Trader's Glossary


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An Acquisition is when a company takes over another one, by either buying the majority of shares or having the full ownership.
The act of buying an asset then selling it immediately to take advantage of a difference in price is called Arbitrage.
Ask or Asking Price is the price at which a security is offered for sale.
Asset Class
An asset class is a group of financial instruments that have similar financial characteristics and behave similarly in the marketplace. Stocks, bonds, real estate, commodities and currencies are common examples of asset classes.
An asset is any resource which can generate cash flow, return profit or provide future economic benefit. In trading, an asset refers to any instrument such as stocks, bonds, currencies or commodities.
Automated Trading
Automated or algorithmic trading is the use of computer programs to automatically execute trading orders without human intervention.
Averaging Down
When a market participant buys a stock/currency/etc. and the price falls, they tend to buy more of the same instrument they already own to reduce the average price at which they bought the trading instrument. This act is called Averaging Down.
Base Currency
A currency pair is formed by two currencies (e.g. EUR/USD). The base currency is the first currency in the currency pair, which in our example is the EUR.
Base Rate
A base rate is the interest rate set by central banks (Federal Reserve, European Central Bank, etc.) to charge commercial banks for loans.
Basis Point
A basis point or bp measures the interest rates and any other percentages in finance. Each basis point is equal to one hundredth of one percent, or 0.01%.
Bears are market participants who share a pessimistic view on a specific stock, currency or the overall market. They believe that a market is overvalued and prices will fall in the future.
Bear Market
A bear market is when a currency/stock/bond or any other asset class is in a long-term down trend.
Being bearish is the belief that the price of an asset will fall. It is the exact opposite of being bullish, which is the belief that prices will increase in value.
The Bid represents the amount someone is willing to pay to buy a financial instrument.
Blue-Chip Stocks
Blue-chip stocks are the shares of companies that tend to be at or near the very top of their sector. They usually are very stable and have sound financials with a long-term economic growth outlook within their sector.
BoE simply stands for the Bank of England, which is the central bank of the UK
Bollinger Bands
Bollinger bands is a technical indicator that consists of an upper and lower band that help traders figure out potential support and resistance levels.
Bond Trading
Bond trading is the act of making profit from fluctuations in the value of bonds.
Bonds are investment securities where an investor lends money to an institution or a government, in exchange for interest payments.
Brent Crude
Brent Crude or ‘Nort Sea Brent Crude’ is a grade of crude oil and one of the 3 main global oil benchmarks. The other two being WTI (West Texas Intermediate) and Dubai Crude.
A broker is a company that provides access to retail and institutional clients to trade in the financial markets. Clients can choose across a number of different asset classes, including stocks, forex, bonds and commodities.
Bulls are market participants who share an optimistic view on a specific stock, currency or the overall market. They believe that a market is undervalued and prices will keep increasing in the future.
Bull Market
A bull market is when a trading instrument is on an uptrend.
Being bullish is the belief that the price of an asset will rise and trend higher. It is the exact opposite of being bearish, which is the belief that prices will fall in value.
Buying a stock, currency or any other asset means purchasing it from someone else in exchange for its market value and taking ownership of it. “Buying” or “Going Long” on an asset also means opening a Buy Position on a derivative of that asset without necessarily taking ownership by means of purchase.
Buy Limit Order
A Buy Limit is a “Pending Order” to buy at a certain price which is below the current market price. Traders place such orders when they expect the price to fall to a certain level and then bounce to the upside. When the market price reaches the level of the buy limit order, the trading platform will open a buy position with the pre-set parameters.
Buy Position
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Buy Stop Order
A Buy Stop is a “Pending Order” to buy at a certain price which is above the current market price. Traders place such orders when they expect the price to continue advancing once it hits a certain level. When the market price reaches the level of the buy limit order, the trading platform will open a buy position with the pre-set parameters.
The GBP/USD currency pair which represents the British Pound against the US Dollar, is also called Cable in forex lingo. The term was coined in the reference to the transatlantic cable that was used to transmit the quotes between the UK and USA.
A chartist or a technical analyst is a trader who takes trading decisions based on the historical price movements and repeatable chart patterns.
