect.You will learn that when you place a trade, it is an educated decision, notmerely a guess. One web site to visit is www.fxtriggers.com to help selecta forex account and to open a simulated trading account and develop theknowledge that will give you the confidence to execute and act on the trading signals. Building confidence in yourself and in your trading skills is extremely important in stimulating an optimistic winning attitude. Opening amini-forex account just may help a newcomer using a technical-based system. Over a period of time, as your trading skills improve, so will your attitude. As Thomas Jefferson once said, “Nothing can stop the man with theright mental attitude from achieving his goal: Nothing on earth can help theman with the wrong mental attitude.”If you want to follow what the moneymakers do, have a good plan,
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CANDLESTICK AND PIVOT POINT TRADING TRIGGERS
method, or system and execute when a trigger presents a call to action.Maintain a winning attitude!I believe the principles in this book combining candles and pivots willkeep you on the right side of the profit ledger. It is the method I have usedfor over 25 years. I have taught my own family to use these setups, and theyhave served us well. My former students have expressed gratitude in seeinga method and applying the concepts whether it is stock, futures, or forex.Some have moved on to open their own brokerage firms, and even other educators come to learn my technique. There is back-tested data to supportthe validity and frequency of patterns. All you need to do is apply theknowledge and follow the rules.
LIVE BY THE RULESIf you follow the rules of any methodology, then you have a better chanceof succeeding. That applies toward any aspect in life, for that matter. AsLeonardo da Vinci stated, “Simplicity breeds elegance.” Keep things simple.••••
Look for buy signals near support.Look for sell signals near resistance.When the system triggers a signal, act on it.When a system says get out, get out!
I wish you well in all your trading endeavors. Remember that if you acton validated signals, your actions are validated. If the method has merit,then your rewards should have merit.All the best,John L. Person
Glossary
Actualize The underlying assets or instruments that are traded in the cash market.Adjustable peg An exchange rate regime in which a country’s exchange rate is determined (i.e., pegged) in relation to another currency, often the dollar or Frenchfranc, but may be changed from time to time.Aggregate demand Total demand for goods and services in a country’s economy; includes private and public sector demand for goods and services within thecountry and the demand of consumers and firms in other countries.Aggregate risk Size of exposure of a bank to a single customer for both spot andforward contracts.Aggregate supply Total supply of goods and services in a country’s economyfrom domestic sources (including imports) available to meet aggregate demand.Appreciation Describes the strengthening of a currency in response to market demand rather than by official action.Arbitrage The action of a simultaneous buy and sell of a similar or like commodity or futures product that may be made in different contract months, on differentexchanges, and in different countries in order to profit from a discrepancy in price.Arbitrage channel The range of prices within which there will be no possibility toarbitrage between the cash and futures market.Ask
The price at which a currency or instrument is offered.
Asset In the context of foreign exchange, the right to receive from a counterpartyan amount of currency either in respect of a balance sheet asset, such as a loan, orat a specified future date in respect of an unmatched forward or spot deal.Asset allocation Dividing instrument funds among markets to achieve diversification or maximum return.At best An instruction given to a dealer to buy or sell at the best rate that can beobtained in a given time period.At or better
An order to deal at a specific rate or better.
317
318
GLOSSARY
Backwardation
The amount by which the spot price exceeds the forward price.
Balance of payments A systematic record of economic transactions during agiven period for a country. (1) The term is often used to mean either (i) balance ofpayments on “current account” or (ii) the current account plus certain long-termcapital movements. (2) The combination of the trade balance, current balance, capital account, and invisible balance, which together make up the balance-of-payments total. Prolonged balance-of-payment deficits tend to lead to restrictions incapital transfers and/or decline in currency values.Bank rate The rate at which a central bank is prepared to lend money to its domestic banking system.Base currency United States dollars; the currency to which each transaction willbe converted at the close of each position.Basis The difference between the cash price and the futures price.Basis point For most currencies, denotes the fourth decimal place in the exchange rate and represents 1/100 of 1 percent (0.01%). For such currencies as theJapanese yen, a basis point is the second decimal place when quoted in currencyterms or the sixth and seventh decimal places, respectively, when quoted in reciprocal terms.Basis trading Taking opposite positions in the cash and the futures markets withthe intention of profiting from favorable movements in the basis.Basket A group of currencies normally used to manage the exchange rate of a currency.Bear
An investor who believes that prices are going to fall.
