Looking to improve your trading knowledge? Our dictionary is an essential educational tool providing you with up-to-date explanations of the most popular and common terms frequently used in the financial industry.
A
Accumulated distribution
It is a popular term used in ETF trading, and it refers to the process of reinvesting dividend payments or other income back into the fund. This is done to increase the size and value of the fund for investors.
Algorithmic Trading
A form of trading that uses automated pre-programmed trading instructions to enter and exit trades in the market. This method allows traders to take advantage of opportunities in the market with faster execution and greater accuracy.
ADR
American Depositary Receipts are certificates that represent ownership of a foreign-listed security. They are typically issued by large banks and traded on U.S. stock exchanges. ADRs provide U.S. investors with an easier way to invest in foreign stocks.
Aggregate demand
Aggregated demand represents the total demand for final goods and services in a market, sector, or economy. It shows how current price levels relate to a nation’s real Gross Domestic Product (GDP).
Aggregate supply
Aggregated supply represents the total amount of goods and services that firms are willing to produce in a market, sector, or economy. It is a reflection of the economy’s current resources, production capacity, and technology.
Alpha
Alpha is a measure of an investment’s performance relative to its benchmark. A positive alpha implies that the investment has performed better than its benchmark, while a negative alpha implies that it has underperformed the benchmark.
Arbitrage
It is the process of simultaneously buying and selling security in different markets to take advantage of price discrepancies. This allows traders to lock in profits without taking on any risk. The asset is often sold in a different market at a higher price than it was bought for, generating an immediate profit for the trader.
Asset
An asset is any resource that can generate economic value. It can be tangible or intangible property, such as cash, stocks, bonds, real estate, or intellectual property. Assets are typically bought and sold in the financial markets.
Asset Allocation
It is an investment strategy that involves dividing a portfolio among different asset classes to optimize return and reduce risk. Different asset classes, such as stocks, bonds, and commodities, have different levels of risk and potential returns. By diversifying across asset classes, investors can mitigate their risk while still achieving their desired returns.
Asset Purchase Program
A monetary policy tool used by central banks to stimulate the economy by purchasing financial assets, such as government bonds, from banks and other financial institutions.
Ask Price
The ask price is the lowest price that a market maker is willing to sell a particular security. It is also known as the ‘offer’ or ‘asking price.’ This is the price that a trader must pay if they want to buy the security.
Aussie
A slang term for the Australian Dollar (AUD) against the US Dollar (USD) currency pair.
Average Daily Trading Volume
Average daily trading volume (ADTV) is the average number of shares that are traded in a security over a given period of time. It is a measure of liquidity and market activity and is often used to gauge investor interest in a particular security.
Available for Withdrawal
Available for withdrawal is the number of funds that can be withdrawn from an account without impacting market positions or triggering margin calls. It is important to understand the available balance before making any trades, as having too little can prevent traders from entering into or exiting positions.
Average price
It is a median price of a security over a given period. It is often used to measure the overall performance of an investment, as it takes into account both highs and lows. This can be useful in making investment decisions, as it reflects the average performance of a security over time.
Average True Range (ATR)
A volatility indicator that measures the average range between the high and low prices of a currency pair over a specified number of periods.
B
Balance of Payments (BOP)
A summary of all transactions between a country and the rest of the world, including trade, investments, and transfers, over a specific period.
Bar Chart
A type of price chart that displays the open, high, low, and close prices of a currency pair for a specified period using vertical bars.
Base currency
The base currency refers to the first currency quoted in a currency pair. It is typically the domestic currency and is used to calculate exchange rates for other currencies. For example, in the EUR/USD currency pair, the EUR is the base currency.
Base rate
The base rate is the rate of interest used by a central bank to set the cost of borrowing money. It is an important factor in determining exchange rates and is used to influence the level of economic activity in an economy.
Basis point
A basis point is a unit of measure used to express interest rate changes. It is equal to 1/100th of a percent, or 0.01%. Changes in interest rates are typically expressed as a change in basis points. The basis point in the forex market is important in order to know the changes in risk-free rate of return.
Bear market
It is a market characterized by falling prices. It usually happens after a period of rising prices and can be caused by economic downturns, political instability, or overvaluation of assets. In a bear market, investors tend to sell off their assets in order to make a profit before prices drop further.
Bearish
It is a term used to describe an outlook that is pessimistic or expects lower prices. It is the opposite of bullish, which means expecting higher prices. In the forex market, a bearish outlook can lead to selling activity as traders look to capitalize on lower prices.
Bid
The bid is the highest price that a buyer is willing to pay for a particular security. This is the price a trader must accept if they want to sell the security. The bid price is usually lower than the asking price, and the difference between them is known as the spread.
Big Figure
The first few digits of a currency exchange rate, which are usually omitted in quoting the bid and ask prices.
Blue-chip stocks
It is a term used to describe stocks of established, large companies with solid financials and good track records. These stocks are usually considered low-risk investments, as they tend to be more stable and less volatile than other stocks. Blue-chip stocks are typically the most sought-after by investors.
Bollinger bands
It is a technical analysis indicator used to measure volatility in the market. It consists of three lines: an upper band, a lower band, and a middle line. The upper and lower bands are set at two standard deviations above and below the middle line, respectively. When prices move outside of the bands, it is an indication of increased volatility.
Bonds
It is a type of debt instrument issued by governments, corporations, or other entities to raise money. It typically pays out interest payments on a regular basis until the bond matures, at which point it is repaid in full. Bond investments are typically considered low-risk and generally have lower returns than other investments.
Book value
It is the value of a company’s assets minus its liabilities and other obligations. This figure can be used to estimate the intrinsic value of a company and is an important metric for investors when evaluating a potential investment. It’s also known as market capitalization.