Closing Price
A closing price is the last price a stock, currency, etc. was traded at before the market closed. Traders use the closing price of the previous days/weeks/months to have a better understanding of what might happen today.
Commission is the service fee that a broker charges a client in return for providing market access.
Commodities cover a wide variety of materials. There are different types of commodities:
  • Agricultural, sometimes referred to as ‘Agro’, like coffee, corn, sugar etc.
  • Energies like oil and natural gas
  • Metals, Precious metals like Gold, Platinum and Palladium and base metals like Copper, Zinc etc.
Cost of Carry
Cost of carry or overnight fees is the interest a trader might have to pay in order to keep their positions open for the next day.
Consumer Price Index or CPI is a statistical indicator that measures that measures the monthly change in prices paid consumers on a specific basket of consumer goods and services.
Currency Appreciation
When one currency increases in value against other currencies, this is called Currency Appreciation.
Currency Depreciation
When one currency decreases in value against other currencies, this is called Currency Depreciation.
Currency Peg
The policy of fixing the exchange rate of a nation’s currency to the currency of another country is called currency peg.
Day Order
A day order is a type of order that expires at the of the trading day if it’s not executed.
Day Trading
Day Trading is a short-term trading style where traders take advantage of the intraday market fluctuations to make a profit. A day trader closes out all of his trades before the market closes for the day or before roll-over time.
A Dividend is the distribution of part of the company’s earnings to the shareholders. Dividends are most often paid out as cash or in the form of additional shares. The shareholders eligible to receive dividend disbursement are those who own the stock before the Ex-Dividend Date
Earnings per Share
Earnings per Share (EPS) is calculated by dividing a company’s total profit generated in a period, by the number of shares held by the company’s shareholders.
ECB is the European Central Bank in charge of monetary policy in the eurozone.
Ex-Dividend Date
The Ex-Dividend Date is the cut-off point which defines whether a shareholder is eligible to receive any dividend distribution. Shareholders who bought and owned the stock before the Ex-Dividend Date are eligible to receive any dividends due as decided by the Company’s Board of Directors. Whereas shareholders who bought the stock on, or after, the Ex-Dividend Date are not eligible to receive dividends in the upcoming dividend distribution.
An exchange is an organized marketplace where member traders and brokers can buy and sell commodities, stocks and other types of securities.
Executing a trade is the completion of a buy or sell order, carried out by a broker.
Exposure can mean two things: the total risk exposure of your portfolio or a portion of your investment in a particular market or asset.
Federal Reserve
The Federal Reserve bank (the Fed) is the central banking system of the United States. The FED’s mandate is to pursue the economic goals of maximum employment and price stability. The FED in charge of forming and applying the necessary monetary policies that promote those goals.
Fibonacci Retracement
A Fibonacci retracement is a popular technical analysis tool that helps traders identify possible support and resistance levels which is very useful to traders and investors. The Fibonacci support and resistance lines can be very helpful to decide when to open and when to close a position.
Whenever a market transaction or an order has been completed, it is often referred to as filled, which means the order has been executed.
Financial Market
A Financial Market is a marketplace where financial instruments are traded by the market participants. The value of these instruments on the market place is determined by the laws of supply and demand, speculation and risk appetite of the market participants.
Floating Exchange Rate
A Floating Exchange Rate determines a currency’s valuation against another currency. Rates fluctuate (float) based on supply and demand for one currency against another.
FOMC (Federal Open Market Committee) is the segment of the of the US Federal Reserve responsible for deciding the course of monetary policy by directing open market.
Forex also known as foreign exchange or FX, is the exchange of one currency to another.
Fundamental Analysis
Fundamental Analysis is a method of studying the intrinsic value financial instrument (a stock, currency, commodity, etc.) by analyzing the financial, microeconomic and macroeconomic factors that influence its price.
Futures Contract
Futures Contracts or simply ‘futures’ are an agreement to buy or sell any trading instrument at a predetermined price at a predefined time in the future.
GDP stands for Gross Domestic Product which is the total value of the goods and services produced in a country in a given period of time. GDP is a great indicator to measure the size and health of a country’s economy.
Going Long
Going long is the act of opening a buy position with the expectation that the asset will rise in value.
Going Short
Going short is the act of opening a sell position with the expectation that the asset will fall in value.
