Glossary

 

Ask price

The buy price. The price you pay when buying a financial instrument

Aussie

The nickname of the Australian Dollar (AUD)

Balance

The funds in your trading account, not including any open positions

Base Currency

The currency at which a price is quoted against. For example, the Euro is the base currency in the EURUSD currency pair. The base currency is always the first currency of the pair

Basis point

0.01%

Bear market

A market in which prices have fallen by over 20%

Bid price

The sell price. The price you will receive upon selling a financial instrument.

Blue-chips

Shares of well-known, reputable, large companies

Bollinger bands

Bollinger Bands are volatility indicators used in technical analysis to measure high and low prices in relation to price action

Broker

The middleman who acts between buyers and sellers to facilitate trading

Bull market

A market in which prices have risen more than 20%

Buy limit

An order to buy at, or below, a specified price

Buy stop

An order to buy at a specified price above the market

Cable

Nickname of the GBPUSD currency-pair. This due to the exchange rate earlier being transmitted across the Atlantic through an (underwater) cable

Candlestick chart

Candlestick charts are a method of plotting price action that has been widely adopted by contemporary traders. Originated in Japan.

Chart

A visualisation of market data

Chart pattern

In technical analysis, chart patterns are certain formalised shapes that traders try to identify

CFD

A Contract For Difference (CFD) is a way to trade the markets without actually having to buy the underlying instrument.   

Commission

A fee charged by brokers for executing an order. Typically, commission is calculated as a percentage of the volume of the transaction

Commodities

Products such as oil, natural gas, platinum and coffee etc.

CPI (Consumer Price Index)

A monthly economic indicator that tracks the changes in the price of goods and services typically purchased by consumers

Currency pair

Currencies are always valued relative to one another.  For example, GBPUSD.  In this case the GBP is known as the base currency whereas the USD is known as the variable currency

Day trader

Someone who buys or sells a financial instrument within one trading day

ECB

The European Central Bank (ECB) is the central bank of the 19 European Union countries that have adopted the Euro

ETF

An Exchange-Traded Fund (ETF) is a security that tracks an index or basket of assets and can be bought or sold on a stock exchange

Entry Order

An Entry Order is an order to open a position when an asset’s price reaches a predefined level

Exponential Moving Average (EMA)

Exponential Moving Averages trace an asset’s average price over a given number of periods with more weighting given to recent prices

Equity

Equity is your balance plus any open profit or, if you’re making a loss, your equity is your balance plus any open loss

Fibonacci retracement

Is a method of technical analysis for determining support and resistance levels

Floating loss

The unrealised loss of an open position

Floating profit

The unrealised profit of an open position

Forex market

The Forex market (short for the foreign exchange market) is the world’s largest financial market. With approx. USD 5 trillion traded every day it’s about ten times larger than the combined global stock markets and it’s open 24 hours a day five days a week

Free margin

Free margin is the money in your account that is not involved in any open positions and can be used to make a new trade

Fundamental analysis

Fundamental analysis involves looking at the ‘fundamentals’ in order to seek out profitable trades. The fundamentals include everything from a company’s financial statements through to industry news and the wider economic picture

Futures

Contracts that allow buyers and sellers to agree upon a price for an asset to be exchanged at a specified later date

Guppy

The nickname of the Japanese Yen JPY

Hedging

Hedging is a strategy that involves taking more than one position to reduce risk. For example, if you were buying EURUSD you might consider selling EURAUD at the same time

Ichimoku cloud

An advanced indicator from Japan for spotting price trends

Index

A measure of the changes in a portfolio of stocks

Kiwi

The nickname of the New Zealand Dollar (NZD)

Leverage

Leverage is when you are effectively provided with more funds in order to make larger trades – allowing you to make bigger potential profits or losses

Liquidity

If a financial instrument is liquid it means it can be bought and sold quickly and easily

Long position

Every time you buy an instrument you are deemed to have a long position

Lot

A standard unit of trading. Its value is the equivalent of EUR100,000

Loonie

Loonie is the market nickname of the Canadian Dollar CAD

MACD

MACD is a popular technical indicator used to show changes in the momentum, direction and duration of an underlying asset’s price action

Margin

The amount required by your broker to open and hold a trade

Margin call

A margin call is when a broker asks a trader to deposit funds into their trading account in order to continue to be able to guarantee open positions

Margin level

The margin that a trader has available to open further positions. Expressed as a percentage, it is the ratio of equity to used margin

Market order

An instruction to buy or sell a financial instrument at the current market price

Micro lot

A Micro lot is a hundredth of a lot, in Forex trading a micro lot represents 1,000 units of the base currency in a pair

Mini lot

A Mini lot is a tenth of a lot, in Forex trading a mini lot represents 10,000 units of the base currency in a pair

Momentum

Momentum is the rate at which a price is accelerate, either positively or negatively.

