New Investment Way 91,94-5 .
Ornstein, robert. author of The Psychology of Consciousness (see book list).
Open interest (01) 51 , The number of futures contracts remaining open at the end of each trading
session. The largest number is usually found in the nearest maturity month (“the nearby month”). As this comes to expire, some positions are rolled over into the next months but many are closed out (for expire, in the case of options contracts). The result is a sharp drop in the total open interest. In the currency contracts this occurs on the third Tuesday of March, June, September and December. The open interest figure becomes available at the start of business on the subsequent day (normally 1.15pm GMT).
The OI is a proxy for the total weight of speculation in a contract. As a matter of fact, it has always tended to rise in line with the perceived price trend – be this up or down. This makes the OI a valuable sentiment gauge: the OI tends to peak at price extremes. But you have to make a mental adjustment for the sudden drop at contract expiry. Clearly this does not imply a proportionate drop in speculation. Equally clearly there will tend to be a gradual rise in the open interest from the day after expiry to the day before expiry 3 months later. So an OI in the D-Mark of 65,000 in late March can denote higher speculation than an OI of 85,000 in early June. Back copies of Currency Bulletin will give you a historical view.
Option 95-6m102 . The right to buy (call option) or sell (put option) without the obligation to do either is worth something. In the currencies it usually costs about 2 to 3% for 3 months to buy this right – at about the current market price ( at-the-money ). the greater the volatility of prices, the greater the value of the option: when things are volatile options tend to cost a bit more. If you buy and option, the cost is the extent of your possible loss – which is why beginners often like to start here – and why not?
In the currency markets there are 3 types of option you can buy (or sell). 1) Options in the IMM, which give you the right to buy or sell futures. 2) Options in Philadelphia (or some other places like Amsterdam) which give you the right to buy or sell forward interbank currencies.
Speculators and investors can stick to IMM options. Others can go for one of the other two, if they wish. Use options when you have little idea how big you “downside” is – e.g. when bottom fishing.
Overbought 47,54 . What CB means by “overbought” or “oversold” is more precise than what others mean. CB means that speculation in the direction of the trend (usually measured by open interest ) is notably high.
Oversold 47,54 . The opposite of overbought, meaning that speculation is high on the short side.
Overtrading 79 . Two kinds. 1) Trading too often. 2) Trading too big. We probably spend our whole trading lives learning not to do either. You lose money regularly if you fall for 1). You lose a lot if you fall for 2), mainly because you can’t think straight.
Pack 102 . Maybe 7 times our of 10, the “currencies” move together like a wolf pack against the dollar. The other three times, the lagging members of the pack usually catch up over time, but it’s sometimes a long time.
Par 45 . Of securities, 100% redemption value e.g. $1,000 or Ј100.
Pirsig, r o b e r t 7 2 . Author of the wonderful classic Zen and the Art of Motorcycle Maintenance, a philosophical novel.
Pennant 65 . Self-descriptive chart pattern: a narrowing wedge pattern following a sharp rise.
PPP 22 .Purchasing power parity. Where inflation differentials are huge, as between hyper-inflating countries and hard-currency countries, the natural tendency of a currency to move towards its purchasing power value against other currencies is the most important determinant of its exchange rate. If you can establish the valid PPP (which must be done on the basis of a comparable basket of goods), it will pay to assume that big divergences from PPP will narrow in due course.
Where inflation differentials are small, PPP comparisons are unhelpful: the trick is to anticipate the divergences rather than the narrowings. The divergencies can be monitored by the use of real inflation-adjusted exchange rates.
Psychology of Consciousness ,The114 . By Robert Ornstein. (See book list).
Price-led (trader) 30,51 . Price-led buyers – sellers are those who are induced to buy after a rise in price and sell after a fall. Their opposite is value-led traders.
Quantum Fund 9 1 . Amazingly successful geared (leveraged) fund investing in currencies, financial futures and major commodities. Founded by George Soros in the 1960s, it grew to near $3bn in 1990 mainly by performance.
Real yield (s) 4 2 . Yield, at any maturity, adjusted for inflation. In chronic high-inflation countries, such as many in Latin America, it has long been common practice for most interest rates to be indexed to
consumer price inflation – in tacit recognition of the notion that interest rates must at least compensate for inflation, otherwise they would not be offering a real return.
Reminiscences of a Stock Operator 76. by edwin lefиvre. the story of the trading experiences of the great Jesse Livermore – larry livingston in the text.
Reserve currency 44 . The five major currencies which have historically been used as foreign currency reserves by the central banks: US dollar, D-Mark, SF, Yen and pound.
Revulsion 106 . Term used to denote an unusual nadir of sentiment, associated with a major
