P1:a/b P2:c/d QC:e/f T1:g
gloss JWBK182-McDowell April 25, 2008 16:35 Printer: Yet to come
Glossary 187filter An indicator that selects only data that meet specific criteria. Too many
filters can lead to overoptimization.
financial instruments This is a term used to denote any form of funding medium.
They can be categorized by whether they are cash instruments or derivative in-
struments. Cash instruments are financial instruments whose value is determined
directly by markets. They can be divided into securities, which are readily trans-
ferable, and other cash instruments such as loans and deposits, where both bor-
rower and lender have to agree on a transfer. Derivative instruments are financial
instruments that derive their value from some other financial instrument or vari-
able. They can be divided into exchange-traded derivatives and over-the-counter
(OTC) derivatives. If it is debt, it can be further categorized into short term (less
than one year) or long term. Foreign exchange instruments and transactions are
neither debt nor equity based and belong in their own category.
flat When you are not in the market with a live position or when you close out all
your positions before end of the trading day you are considered flat.
floor trader A member of the exchange who trades on the floor for personal
profit.
forecasts Individuals that attempt to predict future market behavior are said to
be forecasting the market. They tend to use indicators such as MACD, stochastic
and Elliott waves to determine their forecasts. Forecasting the markets is often like
forecasting the weather; it is difficult to do with any consistent accuracy.
FOREX market The foreign exchange market exists wherever one currency is
traded for another. It is by far the largest financial market in the world, and includes
trading between large banks, central banks, currency speculators, multinational
corporations, governments, and other financial markets and institutions.
fundamental analysis The use of economic data and news data to analyze finan-
cial markets. For example, fundamental analysis of a currency might focus on such
items as relative inflation rates, interest rates, economic growth rates, and political
factors. In evaluating a stock, a fundamental analyst would look at financials, value,
earnings, debt, management, operations, competition and other relative data. Fun-
damental analysis is often contrasted with technical analysis, and some investors
and traders use a combination of the two.
futures When commodity exchanges added stock index contracts and currency
contracts, the term futures was developed to be more inclusive.
futures market An auction market in which participants buy and sell commodity/
future contracts for delivery on a specified future date. Trading is carried on
through open yelling and hand signals in a trading pit.
Gann analysis Market analysis based on a variety of technical concepts developed
by William Gann, a famous stock and commodity trader during the first half of the
twentieth century.