Glossary
Financial Dictionary
Improve your trading knowledge! Serving as an educational tool, our dictionary is constantly updated with definitions of the most popular and commonly used terms in the financial industry.
A
Algorithmic Trading
Trading method of utilizing a predefined set of instructions using computer programs.
Alpha
Measurement of an investment portfolio’s performance against a certain benchmark. The benchmark is typically the stock market index. Alpha measurement refers to the degree a trader has managed to outplay the market over a specific period of time.
Arbitrage
Trading strategy involving a simultaneous purchase and selling of an asset in order to take advantage of the price difference.
Ask (price)
The price at which a trader can purchase a specific asset.
Assets
Resource (financial or other) which is owned by an individual, company or country and possesses economic value or is expected to provide value in the future.
Asset Allocation
The process of choosing which assets to include in a personal trading portfolio.
Available for Withdrawal
The amount of money readily available for withdrawal which is determined by your current equity minus money necessary for maintaining your account out of margin call risk in case of existing open positions.
Average Daily Trading Volume
The total number of assets or shares traded on a given day.
Average Price
Median price of a specific asset over a set timeframe.
B
Balance
The value in your account excluding P&L from open positions.
Base Currency
First currency in a currency pair.
Basis Point
A per ten thousand sign or basis point is one-hundredth of a percent, or, equivalently one-ten thousandths.
Bear Market
A market characterized by falling prices amid investor pessimism (opposite to Bull Market.)
Beta
Typically used in the capital asset pricing model (CAPM), beta is the measurement of systemic risk of an investment portfolio or security against the backdrop of the market as a whole. Beta data provides information about individual stocks and their risk approximation in a diversified investment portfolio.
Bid (Buy) Price
Purchase price on the market; the price which the market is ready to buy a certain asset or a trader can sell the asset.
Bitcoin
The first version of a decentralized virtual currency which was created as an alternative to regular paper currency.
Blockchain
A public legder where all Bitcoin transactions are digitally documented and stored.
Blue Chips Stocks
Stock selection of premium first and corporation that are frontrunners in their industries.
Bonds
Pre-defined interest rate loans which are issued and sold by governments or companies in order to raise money.
Breakout
Expression relating to the moment when a market breaks beyond a key support or resistance level.
Broker
An intermediary company or individual who works between buyers and sellers in order to facilitate trading in exchange for a spread or commission.
Bull Market
Market characterized by rising prices (opposite of Bear Market.)
Buy Order
Instruction from an investor to a broker to purchase a specific amount of security. Examples of buy orders include an investor instructing broker to buy immediately at the best available price, or to wait to buy when a certain price is reached.
C
Central Bank
Institution that manages currency, money supply and interest rates of a state and oversees their commercial banking system.
Chart Patterns
Patterns functioning as indicators of future price movement.
Close (Position)
A process of closing a transaction that will terminate an open transaction.
Closing Price
Final recorded price of an asset in the financial market at the end of a trading day.
Commission
Fee charged by a relevant institution for making a transaction
Commodity
Basic good used in commerce and traded on exchanges in a variety of ways.
Consumer Price Index (CPI)
Change in price of goods and services purchased by consumers; consumer prices account for a majority of overall inflation. Inflation represents rising prices that lead to the central bank raising interest rates out of respect for their inflation containment mandate.
Contract (Lot or Unit)
Standard unit of trading on certain exchanges
Contract for Difference (CFD)
A popular form of derivative trading that enables you to speculate on rising or falling prices of fast-moving global financial markets, such as forex, indices, commodities, shares and treasuries.
Cryptocurrency
Digital money functioning outside the realm of banking regulations and governments.
Currency
Unit of exchange issued by a country’s central bank and/or government. This unit is the basis of trade for each individual’s country.
Currency Calculator
Tool that concerts a set amount of currency into another.
Currency Pair
Two different currencies that form a currency quote.
Current Trading Hours
Daily hours (in GMT), which an asset is available for trading.
D
Day Trading
Buying or selling a financial instrument in day and/or multiple times during the course of a day.
Dealing Desk
A type of broker which acts as Market Makers and earn money from the spreads and commissions charged to clients.
Direct Market Access (DMA)
The act of placing trades directly onto electronic registers of exchanges.
Direct Public Offering (DPO)
Strategy used by companies to offer stock to the public by listing it on a stock exchange.
Diversification
Risk management tactic that mixes a variety of investments within a portfolio.
Dividends
Distribution of a portion of a company’s earnings, issued as cash payments, shares of a stock or a form of property. They are decided by the board of directors, which is paid to a class of its shareholders.
