Trading glossary

At Destek Markets, our goal is to improve your knowledge to help you become a better trader. Use our trading glossary to learn common words, terms and useful phrases associated with trading and the financial markets. To find a term, click on a letter below that the term starts with.

ACCOUNT BALANCE – The value of the account, including profit, loss and equity used to keep at market the open trades.

ACCOUNT CURRENCY – The currency in which all account deposit/withdrawal operations are denominated

ACCUMULATION/DISTRIBUTION INDICATOR – The A/D (Accumulation/Distribution) Indicator shows the difference between all upward price movements up to closing point (accumulation), and all downward price movements (distribution) by closing time during a certain period of time. This indicator helps traders to assess whether the market is controlled by buyers (accumulation) or sellers (distribution).

ALGORITHMIC TRADING – A term that refers to making decisions about timing, price and quantity of market order by means of computers and advanced mathematics, and widely used by hedge funds and banks. To minimize risk and market impact, large trades are broken down into smaller ones, and trades are conducted without any human intervention, using electronically received information.

ALLIGATOR – The Alligator indicator is a profitable trading tactic, and it is a combination of balance lines (moving averages) that use fractal geometry and non-linear dynamics to signal the beginning of a new trend. When a new trend is about to begin, the moving averages start to diverge in different directions. The main signals the alligator shows are the strength of the trend, preparation for entrance into the market, actual entrance, and stop-loss.

ANNUAL INTEREST RATE – An interest rate is the percentage of an amount of money paid for the use of borrowed funds. Interest rates are usually expressed in terms of annual percentage rate.

ARBITRAGE – The act of gaining profit from the correction of price or yield differentials in similar securities in different markets by taking a position in one market and an offsetting position in another. Positions can be profitably closed out as prices or yields move back into line (e.g. a stock and it equivalent futures contract can be quoted at different prices, and the cheaper one can be bought and sold to the higher-priced market).

ASK PRICE – The Ask price is the market price for traders to buy currencies, shown on the right-hand side of a quote. It is also called offer price.

ASSET – An asset, also known as an instrument, is a product which can be traded on the global financial markets. The list of assets includes currencies, commodities, stocks, bonds, and indices.

AUSSIE – Slang term for Australian dollar (AUD).

AUTOMATED TRADING – Also known as algorithmic trading, it is used to divide large trades into smaller trades in order to manage market impact and risk. Automated trading implies the use of computer programs for entering trading orders. It uses mathematical models (algorithms) for taking decisions and carrying out financial market transactions. It is the computer algorithm that decides on the aspects of order, e.g. timing, price or quantity, mostly without any human intervention.

AVERAGE DIRECTIONAL INDEX – The ADX shows trend forces in a series of prices of a financial instrument, indicating their upward or downward tendency. It helps analyze market trends and make trading decisions. The ADX is a lagging indicator that shows only trend strength but not trend direction, and ranges between 0 and 100 (with readings above 50 indicating a very strong trend).

AVERAGE HOURLY EARNINGS – An economic indicator that evaluates the inflation level incurred by all economic sectors (excluding the farming industry) when wages are being paid to employees. Because an increase to en employee’s wages signifies and increase in private consumption, average hourly earnings are a leading indicator of consumer expenditure.

AVERAGE TRUE RANGE – The ATR is a widely-used indicator for price volatility, without actually indicating price trends. Calculations are based on the high-low range of a day’s trading, and the ATR extends this range to yesterday’s closing price if it was outside of today’s range.

AWESOME OSCILLATOR – The AO is a 34-bar moving average histogram showing the market momentum of a recent number of periods compared to the momentum of a larger number of previous periods. It indicates current market situation compared to the momentum of a longer period, and helps traders with their buying or selling decisions.

BAR CHART/GRAPH – Also known as OHLC (open-high-low-close) charts, bar charts illustrate price movements for a financial instrument over time. Each vertical line on the chart represents the highest and lowest prices over one time unit, which can be as short as one minute or as long as several weeks. Vertical lines (called hatch marks or tick marks) indicate the opening price on the left and the closing price on the right for the same period of time.

BASE CURRENCY – It’s the currency that comes first in the currency pair (e.g. in GBPUSD the GBP is the base currency).

BASE METALS – Main industrial non-ferrous metals like copper, zinc, aluminum, lead, tin, or nickel.

BEAR MARKET – A term used by stock marketers to describe the so-called pessimistic market (a bear seen as clawing the market down). As opposed to rising, a pessimistic market views the process of stocks and other securities falling outright or lagging behind.

BEARISH – A bearish market has falling prices. It is a market which is perceived to be weak.

BEARS – Refers to traders who believe and expect that prices will fall; the opposite of Bulls.

BID PRICE – The price at which you can sell the base currency.

BLACK BOX TRADING – Also called automated trading, it refers to the use of computerized systems that have buy and sell instructions generated by a proprietary software program.

BLUE CHIP STOCK – Equity in the securities of companies which are outstanding for high quality. Most DJIA (Dow Jones Industrial Average) companies are ranked in the category of blue chip stock. The ability of blue chip stocks to pay dividends irrespective of the economic climate is popular, and they have lower volatility than lesser known stocks.

BOE – Short form for Bank of England, the central bank of the United Kingdom.

BOJ – Short form for Bank of Japan, the central bank of Japan.

BOLLINGER BANDS – Invented in the 1980s and having evolved from the concept of trading bands, Bollinger Bands is a technical analysis tool that measures the highness or lowness of the price relative to previous trades. It is particularly useful in comparing price action of indicators in order to make systematic trading decisions.

BOND – A bond is a debt instrument issued for a specific time–period that is used for the purpose of raising capital.

BULL MARKET – A term used to describe an optimistic market (like a bull tossing the market up). In bull market, the prices of stocks and securities are continuously rising.

