Learn all the keywords you’ll need to know for binary options trading
The U.S trading session is the most active trading that a Forex trader can participate in. This is because notable economic news is usually released from the U.S during this trading session. In addition, the starting of U.S trading session coincides with the time when European traders are returning from their lunch hours. As the U.S trading session is focused on New York, it follows the working hours of New Yorkers (14:00 GMT to 22:00 GMT).
Major traded pairs during the U.S trading session include the:
Focused on Tokyo, the Asian trading session is from 11pm and 8am GMT. Trading spans across many countries like Singapore, Hong Kong, Sydney and Kuala Lumpur. Due to its timing, Asian trading is considered to be relatively quiet by most Forex traders.
The main indexes traded are:
Due to it physical location, the European trading session which is focused in London overlaps with the Asian and U.S trading session. Overlapping with the Asian trading session occurs in the morning in Europe while the overlap with the U.S trading session is in the afternoon. Among the various financial centers in Europe, London is regarded as the major center which account for 30% of all Forex transactions during the European trading session.
The Shanghai Composite index comprises of all the A and B shares that are listed on the Shanghai Stock Exchange. The index represents a good overall view of the performance of the Shanghai Stock Exchange due to its composition. However, due to capital account controls, the Shanghai Stock Exchange is not fully accessible to foreign investors.
The ASX/S&P 200 is an Australian stock market index created for the benefit of fund managers who needed an index to compare their portfolios too. Traded on the Australian Stock Exchange with the symbol “XJO”, the ASX/S&P 200 comprises of the S&P ASX 100 Index and 100 other stocks listed on the Australian Stock Exchange.
The Nikkei 225 is the leading barometer for the performance of Japanese stocks. It is a weighted index that uses the prices of the leading 225 companies listed on the Tokyo Stock Exchange for its calculation. Similar to the Dow Jones Industrial Index, the Nikkei was once (1975 to1985) actually called the Nikkei Dow Jones Stock Average.
The Hang Seng is a weighted index based on market capitalization of 40 of the largest companies listed on the Hong Kong stock exchange. The index covers around 65% of the total Hong Kong’s market capitalization. Due to its unique status as a special administrative region of China, many Chinese companies are also listed on the Hong Kong stock exchange.
The FTSE 100 or “Footsie” is weighted market capitalization index of 100 blue chip stocks listed on the London Stock Exchange. The index is maintained and calculated by the FTSE Group, a joint venture between the Financial Times and the London Stock Exchange similar to that of Standard & Poor’s in the U.S. Some of the main companies that form part of the constituents of the FTSE include:
Sustainability scores are calculated based on environmental, social and governance criteria.
The CAC 40 index is the French weighted stock market index that is based on 40 of the largest market capitalized French stocks. Similar to the Dow Jones Index, the CAC 40 is used to gauge the overall performance of the Paris Bourse.Traders monitor the CAC 40 as well as the German DAX and FTSE 100 to get a sense of the overall health in the Euro zone economy.
The Dow Jones Index is a weighted index based on the market capitalization of 30 major American companies across the different industrial sectors. It was created by the founder of the Wall Street Journal Charles Dow. Among its major counterparts NASDAQ and S&P 500 it is one of the most closely followed Indexes by investors. It indicates a picture of corporate and economic health in the US.
“NASDAQ” used to be the acronym for the National Association of Securities Dealers Automated Quotation. Today, the word NASDAQ is accepted as a proper noun and is the main exchange that deals with technological stocks like Cisco, Dell, Yahoo and Microsoft. It is the second largest exchange in the world after the NYSE. Stocks listed on this index are usually denoted by four or five letter symbols eg. YHOO and CSCO. Over 500 technology stocks are traded on this index. It forms a portfolio of stocks and averages the prices of the stocks so when the index goes up, the total average of the stocks goes up.
A type of grain, wheat is considered an intermediate raw material that is used in the production of flour. After Corn, this commodity is widely cultivated around the world with China and India being the top producers. Wheat forms a staple for most nations across the globe and goes into the manufacture of many food products. It is is also widely cultivated in the U.S. Currently there are six main types produced by American farmers.
