- A -
Accrual - The apportionment of premiums and discounts on forward exchange
transactions that relate directly to deposit swap (Interest Arbitrage) deals, over
the period of each deal.
Actualize - The underlying assets or instruments which are traded in the cash
market.
Adjustable Peg - Term for an exchange rate regime where a country's
exchange rate is "pegged" (i.e. fixed) in relation to another currency, often the
dollar or French Franc, but where the rate may be changed from time to time.
This was the basis of the Bretton Woods system. See peg, and crawling peg.
Adjustment - Official action normally by either change in the internal economic
policies to correct a payment imbalance or in the official currency rate or.
Agent Bank - (1) A bank acting for a foreign bank. (2) In the Euro market - the
agent bank is the one appointed by the other banks in the syndicate to handle
the administration of the loan.
Aggregate Demand - Total demand for goods and services in the economy. It
includes private and public sector demand for goods and services within the
country and the demand of consumers and and firms in other countries for good
and services.
Aggregate risk - Size of exposure of a bank to a single customer for both spot
and forward contracts.
Aggregate Supply - Total supply of goods and services in the economy from
domestic sources (including imports) available to meet aggregate demand.
Appreciation - Describes a currency strengthening in response to market
demand rather than by official action.
Arbitrage - The simultaneous purchase and sale on different markets, of the
same or equivalent financial instruments to profit from price or currency
differentials. The exchange rate differential or Swap points. May be derived from
Deposit Rate differentials.
Arbitrage channel - The range of prices within which there will be no
possibility to arbitrage between the cash and futures market.
Around - Used in quoting forward "premium / discount". "Five-five around"
would mean five point on either side of the present spot value.
Asset Allocation - Dividing instrument funds among markets to achieve
diversification or maximum return.
Ask - The price at which the currency or instrument is offered.
Asset - In the context of foreign exchange is the right to receive from a
counterparty an amount of currency either in respect of a balance sheet asset
(e.g. a loan) or at a specified future date in respect of an unmatched forward or
spot deal.
At best - An instruction given to a dealer to buy or sell at the best rate that can
be obtained.
At or Better - An order to deal at a specific rate or better.
Authorized Dealer - A financial institution or bank authorized to deal in foreign
exchange.
- B -
Backwardation - Term referring to the amount that the spot price exceeds the
forward price.
Balance of Payments - A systematic record of the economic transactions
during a given period for a country. (1) The term is often used to mean either:
(i) balance of payments on "current account"; or (ii) the current account plus
certain long term capital movements. (2) The combination of the trade balance,
current balance, capital account and invisible balance, which together make up
the balance of payments total. Prolonged balance of payment deficits tend to
lead to restrictions in capital transfers, and or decline in currency values.
Band - The range in which a currency is permitted to move. A system used in
the ERM.
Bank line - Line of credit granted by a bank to a customer, also known as a "
line".
Bank Rate - The rate at which a central bank is prepared to lend money to its
domestic banking system.
Base currency - The currency in which the operating results of the bank or
institution are reported.
Basis - The difference between the cash price and futures price.
Basis point – 1/100 of one percent.
Basis trading - Taking opposite positions in the cash and futures market with
the intention of profiting from favorable movements in the basis.
Basket - A group of currencies normally used to manage the exchange rate of a
currency. Sometimes referred to as a unit of account.
Bear market - A prolonged period of generally falling prices.
Bear - An investor who believes that prices are going to fall.
Bid - The price at which a buyer has offered to purchase the currency or
instrument.
Book - The summary of currency positions held by a dealer, desk, or room. A
total of the assets and liabilities. If the average maturity of the book is less than
that of the assets, the bank is said to be running a short and open book. Passing
the Book refers normally to transferring the trading of the Banks positions to
another office at the close of the day, e.g. from London to New York.
Bretton Woods - The site of the conference which in 1944 led to the
establishment of the post war foreign exchange system that remained intact until
the early 1970s. The conference resulted in the formation of the IMF. The
system fixed currencies in a fixed exchange rate system with 1% fluctuations of
the currency to gold or the dollar.