Book-to-market ratio
It is a measure of the market value of a company’s assets relative to its book value. It is used to determine the quality of a company’s financial performance and to identify potential investments in undervalued stocks. A higher book-to-market ratio indicates that a company is undervalued relative to its assets.
Bull market
It is a market characterized by rising prices. It usually follows a period of falling prices, and the bull market allows investors to capitalize on the newfound optimism in the market. Bull markets are typically driven by economic growth, political stability, and other positive factors.
Breakout
A significant price movement through a support or resistance level, usually followed by increased volatility and heavy trading volume.
Broker
An individual or company that facilitates transactions between traders and the market.
Bullish
The term bullish refers to an outlook that is optimistic or expects higher prices. It is the opposite of bearish, which means expecting lower prices. In the financial market, a bullish outlook can lead to buying activity as traders look to capitalize on higher prices.
C
Cable
A slang term for the British Pound (GBP) against the US Dollar (USD) currency pair.
Call option
It is a type of derivative instrument that gives the holder the right to buy a security at a specified price within a certain period of time. This type of investment is usually used to hedge against other investments, as it provides protection against downside risk.
Candlestick chart
A type of price chart that displays the open, high, low, and close prices of a currency pair for a specified period, often used to identify price patterns and potential trading opportunities.
Capital account
A component of the balance of payments that measures the flow of financial assets, such as direct investments, portfolio investments, and loans, between a country and its trading partners.
Capital expenditure
It is an expenditure made by a company for the acquisition or improvement of long-term assets. Also known as CAPEX includes investments in property, equipment, and other assets that will help the company generate future profits.
Capital gains tax
It is a tax levied on profits made from the sale of investments, such as stocks, bonds, and real estate. This type of tax is typically lower than regular income tax rates, as it is meant to incentivize investments.
Carry Trade
A trading strategy that involves borrowing in a low-interest-rate currency and investing in a high-interest-rate currency, profiting from the difference in interest rates.
Chartist
It is an investor who uses technical analysis to make trading and investment decisions. Chartists use price patterns, chart patterns, and other indicators to analyze the markets and make trading decisions. This type of investor typically takes a short-term approach to investing.
Central bank
It is an independent government entity responsible for managing a country’s monetary policy. It sets interest rates, manages the supply of money in circulation, and implements measures to ensure financial stability. Examples of central banks include the Federal Reserve in the U.S., the Bank of England in the U.K., and the European Central Bank.
Chart pattern
Chart patterns are visual indicators used to analyze financial markets. They provide information about the direction of prices, and traders use them to identify potential entry or exit points. Common chart patterns include head and shoulders, double tops/bottoms, triangles, flags, and wedges.
Closing price
It is the last trading price of a security at the end of the day. This figure can be used to calculate gains and losses for the day and to gauge the performance of a security or an index. It is also used to calculate various technical indicators, such as moving averages.
Commercial Positioning
The net difference between the long and short positions held by commercial traders, such as corporations and banks, in the forex market, often used to gauge the underlying trend.
Commission
It is a fee charged by brokers or dealers for executing transactions in the financial market. This fee is typically calculated as a percentage of the total transaction value and varies depending on the type of security being traded.
Commitments of Traders (COT) Report
A weekly report published by the Commodity Futures Trading Commission (CFTC) that provides an overview of the positions held by various market participants in the futures market, including speculators, commercial traders, and small traders.
Commodity
It is a physical good or product that can be bought and sold in the market. Examples of commodities include metals, energy, and agricultural products. These products are traded in exchanges, and the prices of these commodities are affected by supply and demand.
Commodity Currencies
Currencies of countries with significant natural resource exports, such as the Australian Dollar (AUD), Canadian Dollar (CAD), and New Zealand Dollar (NZD).
Consolidation
A period of limited price movement, often characterized by a narrowing trading range, in which the market is preparing for a potential breakout.
Contingent Order
A period of limited price movement, often characterized by a narrowing An order that is executed only if a specific condition is met, such as the execution of another order or the attainment of a specified price level.trading range, in which the market is preparing for a potential breakout.
Contracts for difference
Contract for difference or CFD is a type of derivatives contract that enables traders to speculate on the price movements of an underlying asset without having to actually own the asset. CFDs are often used for trading stocks, indices, forex, and commodities.
Contingent Order
An order that is executed only if a specific condition is met, such as the execution of another order or the attainment of a specified price level.
Contract (Lot or Unit)
It is a pair of two currencies that are quoted in relation to each other in the foreign exchange market. This is the basis of currency trading and enables investors to speculate on the value of one currency against another. A currency pair has a quote and base currencies. The quote currency is the one being traded, while the base currency is used as a reference point for pricing.
Convergence
A situation in which the price of a currency pair and a technical indicator move in the same direction, often confirming the current trend.
Correlation
A statistical measure of the relationship between two financial assets, such as currency pairs, used to identify potential trading opportunities and manage risk.
Counter Currency
Another term for the quote currency, the second currency in a currency pair.
Counterparty Risk
The risk that one party in a financial transaction will default on its obligations, potentially resulting in a loss for the other party.
Cross Currency Pair
A currency pair that does not include the US Dollar.
Currency Appreciation
An increase in the value of one currency relative to another asset.
Currency Basket
A group of currencies used as a benchmark or for diversification purposes, often weighted according to their relative importance in the global economy.
Currency Depreciation
A decrease in the value of one currency relative to another asset.
Currency Pair
It is the standard size of a trade in the forex market. Also referred to as a lot or unit, it typically consists of 100,000 units of the base currency. The contract size can vary depending on the broker and type of currency pair being traded.