A type of bean which is used to brew a beverage, coffee is widely produced in countries like Brazil, Ethiopia, Colombia, Indonesia and Vietnam. There are two types of beans being traded, Arabica and Robusta. Although Arabica is considered more fragrant and hence more popular, Robusta has a higher concentration of Caffeine which helps to fuel its demand. Futures contracts for coffee beans are traded under the symbol “KC” on the New York Mercantile Exchange. Delivery periods are in March, May, July, September, and December.
The prices of this commodity are heavily affected by various external factors. This is a highly volatile commodity with short term price spikes. These come as a result of changing:
A base metal, copper is widely used in the manufacture of electronics and in many household goods including wiring, brakes on cars and in cooling systems. It is one of the most widely used metals on the planets but is overshadowed by its more popular counterpart gold and even silver. With the rapid rise in the growth of China and India’s economy, the demand for copper has been on the increase in recent years. The major producers of copper are located in South America with Chile being the world’s largest producer followed by the U.S.
Copper prices are much less volatile than gold and have outperformed gold and silver by far in the past 15 years. So you would perhaps it’s time for rices of this metal to correct themselves? But no its expected that prices of this useful commodity will continue to keep rising for a while to come.
Natural Gas is another energy commodity that is widely traded among the industrialized nations of the world. It is normally sold in liquefied form as Liquefied Natural Gas (LNG) to help with transportation of the gas as it only occupies 1/600 the volume required when in gaseous form. Natural gas is normally traded as futures contract or as Exchange Traded Funds (ETFs).
Gas prices are heavily dependent on the weather as the colder it is the more natural gas is used by consumers. This creates a sharp spike in prices. This natural commodity is 1/4 of the energy consumed in the US in households, commercial sites and utility factories.
US uses 25 per cent of global consumption, primarily it consumes its own supply and then imports the rest from Canada. This is a volatile commodity which reacts heavily to weather conditions eg. Tropical storms across Mexico. During and after Hurricane Katrina gas prices were at their highest level as gas plants and operations were heavily damaged as a result.
Crude Oil is an unrefined fossil fuel. After refining process, crude oil is transformed to various types of hydrocarbon based fuel like Diesel, Kerosene and Gasoline. Its by-products also include various other petrochemicals. Because of its importance to the modern industrial economy, it is sometimes referred to as “black gold”.
Investors that buy oil do not take physical possession of this commodity. Instead they speculate on the future price movements. Crude prices are determined by changes in the supply and demand of oil across the globe and are subject to change from various external factors. These include political turmoil in oil producing countries and new availability or discovery of source of oil.
The price of oil is quoted in USD per barrel.
Silver is a considered a precious metal which is widely used in jewellery, coins and photography. Being a good conductor of electricity, it also has industrial usages. There is a strong correlation between gold and silver prices. As they are both precious metals, they tend to follow the same trends. This precious metal as well as a gold is a safe haven for investors who are escaping a weakened dollar. Investors who trade silver do not take purchase of the physical asset but instead speculate on the future price of the commodity. To buy and sell this commodity would necessitate having huge warehouses and of course transportation costs would be expensive, hence the speculation on price rise and fall of this commodity.
Human psychology plays a huge role when it comes to investment in Gold. As Gold is seen as a good hedge against inflation and a good store of value in times of uncertainties, it tends to have an inverse relationship to the value of the U.S dollar. For example, during the credit crunch of 2008, many investors switched from holding U.S dollars to holding investments in Gold. This commodity is often a safe haven when the dollar weakens. Gold is often valued as a future so for instance in technical analysis you will see the future price for delivery for the next month. The New York Comex exchange, a division of the New York mercantile Exchange handle billions of dollars worth of this metal trading each day. The price for this valuable commodity is based on prices quoted by Comex or Commodities Exchange.
The U.S and Canadian dollar currency pair is represented by the notation USD/CAD. Among Forex traders, trading in the USD/CAD currency pair is known as trading the “Loonie”. The Canadian economy is 60% commodities based. Major exports include mineral resources, timber products, grains and petroleum. As such, the value of the USD/CAD is subjected to influences from the cyclical fluctuations in commodity prices.
The U.S dollar and Swiss Franc currency pair is denoted by the notation USD/CHF. Trading in this currency pair is known among the Forex circle as trading the “Swissie”. It shows how many Swiss francs can be exchanged for one U.S dollar. The relative value of this currency pair can be affected by the monetary activities U.S Federal Reserve and the Swiss National Bank (SNB). Due to the U.S dollar being the base currency in this pair, the USD/CHF pair is inversely related to the value of the EUR/USD and GBP/USD currency pairs.