BULLISH – A bullish market has raising prices. It is a market which is perceived to be strong.

BUY LIMIT ORDER – An order to buy provided the future "ASK" price is equal to the pre-defined value. The current price level is higher than the value of the placed order. Orders of this type are usually placed in anticipation of that the security price, having fallen to a certain level, will increase

CABLE – Refers to the GBP/USD exchange rate. The term originates from the mid-1800s, when the rate was being transmitted via a transatlantic cable.

CANDLESTICK CHART – Similar to bar charts but with greater visual detail, candlestick charts show the high, low, opening and closing price for a particular period of time. To highlight the open-close relationship, candlesticks widen and fill the interval between open and close prices.

CFD – CFD’s, or Contracts for Difference, are a type of derivate financial instrument that offer investors leveraged trading on the changing value of an underlying asset (indices, commodities, etc..), without actually owning the underlying financial asset.

CFTC – Short form for Commodity Futures Trading Commission, a US-based independent agency that regulates futures and option markets.

CHAOS THEORY/TRADING – Also called non-linear dynamics, it involves complex analysis but is basically a tool used to determine if repetitive patterns and cycles exist in the markets, that is, the presence of an underlying order. Chaos theory involves the study of historical price action, together with the use of mathematical and statistical tools.

CLEARING HOUSE – Financial institution that provides clearing (all activities from the time a commitment is made for a transactions until it is settled) and settlement services (delivery of securities or interests against payment of money) for financial and commodities derivatives and securities transactions

CLOSE A POSITION – The process of selling or buying a foreign exchange position that results in the liquidation of the position.

COMMISSION – A one-time fee, fixed or variable, paid by a customer to a broker when the customer executes trades through a brokerage company.

COMMODITIES – The raw materials that are traded on the financial markets are called commodities. These include energy products like Crude Oil and Natural Gas, precious metals like Gold and Silver, and agricultural assets, such as Wheat, Coffee, and Sugar.

COMMODITY CHANNEL INDEX – The CCI indicates the variation of a price from its average value. It corresponds to oscillators and thus measures price fluctuations. Designed to show cyclical tendencies, the CCI can be best applied to commodities and other high-and-low cycles that occur in periodic intervals.

CONSUMER CONFIDENCE INDEX – CCI measures consumer confidence defined as the degree of consumer optimism about the state of economy and expressed through their savings and spending activities (e.g. a drastic decrease in consumer confidence may signal that the economy is weakening). While global consumer confidence is not measured, analysis made by countries indicates enormous variance around the globe. Tracking international consumer confidence is a key indicator of economic trends.

CONSUMER PRICE INDEX – CPI is a statistical estimate used for measuring changes in the price level of services and consumer goods purchased by urban consumers. It reports price changes in over 200 categories, and it is one of the price indices calculated by most national statistic agencies. As one of the most frequently watched national economic statistics, CPI is used as a measure of inflation.

CONTRACT – The standard unit of trading.

CONTRACT FOR DIFFERENCE (CFD) – CFD’s, or Contracts for Difference, are a type of derivative financial instrument that offer investors leveraged trading on the changing value of an underlying asset (indices, commodities, etc..), without actually owning the underlying financial asset.

COUNTER-TREND TRADING – A trading method used to take a position contrary to the current market direction, anticipating a change in that direction.

CPI – Short for for Consumer Price Index. CPI is a statistical estimate used for measuring changes in the price level of services and consumer goods purchased by urban consumers. It reports price changes in over 200 categories, and it is one of the price indices calculated by most national statistic agencies. As one of the most frequently watched national economic statistics, CPI is used as a measure of inflation.

CROSS RATE – The exchange rate between two currencies. It is the price of one currency in terms of another in the market of a third country. The cross rate is said to be non-standard in the country where the currency pair is quoted. For instance, in the US, a GBP/Japanese Yen quote would be considered a cross rate, whereas in the UK or Japan this would be one of the primary currency pairs traded.

CURRENCY PAIR – Forex trading is done in currency pairs: one currency is bought, the other is sold. Together they make up the exchange rate. If you buy in Euros with Dollars and the Euro increases in value as compared to the Dollar, you can sell the position and make a profit.

CYCLE – In technical analysis, cycles indicate time targets for potential changes in price action, showing repetitive market fluctuations during a certain period of time (typically, for longer than a year).

DAX 30 – A German market-value weighted stock index including thirty blue chip stocks.

DAY ORDER – A buy or sell order that expires automatically at the end of the trading day on which it was made.

DAY TRADING – A type of trading that refers to the fact that trade positions are opened and closed during the same day.

DEMO ACCOUNT – A virtual account gives you the possibility to test the tradingplatform in a simulated environment with virtual money at no risk.

DERIVATIVE – A derivative is a tradeable contract that derives its value from the price of an underlying instrument. Underlying instruments for derivative contracts may include commodities, currencies, stocks or bonds. Derivatives are primarily used for hedging, to offset risk in a portfolio.

DIRECT QUOTATION – Quoting in variable units of domestic currency per fixed units of foreign currency.

DIRECTIONAL MOVEMENT INDEX – A trend-following indicator that helps determine market trends. It has three components: one for upward price movement, one for downward price movement, and one that measures the difference in these up-and-down market forces, which arrive at an index showing trend strength.

DISINFLATION – Refers to decline in the inflation rate: prices are rising at a slower rate than before. The term is often confused with deflation (meaning that prices fall for an extended period of time).

DIVERSIFICATION – Distribution of investment risk through a portfolio that contains various investments with relatively uncorrelated returns. It is possible to reduce risk levels without an actual reduction in returns.

DIVIDEND – A dividend is the part of a company’s profits that is distributed to the shareholders.

DJIA – Stands for Dow Jones Industrial Average, the standard US stock market index.

