Disclaimer: I CFD sono strumenti complessi e comportano un alto rischio di perdere denaro rapidamente a causa della leva finanziaria.
Dovresti considerare se comprendi come funzionano i CFD e se puoi permetterti di correre l’alto rischio di perdere il tuo denaro.
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C
Counter currency
The latter currency in a currency pair. Also known as the quote currency. In EUR/USD, the euro is the base currency and the US dollar is the quote currency. The exchange rate is the number of units of the counter currency that can be bought with one unit of the base currency. If EUR/USD = 1.08, it means that one euro buys 1.08 US dollars.
When you are trading a currency pair, your profit and loss will be expressed in the counter currency. If you buy EUR/USD and the pair goes up, your profit will be in USD (the quote currency). This is important when converting P&L back to your account’s home currency, especially for accounts not denominated in USD.
The choice as to which is the base currency and which is the counter currency is a matter of convention rather than economic logic. The euro is higher than the pound, which is higher than the dollar, which is higher than most other currencies. EUR is the base in EUR/USD and EUR/GBP, but USD is the base in USD/JPY and USD/CHF.
Example: A trader based in India with an account denominated in rupees buys USD/JPY. Their profit or loss is first calculated in Japanese yen, the counter currency, then converted to US dollars, then rupees. Three currency steps to trade and the account balance. Knowing which leg is which helps avoid costly P&L surprises at settlement.
Country risk
The overall risk of investing in a country, including all that can go wrong at the level of the sovereign, including political instability, policy reversals, currency controls, expropriation, civil unrest, weak rule of law, and the risk that the government itself fails to service its debt. Country risk is not a replacement for company analysis, but it is in addition to it.
It shows up in pricing in the form of the sovereign spread, the difference between the yields on a country’s government bonds and those on US Treasury bonds of the same maturity. The wider the spread, the more investors need to be compensated for the extra risk. Sovereign ratings formalise this assessment, and credit rating agencies assign them, although markets often price risk ahead of rating changes.
Emerging markets investors obsess about tracking country risk. An election result, a court ruling or the appointment of a central bank governor can reprice an entire asset class overnight. It is a universal phenomenon which developed market investors forget until a crisis reminds them.
Example: An investor who holds Argentine bonds denominated in dollars earns a higher yield than on comparable US Treasuries. That yield premium is the price the market pays for Argentina’s history of defaults, currency controls and policy unpredictability. The extra return is nothing more and nothing less than compensation for country risk.
Cover On A Bounce
A short-selling instruction definition: If a declining asset temporarily rebounds from an oversold position, then use that rebound to close (cover) the short position at a more advantageous price than the asset is currently at. The bounce offers liquidity, and the exit is much better than making a buy into the bottom, as the buying pressure can be strong and fills are poor.
Covering on a bounce is a practical trading management. A short seller who waits for absolute lows may end up either getting out completely or getting caught in a short squeeze. A small bounce also gives liquidity, minimizes slippage, and helps to get out of the trade before a permanent break in sentiment occurs.
The course is eminently popular with risk managers who wish to limit their exposure, but aren’t interested in absolute accuracy in timing.
Example: A trader is short an oil stock that has fallen 30% over several weeks. On good news of the sector, the stock springs 5%. Instead of waiting for a lower low, the trader cashes in the short during the bounce, thus capturing the lion’s share of the profit while the stock is still temporarily liquid, and there are natural buyers in the market.
Cover On Approach
A risk management instruction to close a short position before a major level of price that is either a support zone or a prior major low that is well watched or that the price is approaching, but not to wait to see if the price breaks or holds the level.
The logic is asymmetric risk management. When the price gets close to a major support level and remains there, the short-term has a chance of a violent reversal. When big support occurs, and then it turns into a short covering rally, it can be extremely quick and hard. The short seller will take less of the profit on the approach but will have a guarantee on execution, as well as protection from the worst possible scenario of a reversal.
Most useful in fast-moving markets where the distance between making contact with a level and breaking it is small enough that you cannot respond to it later.
Example: A trader shorts a stock index and watches a major multi-year support level come into range. Instead of waiting and seeing if it will break, the risk manager tells the desk to cover before it gets to the level to test. Some loss of profit is incurred if the level breaks. When it does, and the market moves higher, it prevents any negative short-covering rally.
CPA Franc
A currency that is used in two monetary unions in sub-Saharan Africa. Senegal and Côte d’Ivoire are part of the West African Economic and Monetary Union (WAEMU) with eight other countries that use the CFA franc (XOF). The Central African CFA franc (XAF) is used by six countries in the CEMAC zone (Cameroon, Gabon, etc.). Both are regulated by regional central banks under the supervision of the French Treasury.
Both the francs are pegged at fixed rates to the euro, and France guarantees unlimited convertibility. This provides exchange-rate stability and inflation anchoring but takes away independent monetary policy from 14 countries. The critics say it’s a continuation of financial dependency, while supporters note the credibility and the discipline of inflation it brings.
Since the inception of the arrangement, francophone Africa has been debating the issue of monetary sovereignty.
Example: If a cocoa exporter in Senegal sells his product in euros, there is no risk of conversion: the value of the XOF in relation to the EUR is fixed, and the income in CFA francs is therefore always known when the prices of foreign currencies fluctuate. The peg essentially delegates exchange-rate management to the ECB and the French treasury, giving stability in exchange rates at the expense of French monetary flexibility.
CPI (Consumer Price Index)
A measure of the average change over time in the prices paid by consumers for a fixed basket of goods and services such as food, housing, transport, healthcare, clothing and more. Statistical agencies survey prices in thousands of stores, weight each category by its share of typical household spending, and publish the outcome monthly. The year-on-year change is what most people refer to as the inflation rate.
CPI is the one data release that moves the market in most economies. This is the central benchmark for central banks in their inflation mandates. CPI prints above target, raising expectations of rate increases. Ease bets build as it falls back toward the target. Minutes after a CPI release, bond yields, currencies, equity valuations and commodity prices all adjust.
Central bankers tend to focus more on core CPI, which excludes food and energy, because it is a better gauge of persistent inflation rather than temporary supply shocks.
Example: When a country’s CPI prints well above the central bank’s 2% target for several months in a row, short-dated government bond yields spike as traders reprice the likely path of interest rates. The sell-off typically hits equity markets, especially high-growth sectors that are sensitive to discount rates. One number immediately affects the pricing of almost every asset class.
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