Currency Peg
A policy in which a country’s central bank maintains a fixed exchange rate between its currency and another currency or a basket of currencies.
Currency Risk
The potential for losses resulting from changes in exchange rates.
Currency Swap
A financial transaction in which two parties agree to exchange principal and interest payments in different currencies for a specified period.
Currency War
A situation in which countries engage in competitive devaluations of their currencies to gain a trade advantage, often leading to increased volatility in the foreign exchange market.
Current Account
A component of the balance of payments that measures the flow of goods, services, investment income, and transfers between a country and its trading partners.
D
Day order
It is an order placed with a broker that will be executed if the price of the security reaches or surpasses the specified threshold during the trading day.
Day trading
It is a type of trading strategy that involves buying and selling securities within the same day. Day traders typically use technical analysis and leverage to capitalize on short-term price movements. This type of trading is highly risky, as it requires a high degree of discipline and capital to be successful.
Dealing desk
It is a type of broker that uses an internal order book to execute trades. This means that the broker is trading against its clients rather than providing direct market access. Dealing desk brokers typically provide higher spreads and lower commissions than non-dealing desk brokers.
Derivative
It is a financial instrument that derives its value from an underlying asset. Common derivatives include futures, options, and contracts for difference. These instruments are used to hedge risk, speculate on price movements, and generate income.
Dividend
It is a financial payment that is distributed to shareholders by a company. It is typically paid out quarterly or annually and represents a portion of the company’s profits. Dividends are an important source of income for investors and can be used to gauge the performance of a company.
Direct Market Access (DMA)
Direct Market Access, or DMA, is a type of trading system that enables traders to access the order book of exchange directly. This allows traders to place orders directly in the market rather than via a broker. DMA is typically used for high-frequency trading and requires a large amount of capital.
Direct Public Offering (DPO)
It is a type of public offering where shares are sold directly to the public without the involvement of an underwriter. DPOs are typically used by smaller, newer companies that are looking to raise capital quickly.
Direct Quote
An exchange rate quoted as the domestic currency per unit of the foreign currency.
Divergence
A situation in which the price of a currency pair and a technical indicator move in opposite directions, often signaling a potential trend reversal.
Dovish
A monetary policy stance characterized by low interest rates and accommodative measures to stimulate economic growth.
Drawdown
It is a measure of how much capital has been lost from an account due to trading. Drawdown is typically expressed as a percentage and can be used to measure the risk associated with a trading strategy.
E
Earnings per share
It is a measure of a company’s profitability that is calculated by dividing the total net income by the number of outstanding shares. It is an important metric for investors, as it gives an indication of how profitable a company is relative to its share price.
Economic Calendar
A schedule of economic data releases and events that can have an impact on financial markets, often used by traders to plan their strategies.
Economic Indicator
A schedule of economic data releases and events that can have an impact on financial markets, often used by trA statistic that provides information about the overall health of an economy, such as employment, inflation, or GDP growth.aders to plan their strategies.
Elliott Wave Theory
A technical analysis method that identifies price patterns based on the belief that market movements follow a series of repetitive waves, often used to predict future price movements.
Emerging markets
They are countries or regions with economies that are in the process of rapid growth and industrialization. Emerging markets typically have less developed financial systems and higher risk than more developed markets. As such, they present both opportunities and risks to investors.
Entry order
It is an order placed with a broker that will be executed if the price of the security reaches or surpasses the specified threshold. Entry orders are commonly used by day traders to take advantage of short-term price movements.
Equity
It is the value of an asset minus any liabilities associated with it. Equity can be used to refer to an individual’s ownership in a company or to the total value of all assets owned by a company.
Equity options
They are derivatives that give the holder the right, but not the obligation, to buy or sell a specified number of shares of an underlying stock at a predetermined price. Equity options are used to hedge risk, speculate on price movements, and generate income.
Euro
The official currency of the Eurozone, which includes 19 of the 27 European Union (EU) member countries.
Exchange
It is a marketplace where buyers and sellers can come together to trade securities. Exchanges provide liquidity, transparency, and regulation of the markets they serve.
Exchange Rate
The value of one currency in terms of another.
Exotic Currency Pairs
Currency pairs that involve less commonly traded currencies, often with wider spreads and lower liquidity.
Expiry date
It is the date on which a contract or option expires. For futures and options, this is typically the third Friday of the month. The expiry date can be used to determine the value of a contract or option at any given time.
Exchange-Traded Fund (ETF)
It is a type of publicly traded fund that tracks an index or basket of assets. ETFs are tradable on exchanges and can be bought and sold at any time during trading hours. They provide a convenient and cost-effective way for investors to gain exposure to a variety of asset classes.
Exponential Moving Average (EMA)
A type of moving average that assigns more weight to recent price data, making it more responsive to price changes.
F
FCA
It stands for the Financial Conduct Authority, which is the U.K. regulator responsible for overseeing financial services. The FCA sets standards for prudential regulation and consumer protection and is responsible for the regulation of financial markets in the U.K.
Federal Reserve (FED)
It is the central bank of the United States and the most influential financial institution in the world. The Federal Reserve sets monetary policy, regulates banks, and provides liquidity to the financial system. It is also responsible for maintaining stability in the U.S. economy.
Fiat currency
It is a type of currency that is issued and backed by a government. Fiat currencies have no intrinsic value, and their value is determined solely by supply and demand in the market.
Fibonacci retracement
It is a technical analysis tool used to identify potential support and resistance levels based on prior price movements. Fibonacci retracements are calculated by taking two extreme points on a chart and dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8%, and 100%.
Fill or Kill (FOK) Order
An order that must be executed immediately and in its entirety, or not at all.
