R

Random walk theory An efficient market hypothesis, stating that

prices move randomly versus their intrinsic value. Therefore, no one

can forecast market activity based on the available information.

Rate of change A momentum oscillator in which the oldest closing

price is divided into the most recent one.

Ratio call spread A compound option strategy that consists of a number

of long calls with lower strike prices and a larger number of short

calls with a higher strike price. The maximum profit is realized when

the currency price is at the higher strike price. This combination has

two break-even points. The downside break-even point consists of

the sum of the lower strike price and the debit, divided by the

number of long calls. The upside break-even point consists of the

sum of the higher strike price and the maximum profit potential,

divided by the number of naked calls. The maximum loss is twofold.

The maximum downside risk is the net premium. The upside risk is

unlimited.

Ratio put spread A compound option strategy that consists of a number

of long puts with higher strike prices and a larger number of short

puts with a lower strike price. The maximum profit is realized when

the currency price is at the lower strike price. This combination has

two break-even points. The downside break-even point consists of

the difference between the lower strike price and the maximum

profit potential, divided by the number of naked puts. The upside

break-even point consists of the difference between the higher strike

price and the debit, divided by the number of long calls. The

maximum loss is twofold. The maximum downside risk is unlimited.

The upside risk is the net premium.

Ratio spread A compound option strategy in which the number of

long options is different from the number of short options.

Rectangle A continuation formation that resembles the outline of a

parallelogram. The price objective is the height of the rectangle.

Regulation Q Regulation passed by the Federal Reserve that

prohibited payment of interest on demand deposits and prescribed

maximum rates banks could pay on time deposits. These ceilings had

been imposed since 1933 by the U.S. government. The regulation is

not currently in effect.

Relative Strength Index An oscillator that measures the relative

changes between the higher and lower closing prices. The RSI is

plotted on a 0 to 100 scale. The 70 and 30 values are used as

warning signals, whereas values above 85 indicate an overbought

condition (selling signal), and values under 15 suggest an oversold

condition (buying signal).

Replacement risk A form of credit risk that holds that

counterparties of failed banks will find their books unbalanced to the

extent of their exposure to the insolvent party. In order to rebalance

their books, these banks must enter new transactions.

Repurchase agreements (repos) Daily operations executed by the

Federal Reserve. A repurchase agreement between the Federal

Reserve and a government securities dealer consists of the Fed's

purchasing a security for immediate delivery, with the agreement to

sell the same security back at the same price at a predetermined

date in the future (usually within 15 days). This arrangement

amounts to a temporary injection of reserves in the banking system.

Resistance level The peaks representing the price level at which supply

exceeds demand.

Reversal patterns Patterns that occur at the end of the trend,

signaling the trend change.

Rollover (tomorrow/next or torn/next) swap A swap designed for spot

trades' maintenance. It was designed to change the old spot date to

the current spot date (on the front office's side) and to enable the

bank to make the payments to the counterparty (on the back office's

side).

Rounded bottom A bullish reversal pattern that consists of a very slow

and gradual change in the direction of the market.

Rounded top (saucer) A bearish reversal pattern that consists of a very

slow and gradual change in the direction of the market.

Runaway or measurement gap A price gap that occurs within solid

trends. It is also called a measurement gap because it tends to occur

about midway through the life of a trend.

Random walk theory An efficient market hypothesis, stating that

prices move randomly versus their intrinsic value. Therefore, no one

can forecast market activity based on the available information.

Rate of change A momentum oscillator in which the oldest closing

price is divided into the most recent one.

Ratio call spread A compound option strategy that consists of a number

of long calls with lower strike prices and a larger number of short

calls with a higher strike price. The maximum profit is realized when

the currency price is at the higher strike price. This combination has

two break-even points. The downside break-even point consists of

the sum of the lower strike price and the debit, divided by the

number of long calls. The upside break-even point consists of the

sum of the higher strike price and the maximum profit potential,

divided by the number of naked calls. The maximum loss is twofold.

The maximum downside risk is the net premium. The upside risk is

unlimited.

Ratio put spread A compound option strategy that consists of a number

of long puts with higher strike prices and a larger number of short

puts with a lower strike price. The maximum profit is realized when

the currency price is at the lower strike price. This combination has

two break-even points. The downside break-even point consists of

the difference between the lower strike price and the maximum

profit potential, divided by the number of naked puts. The upside

break-even point consists of the difference between the higher strike

price and the debit, divided by the number of long calls. The

maximum loss is twofold. The maximum downside risk is unlimited.

The upside risk is the net premium.

Ratio spread A compound option strategy in which the number of

long options is different from the number of short options.

Rectangle A continuation formation that resembles the outline of a

parallelogram. The price objective is the height of the rectangle.

Regulation Q Regulation passed by the Federal Reserve that

prohibited payment of interest on demand deposits and prescribed

maximum rates banks could pay on time deposits. These ceilings had

been imposed since 1933 by the U.S. government. The regulation is

not currently in effect.

Relative Strength Index An oscillator that measures the relative

changes between the higher and lower closing prices. The RSI is

plotted on a 0 to 100 scale. The 70 and 30 values are used as

warning signals, whereas values above 85 indicate an overbought

condition (selling signal), and values under 15 suggest an oversold

condition (buying signal).

Replacement risk A form of credit risk that holds that

counterparties of failed banks will find their books unbalanced to the

extent of their exposure to the insolvent party. In order to rebalance

their books, these banks must enter new transactions.

Repurchase agreements (repos) Daily operations executed by the

Federal Reserve. A repurchase agreement between the Federal

Reserve and a government securities dealer consists of the Fed's

purchasing a security for immediate delivery, with the agreement to

sell the same security back at the same price at a predetermined

date in the future (usually within 15 days). This arrangement

amounts to a temporary injection of reserves in the banking system.

Resistance level The peaks representing the price level at which supply

exceeds demand.

Reversal patterns Patterns that occur at the end of the trend,

signaling the trend change.

Rollover (tomorrow/next or torn/next) swap A swap designed for spot

trades' maintenance. It was designed to change the old spot date to

the current spot date (on the front office's side) and to enable the

bank to make the payments to the counterparty (on the back office's

side).

Rounded bottom A bullish reversal pattern that consists of a very slow

and gradual change in the direction of the market.

Rounded top (saucer) A bearish reversal pattern that consists of a very

slow and gradual change in the direction of the market.

Runaway or measurement gap A price gap that occurs within solid

trends. It is also called a measurement gap because it tends to occur

about midway through the life of a trend.