Sébastien Haller

The process of stopping (closing) a live trade by executing a trade that is the exact opposite of the open trade.

In technical analysis, a consolidating market is a market that is neither continuing nor countering a long-term trend. Instead, its price is only experiencing rangebound price activity. This is also seen as market indecisiveness. A market’s price during a period of consolidation will still fluctuate, but it won’t break out of a certain price range.As soon as the market breaks out and moves either above or below the stagnant trading pattern, the period of consolidation ends.

The process of settling a trade.

A central bank is a financial institution with special authority to issue government-backed currency. It is often responsible for formulating monetary policy and regulating member banks. Examples of central banks include the Bank of England in the UK and the Federal Reserve in the US.

The dollar pairs that make up the crosses (ie EUR/USD and USD/JPY are the components of EUR/JPY). Selling the cross through the components refers to selling the dollar pairs in alternating fashion to create a cross position.

A contract for difference (CFD) is a financial contract in which you agree to exchange the difference in the settlement price between the open and closing trades on a particular asset. CFDs enable traders and investors to speculate on whether a market will go up or down, and profit from the price movement without owning the underlying asset.

A document signed by counterparts to a transaction that states the terms of said exchange.

A choppy market is when an asset’s price shows no clear trend but instead experiences many smaller fluctuations.  A choppy market can occur when buyers and sellers of a market are at an equilibrium. If there is high liquidity (large trading volumes) in a market and neither bears nor bulls can dominate, the result is often a choppy market. Choppy markets are associated with rectangular price ranges. A rectangular price range is a pattern that occurs on charts that continuously hits the same support (the lower limit) and resistance (the upper limit) levels. This prevents the market from breaking out into a trend, as its price is instead confined between these two levels – creating a rectangle. Traders often look to profit from price trends, so can find it difficult to successfully trade a choppy market. Those who do trade choppy markets to try take advantage of small price movements over a short-term period, but more volatile markets are likely to present greater opportunities for most traders. What are good technical indicators for choppy markets? A good technical indicator to use to identify choppy markets is the Average Directional Index (ADX). The ADX indicator will not only help to identify whether a market is experiencing a price trend, but it will also show the strength of the trend. The main characteristic of a choppy market is that there is little or no trend, so in this case we can use the ADX indicator to identify the strength of a trend in a market. If it indicates there’s no trend, we know a market is choppy and can trade accordingly. The ADX works by using the positive (+DI) and negative (-DI) direction indicator to help traders determine whether they should go long or short on a market based on the direction and strength of the trend. When the ADX is above 25, this shows that the trend is strong. If the ADX is below 20, this implies a non-existent trend – at which point a choppy market has been identified.

Symbol for NASDAQ Composite Index.

Construction spending is the amount of money the government or businesses have spent on construction, labour and materials over a monthly period. This can refer to either residential and non-residential construction and also includes engineering costs.  Residential construction refers to the construction of housing and other forms of accommodation. This is significant to traders as the housing market can often reflect the economic health of a country. Non-residential construction refers to businesses and corporations spending money on infrastructure like new factories, offices or branches. Non-residential construction has an even stronger correlation with economic performance as gross domestic product (GDP) is derived from the output of these businesses, which is a direct measure of economic strength. Although construction spending is not the strongest economic indicator, its relation to GDP makes it significant to traders. If construction spending is high, this implies economic growth as new infrastructure is being built – increasing the capacity of an economy. How do changes in government spending impact construction? Changes in government spending should indirectly impact construction in an economy. This is because there’s a relation between spending and economic strength. The purpose of the government increasing spending is often to stimulate demand in the economy. If done successfully, an economy will grow as consumer spending also increases. This rise in demand can cause the need to raise economic capacity. One way this is facilitated is by increases construction. If government spending leads to an increase in wages, people will have more money and might be more likely to spend rather than save. For example, high consumer confidence off the back of an increase in government spending could subsequently increase the demand for housing[PF4] . This is because, in theory, consumers are more financially stable and in a better position to purchase a home. If the demand for housing rises, the construction industry will benefit as more houses will need to be built. Alternatively, a fall in government spending could have an adverse effect on construction, as the fall in demand would take away the need for new infrastructure. In a weaker economic environment, businesses are less likely to invest in new branches or factories, consumers will be more hesitant with making substantial purchases like buying houses and the construction industry could contract.