Gross Margin
Gross Margin measures a company’s net sales against the cost of goods and services sold (Gross Margin = Net Sales – Cost of Good Sold). A healthy Gross Margin ensure the company retains more capital to fulfill its other obligations.
‘Hedging’ is a risk management strategy that aims to reduce a trader’s existing exposure via investments or trades designed to minimize or manage risk.
Heikin Ashi
Heikin Ashi literally means “Average Pace” in Japanese. This is a type of chart very similar to a Japanese candlestick chart, with one big difference. Heikin Ashi charts use two-period averages in an attempt to filter out market noise and make it easier for the analyst to spot trends and reversals.
Helicopter Money
The term helicopter money is used whenever central banks print a large sum of new money and introduce them into the country's economy to stimulate economic activity.
High Frequency Trading (HFT)
High Frequency Trading or HFT is a trading method the uses powerful trading programs and usually complex algorithms analyze the markets and enter into (and exit form) a large number of orders in record execution times. HFT is characterized by high speed execution and high turnover.
Ichimoku Cloud
The Ichimoku Cloud is a group of technical indicators that use multiple moving averages to show momentum and trend direction together with support and resistance levels.
In finance, an index (or indices in plural) is a composite instrument that measures the collective performance of a group of financial assets. Stock Indices like S&P 500, Dow Jones, FTSE100, ASX200, DAX etc. for example, measure the collective performance of a number of stocks floated on a particular exchange(s).
Indices Trading
Indices trading is the buying and selling of indices in an attempt to make a profit from the price movements.
Inflation is the rise in prices and the decrease of purchasing power of the consumers in an economy. Inflation, which is most often expressed as a percentage, is the rate by which average prices rise on a ‘basket of basic goods and services’ in that economy.
Typically, Interest refers to the cost of borrowing money. Interest is the amount paid by the borrowing party to the lending party. The amount of Interest due is calculated on the basis of the agreed Interest Rate.
Interest Rate
Interest Rate is the percentage the borrowing party is charged for on the principal amount of the loan or on the value of the borrowed asset.
IPO, short for Initial Public Offering refers to refers to the offering of shares of a private company to the general public for the first time
Leverage is a tool that gives you the ability to borrow funds and buy assets with bigger exposure without committing extra capital.
Leveraged Products
Leveraged Products are the assets that allow traders to increase their exposure to the market without increasing their capital.
LIBOR is an abbreviation for the London Interbank Offered Rate. This is the benchmark interest rate at which banks lend to one another for short-term loans in the international interbank market.
Limit Order definition
A limit order is an order you set with your broker to execute a trade at a particular level, and not in the current market price.
Limit Up / Limit Down definition
Limit Up and Limit Down are the maximum amounts a price of a stock or any other financial instrument may increase (limit up) or decrease (limit down) during one trading session without triggering trading restrictions by the exchange. Limit Ups and Limit Downs aim to prevent volatility from reaching extreme levels and to safeguard traders from the resulting extreme risks.
Liquidity refers to the convertibility of a n asset or security into ready cash without affecting the market price. The level of liquidity has to do wit the balance between supply and demand for a particular asset on the market. High demand matched by equally high supply means high liquidity, and in that respect the convertibility of an asset into cash with ease.
Long Position
A trader who ‘goes long’ or enters a ‘long position’ refers to the trader who buys an asset and anticipates the market price to increase in order to make a profit.
A Lot or Standard Lot refers to the number of units in a standard contract size. Lot sizes vary from asset to asset. A Standard Lot of Gold for example is 100 Troy Ounces while a Standard Lot of Silver is 5,000 Troy Ounces. Whereas a Standard Lot in currency exchanges is 100,000 units of the base currency. Similarly, other instruments and commodities have different Standard Lot sizes.
M1 Money Supply
M1 measures the money supply in the economy of the United States comprised of currency and other liquid deposits including savings deposits.
M2 Money Supply
M2 comprises of M1 and “Near Money”. Near Money comprises of money market securities, and other time deposits (in amounts less than $100,000).
Maintenance Margin
Maintenance margin is the amount of money that must be available in the trading account in order to keep a trade open.
Margin is the funds required to trade leveraged financial products.