Financial instrument
It is a contract between two parties that specifies the terms of an investment. Financial instruments can be used to buy, sell, or trade assets such as stocks, bonds, and currencies.
Financial market
It is a market where financial instruments, such as stocks, bonds, and currencies, are bought and sold. Financial markets provide liquidity to investors by enabling them to buy and sell assets quickly and at fair prices.
Fiscal Policy
Government actions related to taxation, spending, and borrowing, used to influence the economy and achieve economic goals, such as full employment and price stability.
Fixed Exchange Rate
An exchange rate system where the value of a currency is pegged to another currency or a basket of currencies.
Floating exchange rate
It is a type of exchange rate system in which the value of a currency is determined by market forces. A floating exchange rate can fluctuate due to supply and demand, political events, and other factors.
Forex
It is an abbreviation for foreign exchange, which refers to the global market where currencies are traded. Forex is one of the most liquid and volatile markets in the world, with significant potential for profit and losses.
Forex Broker
A company that provides access to the foreign exchange market, enabling traders to buy and sell currency pairs.
Forex Intervention
The act of a central bank buying or selling its currency in the foreign exchange market to influence its exchange rate.
Forex Signal
A trading recommendation or alert based on technical or fundamental analysis, often provided by professional traders or trading algorithms.
Futures
Futures are a type of derivative contract that obligates the buyer to purchase a set amount of an asset at a predetermined price in the future. Futures are used for hedging, speculating, and arbitrage.
Fundamental analysis
It is an investment approach that looks at economic indicators, such as GDP and inflation, to predict a currency’s future direction. Fundamental analysis can be used to identify potential trading opportunities in the forex market.
Futures contract
It is an agreement between two parties to buy or sell a certain amount of an asset at a predetermined price on a specified date in the future.
G
G7 Currencies
The currencies of the Group of Seven countries, which include the US Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Canadian Dollar (CAD), Australian Dollar (AUD), and Swiss Franc (CHF).
Gap
A significant price jump or drop on a price chart, usually caused by unexpected news or events.
Gartley Pattern
A type of harmonic pattern characterized by an M- or W-shaped configuration, often used to identify potential reversal points in the market.
GDP
GDP stands for gross domestic product, which is a measure of an economy’s production and consumption. A country’s GDP can be used to identify economic health, trends, and potential trading opportunities in the forex market.
Good 'Til Canceled (GTC) Order
An order that remains active until it is either executed or manually canceled by the trader.
Greenback
A slang term for the US Dollar (USD), the official currency of the United States.
Gross margin
It is a measure of profitability that shows the amount of gross profit as a percentage of sales. Gross margin can be used to compare the profits generated by different companies or across different markets.
Guaranteed stop
It is a type of stop order that allows traders to set guaranteed limits for their losses. A guaranteed stop order will close a position automatically if it reaches a predetermined price, regardless of market volatility.
Gross income
It is the total amount of money earned by an individual or company before any deductions are made. Gross income can be used to calculate taxes and other financial obligations.
GTC (Good Till Cancelled) Order
It is an order that remains in effect until it is canceled by the trader. GTC orders are useful for traders who want to keep their trades active for an extended period of time.
H
Harmonic Patterns
A group of chart patterns based on the principles of geometric shapes and Fibonacci ratios, often used to identify potential reversal points in the market.
Hawkish
A monetary policy stance characterized by high interest rates and restrictive measures to combat inflation.
Head and Shoulders
A chart pattern that signals a trend reversal, characterized by a peak (head) between two smaller peaks (shoulders).
Hedge
It is an investment strategy used to manage risk. Hedging involves taking a position in an asset in order to offset potential losses in another investment. Hedging is often used in the forex market to reduce risk and maximize returns.
High-frequency trading
It is a type of trading that uses powerful computers and algorithms to execute trades rapidly at ultra-fast speeds. High-frequency traders use sophisticated strategies to capture small profits in the market.
Hedging
It is a risk management strategy that involves the use of derivatives, such as futures and options, to reduce exposure to market movements. Hedging allows traders to protect themselves from potential losses.
Historical Returns
It is a measure of the past performance of an investment. Historical returns are used to assess the risk and potential return of a security or portfolio.
Historical Volatility
A measure of the actual volatility of a currency pair over a specific period, calculated using historical price data.
High-Margin Securities
It is an investment type that allows traders to borrow money from their broker to make larger trades. High-margin securities can be highly speculative and carry a greater risk of loss.
I
Ichimoku Cloud
A comprehensive technical analysis tool that provides multiple layers of support and resistance levels, trend direction, and potential entry and exit points.
Immediate or Cancel (IOC) Order
An order that must be executed immediately, with any unfilled portion of the order being canceled.
Index
It is a type of benchmark used to measure the performance of a group of securities or an entire market. Indexes are often used as benchmarks for measuring the performance of an investor’s portfolio.
Indices Trading
It is a type of trading that involves investing in stock market indexes, such as the NASDAQ or S&P 500. Indices trading allows traders to access the underlying securities of an index without having to buy and sell each security individually.
Indirect Quote
An exchange rate quoted as the foreign currency per unit of the domestic currency.
Inflation
It is an economic measure that shows the rate of increase in prices over time. Inflation can affect exchange rates and currency values, as it can lead to a decrease in the purchasing power of a currency.
Inflation risk
It is the risk associated with investing in assets that may be adversely affected by changes in inflation. Inflation can lead to a decrease in the value of an asset, making it difficult for investors to recover their investments.
Inflation Targeting
A monetary policy framework in which a central bank sets a specific inflation rate as its primary objective and adjusts its monetary policy tools accordingly.
