Page 182 - Ultimate Guide to Currency Trading

Pegging
A method of tying the price of a country's currency to that of its main trading partner.

Portfolio theory
The idea that numbers of investments are less risky than just one or two investments, all while
producing the same return; diversification.

Pyramiding
Building and closing out a position in a single currency pair using a series of trades instead of
one big trade in and one big trade out.

Quantitative easing
A term that refers to when a central bank adds liquidity and money supply to the economic
system. See liquidity.

Quote
The way the price of a currency is listed on your trading platform.

Range bound
When an investment vehicle such as a Forex pair is stuck moving within the same price points.

Regression analysis
A method of using statistics to determine the factor that inputs have in an outcome. A good
example is when it is used to determine what currency pairs affect the price of another
currency pair.

Reserve portfolio
The savings account of a central bank.

Risk/Return ratio
The measure of how much risk is taken in a trading system.

Scalping
A method of trading a pair for minutes at a time.

Sharpe ratio
A measure of risk taken for reward gained.

Stop-loss setting
When you precalculate the maximum loss you would take in the trade before your trading
platform places on automated closing out of the trade, thereby placing a limit on the
percentage and dollar amount of the potential loss of the trade.

Strong economies
When a country has high employment and is operating at or near capacity. Strong economies
run the risk of being too strong, this is why central banks will raise interest rates to try to limit
inflation by limiting money supply and raising the cost of borrowing.