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Trading Glossary

Explore our comprehensive glossary of financial terms related to trading and markets. Whether you’re just embarking on your trading journey or are a seasoned expert with decades of experience, understanding these key terms is essential for success.

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A

  • Accumulation phase
    A market phase where informed investors begin to buy assets at lower prices.  
  • After hours trading
    The buying and selling of assets outside of regular trading hours.  
  • Algorithmic trading
    The use of computer programs to automate trading decisions based on pre-defined criteria.
  • Anchored VWAP
    A technical indicator that shows the average price based on volume from a selected starting point.
  • Annual report
    A comprehensive summary of a company’s financial performance over a year.  
  • Appreciation
    An increase in the value of an asset over time due to market demand or economic conditions.  
  • Ask price
    The lowest price a seller is willing to accept for an asset in the market.
  • Asset
    Asset A tradable financial instrument such as stocks, currencies, or commodities.
  • Asset class
    A category of assets with similar characteristics, such as Forex, stocks, or indices.

B

  • Balance
    The amount of money available in a trading account, excluding open positions.
  • Base currency
    The first currency in a currency pair, against which the second currency is quoted.
  • Bear market
    A market trend characterized by falling prices and pessimistic sentiment.
  • Bid price
    The highest price a buyer is willing to pay for an asset.
  • Bid/Ask spread
    The difference between the bid and ask price represents transaction cost.
  • Bond
    A fixed-income investment representing a loan from an investor to a borrower.
  • Breakeven point
    The price level at which a trade generates neither a profit nor a loss.
  • Breakout
    An intermediary who executes trades on behalf of clients in exchange for a fee or commission.
  • Broker
    An intermediary who executes trades on behalf of clients in exchange for a fee or commission.
  • Bull market
    A market condition where prices are rising or expected to rise.
  • Buy limit order
    An order to purchase an asset at a specified price or lower.

C

  • Candlestick chart
    A price chart used in technical analysis shows open, high, low, and close values.
  • Capital gain
    The profit from the sale of an asset is the amount received when it is sold for more than its purchase price.
  • Central bank
    An institution that manages a country’s monetary policy and currency issuance.
  • CFD (Contract for Difference)
    A financial contract that pays the difference between the opening and closing price of an asset.
  • Commission
    A fee charged by a broker for executing a trade on behalf of a client.
  • Commodity
    A raw material or primary product that can be traded, such as oil or gold.  
  • Consumer Price Index (CPI)
    An economic indicator that measures inflation by tracking changes in the cost of a basket of goods.
  • Correction
    A short-term price decline following a prolonged upward trend.
  • Cross currency pair
    A currency pair that does not include the U.S. dollar.
  • Currency pair
    A quote of two different currencies, with the value of one relative to the other.

D

  • Day trading
    A strategy involving opening and closing positions within the same trading day.
  • Deflation
    A decrease in the general price level of goods and services in an economy.
  • Depth of Market (DOM)
    A real-time list of buy and sell orders for a specific financial instrument.  
  • Derivative
    A financial instrument whose value is derived from the value of an underlying asset.
  • Devaluation
    A deliberate downward adjustment of a country's currency value relative to others.  
  • Diversification
    The practice of spreading investments across various assets to reduce risk.
  • Dividend
    A portion of a company’s earnings is distributed to shareholders.  
  • Dollar Index (DXY)
    An index measuring the value of the U.S. dollar relative to a basket of foreign currencies.
  • Dow Jones Industrial Average
    A stock index tracking 30 large, publicly owned U.S. companies.  
  • Drawdown
    A decline in account equity from a peak to a trough during a specific period.

E

  • Earnings report
    A company’s quarterly or annual financial performance summary.  
  • ECB (European Central Bank)
    The European Central Bank is responsible for monetary policy in the Eurozone.
  • Economic indicator
    A statistical measure that reflects economic performance and influences financial markets.  
  • End of day order (EOD)
    A type of order that remains active until the end of the trading day.
  • Entry point
    The price level at which a trader initiates a trade.
  • Equity
    The value of a trader's account, including current balance and unrealized profits or losses.  
  • ETF (Exchange Traded Fund)
    A type of security that tracks an index or asset and trades like a stock.  
  • Exchange rate
    The value of one currency in relation to another.
  • Execution
    The process of completing a buy or sell order in the market.  
  • Exposure
    The amount of capital invested in a particular trade or market.

F

  • Federal Reserve (Fed)
    The central bank of the United States manages monetary policy and interest rates.  
  • Fibonacci retracement
    A tool used to identify potential support and resistance levels based on Fibonacci ratios.  
  • Fill price
    The actual price at which a trading order is executed.
  • Financial instrument
    A tradable contract or asset, such as stocks, bonds, or derivatives.
  • Flat market
    A market condition where prices move within a narrow range with low volatility.  
  • Floating spread
    A spread that varies with market conditions and liquidity.
  • Forex (Foreign Exchange)
    The global marketplace for trading national currencies.
  • Free margin
    The funds in a trading account are available for opening new positions.
  • Fundamental analysis
    The evaluation of securities through economic and financial analysis.
  • Futures contract
    An agreement to buy or sell an asset at a future date for a fixed price.  