DOLLAR RATE – The amount of foreign currency quoted against one US Dollar. Some currencies, such as the British Pound, are quoted in the amount of US Dollars per foreign currency unit.

DOMESTIC RATE – The interest rates that apply to deposits or borrowing of a particular foreign currency. These rates are similar to those offered within the foreign country to citizens who keep money in deposit accounts.

DOUBLE BOTTOM – A chart pattern showing a drop in price, a rebound, and another drop to the same or close to the level of the first drop, followed by another rebound. The chart looks typically W-shaped, with the two bottom points of the W representing the support areas.

DOUBLE TOP – A chart pattern showing a rise in price, a fall, another rise to the same or close to the level of the first rise, followed by another fall. The chart looks typically M-shaped, with the two top points of the M representing the resistance areas.

DURABLE GOODS ORDERS – As a key indicator of future manufacturing activity, Ddurable goods rrders is a US government index that measures the dollar volume of orders, shipments, and unfilled orders of durable goods.

ECB – Short form for European Standard Bank, an independent complementary currency system, with its headquarters in Panama.

ECI – Short form for Employment Cost Index. ECI is a quarterly economic series used to indicate the rising and falling tendencies in employment costs, thus measuring inflation in salaries, wages and employer-paid benefits in business and government establishments in the United States.

ECONOMIC INDICATOR – A set of statistics used to show current economic conditions. It allows analysis of economic performance and predictions of future performance. Economic indicators include a series of indices, reports and summaries, such as stock market prices, money supply changes or consumer leverage ratio.

ELDER-RAYS – As one of the most relevant technical indicators, Elder-rays combine the properties of trend following indicators and oscillators. Based on the relative strength of market Bull and Bear power, Elder-rays are used to estimate the power struggle between these two powers. The moving average stands for the agreed-on price between sellers and buyers for a certain period of time; the maximum price shows the maximum power of the buyers; the minimum price reflects the maximum power of sellers.

ELLIOT WAVE PRINCIPLE – Based on the theory of market behavior and developed by Ralph Nelson Elliot (1871-1948), the Elliot Wave Principle is a form of technical analysis used by traders to analyze financial market cycles and forecast future trends. According to Elliot, prices usually move in five waves in the direction of the larger trend (impulse waves) and in three waves into the opposite direction (corrective waves), and by analyzing these waves, traders can enter their trades at low-risk points and exit them at high-reward points.

EMPLOYMENT COST INDEX – ECI is a quarterly economic series used to indicate the rising and falling tendencies in employment costs, thus measuring inflation in salaries, wages and employer-paid benefits in business and government establishments in the United States.

ENVELOPES – The Envelopes consist of two Moving Average indicators (showing the mean instrument price value for a certain period of time), one of which shifts upwards while the other one shifts downwards. By selecting the optimum relative number of band margins shifting, market volatility can be determined. Envelopes define the upper and lower margins of the price range: sell signals indicate that the price has reached the upper margin of the band; buy signals indicate that the price has reached the lower margin.

EQUITY – The secure amount that clients have in their accounts, taking into consideration the open positions, balance and profit/loss.

EXCHANGE RATE – The exchange rate shows how much a currency is worth in terms of another currency. For instance, in the pair EUR/USD, the exchange rate is 1.30. This means €1 (base currency) is worth $1.30. So you can buy $1.30 with €1, or sell €1 for $1.30.

EXECUTION – The process of completing an order or deal.

EXPERT ADVISOR – Also called trading robots, the EAs are algorithmic trading systems that allow automatic trading on your MT4. The programs are written in MQL, MetaTrader programming language

EXPIRY DATE – The due date at which a CFD will no longer be tradable. At this date the new contract will become available.

FACTORY ORDERS – The Factory Orders report, released by the US Census Bureau, measures dollar volume of new orders, shipments, unfilled orders, and inventories reported by domestic manufacturers. Although the monthly report figures do not affect markets, they help forecast inventories calculations in the quarterly Gross Domestic Product report.

FCA – Stands for Financial Conduct Authority, the regulatory body for the financial services industry in the United Kingdom.

FEDERAL RESERVE SYSTEM – Also known as Federal Reserve, FRS, or simply the Fed, it is the central banking system of the United States.

FIAT CURRENCY – Refers to state-issued money, without any intrinsic value. Fiat currency is the opposite of a gold standard arrangement, which means that the currency value rises and falls on the market in response to demand and supply pressures.

FIBONACCI RETRACEMENT – As a method of technical analysis, the Fibonacci retracement is based on the idea that markets tend to retrace a predictable portion of a move, and then continue moving in the original direction. Fibonacci retracement levels are used as support and resistance levels.

FILL OR KILL – Often used when investors want to buy large quantities of stocks at a particular price, FOK refers to an order to buy or sell a security that must be cancelled if not carried out at once.

FINANCIAL CONDUCT AUTHORITY – The FCA is the UK regulatory authority for financial services.

FINANCIAL INSTRUMENT – Document (check, draft, bond, share, futures or options contract, bill of exchange) with monetary value and that represents a binding (legally enforceable) agreement between two or more parties regarding the payment of money. There are two basic types of financial instruments: debt instrument (loan with agreement to pay back funds with interest) and equity security (share or stock).

FINANCIAL OMBUDSMEN – It is the financial arbitrator for disputes with regulated companies in the financial markets.

FLEXIBLE EXCHANGE RATE – A fixed exchange rate that is, however, frequently re-evaluated.

FLOATING EXCHANGE RATE – An exchange rate the value of which is determined by market forces.

FLOATING PROFIT/LOSS – It refers to the profit or loss that may only be realized in case the open contracts are settled.

FORCE INDEX – The Force Index measures the actual buying or selling pressure: high positive values indicate a strong rising trend, while low values indicate a strong downward trend. The index can be better approximated with the help of the Moving Average (MA): approximation with a short moving average helps to find the best opportunity to open and close positions; with approximation using a long moving average trends and their changes can be indicated.

