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Accumulative Swing Index: The accumulative swing index, or ASI, is a tool developed by J. Welles Wilder to measure the breakout potential of a given market.
The ASI takes the form of a number from 100 to -100, with positive values indicating an upward trend and negative values indicating a downward trend. Once calculated, the ASI can be charted in conjunction with a candlestick chart. The chief value of the ASI is that it's susceptible to the same technical analysis tools as a candlestick chart, allowing traders to use trendlines, wedges, triangles and other tools in order to determine support and resistance levels. However, ASI charts are much simpler and smoother than candlestick charts, making them both easier to analyze and less susceptible to indicating false breakouts. If the absolute value of the ASI for a given day exceeds the absolute value of the ASI at the time of a previous breakout, a new breakout from the trend is imminent, and traders can take positions accordingly.
The ASI is based on Wilder's swing index, which is an extremely complex calculation that incorporates high, low and close prices for an asset along with numerous other variables, some of them specific to certain kinds of markets. On its own, the swing index isn't particularly useful as a predictive tool, but the swing indexes for several successive days can be incorporated by another calculation into the ASI, which fulfills Wilder's original intention for the measure. Full instructions for calculating the swing index and ASI are available in Wilder's "New Concepts in Technical Trading Systems", and a number of popular pieces of trading software are able to calculate the ASI automatically.
Dark Cloud Cover: A bearish reversal pattern that continues the uptrend with a long white body. The next candle opens at a new high then closes below the midpoint of the body of the first candle. The pattern is more signficant if the second candle's body is below the center of the previous body. The pattern is casting a “dark cloud” over the bullish trend that preceded it. Confirmation of the pattern is achieved when another black candle, of smaller size, forms after the second candle
Directional Movement Index: The directional movement index (or DMI) was developed by J. Welles Wilder in order to determine the overall direction of a given asset's prices. DMI is composed of two lines, one representing positive direction ( DI) and one representing a negative direction (-DI).
To calculate the DMI, a trader first calculates the difference between the current high and the previous high (HiDiff), as well as the difference between the previous low and the current low (LowDiff). HiDiff and LowDiff are then compared. If HiDiff is greater in value, a variable DMI is set to HiDiff and a variable -DMI is set to 0. If LowDiff is greater, -DMI is set to LowDiff and DMI is set to 0. If the two values are equal, or if no trend is seen in either highs or lows, both values are set to 0. A calculation known as the Welles Summation is then performed on both DMI and -DMI, resulting in two numbers: DI and -DI, both ranging from 0 to 100. The directional movement index consists of these two points.
The DMI can be used in strongly trending markets to determine strong buy and sell signals. The DMI generates a strong buy signal when DI crosses above -DI at any point and generates a strong sell signal when DI crosses below -DI at any point. In non-trending markets, this indicator becomes less useful.
The directional movement index is the basic value from which the average directional index (or ADX) is derived.
Beige Book: A summary of economic conditions around the United States compiled for the Federal Reserve Board. Each Federal Reserve Bank gathers anecdotal information on current economic condition in its District through reports from Bank and Branch directors and interviews with key businessmen, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. This report allows outsiders to know what the Fed governors are looking at as they prepare for their upcoming FOMC meeting.
Biflation: Biflation is a phenomenon where both inflation and deflation occur at the same time. This term was coined by Dr. Osborne Brown, a Senior Financial Analyst for the Phoenix Investment group.
During biflation, the prices of commodities and earnings-based assets (equities) rise while the prices of debt-based assets (bonds) fall
Carry Trade: The Carry Trade is a trading strategy where investors/traders sell or borrow assets (such as currencies) with lower yielding interest rates to fund or buy higher yielding assets.
In the Foreign exchange, interest is debited or credit from a trader's account everyday on open positions.
The most popular Carry Trade in recent history has been to sell Japanese Yen and buy higher yielding currencies such as the Australian Dollar, New Zealand Dollar, and British Pound.
For example, if you buy the AUD/JPY, then you sell Japanese Yen (which yields 0.00% a year)and buy an equivalent amount of Australian Dollars (which yields 3.50% a year) simultaneously. So, for as long as you hold that position you would pay 0.00% interest a year for borrowing Japanese Yen, and receive 3.50% a year for holding Australian Dollars.
