Trading Glossary

Take a look at our list of the financial terms associated
with trading and the markets.
  • A

    Ask Rate

    The lowest price at which a seller agrees to sell a financial asset.

    Asset

    The underlying instrument essential for determining a contract. It can be a precious metal, stock, currency pair, or bond.

    Asset Allocation

    is a strategy that segregates investment portfolio over various asset classes with the intention of maximizing returns and also minimizing risks.

    At the Money

    A condition when a trade reaches the break-even point, the trader neither profits nor loses.

  • B

    Base Currency

    The first currency in a currency pair quotation. The base currency always equals ‘1’ while the quote or counter currency reflects the value of the base currency.

    Bear

    A trader who believes that the price of an asset will fall.

    Bear Market

    A financial market in which asset prices are falling.

    Bull

    is a trader who believes that the price of an asset will rise.

    Bull Market

    The financial market, in which asset prices are rising.

    Bid

    The selling price of a particular financial asset.

    Blockchain

    Blockchain is a ledger of transactions. Unlike the ledgers kept by banks, they are public and distributed. They are the underlying technology of all cryptocurrencies and allow users to transact with each other without the need for trusted third parties (like banks, PayPal, Western Union, etc.).

    Broker

    An individual or an organization that works as the middleman between retail traders and large established financial corporations.

  • C

    Call Option

    Also known as a “High Option,” a  call option is a situation when a trader believes that an asset price will rise, he purchases a Call option.

    CFD

    CFD stands for Contract for Difference. It’s an agreement between an investor and an investment institution. When the agreement expires, the parties exchange the difference between the opening and the closing prices of a particular financial asset through cash payments.

    Commission

    The fee paid to a brokerage firm for the service rendered in facilitating transactions.

    Commodities

    A general name that refers to basic physical items that are either grown or mined (coffee, precious metals, oil).

    Commodity Pairs

    Three pairs of currencies in the foreign exchange market are from countries with the most extensive quantities of commodities. These pairs are USD/CAD, AUD/USD, and NZD/USD.

    Counter Currency

    Also called ‘Quote Currency’ is the second currency in a currency pair quotation. This reflects the value of one unit of the first currency in the pair (Base Currency).

    CPI

    CPI stands for Consumer Price Index – is a statistical measure that tracks the changes in the purchasing power of the currency as well as the rate of inflation.

    Cross Currency Transaction

    A type of transaction in which two or more currencies are traded at the same time.

    Currency Trading

    The act of participating in the exchange of one currency for another currency.

  • D

    Day Trading

    The opening and closing of positions in the market on the same day without holding them overnight.

    Derivative

    A financial contract whose worth relies upon or is derived from the performance of one or more underlying assets. Examples of underlying assets are stocks, bonds, or indices.

    Dividend

     A portion of a company’s profits paid to every shareholder.

  • E

    EPS

    EPC stands for Earnings per Share – the fraction of an organization’s earnings apportioned to every outstanding share of common stock.

    Expiry Time

    This refers to the time and date when a trade of a financial instrument expires.

  • F

    Financial Instrument

    Any type of a tradable asset – currencies, futures, options, and CFDs.

    Forex

    Forex is a short form of foreign exchange.

    Fundamental Analysis

    A type of market analysis that evaluates the related economic, financial, and other qualitative and quantitative aspects that affect the performance of a particular financial instrument.

  • I

    In the Money

    A phrase used to illustrate when a trader makes a profit.

    Index

    A group of representative stocks within a stock exchange. Some of the most popular indices are the S&P 500, NASDAQ, and the FTSE 100.

  • L

    Leverage

    It is financial tool that enables an investor to amplify his/her market exposure to a level that surpasses his or her initial capital.

    Liquidity

    Liquidity refers to the extent to which a financial instrument can be bought or sold with minimal or no effect on its price.

  • M

    Market Price

    The present price at which a financial instrument is being traded in the market.

  • O

    Out of the Money

    A phrase that is used to illustrate a loss in a trade.

    Overnight Position

    A trading position that continues to run until the next trading day is called an overnight position.

  • P

    Payout

    The amount of money earned from a successful trade.

    Pip

    The smallest unit of measurement used in determining exchange rates between currencies.

    Platform

    The system or technology provided by brokers.

  • Q

    Quote Currency

    Quote currency (also called counter currency) is the second currency in a currency pair quotation. This reflects the value of one unit of the first currency in the pair (Base Currency).

  • R

    Rate

    Rate (also referred to as the exchange rate) is the price of one currency compared to another one.

    Rollover

    The act of prolonging the settlement date of a running position in the market.

    RSI

    A Relative Strength Index – a technical oscillating indicator used to measure the overbought and oversold conditions of a financial instrument.

  • S

    Stock

    A representation of a share in the ownership of a company that is available for trading on the financial markets.

    Stop Loss Order

    An order designed to limit an investor’s loss by buying (or selling) a financial instrument once its price sails above (or falls below) a certain stop price.

  • T

    Trader

     A trader is an investor engaging in transactions in the financial markets.

  • U

    Under-Valuation

    An exchange rate that is usually regarded to be undervalued. This happens if it doesn’t exceed its purchasing power parity.

  • V

    Volatility

    A measure of the rate of fluctuation of the price of a financial instrument over a period of time.

  • W

    Wire Transfer

    The electronic transfer of money from one financial institution to another.

  • Y

    Yield Curve

    This is a graph that illustrates the correlation between the interest rate and the time to maturity of the debt instrument for a particular borrower using a particular currency.

  • Z

    Zero-Bound

    A situation whereby interest rates are very low (close to zero percent), making it difficult for central banks to institute measures for stimulating the expansion of the economy.