Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Web Trader MT5
R
R-Star
R-star, written r*, is economists’ shorthand for the neutral interest rate, the theoretical rate that neither stimulates the economy nor holds it back. It is the level at which policy is in perfect balance, letting the economy grow at its sustainable pace with stable inflation.
The trouble is that r-star cannot be observed directly; it can only be estimated, and the estimates shift and disagree, yet it helps inform how central banks judge whether their policy is loose or tight.
Example: A central banker argues that with r-star around three percent, the current policy rate of five percent is likely to be restrictive, putting downward pressure on economic activity to fight inflation. Because nobody can pin r-star down precisely, officials argue endlessly over where it really sits, and that disagreement matters, since the assessment of how much more to hike, or when to cut, depends partly on a number that can only ever be estimated.
Rally
A continuous upward movement in asset price.
Range
A range is the band within which a price moves when there is no clear directional trend. Bounded by a floor of support and a ceiling of resistance, a ranging market moves sideways rather than trending, bouncing between the two edges as buyers step in near the bottom and sellers cap the top.
Markets spend a surprising amount of time like this, coiled and directionless, until something finally pushes them out of it.
Example: A currency pair spends three weeks trapped between 1.0800 and 1.0900, drifting up to the ceiling, falling back to the floor, and doing it again and again. A range trader may treat the boundaries as her playground, buying near 1.0800 and selling near 1.0900; the danger is always the breakout, the day the price finally punches through one edge and the comfortable range she was fading turns into a trend that runs away from her, potentially turning the strategy into a losing one.
Range trading
Range trading is the strategy of playing a sideways market, buying near the floor and selling near the ceiling of a price stuck in a band. Rather than betting on a trend, the range trader bets on the boundaries holding, fading moves toward the edges on the assumption the price will bounce back into the range as it has before.
It thrives in quiet, directionless markets but can become less effective when a breakout occurs.
Example: A currency oscillates between 1.2000 and 1.2100 for weeks, so a range trader buys each time it dips toward 1.2000 and sells each time it climbs toward 1.2100, pocketing the swing in between. Her nightmare is the breakout: the day the price finally smashes through 1.2100 and keeps going, her short at the top turns into a mounting loss, which is why disciplined range traders may use a stop-loss order just beyond the boundary in case the range gives way.
Range-bound market
When an asset’s price remains confined within a specific range, lacking noticeable trends or momentum.
Rate
Rate is a term whose meaning depends on the context. In foreign exchange, the rate is the exchange rate, how much one currency is worth in another. In lending and central banking, the rate is the interest rate, the price of money.
Both senses run through markets constantly, and the two are deeply linked, since a country’s interest rates can influence its exchange rate.
Example: A trader might say she is watching the rate ahead of a big decision, and only the context tells you which she means. If she is trading EUR/USD, the rate is the exchange rate between the euro and the dollar; if she is talking about the Federal Reserve, the rate is the policy interest rate the Fed is about to set. And the link binds them: when the Fed raises its rate, the dollar’s exchange rate may climb too, as higher yields can pull money toward the currency.
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