The interest rate differential of that position is 3.50 (3.50% - 0.00%). So you would receive approximately 3.50% a year on the value of the position, depending on the margin interest charged by the broker and on exchange rate volatility.
Bearish Reversal Candlestick Patterns: The Bearish Reversal Candlestick Pattern comes in over 12 different forms. These include the Abandoned Baby, the Bearish Engulfing Pattern, the Harami, the Dark Cloud Cover, the Evening Star and the Shooting Star. Bearish Reversal Candlestick Patterns should form in an uptrend and most will require Bearish Confirmation as reinforcement of the pattern. Use additional anaylsis to further support your findings.
Banking Institutions: Banking institutions cater to both the majority of commercial turnover and large amounts of speculative trading every day. The set of forex products offered by various banking institutions vary depending on their size. Some banks offer only spot exchange and currency forwards while the larger institutions offer currency options, currency swaps, currency futures, and option-dated currency forwards.
A large bank could trade billions of dollars daily, much of which is undertaken on behalf of customers, but some is conducted by proprietary desks, in other words: trading for the bank's own account.
A study by Greenwich Associates reveals that the top foreign exchange dealers are dominated by banking institutions such as Deutsche Bank, UBS, Citigroup, Barclays, and the Royal Bank of Scotland. The exact percentage of the daily global forex turnover accountable to banking institutions is not known but Deutsche Bank and UBS each comprise more than 10% of the market share. What’s for certain is that a sizeable part of daily forex trading is concentrated among the world’s top 10 foreign exchange banks. Around 90% of all foreign currency transactions are done by banks, companies, and individual traders.
Beige Book: A summary of economic conditions around the United States compiled for the Federal Reserve Board. Each Federal Reserve Bank gathers anecdotal information on current economic condition in its District through reports from Bank and Branch directors and interviews with key businessmen, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. This report allows outsiders to know what the Fed governors are looking at as they prepare for their upcoming FOMC meeting.
Carbon Credits: Carbon credits pertains to the right to emit a certain volume of greenhouse gases. The current measure is that one ton of C02 (or C02 equivalent gases) is equal to one carbon credit. To encourage businesses and companies to minimize their emission of greenhouse gases, they can exchange, buy, and sell carbon credits in the international market
Derivatives: Derivatives are financial instruments that acquires the majority of their value from the price of the underlying asset they are tracking such as commodities and currencies, or from securities such as stocks and bonds.
Swaps, futures, forwards, and options are the most common derivatives. Investors trade them on exchange or over-the-counter usually as an alternative to speculating in the underlying asset, or to hedge their risk on a position in the underlying asset.
Currency Manipulation: Currency manipulation is the act of changing its value against other currencies instead of leaving it free to fluctuate based on market dynamics. This can be done by fixing the exchange rate or deliberately increasing or decreasing its value.
This practice is usually frowned upon since it results to an artificial distortion in currency prices. In fact, it is considered an illegal practice based on US laws and international agreements.
This could also give way to unfair trade advantages since artificially devaluing a country's currency could make its exports relatively cheaper and more attractive. In the long run, this could eventually result to a global trade imbalance
Commodity Channel Index: The Commodity Channel Index is a tool developed by Donald Lambert to measure the point at which cyclical price reversals for a given asset can be expected. One of the fundamental assumptions behind the CCI is that price trends reverse at regular intervals within an asset, allowing investors to take the appropriate action when the CCI indicates that one of those cyclical reversals is imminent.
The CCI is calculated first by averaging the high, low and closing prices into a measure called the True Price, or TP. A 20-period moving average of the TP becomes the Simple Moving Average of the True Price, or SMATP. A standard deviation of the difference between SMATP and TP over twenty periods is also taken. The difference between TP and SMATP is then divided by the product of this standard deviation and a constant value of .015 to produce the CCI.