The U.S dollar and Japanese Yen currency pair is represented by the notation USD/JPY. It shows how many yen can be bought with one U.S dollar. The trading of this currency pair is also known as trading the “gopher”. While other currency pairs are denoted up to 4 decimal places, the USD/JPY is denoted up to just two decimal places.
The notation AUD/USD stands for the Australian and U.S dollar currency pair. Trading in this currency pair is known as trading the “Aussie”. When trading in the “Aussie”, the interest rate differences between the Reserve Bank of Australia (RBA) and the U.S Federal Reserve is closely monitored. There tend to be an inverse relationship between the AUD/USD and other currency pairs like the USD/CHF and USD/JPY due to the fact that the quote currency of the AUD/USD is the U.S dollar.
The British pound and U.S dollar currency pair is represented by the notation GBP/USD. Trading in this pair is known as trading the “Cable”. Any factors which affect the economic health of these two countries will affect the value of the GBP/USD currency pair. Hence, traders in the GBP/USD normally keep a sharp outlook between the interest rate deferential between the Bank of England and the U.S Federal Reserve.
The notation “EUR/USD” stands for the Euro and U.S dollar currency pair. It shows how much one U.S dollar could be exchanged for one Euro. The first currency in the notation, the Euro, is known as the base currency while the U.S dollar is regarded as the quote currency. Trading the EUR/USD currency pair is known trading the “Euro”. The relative value of this pair is easily affected by the news that concerns the economic well being of both the European Union and U.S economy.
The Swiss Franc is the official currency of Switzerland, Liechtenstein and an Italian exclave Campione d’Italia. It also widely used in Büsingen, a German exclave. The Swiss franc is denoted with the acronym “CHF” derived from the Latin phrase Confoederatio Helvetica. Nevertheless, some businesses also use the acronym “SFr” to denote the Swiss franc. The importance of the Swiss Franc in the Forex community is largely due to the fact that the Swiss Franc is backed by Gold. Swiss laws required the every franc circulated must be backed by a minimum of 40% gold reserve relative to its face value.
The Canadian dollar is also another major currency in the world. Trading the in the Canadian dollar accounts for 5.3% of the global Forex trade. It is abbreviated with “C$” to distinguish it from the American dollar.
As Canada is a major trading partner with the U.S, the value of the Canadian dollar relative to the USD is closely monitored. An increase in the value of the USD will result in more expensive imports and vice versa. Nevertheless, the central bank of Canada, Bank of Canada, does not intervene much in trying to influence the value of the Canadian dollar. In recent years, due to Canada being a major exporter of petroleum, the Canadian dollar had gained value relative to the USD due to rising oil prices.
The Australian dollar is the official currency of Australia, Christmas Island, Cocos Islands and several Micronesia countries like Kiribati, Nauru and Tuvalu. To differentiate it between the U.S dollar, the Australian dollar is denoted by “A$” instead of just “$”. As Australia is a major exporter of mineral resources, the Australian dollar has become the fifth most traded currency globally. However, its heavy reliance on commodities exports has also subjected the stability of the Australian economy to being easily influenced by the commodities cycle. Nevertheless, the Australian dollar remain popular among Forex traders due to the stable government and the lack of intervention by the Australian Central Bank in the Forex market.
The official currency of Japan, the Yen is the 3rd most widely traded currency in the world. In addition, the JPY is also widely used an alternative reserve currency to the Euro, British Pound and U.S dollar. The JPY was originally introduced the Modernistic Meiji government in the late 1870s to replace the currency of the feudal era. After the Second World War, its value declined considerably resulting in it being pegged to the USD in 1949. After 1971, when the USD was no longer directly convertible to Gold, the Yen, after being devalued, became free floating rising and falling value against the USD.
The “USD” or United States dollar is the official currency of the United States of America (USA). It is also regarded as the World’s reserve currency and is widely used in international trade. Many small countries like Panama and Palau have also adopted the USD as their official currency. USD is also fondly known by investors as the Greenback due to the greenish tinge of the back of the notes. Prior to 1971, the dollar was based on the Gold Standard. After President Nixon ended the direct convertibility of the dollar to gold, the USD has become free floating. Today, it is perhaps the most important currency in the world due to the fact that crude oil is being quoted and traded based on the value of the dollar