BearishBid
A down-trending market or a period in which prices depreciate in value.
The price at which a buyer has offered to purchase a currency or instrument.
Book The summary of currency positions held by a dealer, a desk, or a room; asum total of assets and liabilities.Bretton Woods The site of the conference that in 1944 led to the establishment ofthe postwar foreign exchange system that remained intact until the early 1970s.The conference resulted in the formation of the International Monetary Fund (IMF).The system fixed currencies in a fixed exchange rate system with 1 percent fluctuations of the currency to gold or to the U.S. dollar.Bullish Referring to an up-trending market or to a period in which prices appreciate in value.Bull market A prolonged period of generally rising prices.Bundesbank
Central Bank of Germany.
Cable A term used in the foreign exchange market for the U.S. dollar/Britishpound rate.Candlestick charts
Charting method that involves a graphic presentation of the
319
Glossary
relationship between the open, the high, the low, and the close. Color schemes areused to illustrate the real body of a candle, which is the difference between a lowerclose than the open (black or dark) and a higher close than the open (white).Capital risk The risk arising from a bank having to pay the counterparty withoutknowing whether the other party will or is able to meet its side of the bargain.Carrying charges The cost associated with holding or storing cash or physicalcommodities and financial instruments. Four variables are involved: storage, insurance, finance charges, and/or interest payments on borrowed monies.Cash Usually refers to an exchange transaction contracted for settlement on theday the deal is struck. This term is mainly used in the North American markets andthose countries that rely for foreign exchange services on these markets because oftime zone preference (i.e., Latin America). In Europe and Asia, cash transactions areoften referred to as “value same day deals.”Cash market The market in the actual financial instrument on which a futures oroptions contract is based.Cash settlement A procedure for settling futures contracts through payment ofthe cash difference between the future and the market price, rather than throughthe physical delivery of a commodity.CBOT
Chicago Board of Trade.
Central bank A country’s head regulatory bank, which is responsible for the development and implementation of monetary policy.CFTC Commodity Futures Trading Commission, which is the federal regulatoryagency in charge of overseeing the futures and nonbank forex industry.Closed position A transaction that leaves the trade with a zero net commitmentto the market with respect to a particular currency.CME Chicago Mercantile Exchange.COMAS Conditionally Optimized Moving Average System, which incorporatestwo different time-period moving averages with two different variables, such as asimple moving average based on the close and a second value based on the pivotpoint.Commission
The fee that a broker may charge clients for dealing on their behalf.
Commodity A financial instrument or a product that is used in commerce and ismainly traded on a regulated commodity exchange. The types of products are agricultural (such as meats and grains), metals, petroleum, foreign currencies, stockindex futures, single stock futures, and financial instruments (such as interest ratevehicles like notes and bonds).Commodity trading advisor (CTA) A registered individual or entity that advisesothers, for compensation or profit, in buying or selling futures contracts or commodity options; also includes exercising trading authority over a customer’s account and providing research and analysis through newsletters or other media.
320
GLOSSARY
Conversion The process by which an asset or liability denominated in one currency is exchanged for an asset or liability denominated in another currency.Conversion account A general ledger account representing the uncovered position in a particular currency. Such accounts are referred to as “position accounts.”Convertible currency A currency that can be freely exchanged for another currency (and/or gold) without special authorization from the central bank.Copey
Traders’ slang for the Danish krone.
Correspondent bank The foreign bank’s representative who regularly performsservices for a bank that has no branch in the relevant center, e.g., to facilitate thetransfer of funds. In the United States, this often occurs domestically due to interstate banking restrictions.Counterparty The other organization or party with whom an exchange deal isbeing transacted.Countervalue The dollar value of a transaction in which a person buys a currencyagainst the dollar.Country risk The risk attached to a borrower by virtue of its location in a particular country; involves examination of economic, political, and geographical factors.Various organizations generate country risk tables.Coupon The interest rate on a debt instrument expressed in terms of a percent onan annualized basis that the issuer guarantees to pay to the holder until maturity.Cover To close out a short position by buying currency or securities that havebeen sold short.Covered arbitrage Arbitrage between financial instruments denominated in different currencies, using forward cover to eliminate exchange risk.Credit risk Risk of loss that may arise on outstanding contracts should a counterparty default on its obligations.Cross rates
Rates between two currencies, neither of which is the U.S. dollar.
