Trading glossary

A

The Average True Range (ATR)

ATR is a technical analysis indicator that measures the price volatility of an asset by showing the average price variation within a given time period.

Analyst

An analyst is an individual that works in a financial service firm and provides market execution and analysis of the markets.

Altcoin (Cryptocurrencies)

Altcoin is short of an alternative coin and refers to any digital asset that is not Bitcoin. Altcoin can be classified as mining-based altcoins, stablecoins, security tokens, and utility tokens. Some examples of altcoins include Ethereum, Ripple, Cardano, Bitcoin Cash, Dogecoin, etc.

Ask

Ask in trading, also known as asking price, refers to the price at which a seller is willing to sell a certain asset. 

Asset

In trading, an asset refers to any financial instrument that can be exchanged for the purpose of using the asset or to make a profit by speculation. 

Arbitrage

Arbitrage is a trading strategy in which an investor buys and sells the same assets in two different markets. For example, a trader can buy wheat futures contracts on the Chicago Mercantile Exchange and sell the same contract on the Minneapolis Grain Exchange in order to take advantage of a small price difference between the two contracts

Automated Trading

Automated trading is a sophisticated technology that enables users to use computer programs and trading algorithms in order to insert market orders to the market. With this trading system, traders can establish predefined rules to get in and out of positions.

B

Backtesting

Backtesting refers to the process of testing a certain trading strategy by using historical data and predefined trading terms. In case backtesting works well, the trader can move on and activate the strategy in real live markets.

Base Currency

The base currency, also known as a transaction currency, is the first currency listed in a currency pair quote.

Bar Chart

A bar chart is a form of a trading chart that allows investors to see prices and trading patterns in a clear way. A bar chart displays the open, high, low, and close prices of a certain asset in a specified period of time.

Bull Market

A bull market describes a condition in which the market is moving in an upward direction.

Bear Market

A bear market describes a condition in which the market is moving in a downward direction.

Bid

Bid in trading refers to the price at which a buyer is willing to pay for a certain asset.

Buy Limit Order

A buy limit order is a type of order that enables the trader to buy an asset at a specified price lower than the current market price.

Broker

A broker is a financial intermediary that connects investors to the financial market. Hence, they deliver quotes, trading platforms, tools, and place orders on behalf of the investors.

Balance of Trade

The Balance of Trade (BOT) is an economic data that shows the difference between a country’s exports and imports.

Bonds

In finance, bonds are financial securities issued by governments and corporations to raise money. In other words, a bond is a debt security where the investor lends money to the government or to a corporation for a specified period of time in return for a fixed income.

Blockchain

In essence, a blockchain is a decentralized digital ledger that sorts all kinds of data. Blockchain is mostly known as the technology used to facilitate and store cryptocurrency transactions.

Bitcoin (Crypto)

Bitcoin is a digital currency created in 2009 by Satoshi Nakamoto that uses blockchain technology to facilitate transactions without any intermediary of central banks and governments.

C

Commodity Trading

Commodity trading is the buying and selling of various assets and their derivative products via futures contracts, spot markets, options, and CFDs. In finance, commodities are classified into 4 types – metals, energy, agriculture, and livestock.

Some popular commodities include gold, silver, oil, wheat, corn, etc.

Cable

Cable is a forex nickname for the GBP/USD pair and is also used as a slang term among forex traders for the British Pound.

Consumer Price Index (CPI)

A consumer price index is an economic data that measures the change in prices in a basket of goods and services in a specified area over a specified period of time.

Carry Trade

A currency carry trade is a trading strategy in which an investor takes advantage of interest rate differentials between two currencies. By doing so, the investor essentially borrows a low-interest-rate currency and invests in a high-interest rate currency.

Cryptocurrency

A cryptocurrency, also known as a digital asset or digital currency, is a decentralized form of money that is encrypted and runs on blockchain technology. Unlike fiat currencies, this new form of digital currency that can be used as a medium of exchange is not issued by any central authority.

Contract for Difference (CFDs)

A CFD contract is a popular form of derivative trading that enables two parties to speculate on the price of an asset without having to hold and exchange the asset

D

Day Trading 

Day Trading refers to a trading technique in which a trader buys and sells financial assets within the same trading day. 

