Trading Glossary

Account
A place where all of your transactions are registered.

Appreciation
An increase in the value of an instrument.

Ask Rate
The lowest price at which a financial instrument is being sold.

Asset
A financial asset is a security or just an accounting record, by which the security buyer gains the right to receive a future income from the seller.

Base Currency
A currency that other currencies are quoted against. The US Dollar is usually considered the base currency for quotes, meaning that different quotes are expressed as a unit of 1 USD per other currency quoted in a pair.

Bear
A trader who believes that prices will fall. A bearish market is a market where prices are falling, whereas a bear market is when prices have fallen over a sustained period of time.

Bid
A price offered for a currency, a price that a buyer is prepared to purchase at.

Bonds
Bonds are tradable instruments (debt securities), which a borrower issues in order to raise capital. They pay a fixed or floating interest, known as a coupon. When interest rates fall, bond prices rise, and vice versa.

Broker
An individual or a firm that acts as an intermediary between buyers and sellers.

Bull
An investor who believes that market prices are going to rise.

Bull Market
A market where a prolonged period of rising prices can be seen.

Cable
Trader jargon that refers to the Pound Sterling/US Dollar exchange rate.

CFD (Contract for Difference)
A CFD is a derivative of a stock product, and it is used for trading. The CFD prices behave exactly like the underlying stock’s prices. CFD trading offers a number of advantages over traditional stock trading, for example, margin trading and direct (immediate) trading.

Close a Position (Position Squaring)
To eliminate an investment from one’s portfolio by either buying back a short position or selling a long position.

Convertible Currency
A currency that can be exchanged for other currencies, without any special authorization from the corresponding Central bank.

Counterparty
A participant with whom a financial transaction is made.

Cross Rate
At the exchange market of a certain country it means the exchange rate between two currencies.

Depreciation
A decrease in the value of an instrument due to market forces.

Derivatives
Trades that are derived from another security (stock, bond, currency, or commodity). Examples of derivative instruments include Options, Interest Rate Swaps, Forward Rate Agreements, Caps, Floors, and Swap options.

Dividend
The percentage of a company’s stock value paid to shareholders.

Economic Indicator
A statistic that indicates current economic growth and stability issued by the government or a non-governmental institution (e.g. Gross Domestic Product, Employment Rates, Trade Deficits).

EMS
An abbreviation for the European Monetary System.

Euro
The currency of the European Monetary Union (EMU).

Exchange rate
What one currency is worth in terms of another.

Fibonacci technical study
The Fibonacci Fans and Bands are three-line guides drawn on charts derived from the Fibonacci number series. Traders believe they help identify successive areas of support and resistance in the market.

Fixed Exchange Rate
Official rate set by monetary authorities for one or more currencies.

Flat / Square
To be neither long nor short is the same as to be flat or square. One would have a flat book if he has no positions or if all the positions cancel each other out.

Foreign Exchange (or Forex or FX)
A simultaneous purchase of one currency and a sale of another one in Over-The-Counter markets.

Forward
A deal that will commence on the agreed date in the future.

Fundamental Analysis
A thorough analysis of economic and political data with the goal to predict possible future movements in a financial market.

Futures
A way of trading financial instruments, currencies or commodities for a specific price on a specific date in the future. Futures give the obligation (not the option) to buy or sell instruments at a later date.

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Hedge
An investment position or combination of positions that reduces the volatility of your portfolio’s value. The practice of undertaking one investment activity in order to protect another one from a loss is called hedging.

Inflation
An economic condition where there is an increase in the price of consumer goods.

Initial Margin
An initial collateral required for entering into a position.

Instrument
A tradable symbol with a monetary value.

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Leverage
The ability to hold an investment position of a greater value than that of your equity (collateral). When leveraging your investment, you only need to deposit a fraction of the current value of the instrument you are investing in.

Liquidity
The capacity of converting into cash easily and with minimum losses.

Long Position
A market position opened with a lower price, with an expectation that the price would rise.

Lot
Used in Futures contract trading in order to define a fixed contract size corresponding to a fixed amount of the item that will be traded in the future.

Margin
Customers must deposit funds as a collateral in order to cover any potential losses from adverse market movements.

Margin Call
A requirement from a broker or a dealer to add additional funds in order to bring the margin up to a required level.

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Offer
A price or a rate that a seller is prepared to sell at.

Open Position
Any deal which has not been settled yet.

Options
An agreement that allows the holder to have the option to buy/sell a specific security at a certain price within a certain time. There are two types of options: call and put. A call is the right to buy while a put is the right to sell.

Order
An order is the client’s instruction to trade, given to the broker. An order can be placed at a specific price or at the market price.

Over The Counter (OTC)
Used to describe any transaction that is not conducted at a stock exchange.

Overnight Trading
A deal starting from today until the next business day, approx. between 9 p.m. and 8 a.m.

Pip (or Points)
The term used in the currency market to represent the smallest increase an exchange rate can make. Normally represents one basis point.

Quote
An indicative market price.

Resistance
A price level at which traders expect selling to take place.

Risk Capital
The amount of money that an individual can afford to invest, which, if lost, should not affect their lifestyle.

Rollover
Where the settlement of a deal is rolled forward to another value.

Secondary currency
It’s the currency that the investor pays with or receives when trading. For example, in the EUR/USD pair, the USD is the secondary currency.

Securities
Any investment in instruments, except for insurance policies or fixed annuities, issued by a corporation, government or other organization (usually Stocks and Bonds).

Shares
Financial instruments that represent a partial ownership of a company (also known as Stocks or Equities).

Short Position
A market position opened with a high price, with an expectation that the price would fall.

Spread
The difference between the bid and offer (ask) prices. Spreads are used to measure market liquidity. Narrower spreads usually mean high liquidity.

Sterling
The British pound, also known as cable.

Stop Loss Order
An instruction to the dealer to buy or sell a currency pair when it trades beyond a specified price. You may also have a stop order agreed beforehand, by which you automatically settle an open position at a specified price.

Support
The price level at which the fall of a price is expected to slow down or reverse when market participants start to buy the instrument. Resistance is the opposite of support.

Swap
A simultaneous purchase and sale of the same amount of a given currency at an OTC market. The most important swaps are quoted against the American dollar.

Technical analysis
An effort to forecast future market activity by analyzing different market data such as charts, price trends and volume.

Trade Date
The date on which a trade occurs.

Uptick
A new price quote that is higher than the preceding quote for the same currency.

Value Date
Settlement date of a spot or forward deal.

Volume
The number or value of securities traded during a specific period of time.

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Yield
The increase in the value of a company’s stock value plus the dividend paid out per share from one year ago.

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