FOREIGN EXCHANGE – The system by which one currency is exchanged for another. It enables international transactions to take place.

FOREX / FX – It is the abbreviation for Foreign Exchange, the market of currencies trading, where participants are able to speculate (buy and sell) on currencies.

FRACTALS – Fractals are versatile indicators, pointing the tops and bottoms where the market reverses, and are used either stand-alone or combined with other forex indicators. Fractals are used for trend confirmation and trend consolidation, and they can be filtered with the help of the Alligator Indicator.

FREE EQUITY – The amount of equity not used for the trades open in the market, and therefore available to withdraw.

FUNDAMENTAL ANALYSIS – A method used to forecast future currency value by providing analytical details for economic, political and social factors. While technical analysis is based on the results produced by these factors in terms of various price formations, fundamental analysis mainly deals with defining the causes of existing and future price movements.

FUTURES CONTRACT – A future is a contract for the execution of a transaction at a set date in the future. The price for the future transaction is agreed in the present.

FUTURES EXCHANGE – Central marketplace which has established regulations and where buyers and sellers meet to trade futures and options on futures contracts.

G10 – Refers to the G7 member states, completed with four further countries (Belgium, the Netherlands, Sweden and Switzerland), and aims to coordinate fiscal and monetary policies for the sake of a stable global economic system.

G7 – Stands for Group of Seven, and refers to the worldwide leading industrial nations that meet to discuss global economic issues. The G7 members are Canada, France, Italy, Japan, the United Kingdom and the United States.

GATOR OSCILLATOR – The Gator Oscillator helps visualize upcoming changes in trends (i.e. the periods in which Alligator Indicator lines widen or narrow down).

GDP – Short form for Gross Domestic Product. GDP is often correlated with the living standard, as it is the market value of all services and goods produced in a country during a particular time period. It indicates the pace of a country’s economic growth and is determined in three different ways: through product output, income and expenditure.

GOING LONG – Refers to the purchase of a currency pair.

GOING SHORT – Also known as selling short, it refers to selling a currency pair by first borrowing it, then returning it at a later time by buying it back.

GOLDEN CROSS – In technical analysis, golden cross refers to the fact that two moving averages intersect: usually a short one like a 20-day and a long one such as 40-day. This is considered a favorable sign that the underlying currency will move in the same direction.

GROSS DOMESTIC PRODUCT DEFLATOR – The GDP deflator is a measure of price levels for all goods and services in an economy; in other words, it measures the annualized quarterly implied rate of inflation for all economic activities. By using the deflator, the difference between nominal and real GDP can be calculated.

GROSS PROFIT – The difference between company revenues or sales and sales costs.

GTC – It stands for good-till-cancelled order. It is a type of limit order that remains in effect until it is either executed or cancelled, as opposed to a day order, which expires if not executed by the end of the trading day.

HARD CURRENCY – As opposed to soft currency, hard (or strong) currency is currency that investors have confidence. In terms of economics, it refers to a globally traded currency, which is stable. Due to its stability and reliability, investors have confidence in hard currency.

HEAD-AND-SHOULDERS – A price trend pattern with three peaks, the one in the middle being higher than the surrounding two. It is a pattern seen as an indicator of a trend reversal.

HEDGE – A position that reduces the risk of a trader’s primary position.

HEDGE FUND – An investment fund that aims to gain absolute return (profit made on an asset irrespective of market movements), using trading methods like short selling, swaps, derivatives, program trading, and arbitrage.

HEDGING – It is a trading practice of holding open buy and sell positions on the same instrument, hence mitigating the risk of market fluctuation.

HIT THE BID – Selling at the bid price.

HYPERINFLATION – Refers to extremely high, out-of-control inflation: the general price level increases rapidly as the internal currency, as opposed to a foreign currency, and loses its value at an accelerated rate (e.g. the hyperinflation in Zimbabwe between 2004-2009).

ICHIMOKU KINKO HYO – The IKH, also called ichimoku, is a candlestick charting technique that provides a clearer picture of potential price action, as it indicates market movement with its entry and exit points. It is used to determine market trends, support and resistance levels, and to create sale and purchase signals.

IFO – It stands for Institute for Economic Research (Institut für Wirtschaftsforschung). Based on the feedback of over 7,000 German business leaders, the German IFO business survey is considered to be a leading economic indicator for both Germany and Europe. It provides assessment of the current and upcoming economic climate, based on latest economic data.

IMF – Short form for International Monetary Fund, which consists of 186 member countries and provides financing and policy advice to members in economic difficulties. It cooperates with developing countries to help them achieve macroeconomic stability and decrease poverty.

IMPLIED VOLATILITY – The volatility (degree to which the value of a security changes over time) that the market expects in the price of a security. It is a measure, but not the direction, of future price movements, with a tendency to rise in bear markets and fall in bull markets.

INDEX – In a broader sense, it is statistical measure of change in economy. In the financial markets, indices are imaginary securities portfolios that represent a particular market or market segment, and index variations indicate market trends.

INDICES – The world’s indices are the exchanges where a country’s stocks are traded, such as the Japanese NIKKEI, the German DAX, the English FTSE and the American NASDAQ.

INDUSTRIAL PRODUCTION – IP is an economic measure of the changes in output for the industrial sector (such as manufacturing, mining and utilities) of the economy, indicating a country’s industrial capacity.

INFLATION – An economic condition in which prices for consumer goods and services rise, eroding purchasing power.

INITIAL MARGIN – The deposit that clients need to make before they are allocated a trading limit. The first deposit that a client makes and that determines a corresponding maximum trade size.

INSTRUMENT – Any tradeable financial product such as a currency pair, a CFD or a commodity.

INTEREST RATE – The percentage of an amount of money paid for the use of borrowed funds. It is calculated on a daily basis and paid on the first day of each month.