Interbank Market
The global network of banks and financial institutions that trade currencies with each other.
Interest rate
It is the rate at which a lender charges interest for lending money. Interest rates are an important factor in the forex market, as they can affect exchange rates and currency values.
Interest Rate Differential (IRD)
The difference in interest rates between two currencies.
Interest Rate Swap
It is an agreement between two parties to exchange interest payments in order to take advantage of different market conditions. Interest rate swaps can be used to hedge against interest rate risk.
Intervention
The action taken by a central bank to influence the value of its currency in the foreign exchange market.
Intrinsic value
Intrinsic value is the underlying value of an asset, which is independent of the market price. Intrinsic value can be used to determine if a security is undervalued or overvalued.
IPO
It is an acronym for Initial Public Offering, which is when a company offers shares of its stock to the public for the first time. IPOs are a way for companies to access capital and increase their visibility in the marketplace.
Inverted Head and Shoulders
A chart pattern that signals a trend reversal, characterized by a trough (head) between two smaller troughs (shoulders), opposite to the regular head and shoulders pattern.
Investment Strategy
It is the plan or set of decisions that a trader or investor follows in order to make money from their investments.
Implied Volatility
It is a measure of expected future volatility in the market. Implied volatility can help traders assess risks and make trading decisions.
J
J-Curve
After the loss, it is the shape a portfolio takes when investments start to recover. J-Curve represents how long it takes for a portfolio to return to its original value after a period of loss.
Junior ISA
It is an investment vehicle that allows individuals under the age of 18 to save and invest tax-free. Junior ISAs are a great way for young people to save and invest in their future.
January Effect
It is a phenomenon in which stocks tend to experience an increase in prices at the start of the year. The January Effect is believed to be due to traders taking profits from the previous year and reinvesting them in stocks.
Joint Venture (JV)
It is a business partnership between two or more companies. Joint ventures can help businesses access new markets, acquire resources and gain access to capital.
Jobless Claims
It is the number of people who have applied for unemployment benefits in a given week. Jobless Claims are an important indicator of economic health, as they can provide insight into the labor market.
K
Key features document
Key features document The key feature is a document that outlines the features and benefits of a specific investment product. The key features document is used to inform investors of all relevant information about the investment.
Key Economic Indicator
It is an economic measure that can be used to forecast future economic activity. Key economic indicators include unemployment, GDP, inflation, and interest rates.
Kiwi
A slang term for the New Zealand Dollar (NZD) against the US Dollar (USD) currency pair.
L
Lagging Indicator
A lagging indicator is an economic measure that responds to changes in the economy after they have already occurred. It can be used to confirm other economic signals.
Leading Indicator
It is an economic measure that can be used to predict future economic activity. Leading indicators often move in the opposite direction of the overall economy so that they can provide valuable insight into the direction of the economy.
Leverage
It is the use of borrowed funds to increase potential returns on investment. Leverage can be a powerful tool for traders, allowing them to take on larger positions with less capital.
Limit order
It is an order to buy or sell a security at a certain price. Limit orders help traders control their risk by limiting the amount of money they can lose on a trade.
Line Chart
A type of price chart that displays the closing prices of a currency pair for a specified period, connected by a continuous line.
Liquidity
It is a measure of how easily an asset can be bought or sold in the market. Assets with high liquidity tend to have lower spreads and can be more easily traded.
Long Position
A trade in which an investor buys a currency pair with the expectation that its value will increase.
Loonie
A slang term for the Canadian Dollar (CAD) against the US Dollar (USD) currency pair.
Lot
It is the standard unit size of security. Lots vary in size and are typically stated in terms of the currency or underlying asset being traded.
M
Maintenance margin
It is the minimum amount of equity that must be maintained in an account to hold a position. Maintenance margin helps traders limit their risk by ensuring they have enough capital to cover potential losses.
Major Currency Pairs
The most liquid and widely traded currency pairs, which typically include the US Dollar (USD) paired with other major currencies.
Margin call
It is a demand from a broker or exchange to deposit additional funds into an account to cover losses. Margin calls occur when the equity in an account falls below the maintenance margin.
Margin
It is the amount of money that must be deposited into an account to open or maintain a position. Margin is typically expressed as a percentage of the total value of the position.
Market capitalization
It is the total value of a publicly traded company’s outstanding shares. Market capitalization is a measure of the financial size and can be used to compare companies.
Market Impact
The effect that a large trade or order has on the price of a financial asset, often causing it to move away from the desired execution price.
Market Maker
It is an individual or firm that offers both buy and sell orders for security. Market makers add liquidity to the market by providing buyers and sellers with an easy way to transact.
Market Order
It is an order to buy or sell a security at the best available price. Market orders are the most common type of order and can be executed quickly.
Micro Lot
The smallest unit of trading, typically 1,000 units of the base currency.
Mini Lot
A smaller unit of trading, typically 10,000 units of the base currency.
Minor Currency Pairs
Currency pairs that do not include the US Dollar, also known as cross currency pairs.
Monetary Policy
Actions taken by a central bank to influence the money supply, interest rates, and overall economic activity, with the aim of achieving economic objectives such as price stability and sustainable growth.
Money Flow Index (MFI)
A volume-weighted momentum oscillator that measures the flow of money into and out of a currency pair, often used to identify overbought and oversold conditions.
Money Management
The process of managing trading capital to maximize profits and minimize risks.
Moving Average
It is an indicator used to smooth out the price action of a security. Moving averages are used to identify trends and can give insight into future price movements.
Moving Average Convergence Divergence (MACD)
A technical analysis indicator that measures the relationship between two moving averages, used to identify potential trend reversals and market momentum.
