One subject
Correlation
7 lessons, 21 glossary terms and 24 market guides cover this across the academy. Each one links to its own page, and nothing is repeated here.
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The curriculum
7 lessons cover this.
In curriculum order, which is the order you would meet them.
- Worked scenario: two positions and a margin callModule 03Margin and account mechanics9 min
- Conversion and your account currencyModule 04What a trade actually costs7 min
- The Tokyo sessionModule 06When the market moves6 min
- The Federal ReserveModule 08Macro and the calendar13 min
- Oil as a regional macro driverModule 08Macro and the calendar9 min
- What a currency peg doesModule 08Macro and the calendar8 min
- What portfolio heat isModule 09Risk, plan and practice7 min
The glossary
21 terms belong here.
Alphabetical, each defined in one sentence on its own page.
- Account currencyThe single currency an account is denominated in, into which every result, charge and financing adjustment is converted before it reaches the balance.
- ArbitrageHolding the same economic exposure long in one place and short in another to capture a price difference, with the two legs offsetting so the position carries no market direction.
- AussieDealer shorthand for the Australian dollar quoted against the US dollar, one of a handful of desk nicknames that persist because they are faster to say than a currency code.
- BetaA measure of how far an asset's returns have moved with a benchmark's returns over a past window, where a beta of one describes an asset that moved with the benchmark on average.
- Commodity currencyA commodity currency belongs to an economy whose exports are dominated by raw materials, so its exchange rate has tended to move with the price of what that country sells.
- CorrelationCorrelation measures how closely the returns of two markets have moved together over a chosen window, on a scale from perfectly opposite through unrelated to perfectly aligned.
- DiversificationSpreading exposure across positions whose results do not move together, so that the variability of the whole is lower than the average variability of its parts.
- Dollar indexA single number tracking the US dollar against a fixed basket of other currencies, so dollar strength can be read without choosing one pair to read it in.
- IndexAn index is the output of a published rule that measures a defined list of companies as one number, republished continuously in points against a base date, and it is a calculation rather than an asset anyone can hold.
- Index weightingIndex weighting is the rule deciding how much each constituent counts toward an index level, and it changes the behaviour of the same list of companies more than the membership of the list does.
- LoonieLoonie is the dealing room name for the Canadian dollar, taken from the bird on its one dollar coin, and by extension for the US dollar against Canadian dollar rate.
- Market riskMarket risk is the exposure to loss from prices moving, the one risk that remains after credit, liquidity and operational risks have been separated out.
- Oil benchmarkAn oil benchmark is a crude grade at a named delivery point whose traded price is used to price other cargoes, Brent and West Texas Intermediate being the most quoted.
- RebalancingRebalancing returns a portfolio or an index to its intended weights by trimming what has grown past them and adding to what has fallen below, either on a fixed calendar or once a drift threshold is crossed.
- Risk appetiteRisk appetite describes how willing participants are in aggregate to hold assets whose returns are uncertain, and it is inferred from what is being bought and sold rather than measured directly.
- Risk-on risk-offRisk-on risk-off names a market regime in which unrelated assets move as two blocs according to a single swing in appetite for uncertainty, rather than on the fundamentals particular to each of them.
- Safe haven currencyA safe haven currency is one that has tended to attract flows when risk appetite falls, the US dollar, the Swiss franc and the Japanese yen being the three most often described that way.
- SectorA sector is a grouping of listed companies whose principal business is the same, such as energy or financials, used to compare like with like and to describe where an index move came from.
- US Dollar IndexThe US Dollar Index tracks the dollar against a fixed basket of six currencies in which the euro carries more than half the weight, scaled from a base period in the early nineteen seventies.
- Weighted indexA weighted index gives each member an influence set by a stated measure, usually its free float market value, so the same percentage move in a large member shifts the index far more.
- XAGXAG is the currency code for one troy ounce of silver, which is why silver is quoted in the grammar of a currency pair, most often against the US dollar.
The market guides
24 guides answer a question about it.
Standalone reference answers, entered laterally rather than worked through.
- Major currency pairsMarketsWhich pairs the market treats as majors, what each is sensitive to, and how their liquidity behaves.
- Currency crossesMarketsWhat defines a cross, how its rate is derived from two dollar pairs, and why it can move on its own.
- The US dollar and the dollar indexMarketsWhy the dollar sits on one leg of most pairs, what the index measures, and how its basket is weighted.
- Commodity currenciesMarketsWhich currencies the market groups this way, the terms-of-trade link, and why that link is unstable.
- Safe haven currenciesMarketsWhich currencies carry the label, the mechanisms behind the flow, and the episodes where it failed.
- Index CFDsMarketsWhat the index market is, which contracts sit in the class, and how a CFD on a level is settled.
- Index weighting methodsMarketsCapitalisation, free float, price and equal weighting compared, and what each does to concentration.
- US indicesMarketsWall Street 30, US 500, US Tech 100 and US Small Cap 2000: coverage, weighting and trading hours.
- European indicesMarketsGermany 40, UK 100, France 40 and Euro 50 compared: what dominates each list and when they trade.
- Asia Pacific indicesMarketsJapan 225, Hong Kong 50, China A50, Australia 200 and their peers: concentration, sessions and currency.
- Emerging market indicesMarketsHow a market comes to be classified as emerging, and the properties that separate these contracts.
- How the commodities and metals market worksMarketsThe four families the class divides into, who trades them, and the inventory arithmetic that sets prices.
- How the silver market worksMarketsSilver's split monetary and industrial demand, the venues that price it, and why it moves more than gold.
- How the platinum and palladium market worksMarketsThe autocatalyst demand that dominates them, their concentrated supply base, and the substitution link.
- Gold quoted in currencies other than the dollarMarketsWhy gold is quoted in currencies other than the dollar, and how a move splits into metal and currency.
- How the agricultural softs market worksMarketsWhich crops the category covers, why perennial cycles make supply unresponsive, and what reprices them.
- What moves commodity pricesMarketsThe drivers common to every commodity: inelastic supply, inventory, the dollar, energy, weather and policy.
- Sector groups and how they moveMarketsHow the standard classification works, which sectors share sensitivities, and where it stops describing.
- What moves a share priceMarketsThe four forces that reach a share price, and why a reaction depends on the expectation before it.
- Sector ETFsMarketsHow sectors are classified, what the sector funds hold, and why they concentrate more than broad funds.
- EIA crude oil inventories and the weekly petroleum reportEventsWhat the weekly petroleum report contains, why Cushing matters, and the limits of one weekly reading.
- Index rebalancing and review datesEventsHow committees decide constituents and weights, and why the close on a review date carries unusual volume.
- The dirham peg and dollar exposureStructureWhat a fixed dirham parity does to a quoted pair, and how a peg relocates an exposure, not removes it.
- Oil as the regional macro driverStructureThe chain from a barrel price to Gulf bank liquidity and equities, and why the currency never shows it.
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