Broker - An agent, who executes orders to buy and sell currencies and related
instruments either for a commission or on a spread. Brokers are agents working
on commission and not principals or agents acting on their own account. In the
foreign exchange market brokers tend to act as intermediaries between banks
bringing buyers and sellers together for a commission paid by the initiator or by
both parties. There are four or five major global brokers operating through
subsidiaries affiliates and partners in many countries.
Bull market - A prolonged period of generally rising prices.
Bull - An investor who believes that prices are going to rise.
Bundesbank - Central Bank of Germany.
Buying Rate - Rate at which the market and a market maker in particular is
willing to buy the currency. Sometimes called bid rate.
- C -
Cable - A term used in the foreign exchange market for the US Dollar/British
Pound rate.
Capital Risk - The risk arising from a bank having to pay to the counter party
with out knowing whether the other party will or is able to meet its side of the
bargain.
Carry - The interest cost of financing securities or other financial instruments
held.
Cash Delivery - Same day settlement.
Cash market - The market in the actual financial instrument on which a futures
or options contract is based.
Cash - normally refers to an exchange transaction contracted for settlement on
the day the deal is struck. This term is mainly used in the North American
markets and those countries which rely for foreign exchange services on these
markets because of time zone preference i.e. Latin America. In Europe and Asia,
cash transactions are often referred to as value same day deals.
Cash and Carry - The buying of an asset today and selling a future contract on
the asset. A reverse cash and carry is possible by selling an asset and buying a
future.
Cash Settlement - A procedure for settling futures contract where the cash
difference between the future and the market price is paid instead of physical
delivery.
Central Bank - A bank which is responsible for controlling a countries monetary
policy. It is normally the issuing bank and controls bank licensing, and any
foreign exchange control regime.
Central Rate - Exchange rates against the ECU adopted for each currency
within the EMS. Currencies have limited movement from the central rate
according to the relevant band.
Chartist - An individual who studies graphs and charts of historic data to find
trends and predict trend reversals which include the observance of certain
patterns and characteristics of the charts to derive resistance levels, head and
shoulders patterns, and double bottom or double top patterns which are thought
to indicate trend reversals.
Clean float - An exchange rate that is not materially affected by official
intervention.
Closed position - A transaction which leaves the trade with a zero net
commitment to the market with respect to a particular currency.
Commission - The fee that a broker may charge clients for dealing on their
behalf.
Confirmation - A memorandum to the other party describing all the relevant
details of the transaction.
Contract - An agreement to buy or sell a specified amount of a particular
currency or option for a specified month in the future (See Futures contract).
Conversion Account - A general ledger account representing the uncovered
position in a particular currency. Such accounts are referred to as Position
Accounts.
Conversion - The process by which an asset or liability denominated in one
currency is exchanged for an asset or liability denominated in another currency.
Conversion arbitrage - A transaction where the asset is purchased and buys a
put option and sells a call option on the asset purchased, each option having the
same exercise price and expiry.
Convertible currency - A currency that can be freely exchanged for another
currency (and or gold) without special authorization from the central bank.
Copey - Slang for the Danish krone.
Correspondent Bank - The foreign banks representative who regularly
performs services for a bank which has no branch in the relevant centre, e.g. to
facilitate the transfer of funds. In the US this often occurs domestically due to
inter state banking restrictions.
Counterparty - The other organization or party with whom the exchange deal
is being transacted.
Countervalue - Where a person buys a currency against the dollar it is the
dollar value of the transaction.
Country risk - The risk attached to a borrower by virtue of its location in a
particular country. This involves examination of economic, political and
geographical factors. Various organizations generate country risk tables.
Cover - (1) To take out a forward foreign exchange contract. (2) To close out a
short position by buying currency or securities which have been sold.
Covered Arbitrage - Arbitrage between financial instruments denominated in
different currencies, using forward cover to eliminate exchange risk.
Covered Margin - The interest rate margin between two instruments
denominated in different currencies after taking account of the cost of forward
cover.
Crawling peg - A method of exchange rate adjustment; the rate is fixed/
pegged, but adjusted at certain intervals in line with certain economic or market
indicators.
Credit Risk - The risk that a debtor will not repay; more specifically the risk that
the counterparty does not have the currency promised to be delivered.
Cross deal - A foreign exchange deal entered into involving two currencies,
neither of which is the base currency.