Mutual Fund
It is a type of investment fund that pools the money of several investors to purchase a portfolio of securities. Mutual funds are managed by professional investors and can offer diversification and potential growth.
Market Sentiment
It is a term used to describe the overall attitude of investors toward the market. Market sentiment is determined by analyzing the behavior of market participants and can provide insight into future price movements.
Market Trend
It is the direction of a security’s price over a certain period of time. Market trends can be determined by analyzing charts and other technical indicators.
Momentum
It is an indicator that measures the speed and strength of a security’s price movements. Momentum can signal whether a security is overbought or oversold and indicate potential trading opportunities.
N
Nasdaq-100 Index
The Nasdaq-100 index is a stock market index that tracks the performance of the top 100 non-financial companies listed on the Nasdaq stock exchange.
Negative Balance Protection
NBP ensures a trader never lоѕеѕ more thаn the funds in their trading account. NBP automatically liquidates a trader’s position if it is at risk of going into a negative balance.
Negative Correlation
A relationship between two financial assets, such as currency pairs, in which their prices move in opposite directions.
Negative Interest Rate Policy (NIRP)
A monetary policy in which a central bank sets its target interest rate below zero to stimulate economic growth and combat deflation.
Net profit
It is the total profits earned by a company after all expenses and taxes have been deducted. Net profit provides a good indication of the overall financial health.
Nikkei-225 Index
The Nikkei-225 index is a stock market index that tracks the performance of the top 225 companies listed on the Tokyo Stock Exchange.
No Dealing Desk
A type of forex broker that provides direct access to the interbank market, without acting as a counterparty to client trades.
Non-deliverable Forward (NDF)
A cash-settled forward contract on a non-convertible or thinly traded currency, used to hedge currency risk.
Non-Farm Payrolls (NFP)
It is a monthly report from the U.S. Bureau of Labor Statistics that tracks the number of people employed in non-agricultural fields such as manufacturing, retail, and services. The report is a key indicator of economic health.
O
On exchange
It is a type of securities trading that occurs on an organized exchange, such as the NYSE. On-exchange trades offer more liquidity and transparency than over-the-counter trades.
One Cancels the Other (OCO) Order
A pair of orders in which the execution of one order automatically cancels the other order.
Operating Cost
Operating costs are all the expenses associated with running a business. Examples of operating costs include salaries, rent payments, and utilities.
Operating Profit
Operating profit is a company’s total revenue minus its operating costs. It is a good indication of the profitability of the business.
Option
It is a financial contract that gives the buyer the right to buy or sell an asset at a specified price on or before a certain date. Options are often used as a hedge against market risk.
Operational Risk
Operational risk is the risk of loss due to operational factors, such as fraud or human error. Operational risk is possible to mitigate by implementing internal controls.
Order book
It is a record of all buy and sell orders for a particular security. Order books can be used to assess market liquidity and gauge the direction of price movements.
Over The Counter (OTC)
It is a type of securities trading that occurs directly between two parties, usually through an electronic network. OTC trades do not use a traditional central exchange.
Overbought
A market condition in which an asset’s price has risen to a level that suggests it may be overvalued and due for a correction.
Overnight Interest
Overnight interest is the interest charged or earned on open positions held overnight. Overnight interest can affect a trader’s return and should be taken into consideration.
Overnight Rate
The interest rate at which banks lend to each other on an overnight basis, often used as a benchmark for short-term interest rates.
Overnight Position
It is a type of trade that remains open overnight. Overnight positions can be risky and traders should be aware of the potential risks before entering into an overnight position.
Oversold
A market condition in which an asset’s price has fallen to a level that suggests it may be undervalued and due for a rebound.
Overvalued
It is a term used to describe an asset whose price is higher than its intrinsic value. Overvalued assets are often seen as risky investments.
P
Parabolic SAR
A technical indicator that calculates potential trend reversal points by placing dots above or below the price, depending on the direction of the trend.
Partial Fill
A situation in which only a portion of an order is executed due to insufficient liquidity at the desired price level.
P/E ratio
The price-to-earnings (P/E) ratio is a measure of how expensive a stock is relative to its earnings. A higher P/E ratio means that the stock is more expensive and may be riskier.
Pending Order
An order to buy or sell a currency pair at a specified price or when certain conditions are met, which is not executed immediately.
Penny stocks
Penny stocks are stocks that trade for less than $5 per share. Penny stocks can be highly speculative and risky investments.
Pip
It is the smallest unit of price movement in a currency pair, typically equal to 0.0001. Pips are used to measure profits and losses in forex trading.
Pipette
A fractional pip, equal to one-tenth of a pip (0.00001).
Pivot Point
Pivot point is a technical indicator that uses the previous period’s high, low, and closing prices to calculate support and resistance levels.
Portfolio
A collection of financial assets, including currency pairs, held by an investor or trader.
Position size
It is the number of units of a currency pair that are bought or sold in a trade. Position size should be carefully considered before entering into a trade as it will affect the risk exposure of the trader.
Post market
It is a term used to describe the trading of stocks and other securities after the official market closes. Post-market trading involves less volume than regular market hours and can be riskier.
Pre-market
It is a term used to describe the trading of stocks and other securities before the official market opens. Pre-market trading is generally limited and typically involves less volume than regular market hours.
Price Action
Price action is a type of technical analysis that looks at the movements of prices over time to predict future price movements. Price action traders focus on chart patterns and trends, rather than fundamentals.
Price Channel
A pair of parallel trendlines that enclose a currency pair’s price movement, used to identify potential breakouts and trend reversals.
Price Signal
Price signals are indicators of future price movements. Price signals can be used by traders to make decisions about when to enter and exit trades.