Direct Market Access (DMA) 

A direct market access is a way for brokers to electronically place orders on exchanges or on the OTC markets. In the forex market, a DMA execution model ensures that traders get direct access to the forex markets without any intermediaries. 

Doji 

Doji is a unique candlestick pattern in a trading chart that indicates indecision in the market between buyers and sellers and in most cases signals a reversal pattern of the trend in the market.

Dovish 

The term dovish in finance refers to an advocate or a policy maker who supports a looser monetary policy, meaning low interest rates and expansionary monetary policy. 

Derivative Contract 

A derivatives contract is a financial agreement between two parties to exchange an asset with specified conditions or to simply speculate on the price of the underlying asset. 

Dogecoin (Crypto) 

Dogecoin is a peer-to-peer cryptocurrency that was created in 2013 by Billy Markus and Jackson Palmer as a joke. But despite the origins of this sarcastic crypto coin, over the last few years, Dogecoin became one of the most popular digital currencies in the world.

E

Economic Calendar 

A forex economic calendar is a table calendar that shows data released by central banks and governments around the world. 

Economic Indicator 

Economic indicators are statistical data released by government agencies to measure the performance of an economic activity. 

Exchange Rate

In financial markets, an exchange rate refers to the price at which one currency will be exchanged in another currency. 

Euro 

The Euro is the official currency of the Eurozone and is the single currency of 19 of 27 countries in the European Union. 

Exchange-Traded Fund (ETF) 

An Exchange Traded Fund, or ETF, is a type of investment fund that tracks a basket of securities based on a certain market, sector, industry, or region. 

European Central Bank (ECB) 

The European Central Bank is the central bank of 19 of the countries that have adopted the Euro as their official currency. It is responsible for setting interest rates for the Eurozone, maintaining stable prices, and managing the economic development of the Eurozone. 

ECN Broker 

An ECN broker is a financial intermediary that gives market participants access to the markets through electronic communications networks (ECNs). By using the ECN technology, ECN brokers provide faster execution, tighter spreads, and transparent access to the markets. 

Exotic Currency Pair

An exotic currency pair includes one major currency pair and another pair of a developing economy. Examples of currency pairs include USD/SEK, EUR/TRY, GBP/BRL, etc.

F

Futures Contract 

A futures contract is an agreement between two parties to buy or sell an asset at a future date and at an agreed fixed price. Usually, futures contract assets include commodities and financial instruments. 

Fiat Currency 

A fiat currency is a national currency of a country issued by the government and is backed by any commodity such as gold. For example, the US dollar, British Pound, and the Euro are all fiat currencies. 

Fibonacci Levels 

In trading, Fibonacci retracement levels are a technique of technical analysis to help traders identify support and resistance levels. 

FOMC 

The Federal Open Market Committee (FOMC) is a group of 12 members of the Fed’s board of governors that are responsible for maintaining stable prices and US economic growth. 

Forex 

The Foreign Exchange Market, also known as Forex, is an OTC global marketplace where market participants can exchange national currencies. As of 2021, the forex market is the largest and most liquid market in the world with a daily turnover of $6 trillion. 

Federal Reserve 

The Federal Reserve (Fed) is the central bank of the United States since 2013. Due to the economic strength of the US economy and the role of the US dollar as the reserved currency in the global financial system, the Fed is the most powerful financial institution in the world.

G

Gross Domestic Product (GDP) 

Gross domestic product (GDP) is an economic measure of the total value of all goods and services produced in a country during a certain period of time (usually, quarterly or annually).

 

Gold 

Gold is one of the most widely traded commodities around the world, largely due to its role in the economic systems as a store of value against inflation and uncertainty. Gold is traded around the world in the spot markets, futures, and on CFDs. 

 

Good Til Canceled order 

Good til canceled, also known as GTC, is a pending order to buy or sell a certain asset at a specified price that remains in effect until the order is executed or canceled.

H

High-Frequency Trading (HFT) 

High-frequency trading (HFT) is a type of automated trading characterized by high-speed powerful computers that use algorithms to transact a large number of transactions in a fraction of milliseconds. 

Hawkish 

The term hawkish in finance refers to an advocate or a policymaker who supports tighter monetary policy, hence, interest rate hikes by central banks.