Cross rates - Rates between two currencies, neither of which is the US Dollar.
Current Account - The net balance of a country's international payment arising
from exports and imports together with unilateral transfers such as aid and
migrant remittances. It excludes capital flows.
- D -
Day trader - Speculators who take positions in commodities which are then
liquidated prior to the close of the same trading day.
Deal date - The date on which a transaction is agreed upon.
Deal Ticket - The primary method of recording the basic information relating to
a transaction.
Dealer - An individual or firm acting as a principal, rather than as an agent, in
the purchase and/or sale of securities. Dealers trade for their own account and
risk.
Deflator - Difference between real and nominal Gross National Product, which is
equivalent to the overall inflation rate.
Delivery date - The date of maturity of the contract, when the exchange of the
currencies is made This date is more commonly known as the value date in the
FX or Money markets.
Delivery Risk - A term to describe when a counterparty will not be able to
complete his side of the deal, although willing to do so.
Depreciation - A fall in the value of a currency due to market forces rather than
due to official action.
Desk - Term referring to a group dealing with a specific currency or currencies.
Details - All the information required to finalize a foreign exchange transaction,
i.e. name, rate, dates, and point of delivery.
Devaluation - Deliberate downward adjustment of a currency against its fixed
parities or bands, normally by formal announcement.
Direct quotation - Quoting in fixed units of foreign currency against variable
amounts of the domestic currency.
Dirty Float - Floating a currency when the rate is controlled by intervention by
the monetary authorities.
- E -
Easing - Modest decline in price.
Economic Indicator - A statistics which indicates current economic growth
rates and trends such as retail sales and employment.
ECU - European Currency Unit.
EDI - Electronic Data Interchange.
Effective Exchange Rate - An attempt to summarize the effects on a country's
trade balance of its currency's changes against other currencies.
EFT - Electronic Fund Transfer.
EMS - European Monetary System.
European Monetary System - A system designed to stabilize if not eliminate
exchange risk between member states of the EMS as part of the economic
convergence policy of the EU. It permits currencies to move in a measured
fashion (divergence indicator) within agreed bands (the parity grid) with respect
to the ECU and consequently with each other.
Exchange control - A system of controlling inflows and out flows of foreign
exchange, devices include licensing multiple currencies, quotas, auctions, limits,
levies and surcharges.
Exotic - A less broadly traded currency.
Exposure - (i) Net working capital - The current assets in a foreign currency
minus current liabilities in the currency; (ii) Net financial method The current
assets in a foreign currency minus current liabilities and long term debt in the
currency; (iii) Monetary/non-monetary method - Monetary assets and liabilities in
the foreign currency are valued at present exchange rates, while non-monetary
items are entered at the relevant historic rates.
- F -
Fast market - Rapid movement in a market caused by strong interest by buyers
and/or sellers. In such circumstances price levels may be omitted and bid and
offer quotations may occur too rapidly to be fully reported.
Fed Fund Rate - The interest rate on Fed funds. This is a closely watched short
term interest rate as it signals the Feds view as to the state of the money supply.
Fed - The United States Federal Reserve. Federal Deposit Insurance Corporation
Membership is compulsory for Federal Reserve members. The corporation had
deep involvement in the Savings and Loans crisis of the late 80s.
Federal Reserve System - The central banking system of the US comprising
12 Federal Reserve Banks controlling 12 districts under the Federal Reserve
Board. Membership of the Fed is compulsory for banks chartered by the
Comptroller of Currency and optional for state chartered banks.
Fill or Kill - An order which must be entered for trading, normally in a pit three
times, if not filled is immediately canceled.
Fisher Effect - The relationship that exists between interest rates and exchange
rate movements, so that in an ideal situation interest rate differentials would be
exactly off set by exchange rate movements. See interest rate parity.
Fixed exchange rate - Official rate set by monetary authorities. Often the fixed
exchange rate permits fluctuation within a band.
Flexible exchange rate - Exchange rates with a fixed parity against one or
more currencies with frequent revaluation's. A form of managed float.
Floating exchange rate - An exchange rate where the value is determined by
market forces. Even floating currencies are subject to intervention by the
monetary authorities. When such activity is frequent the float is known as a dirty
float.