Prime Brokerage
A specialized service provided by banks and financial institutions to high-net-worth individuals and institutions, offering a range of services including trading, clearing, and settlement.
Profit and loss statement
It is a financial statement that shows the revenues, expenses, and profits or losses for a period of time. The profit and loss statement can be used to measure the company’s financial performance.
Purchasing Managers' Index (PMI)
A monthly economic indicator that measures the activity level of purchasing managers in the manufacturing sector.
Purchasing Power Parity (PPP)
An economic theory that suggests that the exchange rate between two currencies should be equal to the ratio of their respective price levels, allowing for the same basket of goods and services to be purchased in both countries.
Put option
It is an option contract that gives the owner the right to sell a given asset at a specified price on or before a certain date. Put options are often used as a hedge against market risk.
Q
Quantitative easing
Quantitative easing is a monetary policy tool used by central banks to increase the money supply in an effort to stimulate economic activity. It involves buying assets from banks, usually government bonds.
Quote
The current market price of a security, expressed as the bid and ask prices.
Quote currency
The quote currency is the second currency in a currency pair. It is also known as the counter currency or base currency. The value of the quote currency is quoted in terms of the base currency.
Quote price
The quote price is the price at which a currency pair can be bought or sold. The quote price typically has four decimal places and is quoted in terms of the base currency.
R
Range Trading
A trading strategy that involves buying at support levels and selling at resistance levels within a defined price range.
Rate
It is the price of one currency in terms of another. The rate can be used to calculate the value of a currency pair and is also used to compare interest rates between two countries.
Relative Strength Index (RSI)
The Relative Strength Index (RSI) is a technical indicator used to measure the strength of a security’s price movement. It compares the magnitude of a security’s recent gains to its recent losses over a given period.
Resistance Level
It is a price level at which the price of an asset has difficulty rising above. Resistance levels are used by traders to set entry and exit points for trades.
Retracement
It is a temporary reversal in the price of a security. Retracements are used by traders to identify potential entry and exit points for trades.
Revaluation
An increase in the value of a currency due to changes in monetary policy or economic conditions.
Risk Appetite
The willingness of investors and traders to take on risk in pursuit of higher returns, often influencing their choice of financial assets.
Risk Aversion
The preference of investors and traders to avoid risk and seek safer investments, typically during periods of economic uncertainty.
Risk Capital
The portion of a trader’s or investor’s capital that can be lost without jeopardizing their financial security or lifestyle.
Risk Management
Risk management is the process of identifying, assessing, and controlling risks associated with investments. Risk management helps traders avoid losses by setting limits on the amount of money they can lose on a trade.
Risk-Reward Ratio
A measure used to evaluate the potential return of a trade relative to its potential risk, calculated as the potential profit divided by the potential loss.
Rollover
It is the process of transferring a position from one settlement date to another. It is typically used by traders to extend the duration of a trade.
Rollover Date
This term refers to the date when a position is rolled over from one settlement date to another. Rollover dates are important for traders to keep track of because they can affect the profitability of a trade.
Round Trip
A complete trade, including the opening and closing of a position.
S
S&P 500 Index
The S&P 500 Index is a market capitalization-weighted index of the 500 largest publicly traded companies in the U.S. The index is a commonly used benchmark for measuring the performance of the U.S. stock market.
Scalping
It is a trading style that involves taking small profits from many trades in quick succession. Scalping is often used by traders to make small but frequent profits.
Short Position
A trade in which an investor sells a currency pair with the expectation that its value will decrease.
Short-selling
Short-selling is a trading strategy that involves selling an asset that the trader does not currently own in order to take advantage of a decline in price. It is often used as a hedge against market risk.
Simple Moving Average
A simple moving average is a technical indicator that takes the average of a security’s closing prices over a given period of time. It is commonly used to identify trend reversals.
Slippage
Slippage is the difference between the expected price of a trade and the actual price of the trade. It is usually caused by sudden changes in the market condition.
Sovereign Risk
The risk of a government defaulting on its debt obligations or imposing capital controls, which can impact currency values.
Spread
It is the difference between the bid and ask price of a security or currency pair. It can be used to calculate the cost of a trade and is also used to measure liquidity.
Speculation
The act of buying and selling financial assets with the expectation of making a profit from price fluctuations.
Speculative Positioning
The net difference between the long and short positions held by speculators in the forex market, often used as a contrarian indicator.
Spot Market
The market for immediate delivery and settlement of currencies.
Spot Rate
The current market price for the immediate delivery and settlement of a currency pair.
Standard Lot
A unit of trading, typically 100,000 units of the base currency.
Sterling
Another term for the British Pound (GBP), the official currency of the United Kingdom.
Stochastic Oscillator
A momentum indicator that compares the closing price of a currency pair to its price range over a specified number of periods, often used to identify overbought and oversold conditions.
Stock
A stock is a type of security that represents an ownership interest in a company. Stocks can be bought and sold on the stock market, and the prices of these stocks fluctuate based on supply and demand.
Stop loss order
It is an order placed by traders to automatically close their position once a specified price level has been reached. Stop loss orders are used to limit losses on a trade.
Stock Exchange Automated Quotation System (SEAQ)
The Stock Exchange Automated Quotation System (SEAQ) is a computerized system used to display and match orders on the London Stock Exchange.
Swap
It is an agreement between two parties to exchange currencies at a pre-determined rate for a specified period of time. Swaps are used to hedge against currency risk and to speculate on the movement of exchange rates.
Swap Rate
The interest rate differential between the two currencies in a currency pair, used to calculate the cost or income of holding a position overnight.
Swissy
A slang term for the Swiss Franc (CHF) against the US Dollar (USD) currency pair.