HODL (Crypto) 

HODL is a crypto-related slang that was originally derived from a spelling error of the word Hold. Ultimately, the acronym Hold on for dear life was linked to the term and signals a status of investors in the crypto community to hold – not sell the crypto coins you own and not buy any additional coins. 

Hot Wallet (Crypto) 

A hot wallet is a virtual cryptocurrency wallet that is connected to the internet and enables users to store, send and receive digital currencies. While a hot (software) wallet is easier to use, it is also considered less safe than a cold wallet, which is a physical device that is not connected to the internet. 

Hedge Fund 

A hedge fund is a partnership of professional investors that use capital from individual and institutional investors with the goal of making positive returns for clients. 

Head and Shoulders  

Head and shoulders is a chart pattern commonly used by technical analysis day traders. The pattern indicates a trend reversal and helps investors to predict the next price movement in a certain asset. 

Hard Commodity 

A hard commodity refers to any natural resource that must be extracted or mined from the earth. For example, gold, silver, aluminum, oil, and gas.

I

Index

In finance, an index is a collection of assets that measures a certain market, industry, or region. An index helps investors to track the performance of a specific market and the direction of the group of assets within the index. 

Initial Public Offering (IPO) 

An initial public offering (IPO) is a process in which a private company goes public, offering its shares to individual investors and institutional companies via a stock exchange. 

Initial Coin Offering (ICO) (Crypto) 

An initial coin offering, also known as an initial currency offering is a type of fundraising method where crypto projects issue crypto tokens to the public, and by doing that, they are able to raise funds from investors. 

Inflation 

Inflation is an economic measure that represents the increase in prices of goods and services in a certain country over a specified period of time. 

Interest Rate 

In simple terms, an interest rate is a percentage rate set by central banks charged by a lender to use its money, and the amount for a borrower to use the money.

J

Japanese Yen (JPY) 

K

Kiwi

Kiwi is a nickname for the New Zealand Dollar and is also referred to as the slang name for the NZD/USD currency pair.

The Japanese Yen is the official currency of Japan and the third most FX currency pair in the world. 

L

Lot size 

In forex trading, lot size is known as the standard size of FX positions and is equal to 100,000 units of currency. 

Leverage Ratio 

A leverage ratio in trading refers to how much trading capital the broker is willing to lend to a client. For example, a leverage ratio of 10:1 means that the investor needs to use a margin of only 10% of the total position size.

Liquidity

Liquidity in trading can be defined as the extent to which an asset can be bought or sold. Assets with low liquidity may be difficult to buy or sell, while a liquid asset is easier to buy and sell. 

Long Position 

A long position refers to a condition in trading in which an investor buys and holds an asset in order to make a profit if the asset’s value increases. 

Limit Order 

A limit order is a type of pending order to buy or sell an asset at a specific price or better. 

Litecoin 

Litecoin is an alternative digital asset founded in 2011 by Charlee Lee who is a former Google engineer. The litecoin virtual currency is a form of digital money that can be used as a medium of exchange and has many similarities to Bitcoin.

M

MetaTrader 4 and 5 

MetaTrader4 and its successor MetaTrader5 are two of the most popular and widely used trading platforms among CFD traders. The MT4 was originally developed in 2005 by MetaQuotes Software, and its new version, the MT5, was released in 2010. 

Margin 

Margin in trading refers to the process of borrowing funds from a brokerage firm in order to trade financial assets. For example, when a broker has a margin requirement of 10% on a certain asset, it means that the investor can use only the margin to be able to open a position. 

Margin Call 

A margin call occurs when you get a warning from your brokerage firm that the value of the securities in your account falls below a certain level and therefore, you do not have enough funds in your account to cover the losses. In this case, you are required to deposit additional funds. 

MACD 

The Moving Average Convergence Divergence is a momentum technical analysis indicator used by traders and investors to predict future price movements of an asset. 

Market Order 

Simply put, a market order is a type of order to buy or sell a security immediately at the best available price in the market. 

Monetary Policy 

Monetary policy is the policy adopted by a central bank to stabilize prices and maintain economic growth. Central banks have different sets of actions in which they control the quantity of money available in a certain market, and thus, manage the supply of money in the economy of a country. 