FOMC - Federal Open Market Committee, the committee that sets money supply
targets in the US which tend to be implemented through Fed Fund interest rates
etc.
Foreign Exchange - The purchase or sale of a currency against sale or
purchase of another.
Forex - Foreign Exchange.
Forward margins - Discounts or premiums between spot rate and the forward
rate for a currency. Normally quoted in points.
Forward Operations - Foreign exchange transactions, on which the fulfillment
of the mutual delivery obligations is made on a date later than the second
business day after the transaction was concluded.
Forward Outright - A commitment to buy or sell a currency for delivery on a
specified future date or period. The price is quoted as the Spot rate minus or
plus the forward points for the chosen period.
Forward Rate - Forward rates are quoted in terms of forward points, which
represent the difference between the forward and spot rates. In order to obtain
the forward rate from the actual exchange rate the forward points are either
added or subtracted from the exchange rate. The decision to subtract or add
points is determined by the differential between the deposit rates for both
currencies concerned in the transaction. The base currency with the higher
interest rate is said to be at a discount to the lower interest rate quoted currency
in the forward market. Therefore the forward points are subtracted from the spot
rate. Similarly, the lower interest rate base currency is said to be at a premium,
and the forward points are added to the spot rate to obtain the forward rate.
Free Reserves - Total reserves held by a bank less the reserves required by the
authority.
Front Office - The activities carried out by the dealer, normal trading activities.
Fundamentals - The macro economic factors that are accepted as forming the
foundation for the relative value of a currency, these include inflation, growth,
trade balance, government deficit, and interest rates.
FX - Foreign Exchange.
- G -
G7 - The seven leading industrial countries, being US , Germany, Japan, France,
UK, Canada, Italy.
G10 - G7 plus Belgium, Netherlands and Sweden, a group associated with IMF
discussions. Switzerland is sometimes peripherally involved.
Gap - A mismatch between maturities and cash flows in a bank or individual
dealers position book. Gap exposure is effectively interest rate exposure.
Going long - The purchase of a stock, commodity, or currency for investment or
speculation.
Going short - The selling of a currency or instrument not owned by the seller.
Gold Standard - The original system for supporting the value of currency
issued. The was that where the price of gold is fixed against the currency it
means that the increased supply of gold does not lower the price of gold but
causes prices to increase.
Good until canceled - An instruction to a broker that unlike normal practice the
order does not expire at the end of the trading day, although normally
terminates at the end of the trading month.
Grid - Fixed margin within which exchange rates are allowed to fluctuate.
Gross Domestic Product - Total value of a country's output, income or
expenditure produced within the country's physical borders.
Gross National Product - Gross domestic product plus " factor income from
abroad" - income earned from investment or work abroad.
- H -
Hard currency - A currency whose value is expected to remain stable or
increase in terms of other currencies.
Hedge - The purchase or sale of options or futures contracts as a temporary
substitute for a transaction to be made at a later date. Usually it involves
opposite positions in the cash or futures or options market.
Hit the bid - Acceptance of purchasing at the offer or selling at the bid.
- I -
IMF - International Monetary Fund, established in 1946 to provide international
liquidity on a short and medium term and encourage liberalization of exchange
rates. The IMF supports countries with balance of payments problems with the
provision of loans.
IMM - International Monetary Market part of the Chicago Mercantile Exchange
that lists a number of currency and financial futures.
Implied volatility-A measurement of the market's expected price range of the
underlying currency futures based on the traded option premiums.
Implied Rates - The interest rate determined by calculating the difference
between spot and forward rates.
Indicative quote - A market-maker's price which is not firm.
Inflation - Continued rise in the general price level in conjunction with a related
drop in purchasing power.
Initial margin - The margin required by a Foreign Exchange firm to initiate the
buying or selling of a determined amount of currency.
Inter-bank rates - The bid and offer rates at which international banks place
deposits with each other. The basis of the Interbank market.
Interest Arbitrage - Switching into another currency by buying spot and selling
forward, and investing proceeds in order to obtain a higher interest yield.
Interest arbitrage can be inward, i.e. from foreign currency into the local one or
outward, i.e. from the local currency to the foreign one. Sometimes better results
can be obtained by not selling the forward interest amount. In that case some
treat it as no longer being a complete arbitrage, as if the exchange rate moved
against the arbitrageur, the profit on the transaction may create a loss.
