GLOSSARY

Rally

A rally is a rapid and sustained upward movement in the price action of an asset. On many occasions a rally will catch traders by surprise by starting on what looks like a slight downturn. Rallies are characterized by an abundance of buyers in a market and a shortage of sellers.

Re-quote

Brokers give re-quotes when the requested price a trader is trying to execute a trade at is no longer available. This typically occurs in fast moving, volatile markets. In these instances a new price is re-quoted to the trader, which is ordinarily higher for a buy trade and lower for a sell trade. Limit orders are a useful way to avoid re-quotes, however they come with their own risks as in volatile markets the may not be executed at all.

Resistance

Resistance is any price level that an asset’s price seems to be having difficulty trading above. Traders normally plot resistance lines on an asset’s price chart by taking recent high points that price action consistently seems to fail to break above. The more a resistance level fails to be broken, the stronger it becomes in the minds of traders. When a resistance level is finally broken it tends to become a new line of support.

Retail Sales

Retail Sales is a highly influential economic indicator that follows the monthly changes in the retail sales of an economy. The fact that retail sales account for such a large percentage of economic activity makes this indicator extremely important to traders and a good indication of the health of an economy. US retail sales are divided into two separate reports, retail sales and core retail sales, the latter excluding car sales as these large value items are thought to obscure the underlying trends.

Retracement

A retracement occurs when the price action of an asset begins to move in the opposite direction of the established trend.

Reversal

A reversal is a complete change of direction in an asset’s underlying trend. Where as retracements are considered short-lived, reversals signal the end of the old trend and the beginning of a new one.

Risk Capital

Risk capital is the amount of capital that a trader has earmarked for investment purposes.

Rollover

A rollover occurs when a position is kept open overnight without being settled (two days being the usual delivery date for Forex). For the position to remain open it must be closed and re-opened so that the scheduled delivery date is deferred for another day. Brokers automatically do this at the same price the position was initially opened at. Rollovers require a swap transaction to take place where the difference between the interest due on the currency borrowed and currency bought is settled.

Risk Aversion

Risk aversion is characterised by a reluctance, or unwillingness, to take what are deemed to be risky positions. A risk-averse investor’s primary objective is to minimise uncertainty. In trading this can translate to positions in ‘safer’ investments such as bonds and safe-haven assets such as gold.

Risk Appetite

Risk appetite is the amount of risk an individual or institution is prepared to acceptRisk appetite is the amount of risk an individual or institution is prepared to accept in their investment portfolio. in their investment portfolio.