INTERNATIONAL TRADE – International Trade measures the difference between imports and exports (trade balance) of all goods and services. The level of the international trade balance, along with the changes in exports and imports, indicate market trends, and so they are closely followed by foreign exchange markets.

INTRADAY TRADING – Positions that are supposed to be opened and closed within one day.

KIWI – Informal name given to the New Zealand dollar (NZD). The $1 coin depicts the kiwi bird, which New Zealand is mostly associated with.

LEVERAGE – Leverage is a way for an investor to boost their trading power and manage a greater position on the market with a nominal investment. An online broker may offer leveraged trading for up to 200 times the value of trader’s investment.

LIMIT ORDER – It is apending order used to close a trade when the market is moving profitably to the open position.

LINE CHART – As a basic chart type, line charts visualize a trend in data over time intervals by connecting the closing price values straight-line segments.

LIQUIDATION – Refers to the closing of an existing position through the execution of an offsetting transaction.

LIQUIDITY – Refers to the relationship between transaction size and price movements. If large transactions can occur with only minimal price changes, a market can be called ‘liquid’.

LIVE ACCOUNT – A live account that gives you the possibility to access and deal in the financial market through your trading platform.

LOCKED MARGIN – The amount of margin for two trades opened by one symbol and to different sides, e.g. EUR/USD buys 1 lot and EUR/USD sells 1 lot. The rate of EUR/USD is 1.33361The full margin for these trades should be 1333.61+1333.61=2667,22. For example, RealForex trading accounts the locked margin is 50%. If you have two positions with the same volume and currency pair but with opposite directions, the actual margin deducted from the normal value will be 50%. For a better understanding, see two examples below: You have 1 lot EUR/USD buy with margin 100 and 1 lot EUR/USD sell with margin 100. Without taking into account the locked margin, the normal margin will be 100+100=200. However, if you take into account, the 50% locked margin, you will have 1/2 of the 200 normal margin, so your margin will be 100. You have 2.3 lots EUR/USD buy with margin 230 and 1.3 lots EUR/USD sell with margin 130. The 2.3 lot position is represented as an amount of 1.3 lots and 1 lot. You will have a locked margin for 1.3 lots and 1 lot will have a normal margin. If 1.3 lot margin is 130, the total margin will be $130 (locked margin from two 1.3 lot EUR/USD positions) +100 = $230

LONG HEDGE – Hedging position that involves the purchase of futures contracts in order to protect investors and traders against price rises in the corresponding cash markets.

LONG POSITION – A long position refers to the purchase of an instrument, with the expectation that its market value is set to rise.

LONG POSITION – When a currency pair is bought, the primary currency in the pair is 'long', and the secondary currency is 'short'.

LONG-TERM POSITION – Positions supposed to last for several months or even years.

LOT – Foreign exchange is traded in lots. A standard lot means $100,000 of any currency you fund your account with. Trading with only $1 is not possible.

MARGIN – The minimum deposit needed to maintain an open position (e.g. with an open position of $250,000 and a leverage of 50, the required margin is $5000).

MARGIN CALL – A demand for adding funds to cover positions. Some brokers preserve the right to close clients’s positions without previous notification if the equity for the required margin is below 100%.

MARKET DEPTH – Volume of market liquidity that refers to the ability of the market to handle large trading volumes without significantly affecting prices. Market depth is relevant to traders as they can study it to to determine how and when particular orders may impact price action, and to help them find the right timing for entering and exiting trades.

MARKET FACILITATION INDEX – The MFI determines the efficiency of price movement by analyzing the amount that the price changes for each unit of volume. The BW MFI (Bill Williams Market Facilitation Index) evaluates the efficiency of market price movements. Changes in the value of this index are usually compared to changes in volume in order to determine market interest in a particular price trend.

MARK-TO-MARKET – The main principle on which regulated futures bookkeeping is based. It refers to the adjustment made to trading accounts at the end of the day in order to reflect profits and losses on existing positions. Accordingly, winnings are credited to the account, while losses are debited with instant execution. The essence of mark-to-market is that trading is not allowed to participants unless there are available funds to cover the positions.

MATCHED PRINCIPLE BROKER – A license issued but the regulatory authories to deal as principle only to fulfil customer orders. A matched principle broker will never take the opposite side of a client's trade but hedge every order immediately with a another party. 

METATRADER – An independent trading software platform developed for trading forex, options and futures; best known for its diverse technical analysis ability and the option to run forex robots and aexperts advisors.

MID-TERM POSITION – A position the goal of which should be reached within 1-3 weeks.

MOBILE TRADING – Controlling of trading accounts via mobile devices such a cell phone or a PDA (Personal Digital Assistant). Wireless access technologies WAP and GPRS provide access to the Internet.

MOMENTUM – An indicator for market movement and the strength of trends through time. When a trend starts, momentum is the highest, and as the trend changes, it is the lowest. When price and momentum diverge, it suggests weakness. If price extremes occur with weak momentum, it signals the end of movement in that direction. A potential change in price direction can be expected if momentum is trending strongly and prices are flat.

MONEY FLOW INDEX – The MFI is an indicator that shows the intensity and volume of money invested in and withdrawn from a commodity. It compares the value traded on up-days to the value traded on down-days, anticipating trend weakness and points of reverse shift.

MOVING AVERAGE – The Moving Average is a technical indicator that shows the mean instrument price value for a certain period of time. With its four different types of moving averages (simple, exponential, smoothed and linear), it helps calculates the moving average according to increasing and decreasing price changes. 

MOVING AVERAGE CONVERGENCE/DIVERGENCE – The MACD turns two-trend following indicators (moving averages) into a momentum oscillator by subtracting the longer moving average from the shorter moving average. It is one of the most effective momentum indicators as it combines trend following and momentum; and traders can look for signal crossovers, centerline crossovers and divergences to generate signals.