Drawdown
Reduction of a trader’s capital after a series of unsuccessful trades.
E
Earnings-per-Share (EPS)
A company’s financial figure calculated by dividing the total amount of profit generated in a period of time by the number of shares listed on the stock market.
Entry Order
Order used to enter a trade at a specified price level.
Equity
The current value of your account (your balance plus P&L from open positions).
Ethereum
Second largest cryptocurrency platform.
Exchange Rate
Specified rate which one currency is currently being exchanged for.
Exchange-Traded Fund (ETF)
Financial instrument consisting of different groups of security types; usually tracking the performance via the use of an index.
F
Federal Funds Rate
Interest rate at which a depository institution pays funds held in the Federal Reserve to another overnight depository.
Financial Market
A marketplace where people trade currencies, bonds, shares, commodities and other assets.
Financial Report (statement)
Formal record displaying the financial activities and position of a listed company.
Fintech (Financial Technology)
Title describing innovative technologies designed to improve digital financial services.
Foreign Exchange (Forex or FX)
A simultaneous buying of one currency and selling of another on an over-the-counter market.
Forex Signal
A trade recommendation of a specified asset.
Free Margin
The available amount of funds in an account for the purpose of trading.
FTSE 100 Index (Financial Times Stock Exchange)
Major index which compiles the 100 largest and most actively traded companies listed on the London Stock Exchange.
Futures
A method of trading financial instruments, currencies or commodities at a specified price on a specified future date. Futures provide an obligation (not the option) to buy or sell instruments at a later date.
G
Gross Domestic Product (GDP)
Change in inflation-adjusted value of all goods and services produced by the economy; considered the broadest measure of economic activity and the primary gauge of the economy’s health.
Gross Income
Revenue from all sources a company’s income excluding the cost of goods sold.
Gross Margin
The specific amount of money a company possesses after subtracting its cost of goods or services sold from its net sales.
Gross Profit
The total sales income of a company after expenses from producing goods or services offered have been deducted.
GTC (Good Till Cancelled) Order
Order to buy or sell an asset at a fixed price. The order remains active until it is cancelled by the trader.
GTD (Good Till Date/Time)
An order that is active until a specific date, unless it has been fulfilled or the trader cancels it.
H
Hedge Fund
Investment instrument run by a fund manager whose goal is to maximize returns for himself and the contributing members.
Hedging
A risk management strategy used to offset losses in investments by taking an opposite position in a related asset. Risk reduction also typically results in a reduction of potential profits. Strategies include derivatives, such as options and future contracts.
High/Low
Highest and lowest traded prices of a given asset over a specified period of time.
High-Margin Securities
Shares of a company that tend to boast large profit margins.
High-Yield Stocks
Stocks whose dividend yields are higher than that of the average.
Historical Returns
Previous financial performance of a specific security or index.
I
ICO (Initial Coin Offering)
Virtual coin offering made to the public by a blockchain company in place of share offerings.
Implied Volatility
Expected price movement of an asset
Index
A benchmark measuring the performance of a market or sector of the economy.
Inflation
Continuous increase in the overall price level of a goods or service over a specified time period.
Initial Margin
Minimum equity required to open a new position.
Initial Public Offering
The occasion when a private company offers shares to the public for the first time.
Instrument
A general term to define assets such as stocks, currencies or bonds that can be bought, sold or traded.
Interest Rate
Rate at which a depository institution lends balances held at the Central bank to other depository institutions overnight. Short-term interest rates are necessary in currency valuation by traders.
Investment Strategy
The term used to describe an approach to investing in the financial world.
J
J-Curve
A trendline that shows an initial loss immediately followed by a dramatic gain. In a chart, this pattern of activity would follow the shape of a capital “J”.
January Effect
Perceived seasonal increase in stock prices during the month of January. Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December.
Jim Cramer
Jim Cramer is a former hedge fund manager, TV host, and personality of CNBC’s “Mad Money.”
Job Market
The market in which employers search for employees and employees search for jobs.
Jobless Claims
Statistic reported weekly by the U.S. Department of Labor that counts people filing to receive unemployment insurance benefits.
Joint Account
Bank or brokerage account shared between two or more individuals.
Joint Venture (JV)
Business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.
K
Key Economic Indicator
Critical economic data which provides investors insights into a specified economy.
L
Lagging Indicator
Indicator that informs traders when specific trends are underway.
Leading Indicator
Indicator that anticipates potential future market directions.
Leverage
Investment technique which utilizes a small amount of money to make a higher value investment.
