Interest yield 39 . Used to denote yields on deposits and across the maturity spectrum in fixed interest and money instruments.
Intervention 47 . In most countries, the exchange rate is regarded as part of the panoply of tools by which the economy can be influenced. In those with an independent central bank, the value of the currency is usually regarded as the concern of the central bank. In America and Britain, it is the responsibility of the Treasury – and the Bank of England and the Fed are just instruments of Treasury policy.
Jawboning aside, only two ways are known of directly moving the value of the currency – interest rate manipulation and market intervention to support the currency by buying or depress it by selling. The central banks – Bundesbank in particular – have got more sophisticated in intervention. Even the underlying trend in a currency can be turned when the central bank is prepared to meet speculative sales-purchases until they are exhausted. This has been likened to an angler tightening the reel to exhaust the fish.
Key reversal 63 . At that precise moment when a trend is reaching its end, you often get trend followers pushing the going price trend to an extreme against value players who subsequently gain the upper hand. This results in a new high (say), combined with a lower range for the day than the previous day’s –i.e. the price range for the day is ‘outside’ the previous day’s. The same thing applies the other way round, with a new contract low.
You can see it best on a chart. This is a relatively rare phenomenon, which happens more often in a reversal than in a continuation of the trend.Key day 64 reversal. when the above happens in a single day.Key week 64 reversal. when the above happens in the course of a week, compared with the previous week, as seen in retrospect.
Kroll , stanley. engaging writer on futures, and successful trader. author of kroll on futures Trading Strategy; Business One-Irwin, 1987, ISBN 1 55625 033 8 – and other books on trading.
Kovnor, bruce 54,83,88-9. as of 1990, one of the most successful living traders, particularly active in the currencies. Heads the futures fund management group Caxton Corporation.
Koy, kevin 68 . Popularist ofPeter Steidlmayer’s original ideas. author of The Big Hitters.
Lao-Tzu 11 . Chinese thinker of 5th century BC; credited with being the an originator of Taoism and author of the seminal text Tao Te Ching. Died 479 BC.
Lateral thinking 1 1 3 . Phrase popularised by Edward de Bono , to denote the opposite of logical, step-by-step, “vertical” reasoning. Like right-brain thinking, often the best kind for financial markets.
Lefиvre, edwin 6 8 . Admirable author of classic “autobiography” of Jesse Livermore, Reminiscences of a Stock Operator (see book list)
Livermore, jesse 8,76,88,107,115 . “The Boy Plunger”, who started trading stocks in bucket shops and moved on to make and lose several big fortunes in stock and commodity markets in the 1920s and 30s, finally shooting himself.
Long . having bough and holding a security or future: opposite of short.
Margin 93 . The deposit put up by a futures trader – initially on opening a position (initial margin) and further (variation or continuation margin in the event of a loss on the position exceeding the initial margin.Margin call 94. a call for more (variation) margin. If it ever happens to you, close at least two thirds of your position and trade at the lower level in future.
Market Action 56 .The way the price of a currency or other instrument behaves in relation to to news and other background data. A price is said to be “acting well” when it rises in bearish circumsances and “acting badly” when it falls against a bullish background.
Market Vane 54 . A sentiment-polling service, surveying the opinion of a large selection of commodity pros. The interpretation is contrarian: a highly bullish reading is seen as unfavourable; a low bullish reading s favourable.
Market Wizards : interviews with Top Traders 68,82-90 . By Jack Schwager (see book list).
Mindsets 15 . The pre-judgements and assumptions we carry with us which are not derived from an objective assessment of the available data but from education, convention, herd opinion.
Mint investment Corporation 71 . A highly successful futures management firm, which uses a computerised trend-following trading system, and managed assets of around $1bn in 1990.
MIT “market if touched” – an order to deal at a specific target price, if touched even if not exceeded.
Neckline 6 2 . The low point either side of the head of a head and shoulders pattern.
New Investment Way 91,94-5 .
Ornstein, robert. author of The Psychology of Consciousness (see book list).
Open interest (01) 51 , The number of futures contracts remaining open at the end of each trading
session. The largest number is usually found in the nearest maturity month (“the nearby month”). As this comes to expire, some positions are rolled over into the next months but many are closed out (for expire, in the case of options contracts). The result is a sharp drop in the total open interest. In the currency contracts this occurs on the third Tuesday of March, June, September and December. The open interest figure becomes available at the start of business on the subsequent day (normally 1.15pm GMT).
The OI is a proxy for the total weight of speculation in a contract. As a matter of fact, it has always tended to rise in line with the perceived price trend – be this up or down. This makes the OI a valuable sentiment gauge: the OI tends to peak at price extremes. But you have to make a mental adjustment for the sudden drop at contract expiry. Clearly this does not imply a proportionate drop in speculation. Equally clearly there will tend to be a gradual rise in the open interest from the day after expiry to the day before expiry 3 months later. So an OI in the D-Mark of 65,000 in late March can denote higher speculation than an OI of 85,000 in early June. Back copies of Currency Bulletin will give you a historical view.
Option 95-6m102 . The right to buy (call option) or sell (put option) without the obligation to do either is worth something. In the currencies it usually costs about 2 to 3% for 3 months to buy this right – at about the current market price ( at-the-money ). the greater the volatility of prices, the greater the value of the option: when things are volatile options tend to cost a bit more. If you buy and option, the cost is the extent of your possible loss – which is why beginners often like to start here – and why not?
In the currency markets there are 3 types of option you can buy (or sell). 1) Options in the IMM, which give you the right to buy or sell futures. 2) Options in Philadelphia (or some other places like Amsterdam) which give you the right to buy or sell forward interbank currencies.
Speculators and investors can stick to IMM options. Others can go for one of the other two, if they wish. Use options when you have little idea how big you “downside” is – e.g. when bottom fishing.
Overbought 47,54 . What CB means by “overbought” or “oversold” is more precise than what others mean. CB means that speculation in the direction of the trend (usually measured by open interest ) is notably high.