Interest parity - One currency is in interest parity with another when the
difference in the interest rates is equalized by the forward exchange margins. For
instance, if the operative interest rate in Japan is 3% and in the UK 6%, a
forward premium of 3% for the Japanese Yen against sterling would bring about
interest parity.
Interest rate Swaps - An agreement to swap interest rate exposures from
floating to fixed or vice versa. There is no swap of the principal. It is the interest
cash flows be they payments or receipts that are exchanged.
Internationalization - Referring to a currency that is widely used to
denominate trade and credit transactions by non residents of the country of
issue. US dollar and Swiss Franc are examples.
Intervention - Action by a central bank to affect the value of its currency by
entering the market. Concerted intervention refers to action by a number of
central banks to control exchange rates.
- K -
Kiwi - Slang for the New Zealand dollar.
- L -
Leading Indicators - Statistic that are considered to precede changes in
economic growth rates and total business activity, e.g. factory orders.
Liability - In terms of foreign exchange , the obligation to deliver to a
counterparty an amount of currency either in respect of a balance sheet holding
at a specified future date or in respect of an un-matured forward or spot
transaction.
Limit order - An order to buy or sell a specified amount of a currency at a
specified price or better.
Liquidation - Any transaction that offsets or closes out a previously established
position.
Liquidity - The ability of a market to accept large transactions.
- M -
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.
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 call - A demand for additional funds to be deposited in a margin
account to meet margin requirements because of adverse future price
movements.
Margin - For currencies a deposit made to the forex firm on establishing a
futures position account.
Mark to market - The daily adjustment of an account to reflect accrued profits
and losses often required to calculate variations of margins.
Market maker - A market maker is a person or firm authorized to create and
maintain a market in an instrument.
Market order - An order to buy or sell a financial instrument immediately at the
best possible price.
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 futures contract.
Monetary Base - Currency in circulation plus banks' required and excess
deposits at the central bank.
- N -
Net Position - The amount of currency bought or sold which have not yet been
offset by opposite transactions.
- O -
Odd Lot - A non standard amount for a transaction.
Offer - The price at which a seller is willing to sell. The best offer is the lowest
such price available.
Offset - The closing-out or liquidation of a futures position.
Off-shore - The operations of a financial institution which although physically
located in a country, has little connection with that country's financial systems.
In certain countries a bank is not permitted to do business in the domestic
market but only with other foreign banks. This is known as an off shore banking
unit.
Overnight limit - Net long or short position in one or more currencies that a
dealer can carry over into the next dealing day. Passing the book to other bank
dealing rooms in the next trading time zone reduces the need for dealers to
maintain these unmonitored exposures.
Overnight - A deal from today until the next business day.
- P -
Parity - (1) Foreign exchange dealer's slang for your price is the correct market
price. (2) Official rates in terms of SDR or other pegging currency.
Parities - The value of one currency in terms of another.
Pegged - A system where a currency moves in line with another currency, some
pegs are strict while others have bands of movement.
Pip - Minimum fluctuation or smallest increment of price movement.
Position - The netted total commitments in a given currency. A position can be
either flat or square (no exposure), long, (more currency bought than sold), or
short ( more currency sold than bought).
Profit Taking - The unwinding of a position to realize profits.
- Q -
Quote - An indicative price. The price quoted for information purposes but not
to deal.
- R -
Rally - A recovery in price after a period of decline.
Range - The difference between the highest and lowest price of a future
recorded during a given trading session.
Rate - (1) The price of one currency in terms of another, normally against USD.
(2) Assessment of the credit worthiness of an institution.
Reaction - A decline in prices following an advance.
Reciprocal currency - A currency that is normally quoted as dollars per unit of
currency rather than the normal quote method of units of currency per dollar.
Sterling is the most common example.
Revaluation - Increase in the exchange rate of a currency as a result of official
action.
Revaluation rate - The rate for any period or currency which is used to revalue
a position or book.
Risk management - The identification and acceptance or offsetting of the risks
threatening the profitability or existence of an organization. With respect to
foreign exchange involves among others consideration of market, sovereign,
country, transfer, delivery, credit, and counterparty risk.
