Oversold 47,54 . The opposite of overbought, meaning that speculation is high on the short side.
Overtrading 79 . Two kinds. 1) Trading too often. 2) Trading too big. We probably spend our whole trading lives learning not to do either. You lose money regularly if you fall for 1). You lose a lot if you fall for 2), mainly because you can’t think straight.
Pack 102 . Maybe 7 times our of 10, the “currencies” move together like a wolf pack against the dollar. The other three times, the lagging members of the pack usually catch up over time, but it’s sometimes a long time.
Par 45 . Of securities, 100% redemption value e.g. $1,000 or Ј100.
Pirsig, r o b e r t 7 2 . Author of the wonderful classic Zen and the Art of Motorcycle Maintenance, a philosophical novel.
Pennant 65 . Self-descriptive chart pattern: a narrowing wedge pattern following a sharp rise.
PPP 22 .Purchasing power parity. Where inflation differentials are huge, as between hyper-inflating countries and hard-currency countries, the natural tendency of a currency to move towards its purchasing power value against other currencies is the most important determinant of its exchange rate. If you can establish the valid PPP (which must be done on the basis of a comparable basket of goods), it will pay to assume that big divergences from PPP will narrow in due course.
Where inflation differentials are small, PPP comparisons are unhelpful: the trick is to anticipate the divergences rather than the narrowings. The divergencies can be monitored by the use of real inflation-adjusted exchange rates.
Psychology of Consciousness ,The114 . By Robert Ornstein. (See book list).
Price-led (trader) 30,51 . Price-led buyers – sellers are those who are induced to buy after a rise in price and sell after a fall. Their opposite is value-led traders.
Quantum Fund 9 1 . Amazingly successful geared (leveraged) fund investing in currencies, financial futures and major commodities. Founded by George Soros in the 1960s, it grew to near $3bn in 1990 mainly by performance.
Real yield (s) 4 2 . Yield, at any maturity, adjusted for inflation. In chronic high-inflation countries, such as many in Latin America, it has long been common practice for most interest rates to be indexed to
consumer price inflation – in tacit recognition of the notion that interest rates must at least compensate for inflation, otherwise they would not be offering a real return.
Reminiscences of a Stock Operator 76. by edwin lefиvre. the story of the trading experiences of the great Jesse Livermore – larry livingston in the text.
Reserve currency 44 . The five major currencies which have historically been used as foreign currency reserves by the central banks: US dollar, D-Mark, SF, Yen and pound.
Revulsion 106 . Term used to denote an unusual nadir of sentiment, associated with a major price trough.
Right brain 66, 113-5 . The pattern-recognising and intuitive function of the mind takes place in the right hemisphere of the brain, often called “right brain” for short.
Rogers , james 86 . Brilliant long-term investor and one-time partner of George Soros in the $3bn Quantum Fund. Author of “Investment Biker.”
Schwager, jack 68, 82 . Admirable author of the 1989 classic, Market Wizards (see book list) – and other investment books, including A Complete Guide to the Futures Market.
Sentimen t 5 0 . Arguably the prime determinant of price change in financial markets; surely the most useful area of analysis for anticipating price change.
Sentiment gauges 50 . CB’s checklist of 4 indicators of sentiment as applicable to currency analysis.
Seykota , ed 83, 87-8, 102, 117-19 . Prodigiously successful American futures investor and sage.
Set-up conditions 29 . The specific set of circumstances which precede major price moves. Most of these circumstances are to do with the emotional condition of market participants.
Short. having sold what was not previously held, with the obligation to repurchase. The idea is to sell (forward) at a high price and buy back lower, at a profit. Of course with currencies you have to sell a currency in order to buy one; so every forward currency purchase involves a short sale.Opposite of long .
Soros , george 68, 91 . Legendary investor, author of The Alchemy of Finance, and founder of theQuantum Fund which rose 500-fold from inception
in 1969 to Spring 1991.
Spot 39 Cash currency, as opposed to forward or future. From ‘cash-on-the-spot’.
Spread (s) 17 . The difference between buying and selling (offer and bid) prices. Equals the market-maker’s turn.
Steidlmayer, peter 74,86-7, 118 . Very successful futures trader and well-known market analyst, who invented a new theory of market mechanics incorporating a price and volume recording system which goes under the name of Market Profile. PS bequeathed the system to the Chicago Board of Trade which runs a widely used Market Profile database. Author of 3 best-selling books, the latest of which is New Market Discoveries. The heart of Steidlmayer’s theory is that value is determined by volume, and price – just as the value of real estate, for example, or used cars, is generally determined at any time by the number of sales recorded at “x” price. Thus the price at which volume is highest represents correct value at any given time.
Stop (s) (order) 65, 74-6,96 , A stop is an order left with a broker or dealer which is executed automatically at a given price. Most frequently used to close an existing position, and most frequently to limit a loss on said position – but not necessarily.
The IMM exchange rules ensure that a trader’s stop, if left “with the market”, will be executed in the IMM if the price moves through the stop level. In the interbank market there is no such assurance. If you wish an order to be executed in the event a price is touched, even if not exceeded, you can give a “market-if-touched” (MIT) order – normally for a profit-target rather than a loss limit.
– Crawling stop. some traders like to move their stops along in the direct of the price movement – to lock in the profit or minimisedrawdown.
– Stop buy. an order to purchase in the event the price rises to a specific level. An order to purchase in the event a price falls to a specific level is usually called a ‘limit buy ’ order.
– Stop-loss. an order to buy or sell in the event of an adverse price movement to a specific level.Trailing stop 103. same as crawling stop.
Strike (price) 96 , or “exercise price”. The price at which an option can be exercised. A favourable price move beyond the exercise price puts the option ‘in the money’. At that point it has intrinsic value: before that point, when it has no intrinsic value, it is said to be ‘out of the money ’. See also At-the-money.
Tao 49 . The core notion of the ancient Chinese philosophy referred to as Taoism, which developed alongside Buddhism, meaning “The Way” – i.e. the way things are. The original test-book of Taoism, the Tao Te Ching by Lao-Tzu exists in hundreds of translation – all very different.