Current account The net balance of a country’s international payments arisingfrom exports and imports together with unilateral transfers, such as aid and migrantremittances; excludes capital flows.Day trader A speculators who takes positions in commodities that are iquidatedprior to the close of the same trading day.Dead cross A term used when a sell signal is generated when one or moreshorter-term moving averages cross below a longer-term moving average.Deal date
The date on which a transaction is agreed on.
Dealer A person who acts as a principal in all transactions, buying and selling forhis or her own accounts; opposite of broker.Deal ticket The primary method of recording the basic information relating to atransaction.
321
Glossary
Deferred month The more distant month in which futures trading is taking place,as established from the active nearby or front contract delivery month.Deflator Difference between real and nominal gross national product (GNP),which is equivalent to the overall inflation rate.Delivery date The date of maturity of a contract, when the exchange of the currencies is made; more commonly known as the “value date” in the forex or moneymarkets.Delivery risk A term to describe when a counterparty might not be able to complete one side of the deal, although willing to do so.Depreciation A fall in the value of a currency due to market forces, rather than toofficial action.Discount rateber banks.
The interest rate charged on loans by the Federal Reserve to mem-
Doji A candlestick term; used to describe a time period when the open and theclose are nearly exact. It is a strong sell signal, but a cautionary warning at bottoms.Easing
Modest decline in price.
Economic indicator A statistic that indicates current economic growth rates andtrends, such as retail sales and employment.ECU
European currency unit.
Effective exchange rate An attempt to summarize the effects on a country’strade balance of its currency’s changes against other currencies.Elliott Wave Analysis theory developed by Ralph Elliott, based on the premisethat prices move in two basic types of waves: impulse waves, which move with themain trend, and corrective waves, which move against the main trend.Euro dollars U.S. dollars on deposit with a bank outside of the United States and,consequently, outside the jurisdiction of the United States. The bank could be eithera foreign bank or a subsidiary of a U.S. bank.European Monetary System (EMS) A system designed to stabilize if not eliminate exchange risk between member states of the EMS as part of the economic convergence policy of the European Union (EU). It permits currencies to move in ameasured fashion (divergence indicator) within agreed bands (the parity grid) withrespect to the ECU and consequently with each other.Exchange controlrency.
Rules used to preserve or protect the value of a country’s cur-
Exchange for physicals (EFP) A transaction generally used by two hedgers whowant to exchange futures for cash positions; also referred to as “against actuals” or“versus cash.”Exercise The process by which options traders convert an options position intothe underlying futures or derivative market; e.g., the buyer of a call option would
322
GLOSSARY
convert his or her calls for a long position, and the buyer of a put option would convert his or her option to a short futures contract.Face value The amount of money printed on the face of the certificate of a security; the original dollar amount of indebtedness incurred.Falling three methods A bearish continuation pattern similar to the Westernversion of a bear flag. It is a four- but mostly a five-candle pattern composition.Fast market Rapid movement in a market caused by strong interest by buyersand/or sellers. In such circumstances, price levels may be omitted, and bid-andoffer quotations may occur too rapidly to be fully reported.Fed The United States Federal Reserve System. Federal Deposit Insurance Corporation (FDIC) membership is compulsory for Federal Reserve members. The corporation had deep involvement in the savings-and-loan crisis of the late 1980s.Federal Reserve System
The central banking system of the United States.
Fed fund rate The interest rate on Federal Reserve System funds. This is a closelywatched short-term interest rate because it signals the Fed’s view as to the state ofthe money supply.Fibonacci numbers and ratios A series of numbers that when added togethercontinue to infinity. The ratios are the math calculations, which are the sum of therelationships between the numbers derived either from dividing the series numbersor, in some cases, taking the square roots of the numbers. The common ratio numbers are 0.38%, 0.618%, 50%, and 100%.Fill or kill An order that must be entered for trading, normally in a pit, three times;is immediately canceled if not filled.Financial instrument One of two basic types: a debt instrument, which is a loanwith an agreement to pay back funds with interest, and an equity security, which isa share or stock in a company.First notice day According to Chicago Board of Trade (CBOT) rules, the first dayon which a notice of intent to deliver a commodity in fulfillment of a given month’sfutures contract can be made by the clearinghouse to a buyer. The clearinghousealso informs the sellers of whom they have been matched up with. Each exchangesets its own guides and rules for this process.Fixed exchange rate Official rate set by monetary authorities; often permits fluctuation within a band.Flexible exchange rate An exchange rate with a fixed parity against one or morecurrencies with frequent revaluations.Floating exchange rate An exchange rate determined by market forces. Evenfloating currencies are subject to intervention by the monetary authorities.FOMC Federal Open Market Committee, which sets U.S. money supply targets,which tend to be implemented through Fed Fund interest rates, and so on.