The constant value of .015 ensures that the majority of CCI values fall between 100 and -100. In the case that the absolute value of CCI exceeds 100, Lambert's theory indicates that the market is approaching one of its cyclical reversals, and that traders should take the appropriate action. The CCI also indicates overbought and oversold levels, which are any levels whose absolute value exceeds 100. If the CCI moves outside of the -100 to 100 range and then returns, either a buy or sell signal is generated, depending on whether the CCI was below -100 (oversold) or above 100 (overbought.)
Average True Range: Average True Range is one measure of volatility of a given market. The measure was created by J. Welles Wilder, Jr. in his 1979 book “New Concepts in Technical Trading Systems”.
Average True Range is based on the True Range, which is defined as the greatest of three measures:
•The difference between the greatest high and the greatest low
•The absolute value of the current high minus the latest close
•The absolute value of the current low minus the latest close
As a rule, fourteen measurements of the True Range are used in deriving the ATR. These measurements can be taken for four different time intervals: within a day, daily, weekly and monthly. The first ATR in a series is simply the average of the TR for fourteen periods. Future ATRs in the series are derived by the following algorithm:
•Multiply the previous 14-day ATR by 13.
•Add the current ATR.
•Divide the sum by 14.
The measurement is useful due to its sensitivity to large fluctuations in the value of a currency across several periods of measurement, even when the difference between the high and low values for a single period is very small (which would falsely indicate a low overall volatility.)
British Industrial Production: Release Schedule: 8:30 (GMT); monthly, usually 26 working days following the reporting month's end
Revisions Schedule: Monthly revisions made to adjust for incomplete data.
Source of Report: Office for National Statistics (UK)
Web Address: http://www.statistics.gov.uk/default.asp
Address of release: http://www.statistics.gov.uk/statbase/Product.asp?vlnk=6230
Carry Trade: The Carry Trade is a trading strategy where investors/traders sell or borrow assets (such as currencies) with lower yielding interest rates to fund or buy higher yielding assets.
In the Foreign exchange, interest is debited or credit from a trader's account everyday on open positions.
The most popular Carry Trade in recent history has been to sell Japanese Yen and buy higher yielding currencies such as the Australian Dollar, New Zealand Dollar, and British Pound.
For example, if you buy the AUD/JPY, then you sell Japanese Yen (which yields 0.00% a year)and buy an equivalent amount of Australian Dollars (which yields 3.50% a year) simultaneously. So, for as long as you hold that position you would pay 0.00% interest a year for borrowing Japanese Yen, and receive 3.50% a year for holding Australian Dollars.
The interest rate differential of that position is 3.50 (3.50% - 0.00%). So you would receive approximately 3.50% a year on the value of the position, depending on the margin interest charged by the broker and on exchange rate volatility.
Commodity Channel Index: The Commodity Channel Index is a tool developed by Donald Lambert to measure the point at which cyclical price reversals for a given asset can be expected. One of the fundamental assumptions behind the CCI is that price trends reverse at regular intervals within an asset, allowing investors to take the appropriate action when the CCI indicates that one of those cyclical reversals is imminent.
The CCI is calculated first by averaging the high, low and closing prices into a measure called the True Price, or TP. A 20-period moving average of the TP becomes the Simple Moving Average of the True Price, or SMATP. A standard deviation of the difference between SMATP and TP over twenty periods is also taken. The difference between TP and SMATP is then divided by the product of this standard deviation and a constant value of .015 to produce the CCI.
The constant value of .015 ensures that the majority of CCI values fall between 100 and -100. In the case that the absolute value of CCI exceeds 100, Lambert's theory indicates that the market is approaching one of its cyclical reversals, and that traders should take the appropriate action. The CCI also indicates overbought and oversold levels, which are any levels whose absolute value exceeds 100. If the CCI moves outside of the -100 to 100 range and then returns, either a buy or sell signal is generated, depending on whether the CCI was below -100 (oversold) or above 100 (overbought.)
Building Permits - Canada: Release Schedule : 8:30 AM (EST); monthly, on the first week of the reporting month
Revision Schedule: The report following next month
Source of Report : Statistics Canada
Web Address : http://www.statcan.ca/start.html
Address of Release : http://www.statcan.ca/english/Release/index.htm