Forex Trading Glossary E-F
Economic Indicator
Measures the strength or weakness of all or part of a country’s economy.
EMA
See Exponential Moving Average
Engulfing – Bullish and Bearish
(Candlestick Reversal Pattern)
The first bar of the pattern is a long black/white day, which is then followed by a white/black candlestick that completely engulfs the total range of the first day.
In a downtrend, the market opens at a new low but buying pressure is so strong that it closes at or above the previous day’s open. This strong reversal suggests that the bulls are in control and may overwhelm the bears.
In an uptrend, the market opens at a new high but selling pressure is so strong that it closes at or below the previous day’s open. This strong reversal suggests that the bears are in control and may overwhelm the bulls.
It is very similar to a Key Reversal Day.
Envelope
Trading bands that are plotted as lines above and below a market normally by plotting a percentage of price around a central moving average.
Euro
Introduced on January 1, 1999, this currency combined its European member nations’ individual currencies into a new single currency, the Euro.
European Central Bank (ECB)
The regulatory body charged with setting monetary policy and controlling the money supply of the Euro.
European Monetary Unit
The Euro.
Evening Star and Morning Star
(Candlestick Reversal Pattern)
The first bar to develop in a morning or evening star is a long white/black day. This is followed by a gap in the direction of the trend and then a Short Day.
There will be no overlap between the first and second candlesticks. (The short day may be substituted with a Doji).
Finally there is a second black/white long day, gapping in the opposite direction, with no overlapping shadows.
The pattern is similar to an “Island Reversal” in classical patterns, representing a market that has over-extended in one direction, with little supporting sentiment. It is always preferable to have other supporting technical evidence of a potential reversal such as a bullish/bearish divergence or break of trend line.
Exchange Rate
The value, or price of one currency quoted in terms of another.
Expanded Flat
(Elliott Wave)
Occasionally in a correction the end of wave B will penetrate the extreme of the end of the impulsive wave. Wave C will normally retrace to the extreme of wave A. Wave A will be comprised of three waves. Wave C will be comprised of five waves. These normally occur before an extended wave and will signal a significant trend. This is also called an “irregular correction”.
Expanding Triangle
(Elliott Wave)
This is a five-wave pattern in which the waves are constructed of three waves. There are two different forms of this:
(1) The pattern emerges normally between two rising (or falling) diverging lines. It is most commonly found in wave 5 positions and occur before a large reversal in trend direction.
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(2) The pattern emerges normally between one rising and one falling diverging lines. In this situation it is a continuation pattern and is merely an inverted standard triangle.
Exponential Moving Average (EMA)
A technical indicator that addresses the weighting limitations of the Simple Moving Average by assigning greater value to the most recent closing price, and a declining value to older prices, making it easier to see the general direction of a trend underlying market action.
Extended Wave
(Elliott Wave)
On occasion one of the impulsive waves can extend. An extending wave will be constructed of more than five internal waves, and the additional waves will be of the same degree as the others. Normally there will be 7 or 9 waves in an extended wave. Most often wave 3 will extend, but extensions in wave 5 are also very common.
Forex Trading Glossary E-F
Failed Fifth
(Elliott Wave)
A failed fifth wave occurs when the completion of the fifth wave does not penetrate the extreme of the third wave. It is indicative of either the price target having been met or a sharper reversal in prices.
Falling and Rising Three
(Candlestick Continuation Pattern)
A Rising Three pattern is a bullish continuation pattern in an uptrend. The first bar develops as a long white bar. The following three bars are all short days but which fail to move below the low of the first day’s long white bar. On the fifth day a further long white bar develops that breaks above the high of the first long white day.
The failure of the correction that lasts over three days to retrace past the low of the first long white bar signals that the selling pressure is weak and that bulls can dominate once again.
A Falling Three pattern is a bearish continuation pattern in a downtrend. The first bar develops as a long black bar. The following three bars are all short days but which fail to move above the high of the first day’s long black bar. On the fifth day a further long black bar develops that breaks below the low of the first long black day.
The failure of the correction that lasts over three days to retrace past the high of the first long black bar signals that the buying pressure is weak and that bears can dominate once again.
Fast Fourier Transform
Decomposes a periodic series of data into its component frequencies.
Failure Swing
The market not trading to a new high and thereby not reaffirming the uptrend, or not trading to a new low in a downtrend. Also used when an oscillator does not move to a new high when the market makes a new high, or the oscillator does not make a new low when the market makes a new low.
Failure
An event in the Elliott Wave Principal, when the fifth wave of a five-wave pattern fails to move above the top of the completed third. This will normally be a precursor to a strong reversal.
Federal Reserve (Fed)
The central bank of the United States.
Fibonacci
Leonardo Fibonacci was an Italian 13th century mathematician who developed a sequence of “magic” numbers that many consider has a natural place in the financial market place. The sequence was developed by taking zero and adding one to this, then adding the current number in the sequence to the previous number to create the next in the sequence:
0 – 1 – 1 – 2 – 3 – 5 – 8 – 13 – 21 – 34 – 55 – 89 – 144 etc.
>From this sequence of numbers certain ratios such as 38.2% and 61.8% can be derived and used in determining support and resistance.
Filter
A mathematical routine that alters the price series. This may be achieved by measuring the movement of price around a moving average that smoothes the price data to remove noise. Alternatively filters may be used in developing trading rules to eliminate loss making trades.
5-3-5
(Elliott Wave)
This is a method of referring to a simple ABC pattern that is comprised of five-wave waves A and C divided by a three-wave wave B. The diagram shows this pattern.
Forex Trading Glossary E-F
Fixed Exchange Rate
Also referred to as a pegged rate. An exchange rate that has been set by a country’s central bank against one or more currencies. Example: from 1993 – 2002 the Argentine Peso was fixed against the U.S. Dollar but floated freely against other currencies.
Flag
A pattern formed during a short consolidation in price movement that is contained by two parallel lines and thus looks similar to a flag on a flagpole. Additionally, the price movements before and after the flag are generally equal in length.
Flat Correction
(Elliott Wave)
Occasionally in a correction the end of wave B will complete at the extreme of the end of the impulsive wave. Wave C will normally retrace to the extreme of wave A. Wave A will be comprised of three waves. Wave C will be comprised of five waves.
Foreign Exchange
(Forex or FX) Terms used to describe the process of trading one currency against another at a set price or rate. Also names for the global currency market, itself.
Forex – See Foreign Exchange.
Frequency
The number of cycles within a time period. For instance a 13 week cycle would have an annual frequency of four.
Front and Back Office
A phrase used in banks to differentiate the area that conducts trades (front office), and the area that process trades (back office).
Front-Loaded
The fees and commission are subtracted from the initial investment before trading.
Fundamental Analysis
Examines the affect of economic, social and political events on currency prices.
Fundamental Factors
Financial, Economic, Political, and Social events affecting the FX market.
FX – see Foreign Exchange
FX-Strategy System
Developed by Doug Schaff in the 1990s, this back-tested technical trading system is designed to give traders a clear picture of the overall momentum or trend of a currency market.
Forex Trading Glossary E-F
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