P1:a/b P2:c/d QC:e/f T1:g
gloss JWBK182-McDowell April 25, 2008 16:35 Printer: Yet to come
Glossary 191market index This is the weighted average of companies comprising an index.
The index represents a category or market (such as the S&P 500 or the NASDAQ).
market maker A broker, bank, or firm such as Goldman Sachs or Merrill Lynch,
which buys or sells a security, currency, or futures contract.
market order Order to execute a purchase or sale for the best price available at
the time the order is received.
market risk Uncontrolled risk possibilities that are always present in open trade
and investment positions are considered market risk. Economic and world events
can cause market risk where the market could move so quickly that you may not
be able to exit at your stop-loss exit point.
Minneapolis Grain Exchange (MGEX) This exchange was founded as a not-for-
profit membership organization and maintains that structure today with a member-
ship base of 390 outstanding seats, or memberships. In 1883, MGEX launched its
first futures contract, hard red spring wheat, which is the exchange’s most heavily
traded product today.
minor pyramid trading point©R(MP) An MP indicates a correction in the dominant
trend.
momentum investing and trading Momentum represents the change in price now
from some fixed time period in the past. This strategy attempts to capture short-
term price movements based on the belief that price patterns are indicative of fu-
ture results.
money flow index (MFI) A volume-weighted momentum indicator that measures
the strength of money flowing in and out of a financial instrument. It compares
positivemoney flow tonegativemoney flow to create an indicator that can be
compared to price in order to identify the strength or weakness of a trend. The MFI
is measured on a 0 to 100 scale and is often calculated using a 14-day period.
money management The use of various methods of risk control in trading and
investing. These methods include: (1) using proper trade size; (2) not risking more
than 2 percent of your risk account on any one trade; and (3) diversifying your
trading or investing account over a number of markets and sectors. This is also
known asrisk management.
moving average (MA) An average of data for a certain number of time periods.
It moves because for each calculation, we use the latest number of time periods’
data. By definition, a moving average lags the market. An exponentially smoothed
moving average (EMA) gives greater weight to the more recent data, in an attempt
to reduce the lag time.
moving average convergence/divergence (MACD) This is an indicator devel-
oped by Gerald Appel. It is calculated by subtracting the 26-period exponential
moving average of a given financial instrument from its 12-period exponential
moving average. By comparing moving averages, MACD displays trend following