MOVING AVERAGE OF OSCILLATOR – Though similar to the MACD (Moving Average Convergence/Divergence), the OsMA is a modified version of the latter. It applies more smoothing features, and helps spot out convergences and divergences that indicate market changes.

NASDAQ – National Association of Securities Dealers Automatic Quotation System. NASDAQ provides market participants with price quotations about common stock issues most actively traded in the OTC (over-the-counter) market.

NET POSITION – Refers to the difference between long and short market positions held by an individual or a company. A dealer with 100 short futures contracts and 80 long contracts will have a net short position of 20 contracts. Conversely, once he sold 120 contracts and bought 150 contracts, he will have a net long position of 30 contracts.

NEW YORK STOCK EXCHANGE – Also known by the name NYSE, or the Big Board, it is the world’s biggest equity exchange based on the total market capitalization of its listed securities. Operated by NYSE Euronext, its average daily trading value was estimated to 153 billion USD in 2008.

NON-FARM PAYROLL EMPLOYMENT – It is an essential economic indicator and statistic released every month by the US Department of Labor. As part of a comprehensive report on the current state of the labor market, nonfarm payroll employment reports include 80% of the workers who produce the entire GDP in the United States. These reports are also used to predict future levels of economic activity.

OFFICIAL CASH RATE – Official Cash Rate (OCR) is the interest rate set by the Reserve Bank of Australia and New Zealand, and used to influence the general level of interest rates in banking and the economy. Changes to the cash rate, also called official interest rates, flow on to variable home loan, personal loan and credit card rates within weeks.

ON BALANCE VOLUME – As one of the first technical indicators to measure positive and negative volume flow (i.e. the buying and selling pressure), the OBV is used to predict price movements, or to confirm price trends.

OPEN ORDER – A buy or sell order that does not expire until it is cancelled. Theoretically speaking, an order does not expire. However, it usually does so in practice, at the end of the trading month rather than lasting forever.

OPEN POSITION – It is a trade in the market which has not been closed yet.

OPTION – It gives the buyer the right, without obliging him, to buy or sell an underlying financial asset at a pre-determined price. An option gives the buyer the right to decide whether to exercise it (i.e. buy or sell it) or not. As flexible instruments, options allow investors to profit from favorable price movements and decrease the consequences of unfavorable price moves.

ORDER – Any instruction to trade as either a market order or pending order.

OVERBOUGHT – A term used with reference to currency pairs. A currency pair is overbought when its price rises much more quickly than usual in response to net buying. Once overbought, the pair is expected to make a contrarian move (i.e. a fall in its price is to be expected).

OVERNIGHT POSITION – An overnight position is a trade that remains open until the next business day.

OVERSOLD – A term used in technical analysis showing that the price of a certain currency, compared to another currency, has moved too far and fast into a certain direction.

OVER-THE-COUNTER TRADING – Also known as OTC or off-exchange trading. It refers to trading financial instruments (stocks, bonds, commodities) between two parties directly.

PAR – The official value of a currency. In finance, par value means stated value. The term ‘at par’ is used when two currencies are exchanged at equal value.

PARABOLIC SAR – Originally called Parabolic Time/Price System and referring to a price- and time-based trading system, SAR (stop and reverse) is an indicator used in this system. The SAR indicates price changes over time; it stops and reverses at the same time when a price trend reverses and moves above or below the indicator.

PARTIAL CLOSURE – It is when the trader closes part of an open position.

PEGGED EXCHANGE RATE – A fixed exchange rate meaning that the value on one currency is matched to the value of another single currency or a set of other currencies. It is mostly used to stabilize the value of one currency against the currency it is pegged to.

PENDING ORDER – An order set in the trading platform for the execution of a trade at a later time or market level.

PIP – A pip is the smallest measure of a currency. It is a 10 thousandth of a currency unit, and the fourth and final number after the decimal point. Pips are the means by which market profits and losses are quantified.

PIVOT – A price level of significance used in technical analysis of a financial market. Pivot points are used by traders as predictive indicators of market movements, and they are calculated as an average of relevant prices (i.e. high, low, close) from the performance of a market during the previous trading period.

PMI – Short form for Purchasing Managers Index. It indicates economic activity by reflecting the percentage of purchasing managers (employees of a company or business in charge of acquisition of goods and services needed by the company) in a certain economic sector. The PMI is released by the Institute for Supply Management on the first business day of every month. A PMI over 50 is often taken to indicate that the economy is expanding, while anything below 50 suggests economic contraction.

POINT AND FIGURE CHART – A technique that uses numerical filters to mark price changes, without showing a time scale to associate a certain day with a certain price action.

PORTFOLIO – A set of investments held either by an individual investor or a financial institution, and it may include stocks, futures, bonds, options, contracts, real estate investments, or any other items that the holder believes will retain their value.

POSITION TRADING – A type of trading during which the trader either buys or sells contracts and holds them for an extended period of time.

PPI – Short form for Producer Price Index, formerly known as Wholesale price Index (WPI). As one of several price indices, it measures average price changes received by domestic producers for their output.

PRICE INDEX – A weighted average of prices for a particular class of services or goods available in a given region and during a given time interval. It is a statistic used to compare how these prices, all taken together, differ between time periods or geographical locations.

PROFIT TAKING – Closing a position with the purpose to make a gain.

PROFIT/LOSS – The proceeds of a trade.

PROGRAM TRADING – It involves computer-based trading techniques that rely on the flow of trading and price levels rather than on demand factors and fundamental supply.

QUANTITATIVE ANALYSIS – A technique used to analyze an observed behavior by applying complex mathematical and statistical modeling, measurement, and research.