Support level
It is a price level at which the price of an asset has difficulty dropping below. Support levels are used by traders to set entry and exit points for trades.
Swing trading
Swing trading is a trading strategy that involves taking advantage of short-term price movements in the market. It is commonly used by traders to capitalize on short-term price movements.
T
Take-Profit Order
An order to close a trade at a specific price to lock in profits.
Tapering
The process of gradually reducing the pace of asset purchases by a central bank, often in response to improvements in economic conditions.
Taylor Rule
A monetary policy guideline that suggests how central banks should adjust interest rates based on the deviation of inflation from its target and the output gap.
Technical analysis
Technical analysis is the use of charting tools and other analytical techniques to identify trading opportunities in the financial markets.
Terms of Trade
The ratio of a country’s export prices to its import prices, which can be used to assess the relative competitiveness of its goods and services in the global market.
Tick
The smallest possible price change in the forex market, typically equal to one-tenth of a pip (0.00001).
Ticker
A ticker is a symbol used to identify a particular security on the stock market. Tickers are typically comprised of one or two letters and represent the company or security being traded.
Time decay
Time decay is the gradual decrease in the value of an option over time due to the passage of time. It is a common factor that affects options traders and should be taken into consideration when making trading decisions.
Timeframe
The period represented by each data point on a price chart, such as 1 minute, 1 hour, or 1 day.
Technical Indicator
A technical indicator is a chart or mathematical formula used to identify key points in the price action of a security. Common examples of technical indicators include moving averages, stochastic, and Bollinger bands.
Tradable Balance
The amount of money in a trading account that can be used to open new positions.
Trade Balance
The difference between the value of a country’s exports and imports of goods and services, often used as an indicator of a country’s economic health.
Trading Desk
A department within a financial institution responsible for executing trades on behalf of clients and managing market risk.
Trading Plan
A comprehensive strategy that outlines a trader’s goals, risk tolerance, and preferred trading methods.
Trailing Stop
A type of stop-loss order that moves with the market price, locking in profits as the price moves in the trader’s favor.
Trading Volume
Trading volume refers to the number of shares that are traded in a given period of time. Trading volume is an important indicator for traders, as it can be used to gauge market sentiment and identify potential trading opportunities.
Trailing stop orders
Trailing stop orders are used to limit losses and protect profits. They are set at a percentage or dollar amount below the current market price and will automatically adjust with the market.
Trend
The general direction of the market, which can be upward (bullish), downward (bearish), or sideways (range-bound).
Trendline
A line drawn on a price chart to represent the direction of the market trend, often used as a tool for identifying potential support and resistance levels.
Triple Bottom
A bullish chart pattern in which the price of a currency pair tests a support level three times before reversing upward.
Triple Top
A bearish chart pattern in which the price of a currency pair tests a resistance level three times before reversing downward.
Turnover
The total volume of currency transactions during a specified period, often used as a measure of market liquidity.
U
Unborrowable stock
Unborrowable stock is a stock that cannot be borrowed and sold short. This type of stock is often illiquid and not available for borrowing, making it difficult to trade.
Undervalued
Undervalued refers to a stock or security that is trading at less than its intrinsic value. This type of stock may be attractive to investors who believe the price is set to increase in the future.
Unemployment Rate
The percentage of the total labor force that is unemployed but actively seeking employment.
Used Margin
Used Margin is the amount of capital that has been used to open a position. It is calculated by multiplying the amount of money being invested by the margin percentage required by the broker.
Unrealized Profit/Loss
The gain or loss on open positions that have not been closed, calculated as the difference between the current market price and the trade entry price.
V
Value at Risk (VaR)
A statistical measure used to estimate the potential loss of a trading portfolio over a specified period and at a given confidence level.
Variable Spread
A spread that fluctuates with market conditions, typically widening during periods of high volatility and low liquidity.
Volatility
Volatility is a measure of the price movement of an asset over time. It is an important factor to consider when trading, as it can indicate the potential risk of a trade.
Volatility Breakout
A sudden increase in price volatility, often accompanied by a breakout from a trading range or consolidation pattern.
Volatility Index (VIX)
An index that measures the implied volatility of the stock market, often used as an indicator of market sentiment and potential risk.
Volume
Volume is the total number of shares or contracts that have been traded in a given period of time. It can be used to identify potential trading opportunities or to gauge market sentiment.
Venture Fund
A venture fund is a type of private investment vehicle that invests in early-stage companies and startups. Venture funds are typically managed by professional investors.
W
Weighted Moving Average (WMA)
A type of moving average that assigns more weight to recent price data, making it more responsive to price changes.
West Texas Intermediate (WTI)
West Texas Intermediate (WTI) is a type of crude oil used as a benchmark in the global oil market. It is the most commonly traded oil in the world and is used to set global oil prices.
Whipsaw
A sudden and sharp price reversal, often caused by market volatility or news events, which can lead to the triggering of stop-loss orders and liquidation of positions.
Working capital
Working capital is the amount of money that a company has available to finance its operations and growth. It is calculated by subtracting current liabilities from current assets.
Y
Yield
Yield is the return on investment, typically expressed as a percentage of the original capital invested. It can be used to measure the performance of a security or portfolio.
Z
Zero Interest Rate Policy (ZIRP)
A monetary policy in which a central bank sets its target interest rate at or near zero to stimulate economic growth.
Zero-bound Interest Rate
An interest rate that is near or at zero, limiting the ability of a central bank to use conventional monetary policy tools to stimulate the economy.
Zone of Resistance
A price range in which selling pressure is expected to be strong, preventing further price increases.
Zone of Support
A price range in which buying pressure is expected to be strong, preventing further price declines.
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