Margin Call
A margin call is when a broker requests additional funds from a trader to be deposited in their trading account, in order to keep a trade open.
Margin Deposit
Margin deposit or initial margin is the amount a trader needs to deposit in order to execute a leveraged position.
Market Data
Market data refers to the price, bid/ask quotes, charts and other related data for financial instruments like stocks, indices, forex and commodities.
Market Maker
A market maker is an individual or an institution that provides liquidity to the market by buying and selling large amounts of financial instruments.
Market Order
A market order is an order from a trader to a broker to buy or sell a stock at the current market price.
A merger is an agreement that combines two or more companies into one new company.
MetaTrader is a widely used trading platform to buy or sell securities.
Moving Average
Moving Averages (MAs) are trading indicators often used in technical analysis to smoothen out price data and remove market noise resulting from the random short-term market fluctuations.
Non-Farm Payrolls
Non-Farm Payroll or NFP is a monthly economic report issued the first Friday of each calendar month for the previous month. This report measures the jobs added to the US economy during the previous month in all sectors excluding farming, government, private households, and nonprofit organizations.
Offer is the price a trader requests to buy a financial instrument from a broker or a market maker.
The Organization of the Petroleum Exporting Countries (OPEC) was founded in 1960 to coordinate the petroleum policies and manage the supply of oil in order to avoid price fluctuations that might affect economies.
Open Position
An Open Position is a trade that is ‘running’ with a floating profit, or floating loss or breaking even. When a trading position is closed any floating profit becomes realized profit, and conversely any floating loss becomes realized loss.
An order is a request sent to a broker to buy or sell a security in the financial markets.
OTC Trading
Over-the-counter (OTC) trading is done directly between two parties without going through an organized exchange.
Overexposure means taking too much risk without any proper risk management.
Parity in the currency trading market (Forex Market) is when two currencies have an equal value, which means that the exchange rate between the two currencies is exactly 1 to 1.
Pending Order
A Pending Order also known as a Working Order is a general term for Stop Orders and Limit Orders like Buy Stops, Sell Stops, Buy Limits and Sell Limits. These Pending Orders are triggered when the market reaches the prices the Pending Order is set to trigger at.
Pip is an acronym for Percentage in Point. It is a unit of measure for currency rate fluctuations. For most currency pairs the Pip is represented by the 4th decimal in the quote. There are some exceptions though. The Japanese Yen currency pairs being the most notable one of these exceptions. In Japanese Yen currency pairs, the Pip is quoted on the 2nd decimal. Other exceptions are the Czech Krona, Hungarian Forint and Russian Rubble where the Pip is quoted on the 2nd and 3rd decimals.
A purchasing managers index (PMI) is an economic index that reflects the direction of economic trends in the manufacturing and services sectors.
Quantitative Easing
Quantitative Easing or QE for short, is an economic monetary policy whereby a central bank buys long-term securities from the open market aiming to increase the money supply and stimulate lending and investments. By buying these types of securities the central bank of the country injects new money into the country’s economy. Bidding up such fixed-income securities also aims in pushing down interest rates.
A Quote states the most recent Bid and Ask prices that buyers and sellers are willing to Buy and offer to Sell o security.
Quote Currency
Quote Currency, also known as the counter currency, is the second currency that appears in a currency pair. In EUR/USD, for example, USD is the Quote Currency and EUR is the Base Currency.
A rally is period of continued increases in the price of a security. During these periods the price of an asset gathers a strong upward momentum.
The difference between the highest and lowest price in any given timeframe is called the Range.
Resistance Level
A Resistance Level is a price level at which the price of a financial instrument might face selling pressure while climbing. This is due the growing number of sellers who wish to sell at that price exceed the buyers.
A Reversal, also referred to as Trend Reversal, is a change to an opposite direction in the price movement of an asset.
Risk is the probability that the outcome or return will differ from the expected outcome or return.
Risk Management
Risk Management is the identification of the risks involved in your trades and investments, and take the necessary steps to minimize the negative impact they may have on your investment.
Relative Strength Index (RSI) is a momentum indicator that shows whether an asset is overbought or oversold.