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Glossary
Foreign exchange (forex)chase of another.
The purchase or sale of a currency against sale or pur-
Forex market Usually referred to as the over-the-counter market where buyersand sellers conduct foreign currency exchange business.Forward margins Discounts or premiums between the spot rate and the forwardrate for a currency; usually quoted in points.Forward operations Foreign exchange transactions on which the fulfillment ofthe mutual delivery obligations is made on a date later than the second business dayafter the transaction was concluded.Forward outright A commitment to buy to or sell a currency for delivery on aspecified future date or period. The price is quoted as the spot rate plus or minus theforward points for the chosen period.Forward rate Quoted in terms of forward points, which represent the differencebetween the forward rate and the spot rate. To obtain the forward rate from the actual exchange rate, the forward points are either added or subtracted from the exchange rate. The decision to add or subtract points is determined by the differentialbetween the deposit rates for both currencies concerned in the transaction. Thebase currency with the higher interest rate is said to be at a discount to the lower interest rate quoted currency in the forward market. Therefore, the forward points aresubtracted from the spot rate. Similarly, the lower interest rate base currency is saidto be at a premium, and the forward points are added to the spot rate to obtain theforward rate.Free reservesauthority.
Total reserves held by a bank minus the reserves required by the
Full carrying charge market A futures market where the price difference between delivery months reflects the total costs of interest, insurance, and storage.Fundamental analysis A method of anticipating future price movement usingsupply and demand information; also a method to study the macroeconomic factors(including inflation, growth, trade balance, government deficit, and interest rates)that influence currency and financial markets.G7 (Group of Seven) The seven leading industrial countries: the United States,Germany, Japan, France, the United Kingdom, Canada, and Italy.Gann, William D. An early pioneer in technical analysis who is credited with amathematical system based on Fibonacci numbers and with the Gann Square andCycle studies.Gap A mismatch between maturities and cash flows in a bank or individualdealer’s position book. Gap exposure is effectively interest rate exposure.GLOBEX A global after-hours electronic trading system used on the Chicago Mercantile Exchange (CME).
324
GLOSSARY
Golden cross A bullish term used when one or more shorter-term moving averages cross above a longer-term moving average; generally generates a buy signal.Gold standard The original system for supporting the value of currency issued.This is where the price of gold is fixed against the currency; it means that the increased supply of gold does not lower the price of gold but causes prices to increase.Good until canceled An instruction to a broker that, unlike normal practice, doesnot expire at the end of the trading day; usually terminates at the end of the tradingmonth.Gravestone dojiof the range.
A long range day where the open and the close are near the low
Gross Domestic Product (GDP) Total value of a country’s output, income, or expenditure produced within the country’s physical borders.Gross National Product (GNP) Gross domestic product plus “factor income fromabroad,” i.e., income earned from investment or work abroad.Hammer A candlestick pattern that forms at bottoms. At market tops, the sameconstruction is called a “hanging man.” The shadow is generally twice the length ofthe real body.Harami A two-candle candlestick pattern that can be seen to mark tops and bottoms. The second candle of this formation is contained within the real body of theprior session’s candle.Hard currency Any one of the major world currencies that is well traded and easily converted into other currencies.Head and shoulders A pattern in price trends that, according to chartists, indicates a price trend reversal. The price has risen for some time, at the peak of the leftshoulder; profit taking has caused the price to drop or to level. The price then risessteeply again to the head before more profit taking causes the price to drop toaround the same level as the shoulder. A further modest rise or level will indicatethat a further major fall is imminent. The breach of the neckline is the indication tosell.Hedging The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market. Hedgers usethe futures markets to protect their businesses from adverse price changes.High wave A candle that has a wide range with a small real body that develops inthe middle of that range. It has significance as a reversal formation, especially if several of these form in succession.Horizontal spread The purchase of either a call or a put option and the simultaneous sale of the same type of option with typically the same strike price but witha different expiration month; also referred to as a “calendar spread.”IMF
International Monetary Fund; established in 1946 to provide international liq-
325
Glossary
uidity on a short and medium term and to encourage liberalization of exchangerates. The IMF supports countries with balance-of-payments problems with the provision of loans.IMM International Monetary Market; part of the Chicago Mercantile Exchangethat lists a number of currency and financial futures.Implied rates The interest rate determined by calculating the difference betweenspot and forward rates.Implied volatility A measurement of the market’s expected price range of the underlying currency futures based on the traded option premiums.Indicative quote
A market maker’s price that is not firm.
