Forex Glossary (M)

Commonly used forex terms and their definitions.

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MACD (Moving Average Convergence/Divergence) - A technical indicator developed by Gerald Appel that is calculated by subtracting the 26-period exponential moving average of a given security from its 12-period exponential moving average. By comparing moving averages, MACD displays trend following characteristics, and by plotting the difference of the moving averages as an oscillator, MACD displays momentum characteristics.

MACD Histogram - A technical indicator shows a visual representation of the difference between the MACD line and the MACD signal line. The plot of this difference is presented as a histogram, making the centerline crossovers and divergences easily identifiable.

Maintenance Margin - The minimum margin which an investor must keep on deposit in a margin account at all times in respect of each open contract. (See margin).

Make a Market - A dealer is said to make a market when he or she quotes bid and offer prices at which he or she stands ready to buy and sell.

Managed Float - When the monetary authorities intervene regularly in the market to stabilize the rates or to aim the exchange rate in a required direction.

Margin - The amount of money or collateral that must be, in the first instance, provided or thereafter, maintained, to ensure against losses on open contracts. Initial must be placed before a trade is entered into. Maintenance or Variation margin must be added to initial to maintain against losses on open positions. Sometimes herein the amount that needs to be present to establish or thereafter maintained is sometimes herein referred to as necessary margin.The high degree of leverage that is obtainable in the trading of off-exchange foreign currency transactions can work against you as well as for you. Leverage can lead to large losses as well as gains.

Margin Call - A demand for additional funds by a clearing house, broker, dealer, bank or another financial institution from a client to provide sufficient minimum collateral against positions held. A client that does not produce the required margin call runs the risk of having his positions closed either in part or in full by the dealer as per his discretion for insufficient funds.

Market Order - An order to buy or sell a security at the prevailing market price. Sometimes referred to as "at the market", these orders are usually filled immediately by the market maker. A sell order placed at the market will be filled at the bid price and a buy order will be filled at the ask price. During times of extreme volatility it can be difficult or impossible to execute orders.

Market Maker - A dealer who supplies prices and is prepared to buy or sell at those stated bid and ask prices. A market maker runs a trading book.

Mark To Market - The daily adjustment of an account to reflect accrued profits and losses often required to calculate variations of margins.

Micro Economics - The study of economic activity as it applies to individual firms or well defined small groups of individuals or economic sectors.

Mid-Price or Middle Rate - The price half-way between the two prices, or the average of both buying and selling prices offered by the market makers.

Minimum Price Fluctuation - The smallest increment of market price movement possible in a given financial market instrument.

Momentum - A technical indicator measuring a security's rate-of-change. The ongoing plot forms an oscillator that moves above and below 100. Bullish and bearish interpretations are found by looking for divergences, centerline crossovers and extreme readings. Momentum can also refer to a particular investing or trading style. The rational is that the hot get hotter and the cold get colder. Bullish momentum players buy securities that are popular or that they believe will become popular. As the word spreads and popularity grows, the advance will accelerate. Price acceleration is the same as an increase in momentum.

Monetary Base - Currency in circulation plus banks" required and excess deposits at the central bank.

Moving Average (MA) - A technical indicator showing an average of data for a certain number of time periods. It "moves" because for each calculation, we use the latest x 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.


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