G

  • Gap
    A sharp price movement with little or no trading in between.  
  • GDP (Gross Domestic Product)
    The total market value of goods and services produced in a country.  
  • Gearing
    Another term for leverage used in trading to amplify exposure.
  • Going Long
    Buying an asset with the expectation that its price will rise.

  • Going short
    Selling an asset with the expectation that its price will fall.  
  • Gross profit
    Revenue minus the cost of goods sold before expenses.  
  • Guaranteed stop
    A stop-loss order that guarantees execution at the specified price.  

H

  • Head and shoulders
    A technical pattern signaling a possible reversal in a trend.
  • Hedge
    An investment made to reduce the risk of adverse price movements in another asset.                        
  • Hedge fund
    A pooled investment fund that employs diverse strategies to earn active returns.
  • High frequency trading (HFT)
    The use of powerful algorithms to execute large numbers of orders at high speeds.  
  • High/low
    The highest and lowest prices traded for an asset during a specified time.
  • Holding period
    The amount of time an asset is held in a portfolio before being sold.  
  • Horizontal channel
    A price pattern where the asset trades between parallel support and resistance levels.  
  • Hypothetical performance
    Simulated trading results are based on historical data rather than actual trades.

I

  • Illiquidity
    The lack of sufficient volume in the market to buy or sell an asset easily.  
  • Index
    A statistical measure representing the value of a group of assets.  
  • Indicator
    A tool used in technical analysis to predict market movements.
  • Inflation
    The rate at which the general level of prices for goods and services rises.  
  • Institutional investor
    Large entities like banks and hedge funds that trade in huge volumes.
  • Interest rate
    The amount charged by lenders to borrowers, expressed as a percentage.  
  • Intraday trading
    Buying and selling assets on the same trading day.  
  • IPO (Initial Public Offering)
    The first time a private company offers its shares to the public.  

J

  • Job report (NFP)
    A major economic indicator showing monthly U.S. employment data.  
  • Jobless claims
    The number of people filing for unemployment benefits in a given week.  
  • JPY (Japanese Yen)
    The official currency of Japan, often traded as a safe-haven asset.  
  • Jump risk
    The risk of price gaps due to unexpected market news.  
  • Junior stock
    Shares with lower priority in the event of company liquidation.

K

  • Keltner channel
    A volatility-based indicator used to identify overbought and oversold levels.  
  • Key reversal
    A pattern indicating a potential change in the prevailing trend.
  • Kicker pattern
    A strong candlestick pattern indicates a major market reversal.  
  • Kiwi
    A slang term for the New Zealand Dollar (NZD).  

L

  • Leading indicator
    A metric that predicts future market or economic movements.
  • Leverage
    Borrowed capital is used to increase potential returns on investment.  
  • Leverage ratio
    The ratio of borrowed funds to the trader’s capital.  
  • LIBOR
    The London Interbank Offered Rate, a benchmark for global interest rates.  
  • Limit order
    An order to buy or sell a security at a specific price or better.  
  • Limit up/down
    Price limits that prevent a security from moving beyond a certain range in a session.  
  • Liquidity
    The ease with which an asset can be bought or sold without affecting its price. .
  • Liquidity provider
    An institution that ensures market liquidity by offering bid and ask quotes.  
  • Long position
    Buying an asset with the expectation that its price will increase.  
  • Lot
    A standardized quantity of a trading asset, such as 100,000 units in Forex.

M

  • MACD
    A trend-following momentum indicator showing the relationship between two moving averages.  
  • Margin
    The amount of money required to open or maintain a leveraged position.  
  • Margin call
    A broker’s request for additional funds when account equity falls below required levels.  
  • Market maker
    A firm that provides liquidity by continuously quoting buy and sell prices.  
  • Market order
    An order to buy or sell an asset immediately at the best available price.  
  • Market sentiment
    The overall attitude of traders toward a particular market or asset.
  • MetaTrader 5 (MT5)
    A popular trading platform offering tools for technical and automated trading.  
  • Momentum
    The rate of acceleration of a security’s price or volume.  
  • Monetary policy
    The actions taken by a central bank to manage interest rates and money supply.  
  • Moving average
    A widely used indicator that smooths price data to identify trends.  

N

  • NASDAQ
    A major U.S. stock exchange known for tech-related companies.  
  • NAV (Net Asset Value)
    The value of an entity’s assets minus its liabilities.
  • Negative balance protection
    A feature that prevents traders from losing more than their deposited funds.  
  • Net Position
    The difference between total long and short positions held by a trader.  
  • News trading
    A strategy focused on trading based on economic news releases.  
  • Non Farm Payrolls (NFP)
    A key U.S. employment report that impacts Forex and stock markets.  
  • Notional value
    The total value of a leveraged position in a derivative contract.  