Scalp Definition
Scalping is a trading strategy targeting profits from minor price changes in an assets value. Scalpers open multiple trading orders targeting minor market movement. Scalping strategies are based on the belief that smaller market movements are easier to target and capture as opposed to larger ones. And that the many small profits eventually compound to more substantial ones.
The SEC stands for the Securities and Exchange Commission, which is a federal government regulatory agency in the United States. The mandate of the SEC is to regulate markets and protect investors in the US.
A sector is a part of the economy in which companies share similar business activities, products, or services. Some examples of economy sectors are technology, financial, energy, materials, communications etc.
Selling a stock, currency or any other asset means transferring the ownership to someone else in exchange for its market value. “Selling” or “Going Short” on an asset also means opening a Sell Position on a derivative of that asset without necessarily owning the asset and transferring ownership to another party.
Sell Limit Order
A Sell Limit is a “Pending Order” to sell at a certain price which is above the current market price. Traders place such orders when they expect the price to rise to a certain level and then bounce back to the downside. When the market price reaches the level of the sell limit order, the trading platform will open a sell position with the pre-set parameters.
Sell Stop Order
A Sell Stop is a “Pending Order” to sell at a certain price which is below the current market price. Traders place such orders when they expect the price to continue dropping once it hits a certain level. When the market price reaches the level of the sell limit order, the trading platform will open a sell position with the pre-set parameters.
Share Buyback
Share Buyback or Share Repurchase is defines as a company buying back its own shares from the marketplace. There are a number of reasons a company may choose to buy back it’s own shares including decreasing share supply and thereby increasing share the price of the remaining outstanding shares, or reducing the supply to prevent some shareholders from gaining a controlling stake in the company.
A Short Trade or Shorting is when a trader ‘goes short’ on an asset in the hope to generate profit if the instrument falls in price.
Slippage refers to the difference between the expected price and the price at which an order is actually executed.
Swiss National Bank (SNB) is the central bank of Switzerland.
Spot Price
The spot price is the current price of an asset in the marketplace which can be bought or sold for immediate delivery.
The spread is the difference in price, or the gap, between the Bid and Ask prices of a security or an asset.
Stock Symbol
A Stock Symbol or a ‘ticker’ is a unique abbreviation assigned to a publicly traded company to differentiate itself from other companies on the exchange.
Stop Order Definition
A stop order is a type of order a trader sets with his broker to execute a trade when it reaches a particular level.
Support Level
A Support Level is a price level at which the price of a financial instrument might face buying pressure while falling. This is due the growing number of buyers who are willing to buy at that price exceed the sellers.
Technical Analysis
Technical Analysis is the practice of using different analytical and charting tools to identify trends, predict future price movements and determine potential entry and exit points in the financial markets.
Trading Plan
A Trading Plan is a systematic process-driven strategy set by a trader in order to identify the highest probable trading opportunities.
Trailing Stop
A Trailing Stop is a movable Stop-Loss Order that that follows the market price at a predefined distance as the price moves in your favour but stands firm when the market price reverses and moves against you. Trailing Stops are used to protect a portion of floating (unrealized) profits from market reversals.
A trend is the overall direction in the price of a trading instrument. Identifying bullish & bearish trends is a key part of market analysis. A Bullish Trend is defined by a series of higher highs and higher lows. Conversely, a Bearish Trend is identified by a series of lower highs and lower lows.
VIX is the volatility index that measures volatility on the S&P 500 index.
Volatility is the rate at which the price of a financial instrument rises or falls. In general, the higher the volatility, the riskier the security.
Volume is the number of contracts for a specific asset that have been bought and sold in a specific period of time.
VWAP stands for volume-weighted average price, which is a technical analysis tool that shows the average price of a trading instrument adjusted for its volume.
Working Order
A Working Order or a Pending Order is a general term for Stop Orders and Limit Orders like Buy Stops, Sell Stops, Buy Limits and Sell Limits. These Working Orders are triggered when the market reaches the prices the Working Order is set to trigger at.
WTI stands for West Texas Intermediate is a grade of crude oil and one of the 3 main global oil benchmarks. The other two being Brent crude and Dubai crude.
Yield is the profit generated on an investment over a specific timeframe. Yield is the amount of earnings generated in the specific time period expressed as a percentage of the invested amount.