Inflation Continued rise in the general price level in conjunction with a relateddrop in purchasing power; sometimes referred to as an excessive movement in suchprice levels.Initial margin The margin required by a foreign exchange firm to initiate the buying or the selling of a determined amount of currency.Interbank rates The bid and offer rates at which international banks place deposits with each other; the basis of the interbank market.Intercommodity spread The purchase of a given delivery month of one futuresmarket and the simultaneous sale of the same delivery month of a different, but related, futures market.Interdelivery spread The purchase of one delivery month of a given futures contract and the simultaneous sale of another delivery month of the same commodityon the same exchange; also referred to as an “intramarket spread” or “calendarspread.”Interest arbitrage Switching into another currency by buying spot and sellingforward, and investing proceeds in order to obtain a higher interest yield. Interestarbitrage can be inward (from foreign currency into the local one) or outward (fromthe local currency to the foreign one). Sometimes better results can be obtained bynot selling the forward interest amount. In that case, some treat it as no longerbeing a complete arbitrage because if the exchange rate moved against the arbitrageur, the profit on the transaction may create a loss.Interest rate swaps An agreement to swap interest rate exposures from floatingto fixed or vice versa. There is no swap of the principal. It is the interest cash flows,be they payments or receipts, that are exchanged.Intermarket spread The sale of a given delivery month of a futures contract onone exchange and the simultaneous purchase of the same delivery month and futures contract on another exchange.Internationalization Referring to a currency that is widely used to denominatetrade and credit transactions by nonresidents of the country of issue. The U.S. dollar and the Swiss franc are examples.
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GLOSSARY
Intervention Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of centralbanks to control exchange rates.Introducing broker (IB) A person or an organization that solicits or accepts orders to buy or sell futures contracts or commodity options but does not acceptmoney or other assets from customers to support such orders.Inverted market A futures market in which the relationship between two delivery months of the same commodity is abnormal.Island chart pattern Formed when the market gaps in one direction and then inthe next session gaps open in the opposite direction, leaving the prior day’s bar orrange seeming like an “island” on the chart. At tops, this is extremely bearish; andat bottoms, it is considered extremely bullish. This is a rare chart pattern and is similar in nature to the Japanese candlestick pattern called the ”abandon baby.”J trader An independent electronic trading order entry platform provider by PatsSystems that routes orders to the exchanges trading systems, such as the ChicagoBoard of Trade’s E-CBOT system and the Chicago Mercantile Exchange’s GLOBEXsystem.Lagging indicators Market indicators showing the general direction of the economy and confirming or denying the trend implied by the leading indicators.Last trading day (LTD) The final day on which trading may occur in a given futures or options contract month.Leading indicators Market indicators that signal the state of the economy for thecoming months. Some of the leading indicators include average manufacturingworkweek, initial claims for unemployment insurance, orders for consumer goodsand material, percentage of companies reporting slower deliveries, change in manufacturers’ unfilled orders for durable goods, plant and equipment orders, newbuilding permits, index of consumer expectations, change in material prices, pricesof stocks, and change in money supply.LEAPS Long-Term Equity Anticipation Securities; options that have an extendedlife as long as five years; generally used for options on stocks.Leverage The ability to control large dollar amounts of a commodity with a comparatively small amount of capital.Liability In terms of foreign exchange, the obligation to deliver to a counterpartyan amount of currency either in respect of a balance sheet holding at a specified future date or in respect of an unmatured forward or spot transaction.Limit order A request to deal as a buyer or a seller for a foreign currency transaction at a specified price or at a better price, if obtainable.Liquidation Any transaction that offsets or closes out a previously established position.Liquidity
The ability of a market to accept large transactions.