O

  • On balance volume (OBV)
    A momentum indicator using volume to predict price direction.  
  • Open interest
    The number of outstanding contracts in a derivative market.  
  • Opening gap
    A price gap that occurs between the previous day’s close and the new day’s open.  
  • Option
    A financial contract giving the right, but not the obligation, to buy or sell an asset.  
  • Order book
    A real-time list of buy and sell orders for a particular financial asset.  
  • Order execution
    The process of completing a trading order.  
  • Order flow
    The analysis of the volume and direction of trade orders in the market.
  • Oscillator
    A technical analysis tool that identifies overbought and oversold conditions.  
  • OTC (Over the Counter)
    Trading that occurs directly between parties without a central exchange.  
  • Out of the money
    An option that has no intrinsic value.  

P

  • Pending order
    An order that will be executed only when the price reaches a specified level.  
  • Pip
    The smallest price move that a given exchange rate can make.  
  • Portfolio
    A collection of financial assets held by an individual or institution.  
  • Position
    The amount of a security owned or sold short by a trader.    
  • Price action
    The movement of an asset’s price over time is used in technical trading.  
  • Price to earnings ratio (P/E)
    A valuation ratio comparing a company’s share price to its earnings per share.
  • Profit/loss (P&L)
    The financial result of a trade, indicating gain or loss.  

Q

  • Qualified dividend
    A type of dividend that is taxed at a lower rate than ordinary income.  
  • Quarterly report
    A report issued by a company every three months detailing financial performance.  
  • Quick ratio
    A liquidity metric that measures a company’s ability to cover short-term liabilities.  
  • Quiet market
    A market with low trading volume and minimal volatility.  
  • Quote
    The current price at which an asset can be bought or sold.
  • Quote currency
    The second currency in a currency pair is used to determine the value of the base currency.  
  • Quoting convention
    The format in which exchange rates or asset prices are quoted.  

R

  • Realized profit
    The actual gains made after closing a position.  
  • Recession
    A significant decline in economic activity across the economy.  
  • Relative strength index (RSI)
    A momentum oscillator that measures the speed and changes of price movements.
  • Requote
    A change in the offered price by a broker, often during high volatility.  
  • Resistance level
    A price level where selling pressure tends to prevent further price increases.  
  • Retracement
    A temporary reversal in the direction of a price trend.  
  • Return on investment (ROI)
    A measure of profitability calculated as profit divided by investment.  
  • Risk management
    Strategies used to minimize potential losses in trading.  
  • Risk reward ratio
    A metric that compares potential profit to potential loss in a trade.  
  • Rollover
    Extending the settlement date of an open position in Forex.  

S

  • Scalping
    A short-term trading strategy focused on small and quick profits.  
  • Short position
    Selling an asset with the intention of buying it back at a lower price.  
  • Slippage
    The difference between the expected price and the actual executed price.  
  • Spread
    The difference between the bid and ask prices of an asset.  
  • Spread betting
    A type of derivative that allows speculation on price movements without owning the asset.
  • Standard lot
    A unit of measurement in Forex equal to 100,000 units of the base currency.  
  • Stop loss
    An order to automatically close a trade at a specific loss level.  
  • Support level
    A price level where buying pressure tends to prevent further price decline.  
  • Swap rate
    The interest paid or earned for holding a position overnight in Forex.  
  • Swing trading
    A medium-term strategy that captures price swings over days or weeks.  

T

  • Take profit
    An order to automatically close a trade at a predetermined profit level.  
  • Technical analysis
    The study of price charts and indicators to forecast future market movements.  
  • Tick
    The smallest possible movement in the price of a trading instrument.
  • Time frame
    The length of time used to analyze market data or execute trades.
  • Trade balance
    The difference between a country’s exports and imports.
  • Trading plan
    A structured approach outlining a trader’s strategy, rules, and risk tolerance.
  • Trailing stop
    A dynamic stop loss that moves with the market price to lock in profits.  
  • Trend line
    A straight line drawn on a chart to connect successive price points. A straight line drawn on a chart to connect successive price points.
  • Turnover
    The total volume of a financial asset traded in a given period.

U

V

W

  • Wall Street
    A term referring to the financial markets and institutions in the U.S.
  • Watchlist
    A list of financial instruments a trader monitors for potential opportunities.
  • Wedge pattern
    A technical analysis pattern signals a potential breakout.
  • Wire transfer
    An electronic method of transferring funds between bank accounts.
  • Withdrawal
    The act of removing funds from a trading or investment account.
  • Withdrawal fee
    A fee is charged for taking money out of a trading account.

X

  • XAG/USD
    The international symbol for one troy ounce of silver.  
  • XAU/USD

    XAU/USD is the label for spot gold traded on the foreign exchange market

  • XAX.X
    XAX.X is the symbol for the AMEX composite index

Y

  • Yen (JPY)
    The official currency of Japan and a major global trading currency.
  • Yield
    The earnings generated on an investment over a while.

  • Yield curve
    A graph showing interest rates across different contract lengths for a similar debt contract.  
  • YoY (Year over year)
    A comparison of a statistic for one period to the same period the previous ye

Z

  • Zero bound
    The lower limit for interest rates, typically set at or near zero.
  • Zigzag indicator
    A chart tool that filters minor price fluctuations to identify major trends.  
  • Zone of resistance
    A price range where selling pressure may prevent price increases.  
  • Zone of support
    A price range where demand is expected to be strong enough to prevent further decline.  

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