QUANTITATIVE EASING – A monetary tool used by central banks to encourage spending within an economy. One of the most well-known instances of quantitative easing remains the Bank of Japan's attempts to fight domestic deflation in the early 2000s. Interest rates during this time got close to zero and further cuts could not be implemented. As a result, the Bank of Japan flooded commercial banks with excess funds to promote lending and by extension, encourage spending.

QUOTE – A quote is an indicative market price used as information only.

QUOTE CURRENCY – The second currency of two in a currency pair. For the EUR/USD, USD is the quote currency. The exchange rate quoted is how many units of the second currency you will receive for one unit of the base currency.

RANGE – Range refers to when a price is trading between a set high and low and the instrument value remains within these set price boundaries.

REAL INTEREST RATES – It is approximately the nominal interest rate (before adjustment for inflation) minus the inflation rate (rise in the general level of prices of goods and services in an economy).

REAL-TIME DATA – As opposed to historical data, real-time data refers to live prices.

REGULATION – It is the law issued by the regulator governing the fairness of the market operators.

RELATIVE STRENGTH INDEX – The RSI is a momentum indicator that shows the change and speed of price movements. Oscillating between 0-100, the RSI refers to overbought when it goes above 70, and oversold when it goes below 30. It can be also used to generate signals for divergences, failure swings (i.e. strong indications of market reversal) and centerline cross-overs (i.e. the RSI value moves over the centerline of the RSI scale).

RELATIVE VIGOR INDEX – The RVI indicates the actual energy (vigor) of the current market, and it is used to analyze price movements between the open and close of the market. By comparing results gained about the up-market (bull) and the down-market (bear), traders can assess the overall vigor of the market and predict the outcome of certain trends.

RELIEF RALLY – A relief rally in the markets is when there is a sharp upward spike in prices after a period of investor uncertainty.

RESISTANCE – A resistance serves as a ceiling for past or future price changes. It is the opposite of support.

RETAIL SALES – Retail Sales is a monthly report that measures consumer expenditure, which is an essential indicator of US Gross Domestic Product. The report is based on data submitted by retail firms on the dollar value of their retail sales and inventories. It is particularly useful as a timely indicator of broad consumer spending patterns, and it can be used to assess the immediate direction of an economy.

RETRACEMENT – Percentage retracement of market price movements is a technique used to determine price objectives. The market is believed to retrace previous moves by predictable percentages like 33%, 50%, and 67%. In Dow Theory, the minimum and maximum retracements are 33% and 67%; according to technical analyst W.D. Gann, 50% is the most important; and the sequence produced by the Fibonacci Numbers is 61.8%, 38%, 50%

RISK MANAGEMENT – Involves the use of strategies in order to control or reduce financial risk. An example is a stop-loss order that minimizes maximum loss.

ROLLOVER – A rollover is when an open position is closed at today’s price and simultaneously, a new position is opened for the next day’s price at a value that reflects the interest rate differential between both currencies.

ROLLOVER RATE – Generally, the daily rollover interest rate is the amount a trader either pays or earns, depending on the currency pairs in question.

SCALPING – It is the practice of short term and high frequency trading on small market movements.

SHORT POSITION – A short position refers to the sale of an instrument, with the expectation that its market value is set to fall.

SLIPPAGE – Slippage occurs due to changing market conditions and it is the difference between the requested price and the actual price that was obtained.

SPIKE – A term used in the context of general equities (an order ticket displaying the stock, price and number of shares, type, and account of the order). Spike can also refer to an unexpected and drastic increase in a company's share price. It is an error quote from a broker’s server characterized by the following features: a) within a short period of time a significant price gap occurs, b) preceding its occurrence, there is no rapid price movement and/or no significant macro-economic indicator, or corporate reports. Error quotes are mainly caused by either a technical failure or separate deals, often mistaken, in the information system. When error quotes occur, deals on real accounts are not executed, or they are annulled. Deals do not get annulled on demo accounts.

SPOT MARKET – Also called cash market, it is a financial market where financial instruments or commodities are traded for immediate delivery (spot, or spot transaction). Spot market is the opposite of futures market, where delivery is due a later date.

SPOT PRICE – In terms of foreign exchange, it is the market price at a particular point in time.

SPREAD – The spread is the difference between the bid and ask prices.

STANDARD DEVIATION – As a statistical method for measuring volatility, Standard Deviation indicates the difference between closing prices and the average prices over a number of time periods. It is a particularly useful indicator for target exchange rate volatility because the higher Standard Deviation gets, the higher volatility is.

STERLING – Refers to pound sterling (GBP), the official currency of the United Kingdom, the fourth most traded currency in the forex market after the US dollar, the euro and the Japanese yen.

STOCHASTIC OSCILLATOR – By using support and resistance level, the Stochastic Oscillator is a momentum indicator that shows the location of the close relative to the high-low range over a period of time.

STOCK – A stock is a percentage of a company and a stock holder is someone who owns a share of the company profits.

STOCK INDEX – Statistical indicator used to measure and report changes in the market value of a group of stocks or shares (e.g. Dow Jones Industrial Average).

STOP LOSS – A stop loss order, also termed a stop order, is a risk management tool allowing a position to be closed, once it reaches a specific preset price. This protects against further losses on an open position if prices continue in an unfavourable direction for the investor.

STOP ORDER – A pending order used to close a trade when the market is moving adversely to the open position.

STOP-OUT LEVEL – Trading account conditions are controlled by a server that closes all positions automatically if the margin level reaches 50% or less for REALForex accounts and STP accpunts. This is called stop-out, and it is in accordance with the current market price.

STP (STRAIGHT-THROUGH-PROCESSING) – Upon receipt of a client order the STP broker will pass the oder directly to it's liquidty providers and will never take the opposite side of a client's trade.   

STRENGTH – A technical indicator that represents the intensity of market opinion on a certain price by analyzing the market positions taken by various market participants.