Limit Order
An order to buy or sell at a specified or better price. A Buy Limit Order is executed at the specified or lowered price. A Sell Limit Order is executed at the specified limit or higher price.
Liquid Asset
Asset that is easily converted into cash without impacting its overall value.
Liquidity
Ability of a market to accept large transactions with little to no impact on price stability.
Long (Position)
Purchase of stocks, commodities or currencies with the expectation that the asset value will rise.
Lot
Term in forex referring to the number of currency units you’re buying or selling.
Low-Risk Investment
A type of investment that reduces the chances of losing some or all used capital.
M
Maintenance Margin
Minimum amount of required equity to maintain an investors current open positions. If investor equity levels drop below the maintenance margin, open positions will be closed automatically.
Margin Call
Requirement from a broker or dealer for additional funds or other collateral to bring margin up to the required level in order to guarantee performance on a position that has moved against the client.
Margin Level
Indication to displaying how close your account is to a margin call. It is shown in a percent (%) and calculated as Equity/Initial Margin.
Market Maker
Brokerage firm that offers to buy and sell securities in order to ensure liquidity of a specific market.
Market Order
Default option to buy or sell an investment immediately at the best current available price.
Market Sentiment
General attitude of investors towards a specified security.
Market Trend
General perceived trajectory of a specific market.
Minimum Trade Size
Minimum amount of a financial instrument that can be traded.
Momentum
Rate at which an underlying asset’s price shifts.
Mortgage
Secured loan used to purchase real estate property.
Moving Average (MA)
Technical Analysis tool that checks price swings over a specified timeframe.
Municipal Bond
A specific type of bond issued by a local government or state to find public projects.
Mutual Fund
Type of investment fund that pools money from multiple contributing members to invest in various types of securities.
N
Nasdaq-100 Index
An index featuring the world’s largest non-financial companies which are listed on the NASDAQ Stock Market.
Net Profit
A company’s profit figures after operating costs, taxes, interest and deprecation are removed from its total revenues.
Nikkei-225 Index
Largest Japanese index featuring the largest blue-chip companies which are listed on the Tokyo Stock Exchange
Non-Disclosure Agreement
Legally binding agreement establishing a confidential relationship between two parties.
O
Open P&L
The sum of profit and loss from an investor’s open positions.
Operating Cost
Expense associated with the administration of a business.
Operating Profit
Company’s income from revenue after the variable costs of running the business are subtracted, and before fixed costs are deducted.
Operational Risk
Term defining the prospect of loss resulting from inadequate or failed procedures, systems or policies.
Option
Financial instrument permitting the right, but not obligation, to buy or sell an asset for a pre-set price at a set future date.
Order Book
Electronic register consisting of buy and/or sell orders for a financial instrument.
Output
Quantity of goods or services produced in a specific timeframe by a firm, industry or country.
Over The Counter (OTC)
Any other transaction that is not conducted over a recognized exchange.
Overnight Interest
Interest which is credited or debited from an investor’s account when a position is held overnight. These transactions take place at the end of every trading session.
Overnight Interest Time
Specified time that an overnight interest is credited or debited from an investor’s account.
Overnight Position
An open position that is not closed at the end of a trading day therefore kept overnight.
Overvalued
Investing term referring to a stock price that isn’t justified by its earnings outlook.
P
Pending Order
Instruction to buy or sell a specific instrument when additional specific predetermined conditions are met.
Penny Stock
Term describing stocks of smaller public companies with a lower market capitalization.
Petrodollars
U.S. dollars paid to an oil-exporting country for the sale of oil.
PIP (or points)
Term used in a currency market to represent the smallest incremental move an exchange rate can make. Depending on context, this is normally one basis point (0.0001) in the case of EUR/USD, GBP/USD, USD/CHF, and .01 in the case of USD/JPY.
Pivot Point
Is a technical analysis indicator used to determine the overall trend of the market over different time frames. The pivot itself is simply the average of the high, low and closing prices from the previous trading day.
Portfolio
The total collection of assets owned by an investor.
Position
Total amount of security owned by an investor.
Position Trader
A specific investor who holds a position for an extended time, in the hopes that its price will increase.
PPI (Producer Price Index)
Change in the price of finished goods and services sold by producers; a leading indicator of consumer inflation.
Price Action
The movement of a security’s price over time.
Price Signal
Term describing a change in the price of goods or services, which indicates that the supply or demand may need adjustments.
Profit/Loss
Sum of profit and loss from an investor’s open positions.