Risk Position - An asset or liability, which is exposed to fluctuations in value
through changes in exchange rates or interest rates.
Rollover - An overnight swap, specifically the next business day against the
following business day (also called Tomorrow Next, abbreviated to Tom-Next).
Round trip - Buying and selling of a specified amount of currency.
- S -
Same day transaction - A transaction that matures on the day the transaction
takes place.
Selling rate - Rate at which a bank is willing to sell foreign currency.
Settlement date - The date by which an executed order must be settled by the
transference of instruments or currencies and funds between buyer and seller.
Settlement Risk - Risk associated with the non settlement of the transaction by
the counter party.
Short sale - The sale of a specified amount of currency not owned by the seller
at the time of the trade. Short sales are usually made in expectation of a decline
in the price.
Short-term interest rates - Normally the 90 day rate.
Sidelined - A major currency that is lightly traded due to major market interest
being in another currency pair.
Soft Market - More potential sellers than buyers, which creates an environment
where rapid price falls are likely.
Spot - (1) The most common foreign exchange transaction. (2) Spot or Spot
date refers to the spot transaction value date that requires settlement within two
business days, subject to value date calculation.
Spot next - The overnight swap from the spot date to the next business day.
Spot price/rate - The price at which the currency is currently trading in the
spot market.
Spread - (l)The difference between the bid and ask price of a currency. (2) The
difference between the price of two related futures contracts.
Square - Purchase and sales are in balance and thus the dealer has no open
position.
Squeeze - Action by a central bank to reduce supply in order to increase the
price of money.
Stable market - An active market which can absorb large sale or purchases of
currency without major moves.
Standard - A term referring to certain normal amounts and maturities for
dealing.
Sterilization - Central Bank activity in the domestic money market to reduce
the impact on money supply of its intervention activities in the FX market.
Sterling - British pound
Stocky - Market slang for Swedish Krona.
Stop loss order - Order given to ensure that, should a currency weaken by a
certain percentage, a short position will be covered even though this involves
taking a loss. Realize profit orders are less common.
Swap price - A price as a differential between two dates of the swap.
Swap - The simultaneous purchase and sale of the same amount of a given
currency for two different dates, against the sale and purchase of another. A
swap can be a swap against a forward. In essence, swapping is somewhat
similar to borrowing one currency and lending another for the same period.
However, any rate of return or cost of funds is expressed in the price differential
between the two sides of the transaction.
- T -
Technical Correction - An adjustment to price not based on market sentiment
but technical factors such as volume and charting.
Thin market - A market in which trading volume is low and in which
consequently bid and ask quotes are wide and the liquidity of the instrument
traded is low.
Tick - A minimum change in price, up or down.
Today/Tomorrow - Simultaneous buying of a currency for delivery the
following day and selling for the spot day, or vice versa. Also referred to as
overnight.
Tomorrow next (Tom next) - Simultaneous buying of a currency for delivery
the following day and selling for the spot day or vice versa.
Trade date - The date on which a trade occurs.
Tradeable amount - Smallest transaction size acceptable.
Transaction date - The date on which a trade occurs.
Transaction - The buying or selling of currencies resulting from the execution
of an order.
Two Tier market - A dual exchange rate system where normally only one rate
is open to market pressure, e.g. South Africa.
Two-Way quotation - When a dealer quotes both buying and selling rates for
foreign exchange transactions.
- U -
Uncovered - Another term for an open position.
Under-valuation - An exchange rate is normally considered to be undervalued
when it is below its purchasing power parity.
Up tick - A transaction executed at a price greater than the previous
transaction.
- V -
Value Date - For a spot transaction it is two business banking days forward in
the country of the bank providing quotations which determine the spot value
date. The only exception to this general rule is the spot day in the quoting centre
coinciding with a banking holiday in the country(ies) of the foreign currency(ies).
The value date then moves forward a day.
Value Spot - Normally settlement for two working days from today.
Volatility - A measure of the amount by which an asset price is expected to
fluctuate over a given period.
- W -
Wash trade - A matched deal which produces neither a gain nor a loss.
Whipsaw - Term for where a trader takes a position, then has to move against
it triggering stop loss limits and liquidation of positions, then having to move in
the original direction. Normally occurs in volatile markets.