SUPPORT – A support serves as a floor for past or future price changes. It is the opposite of resistance.

SUPPORT AND RESISTANCE LEVEL – The concept of support and resistance is based on the idea that the price of securities tends to stop and reverse at particular, pre-determined price levels, and describes the price levels where markets repeatedly rise or fall and then reverse. This phenomenon is attributed to basic supply and demand. The support level indicates a price level at which the decreasing price will find support, while the resistance level is where the increasing price tends to find resistance.

SWAP – See above Rollover.

SWISSIE – Slang term used for the Swiss franc (CHF), the official currency of Switzerland and Liechtenstein.

TAKE PROFIT – A take profit order, also shortened to T/P, is a risk management tool allowing a position to be closed automatically, once it reaches a specific preset profit goal. This protects against profits being lost in an unanticipated reversal of price direction before the investor can close the position.

TANKAN – Tankan (Short-period Economy Observation) is a business confidence poll reported quarterly on the status of Japanese economy by the Bank of Japan. It is considered to be a major financial indicator in Japan as it significantly affects stock prices and currency rate.

TECHNICAL ANALYSIS – Technical analysis is a means of assessing the price direction of an instrument, based on price charts and historical performance.

TECHNICAL INDICATOR – Short-term trends used by technical analysts to predict future price movements of securities and/or commodities.

TICK – Refers to the minimum upward or downward movement in the price of a futures or options contract during a trading session specified by the terms of the contract.

TRADE – A deal made in the market.

TRADING PLATFORM – This is software provided to clients by a broker company to make trading possible through their own system and to manage accounts securely.

TRADING SESSION – Periods of trading activity from the time a market opens until it closes. The forex market offers round-the-clock opportunity to trade; and because global forex sessions overlap due to the different time zones, it is possible to trade in different markets during the same session. There are four global trading sessions that operate in different time zones and according to summer or winter time: Sydney session, Asian session, London session, New York session.

TRAILING STOP – A trailing stop lets a trade keep rising in value when the market price moves in the right direction for the investor. However, if the market price suddenly moves a preset amount in an unfavourable direction then the trade is automatically closed.

TREND – A trend is a price shift that results in a net change in value. An uptrend produces higher highs and lows and a downtrend produces lower highs and lows.

TRENDING – Trending refers to the phenomenon by which price movements tend to persist in a particular direction during a particular period of time. Market trends indicate upwards (bull market), downwards (bear market), and sideways market movements over time. They are categorized as secular (lasting long), primary (for medium time frames), and secondary (lasting short).

TURNOVER – The volume of executed trading transactions during a certain period of time.

TWO-WAY PRICE – A term meaning that both a bid and offer rate has been quoted for a forex transaction.

UNDERLYING ASSET – The asset/contract on which any CFD price is based.

UNEMPLOYMENT RATE – Unemployment rate is the percentage of jobless people, and it is measured by the ratio of unemployed people who are willing and able to work as opposed to the total number of people in the work force. It is a lagging indicator (it changes along with economy) that may cause moderate market volatility as it gives traders clues about future interest rates and monetary policies.

UNREALIZED GAIN OR LOSS – The theoretical gain or loss made on an open position and valued at current market rates. Unrealized gains/losses become profits/losses when the position is closed.

UPTICK – An uptick is a new price quote that is higher than the preceding one.

UPTREND/DOWNTREND – Refers to movements on a market’s price chart where every successive peak or trough is higher, or lower, than the preceding one.

USDX – Short form for US Dollar Index. It is a measure of the value of the US dollar relative to a market basket of foreign currencies (i.e. a fixed list of items used to track the progress of inflation or a specific market). USDX goes up whenever the US dollar goes stronger in value as compared to other currencies.

USED MARGIN – The amount in the client’s trading account necessary to support all current positions.

VALUE DATE – The date on which two contracting parties exchange the currencies that are being bought or sold.

VARIATION MARGIN – Funds that are required to be deposited by the client when a price movement has caused funds to fall below the stipulated percentage of the value of the contract.

VOLATILE MARKET – Refers to a market that is often exposed to wide price fluctuation. This kind of volatility is usually the result of the lack of liquidity (also referred to as wicked market).

VOLATILITY – A volatile market is one that fluctuates a great deal. It presents more trade opportunities, due to greater market activity.

WEDGES – Chart pattern (i.e. shape created by movements on a price graph) used in technical analysis to forecast market trends: two converging lines connect a series of peaks and troughs to form a wedge.

WHIPSAW – A slang term for a particular condition of a highly volatile market, meaning that a sharp price movement is quickly followed by a sharp reversal.

WHOLESALE MONEY – The money borrowed in large amounts from banks and institutions rather than from small investors.

WHOLESALE PRICE INDEX – It measures price changes in the manufacturing and distribution sector of the economy and tends to lead the consumer price index by 60 to 90 days. The index is often quoted separately for food and industrial products.

WIDE OPENING – Refers to the unusually wide spread between the bid and ask quote.

WILLIAM’S PERCENT RANGE – The WPR measures overbought and oversold market conditions, the %R always falling between a value of 100-0: indicator values between 80-100% show that the market is oversold, while those ranging between 0-20% indicate an overbought market.

WIRE TRANSFER – Wire transfer is an electronic payment service for transferring funds between two accounts by electronic means.

WORLD BANK – An international agency that channels aid funds to developing countries, and raises funds by selling bonds on world capital markets.

WTO – Stands for World Trade Organization, which supervises existing international trade accords, and provides a forum for negotiating new agreements and adjudicating disputes.

YARD – Informal name given to one billion currency units. Mainly used in currency trading to avoid mistaking “million” for “billion”. As one billion Japanese yen equals roughly 10 million US dollars, the two very similar words can be easily misheard.

YIELD – The percentage rate of return paid on a stock in the form of dividends, or the effective interest rate paid on a bond or note.

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