Q
Quote
An indicative market price that shows the highest bid and/or lowest ask price available on a security at any given time.
Quantitative Easing (QE)
Is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply.
Quote Currency
The second currency in a currency pair.
R
Rate
Price of one currency in terms of another.
Relative Strength Index (RSI)
Well-known technical analysis indicator which measures current price strength relative to previous prices.
Reserve Currency
A currency held by banks to service debts, purchase commodities, and influence exchange rates.
Resistance (Level)
Chart point or range that caps an increase in the level of an asset over a period of time.
Retail Sales
Change in the total value of sales at the retail level; the primary gauge of consumer spending, which accounts for the majority of overall economic activity.
Retracement
Term that describes a brief reversal in the direction of an asset.
Rollover
Process of keeping a position open beyond its expiry.
Rollover Date
Price of CFDs are derived from their relevant future contracts. Because future contracts have an expiration date, open positions in such CFDs will be rolled over prior to the future contract expiration date, at the end of the asset’s specified trading day. A rollover adjustment will be credited or debited accordingly.
S
S&P 500 Index
An index which includes the top 500 quoted companies in the United States.
Scalping
Trading strategy involving placing many quick-fire trades to take advantage of small price changes.
Security
Tradable financial asset.
Short (or Short Position)
A directional trading or investing strategy where the investor sells shares of borrowed stock in the open market. The expectation of the investor is that the price of the stock will decrease over time, at which point he will purchase the shares in the open market and return the shares to the broker which he borrowed them from.
Simple Moving Average (SMA)
Technical analysis tool calculating an asset’s average price over a specific timeframe.
Slippage
The difference between the expected price of a trade and the price at which the trade is actually executed.
Spread
The difference between the buy and sale price in a market quotation.
Standard Deviation
Measure that is used to quantify the amount of variation or dispersion of a set of data values. A low standard deviation indicates that the data points tend to be close to the mean of the set, while the high standard deviation indicates that the data points are spread out over a wider range of values.
Stock
Tradable asset ranting the ownership of a fraction of a company.
Stock Market
The collection of markets and exchanges where people can trade shares of public companies.
Stop Order
Order to buy or sell a security when its price increases past a particular point, thus, ensuring a higher probability of achieving a predetermined entry or exit price, limiting the investor’s loss, or locking in the profit. Once the price surpasses the predefined entry/exit point, the stop order becomes a market order.
Stop Loss
Instruction from an investor to a broker to buy or sell a security when it reaches a certain price. Stop loss orders are designed to limit an investor’s loss. and minimize risk.
Support or Support Level
The price level below which, historically, an asset has had difficulty falling. It is the level at which buyers tend to enter the asset.
Swap
Forex term referring to the interest rate you pay for holding a position in a currency pair overnight.
Swing Trading
Trading strategy involving capitalizing on short-term price trends.
T
Take Profit (T/P)
A type of order that specifies the exact price at which to close out an open position for a profit.
Technical Analysis
A type of analysis that focuses on the internal factors that can impact an asset’s price.
Technical Indicator
Mathematical calculation based on historical price and volume of an asset that people use to predict the market direction.
Tick
Term used to describe the smallest price move possible in any market
Trade Balance
Difference in value between imported and exported goods during the reported month; Export demand and currency demand are directly linked because foreigners must buy the domestic currency to pay for the nation’s exports. Export demand also impacts production and prices at domestic manufacturers.
Trade Deficit
Usually referred to a country or economic region which imports more than it exports.
Trading Plan
Term describing the set of strategies an investor adheres to when trading the financial markets.
Trading Volume
The number of trades executed during a specific timeframe.
Trailing Stop
Modification of a typical stop order that can be set as a defined percentage or dollar amount away from a security’s current market price. Often placed at the same time as the initial trade, trailing stops are designed to protect investor’s gains by enabling a trade to remain open and continue to profit as long as the price is moving in the trader’s favor.
Trend Line
A line on a chart showing the price direction of an asset.
U
Undervalued
The cash value of an asset selling for a price below its presumed intrinsic value.
Used Margin
Indicates the sum of the margin currently being used by your open positions. Calculated by adding all of the initial margins of your open positions.
V
Venture Fund
Type of investment fund for people that want to invest in private start-up companies with healthy growth potential.
Volatility
A statistical measure of a market or a security’s price movements over time, it is calculated by using standard deviation.
Volume
The number or value of securities traded during a specific period.
W
Wallet
Software used for sending and receiving crypto tokens.
Working Capital
Term to describe the difference between a company’s current assets and current liabilities.