Moving Average Indicator 

A moving average (MA) is a technical analysis indicator used by traders to predict price movements in a certain market. There are five types of MA indicators that include the simple moving average, exponential moving average, variable moving average, weighted moving average, and triangular moving average.

N

Non-Farm Payroll 

The non-farm payroll, also known as NFP, is an employment report from the US released monthly on the first Friday of every month. The NFP measures the change in the number of people added to the employment rolls during the previous month. It is considered one of the most important economic indicators in the market. 

Net Change

Net change in trading is the difference between the asset’s closing price of the existing trading session, compared to the closing price of the prior trading session.

O

Over the Counter (OTC) 

Over the Counter is a form of off-exchange trading where two parties exchange financial instruments and commodities without any involvement of an exchange. 

Overnight Position

An overnight position refers to positions kept open overnight for trading the following day. 

Option Contract 

An option contract is a financial agreement between two parties that gives them the right, but not the obligation, to buy or sell the underlying asset at a certain price, and at a certain date. 

OPEC 

The Organization of the Petroleum Exporting Countries (OPEC) is an organization of 13 major oil-exporting countries to coordinate the prices of petroleum-based products. At the time of writing, OPEC members include Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia, the United Arab Emirates, and Venezuela

P

Producer Price Index (PPI) 

The Producer Price Index is an economic indicator that measures the average change in selling prices received by producers in a certain economy over a specified period of time. 

Pip 

A pip is a short of ‘percentage in point’ and represents the smallest price movement in currency pairs in the foreign exchange market. For example, if the EUR/USD moves from 1.1600 to 1.1601 then the change of 0.0001 is a pip.  

P/E Ratio 

The price-earnings ratio measures the ratio of a company’s share price to its earnings per share. The PE ratio is widely used by investors and analysts to determine whether a company is overvalued or devalued. 

Price Gap 

A price gap is trading an area on a chart where the price of an asset opens a new bar/candlestick higher or lower from the previous close, creating a price gap. 

 

Position 

In trading, a position is an act of buying or short selling an asset by a trader or investor. For example, a trader takes a position when purchasing (or short selling) an asset.

Purchasing Managers Index (PMI) 

The Purchasing Managers Index is an economic indicator that signals the health of business activity in a certain economy. The PMI is from monthly surveys and reports of private sector companies.

Q

Quote 

A quote is the last price in which an asset was traded, either on the exchange or on the OTC market. 

Quote Currency 

A quote currency is the second listed currency in a forex currency pair. For example, if taking the USD/JPY, then the Japanese is the quoted currency and the US dollar is the base currency.

Quantitative Easing 

Quantitative easing (QE) is a form of monetary policy adopted by central banks to purchase domestic governments bonds or other assets or lower interest rates in order to increase the money supply in the economy.

R

Range Trading

Range trading is a trading strategy whereby an investor identifies support and resistance levels (a range market) and buys an asset at the support and sells an asset at the resistance level.

Ripple 

Ripple is a payment system for financial transactions developed by Ripple Labs that has its own native cryptocurrency XRP. The platform enables banks and financial institutions to transfer funds quickly and efficiently through the XRP ledger that runs on blockchain technology.

Recession 

In an economy, a recession can be best described as a decline in economic activity. During a recession, there’s a significant increase in unemployment, a drop in house prices, and a decrease in stock markets. 

Risk Management 

Risk management in trading refers to the processes used by traders to mitigate the risk of losing capital. Some of the most widely used risk management in trading include the risk-reward ratio, stop loss and take profit orders, trailing stop loss, etc. 

Return on Investment (ROI) 

Return on investment is a measure of the profitability of a certain investment by calculating the ratio between net income and the investment.

Risk-Off/Risk-On

Risk-on risk-off refers to the market sentiment and the risk sentiment in a certain market or economy. As such, during periods of uncertainty, investors will prefer to purchase “risk-off” assets like gold, silver, US dollar, etc. On the other hand, when the markets are doing well, investors typically take more risk due to the ‘risk-on’ mode. 

Relative Strength Index (RSI) 

The Relative Strength Index is a technical analysis momentum indicator used by traders to identify oversold and overbought areas in a certain market. 