Glossary
327
Long The condition of having bought futures contracts or owning a cashcommodity.Long-legged doji A specific doji that forms when the open and the close occurnear the middle of a wide-range trading session.Maintenance margin A set minimum margin that a customer must maintain inhis or her margin account. If the cash amount in a trading account drops below themargin level and a margin call is generated, then a trader must either send additional funds to get the account back to the initial margin level or liquidate positionsto satisfy the call.Make a market The action of a dealer quoting bid and offer prices at which he orshe stands ready to buy and sell.Managed float The regular intervention of the monetary authorities in the marketto stabilize the rates or to aim the exchange rate in a required direction.Managed futures Represents an industry comprised of professional money managers known as commodity trading advisors who manage client assets on a discretionary basis, using global futures markets as an investment medium.Margin The amount of money or collateral that must be initially provided or thereafter maintained to ensure against losses on open contracts. Initial margin must beplaced before a trade is entered. Maintenance or variation margin must be added toinitial margin to maintain against losses on open positions. The amount that needsto be present to establish or thereafter maintain is sometimes referred to as “necessary margin.”Margin call A claim by one’s broker or dealer for additional good faith performance monies, usually issued when an investor’s account suffers adverse pricemovements.Market maker A person or firm authorized to create and maintain a market in aninstrument.Market order An order to buy or to sell a financial instrument immediately at thebest possible price.Market profiletime brackets.
A method of charting that analyzes price and volume in specific
Mark to market The daily adjustment of an account to reflect accrued profits andlosses; often required to calculate variations of margins.Microeconomics The study of economic activity as it applies to individual firmsor well-defined small groups of individuals or economic sectors.Midprice or middle rate The price halfway between two prices, or the average ofboth buying and selling prices offered by the market makers.Minimum price fluctuation The smallest increment of market price movementpossible in a given futures contract.
328Momentum
GLOSSARY
The measure of the rate of change in prices.
Morning doji starformed by a doji.
A bullish three-candle formation in which the middle candle is
Moving average A way of smoothing a set of data; widely used in price time series.National Futures Association (NFA) The self-regulatory agency for futures andoptions markets. The primary responsibilities of the NFA are to enforce ethicalstandards and customer protection rules, to screen futures professionals for membership, to audit and monitor professionals for financial and general compliancerules, and to provide for arbitration of futures-related disputes.Nearby monthspot month.
The futures contract month closest to expiration. Also called the
Net position The amount of currency bought or sold that has not yet been offsetby opposite transactions.Offer The price at which a seller is willing to sell; the best offer is the lowest suchprice available.Offset The closing out or liquidation of a futures position.Offshore The operations of a financial institution that, although physically located in a country, has little connection with that country’s financial systems. In certain countries, a bank is not permitted to do business in the domestic market butonly with other foreign banks; this is known as an “offshore banking unit.”One cancels other A contingency order instructing a broker to cancel one sideof a two-sided entry order.Opening range A range of prices at which buy and sell transactions take placeduring the first minute of the opening of the market for most markets.Open interest The total number of futures or options contracts of a given commodity that have been neither offset by an opposite futures or option transactionnor fulfilled by delivery of the commodity or option exercise. Each open transactionhas a buyer and a seller; but for calculation of open interest, only one side of thecontract is counted.Open outcry Method of public auction for making verbal bids and offers in thetrading pits or rings of futures exchanges.Option A contract that conveys the right, but not the obligation, to buy or to sella particular item at a certain price for a limited time.Out-of-the-money option An option with no intrinsic value; i.e., a call whosestrike price is above the current futures price or a put whose strike price is belowthe current futures price.Overbought The condition of a specific move when the market price has risentoo far too fast and is set up for a corrective pullback or period of consolidation; theopposite of oversold.
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Glossary
Overnight
A deal from today until the next business day.
Overnight limit Net long or short position in one or more currencies that a dealercan carry over into the next dealing day. Passing the book to other bank dealingrooms in the next trading time zone reduces the need for dealers to maintain theseunmonitored exposures.Oversold The condition of a specific move when the market price has fallen andis in a position for a corrective rally or a period of consolidation; the opposite ofoverbought.Par The face value of a security; e.g., a bond selling at par is worth the same dollar amount it was issued for or at which it will be redeemed at maturity.Parities
The value of one currency in terms of another.
Pegged A system where a currency moves in line with another currency; somepegs are strict while others have bands of movement.Piercing pattern A candlestick formation involving two candles formed at bottoms of market moves. The first candle is a long dark candle; the second candleopens lower than the dark candle’s low and closes more than half way above thefirst candle’s real body.PIP (percentage in points) One unit of price change in the bid/ask price of a currency. For most currencies, it denotes the fourth decimal place in an exchange rateand represents 1/100 of 1 percent (0.01%).Pit The area on the trading floor where futures and