Financial Dictionary

Face value, or par value, is the amount a bond issuer repays at maturity. Coupons are calculated as a percentage of it.

Fair value is an estimate of what an asset is really worth, based on its fundamentals. Traders compare it with the market price to judge whether something looks cheap or expensive.

A fair value gap is a three candle formation where the wicks of the first and third candles do not overlap, leaving a price zone that traded quickly. Some traders expect price to return to fill that gap.

A falling wedge is formed by two downward sloping trendlines that converge. It is usually read as bullish, with a break above the upper line taken as the signal.

A false breakout is when price moves through support or resistance but quickly reverses back inside the range. Waiting for a close beyond the level, or for higher volume, can help filter them out.

A fear and greed index combines several market measures, such as volatility and momentum, into a single sentiment score. Extreme fear or greed readings are sometimes read as contrary signals.

The federal funds rate is the interest rate at which US banks lend reserves to each other overnight. The Federal Reserve sets a target range for it, and it anchors borrowing costs across the US economy.

The Federal Reserve is the central bank of the United States. It sets the federal funds rate to pursue stable prices and maximum employment, and its decisions move markets around the world.

Fiat currency is money issued by a government that is not backed by a physical commodity such as gold. Its value rests on trust in the issuing government and central bank.

Fibonacci extension projects levels beyond the end of a prior move, such as 127.2% and 161.8%. Traders use them to set possible profit targets.

Fibonacci retracement draws horizontal levels at set percentages of a prior move, commonly 23.6%, 38.2%, 50%, 61.8% and 78.6%. Traders watch these levels as possible support or resistance during a pullback.

Fiscal policy is the government's use of spending and taxes to influence the economy. Large spending plans or tax cuts can raise growth, inflation and bond yields.

Fixed income refers to bonds and other debt instruments that pay a set rate of interest. Prices move inversely to interest rates.

A flash PMI is an early estimate of a purchasing managers' index, released near the end of the month it covers. Because it comes before the final figure, it often moves markets more.

A flight to safety is when traders move money out of riskier assets into those seen as safer, such as government bonds, gold or the Swiss franc. It usually happens during market stress.

A floating exchange rate is set by supply and demand in the currency market rather than fixed by a government. Most major currencies float, though central banks sometimes step in to smooth sharp moves.

An FOMC meeting is a meeting of the Federal Open Market Committee, the Federal Reserve body that sets US interest rate policy. It meets eight times a year, and the statement and press conference that follow often move all major markets.

FOMO, or fear of missing out, is the urge to jump into a trade because price is moving fast and others seem to be profiting. It often leads to buying late, near short term tops.

Forex is the global market for buying and selling currencies, and the largest financial market in the world by daily volume. It trades around the clock on weekdays through banks, brokers and electronic networks.

A fork is a change to a blockchain's rules. A hard fork can split one chain into two separate cryptocurrencies, while a soft fork stays compatible with the old rules.

Forward guidance is what a central bank says about the likely path of future policy. Markets react to changes in wording as much as to rate decisions themselves.

Free cash flow is the cash a company generates after paying for operations and capital expenditure. It funds dividends, buybacks and debt repayment.

Free float is the number of a company's shares available for public trading, excluding those held by insiders, governments or strategic owners. Many indices weight companies by free float rather than total shares.

Free margin is the equity in a trading account that is not tied up as margin for open positions. It is the amount available to open new trades or absorb losses.

The front month is the futures contract nearest to expiry. It is usually the most traded contract and the one quoted as the headline price.

The FTSE 100 tracks the 100 largest companies listed on the London Stock Exchange. Many of them earn most of their revenue overseas, so a weaker pound often lifts the index.

Fundamental analysis assesses an asset's value from economic data, company finances, interest rates and other real world factors. It aims to find assets that are priced too high or too low.

A futures contract is an agreement to buy or sell an asset at a set price on a set future date. Futures trade on exchanges and are used both to hedge and to speculate.