S

Scalping 

Scalping is a popular trading strategy in which traders aim to make a profit from small price fluctuations in very short periods of time (normally, seconds or minutes). 

Short Position 

A short position involves the process of borrowing assets from a brokerage firm in order to make a profit from a decline in an asset’s price. For example, if a trader believes Apple stock price is about to fall, then he/she will borrow Apple shares from the brokerage in order to sell them and then buy the stocks back at a lower price. 

Short Squeeze 

A short squeeze occurs when many investors short sell a certain asset, meaning they believe the price is expected to drop. However, instead, the large number of sell orders triggers a rapid increase in the asset’s price. 

Swap Rate 

A swap rate, also known as rollover rate, refers to the rate at which an investor must pay or receive for holding a position open overnight. 

Swing Trading

Swing trading is a type of trading strategy that involves buying and selling assets over a course of a few days, typically 2-5 days. 

Stop-Loss Order 

A stop-loss is an automatic pending order to exit a position if the price reaches a certain level. By using a stop-loss order, a trader prevents large and unexpected losses, and better controls the risk involved in trading. 

Spread 

A spread in trading refers to the difference between the buy (bid) and sell (ask) prices quoted for any financial security. 

Spot Price 

A spot price refers to the current market price at which any security can be bought or sold for immediate delivery (usually via the spot market).

Soft Commodities 

Soft commodities, also known as softs, are commodities that are naturally grown rather than mined and extracted from the earth. Such commodities include coffee, corn, wheat, cocoa, cotton, sugar, etc. 

Social Trading 

Social trading is a method of investing that allows users to join a community, share trading ideas, and copy the trades of other users. 

Slippage 

Slippage in trading refers to a market condition when an investor receives a different trade execution price than the actual requested price.

T

Take Profit Order 

A take profit order is a type of pending order that enables the user to set a specific price at which the positions will be closed, and ensure the profit will be realized. 

Technical Analysis 

Technical analysis is a trading discipline that helps traders to identify trading opportunities by using trading charts, technical indicators, and repetitive patterns. 

Trailing Stop Loss Order 

A trailing stop-loss order is a type of order that enables an investor to set a fixed percentage or number of ticks/pips/points in order to limit the loss of a trade. For example, an investor can put a trailing stop of 5%, which means that if the stock price dropped by 5, the stocks would be sold automatically. However, if the price of the stock rises by 10%, the trailing stop-loss order is still in effect meaning, the investor can ensure locking profits of at least 5%.

U

Underlying Asset 

An underlying asset can be best described as the asset on which a financial derivative is based. For example, physical crude oil barrels are the underlying asset of crude oil future contracts as well as crude oil CFDs. 

US Dollar 

The US dollar is the official currency of the United States and is the world’s most dominant reserve currency. Additionally, in finance, the US dollar is the most actively traded currency and is the benchmark currency for most assets around the world.

V

Volatility 

In finance, volatility is a measure of the intensity of price movements of certain securities. Simply put, the higher the volatility, the higher the risk of trading the asset. 

Volume

In financial terms, trading volume refers to the number of contracts or shares of a certain asset transacted in a specific period of time. 

VIX Index 

The CBOE Volatility Index, also known as the VIX, is a market index measuring the anticipated volatility of the US stock markets over the upcoming 30 days.

W

WTI Crude Oil 

West Texas Intermediate (WTI) crude oil is a widely traded oil and is the most liquid oil contract on futures exchanges. In the world of finance and generally, WTI Crude oil is used as a benchmark for oil prices and is one of the most important commodities in the world. 

Weighted Moving Average (WMA) 

A Weighted Moving Average (WMA) is a technique used in technical analysis to determine the weighted average of an asset over a certain period of time. This technical analysis works on the same principle of the MA indicator, however, it emphasizes more on recent prices rather than on older prices.

Y

Yield

In finance, yield refers to the net income earned from an investment, usually expressed in percentage yield over various periods of time.

Z

Zero Interest Rate Policy 

A zero interest-rate policy is an expansionary policy in which central banks lower and maintain interest rates at zero and below to stimulate economic activity. 

Zew Financial Market Survey 

The Zew Financial Market Survey is an economic data followed closely in financial markets. The survey aggregates the opinions of 350 analysts and economists in regard to the future economic condition in Germany.

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