Non Farm Payrolls - NFP

NFP is an economic indicator released in the U.S. It tracks the changes in the number of employed people.

Open position

A trade that has been opened and remains in the market

Option

An Option is a financial instrument that gives one the right, though not the obligation, to buy or sell a given asset at a certain price on a specified date.

Order

An Order is an instruction from a trader to a broker to buy or sell a specified security

Oscillator

Indicators that plot the output of an indicator between two extreme values are called Oscillators. Oscillators are employed by traders to identify overbought and oversold conditions

Parabolic SAR

A technical indicator that is used in trending markets to determine potential entry and exit points and is also employed to set trailing stop-losses

Pending order

A Pending Order is an instruction to buy or sell a financial instrument at a specified price that has not yet been reached

Period

In trading a Period is a standardised unit of time used in the monitoring of an asset. Depending on the time frame, it will often refer to one, five, 15 or 30 minutes, one or  four hours, one day, one week and one month respectively

Pip

A Pip is the smallest unit of measurement of a currency pair

Pip value

Pip Value relates to the value of each pip in a given trade, which is converted into a trader’s account currency

Pivot point

Pivot Points are technical indicators used to predict short-term movements in price action

Portfolio

A Portfolio is a group of different financial assets held by an investor

Producer Price Index  - PPI

This is a leading economic indicator which tracks the changing prices of goods and services sold by producers on a monthly basis

Price action

Price Action is merely the term for describing how prices are moving over a given period on a chart

Price channel

A Price Channel is the price action that takes place between two parallel lines on a chart

Rally

A Rally refers to a large upward movement in prices

Resistance level

Resistance is the level at which the market hits a ceiling which is difficult to penetrate

Retracement

When price action moves in the opposite direction of the prevailing trend it is regarded as a Retracement

Risk capital

The amount of capital a trader is prepared to lose, either in a trade, or in a trading account

Rollover

A Rollover is a position that is kept open overnight without it being settled and which results in the transfer of interest (swap) between trader and broker

RSI (Relative Strength Index)

A very popular momentum oscillator used in technical analysis to determine whether an asset is overbought or oversold.

Scalping

A strategy in which traders look to profit from small changes in price by rapidly opening and closing a large number of positions.

Sell limit

An order to sell a financial instrument at, or above, a specified price

Sell stop

An order to sell an instrument at or below a specified price

Sentiment

Sentiment is the general often intangible feeling surrounding a given financial instrument, market or economy

Short position/selling

This is when you sell a financial instrument

Signals

Signals is the term given to indications of where to buy or sell when you are trading

Simple Moving Average (SMA)

Simple Moving Averages represent an asset’s average price over a given period of time

Spike

Spikes are relatively large, though short-lived, positive or negative movements in price action.

Spot rate

In Forex trading the spot rate is the current rate at which a given currency pair can be bought or sold

Spread

The difference between the bid and offer

Stochastic oscillator

Is an indicator used in technical analysis to track bullish and bearish divergences, as well as oversold and overbought conditions

Stock

Also known as a share or equity, a Stock is a tradable security which grants the purchaser ownership of a fraction of a corporation

Stop loss

An order to close a position at a specified price in order to limit losses

Support level

Support is the level at which the market finds a floor which is difficult to penetrate through

Swap

The interest either paid or earned when you rollover a trade overnight

Swing trading

Swing Trading is a relatively short-term investment style that attempts to capitalise on short-term trends that may last for up to several days

Swissy

The Swissy is the market nickname for the Swiss Franc (CHF)

Take profit

An order to close a position at a given price in order to realise the profit

Technical analysis

The art of looking at charts and analysing patterns and trends to predict future price movements. Because Technical Analysis involves a lot of looking at charts, traders who use it are often referred to as ‘chartists’

Trade balance

An economic indicator that tracks the monthly changes in the difference between the value of goods and services imported and exported

Trailing stop

Trailing Stops are dynamic stop-loss orders that react to changes in the underlying price

Trend

A Trend is the prevailing direction that a certain asset or market is moving in

Trend line

Trend Lines are drawn beneath uptrends and above downtrends to mark their respective support and resistance levels

Variable currency

The currency at which a price fluctuates against. For example, USD is the variable currency in the EURUSD currency pair

Volatility

Volatility is a measure of how rapidly prices are changing over any given time

 

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