GLOSSARY

Pending Order

A pending order is an instruction given by a trader to open or close a position only when the price reaches a certain level. There are two types of pending orders, limit orders and stop orders.

Period

Period refers to the time frame an asset is being charted at. On a candlestick chart, a period simply refers to the amount of time represented by each candlestick.

Pip

Pip is an acronym for “percentage in point”, which refers to the smallest decimal unit of a currency pair. Most modern brokerages now use a fifth decimal place for the majority of the currencies they offer and a third decimal place for JPY. This extra decimal place is often referred to as a precision point.

Pip Value

Pip value is how much each pip movement is worth to you in a given currency trade. It is important to know this figure as it can help you to set take profit and stop loss targets.

Pivot Point

A pivot point is a technical indicator used by traders to identify the direction of the general trend. Pivot points are calculated by averaging out the previous high, low and closing prices and then plotting the result over current price action. If current trading activity is taking place above the pivot point in question, then the trend is thought to be bullish, if trading is taking place bellow the pivot point in question then the trend is thought to be bearish.

Purchasing Managers’ Index (PMI)

Purchasing Managers’ Index is an influential economic indicator that is calculated by taking the survey responses of a large sample of purchasing managers. The respondents to the survey are asked about the general business conditions of their industry. The indicator itself comes in as a figure that is either above or below 50.0. A PMI above 50.0 indicates a sector that is growing, whereas a PMI figure below 50.0 refers to an industry that is shrinking. PMI is a leading indicator as the implications of its findings have usually yet to trickle down into the broader economy.

Producer Price Index (PPI)

The Producer Price Index is an important technical indicator that focuses on the fluctuating prices of wholesale goods and services available to producers. PPI is released on a monthly basis and is considered a leading indicator, due to the trickle down effect of the prices it tracks on the broader economy. PPI is an important gauge of inflation due to the fact that rising prices for producers are normally passed on to consumers.

Profit and Loss (P&L)

Profit and loss is the most important measure of a trader’s performance. It is calculated by taking the sum total of all profits and dividing them by the sum total of all losses. If the result is a number that is greater than 1, the strategy being employed is deemed to be profitable. If the result is a number that is equal to or less than 1, then the strategy is at best breaking even.

Portfolio

A portfolio is a collection of securities that is held by an investor. It is considered prudent to have as diverse a portfolio as possible to protect against unforeseen downturns in individual markets.

Price Channel

A price channel in technical analysis constitutes a pair of two parallel trend lines on a chart. Price channels are defined by using a line to connect at least three lows which is regarded as the support level and another line to connect at least three highs which is regarded as the resistance level.