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Financial Dictionary

Improve your trading knowledge! Our dictionary, constantly updated with the definitions of the most popular and most commonly used terms in the financial sector, is a valuable training tool.

Available for Withdrawal

Amount of money you are able to withdraw. It equals to your current equity minus money necessary for maintaining your account out of margin call risk in case of existing open positions.


ADP Non-Farm Employment Change

Estimated change in the number of employed people during the previous month, excluding the farming industry and government.


ASK (Price)

The price at which a trader can buy a certain asset. It is highlighted on the right side of the quote.


Assets

An asset is a resource (financial or other) owned by an individual, company or country that has economic value or from which it expects to provide value in the future.

Balance

Your account’s value excluding P&L from open positions – it equals the funds you deposited into your account and your P&L from closed positions.


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 (opposed to the Bull market).


Bid (Buy) Price

The bid is the purchase price on the market, the price at which the market is ready to buy a certain asset. At this price, the trader can sell the asset. This is displayed on the left side of the quote.


Bull Market

A market that is characterized by rising prices.

Current Trading Hours

Daily hours in which an instrument is available for trading. All times shown are GMT.


Currency

A unit of exchange issued by a country’s government or central bank. This unit is the basis for trade.


Contract (Unit or Lot)

The standard unit of trading on certain exchanges.


CFD (CONTRACT FOR DIFFERENCE)

Is a contract between two parties, typically described as “buyer” and “seller”, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time (if the difference is negative, then the buyer pays instead to the seller). In effect, CFDs are financial derivatives that allow traders to take advantage of prices moving up (long positions) or prices moving down (short positions) on underlying financial instruments.


CPI – Consumer Price Index

Change in the price of goods and services purchased by consumers; Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate.


Cable

Slang for the Forex Currency pair GBP/USD.


Close (Position)

The process of closing a transaction that will terminate the open transaction.


Currency Pair

The two currencies that form a currency quote, for example USD / CHF.


Commission

The fee charged by an institution for making a transaction.


Central Bank

A central bank is the institution that manages the currency, money supply, and interest rates of a state and oversees their commercial banking system. The central Bank of the US is the Federal Reserve and the whilst the German one is called Bundesbank.

Dividends

A dividend is a distribution of a portion of a company’s earnings, decided by the board of directors, paid to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.


Day Trading

Represents act of buying and selling a financial instrument within the same day or even multiple times over the course of a day.

Equity

Your current account’s value – it equals your balance plus any P&L from open positions.


Euro

The official currency of the Member States of the European Union (EU). It was introduced in 1999, and in 2002 the euro coins and paper banknotes were introduced.


Eurozone

The group of 19 of the 28 EU Member States that combined their coins into a single currency (euro). They still have separate sovereigns but also have a combined central bank (ECB), which manages economic policy issues for them, as a single group.


Execution

In trading: Making a Buy or Sale order on behalf of a trader by a broker.


Expiry (Expiration) Date

The date on which the contract will expire and can no longer be traded. In CFD trading, is most often used for futures contracts.

Free Margin

The sum of funds you have available to use as initial margin for new positions. Calculated by subtracting the margin used by your current open positions from your equity.


Futures

A way of trading financial instruments, currencies, or commodities for a specific price on a specific date in the future. Unlike options, futures give the obligation (not the option) to buy or sell instruments at a later date.


Foreign Exchange (Forex or FX)

The simultaneous buying of one currency and selling of another in an over-the-counter market.


Federal Funds Rate

The interest rate at which a depositary institution (ie a bank) pays funds held in the Federal Reserve to another overnight depository. This is a closely monitored short-term interest rate as it indicates the EDF’s opinion on the monetary supply situation.


Federal Open Market Committee (FOMC)

A branch of the Fed, which determines the direction of US monetary policy: adjusting the discount rate, establishing bank reserve requirements, monetary mass targets, and others.


Fundamental Analysis

An analysis based on economic and political data used to determine the future evolution of a financial instrument.

GDP – Gross Domestic Product

Change in the inflation-adjusted value of all goods and services produced by the economy; It’s the broadest measure of economic activity and the primary gauge of the economy’s health.


GTC (Good Till Cancelled) Order

An order to buy or sell an asset at a fixed price. The order remains active until it is canceled by the trader.

Hedging

The practice of conducting an investment activity to protect against loss in another investment activity, such as short selling to neutralize a previous purchase, or long buying to offset a previous short sale. While hedging reduces potential losses, it tends to reduce potential profits as well.


High/Low

The highest and lowest traded prices of the asset over a predefined time period.

Initial Margin

Indicates the minimum equity required to open a new position.


Interest Rate

The rate at which depository institutions lend balances held at the Central bank to other depository institutions overnight; Short term interest rates are the paramount factor in currency valuation – traders look at most other indicators merely to predict how rates will change in the future.


Initial Public Offer

The moment a private company offers for the first time shares to the public.

Kiwi

Slang for New Zealand Dollar.

Leverage

Leverage is an investment technique that uses a small amount of money to make a much higher value investment.


Limit Order

Is an order to buy or sell at a specified price or better. A Buy Limit order (a limit order to buy) is executed at the specified limit price or lower (i.e., better). Conversely, a Sell Limit order (a limit order to sell) is executed at the specified limit price or higher (again, better). Unlike a market order, where you simply press “buy”/”sell” and let the market choose the price, you have to specify a price when using a limit order.


Long (or long position)

Is the buying of a security such as a stock, commodity or currency with the expectation that the asset will rise in value.


Liquidity

The ability of a market to accept large transactions with little or no impact on price stability.

Maintenance Margin

The minimum amount of equity required to maintain your current open positions. If your equity level drops below this number, your open positions will be automatically closed.


Margin Level

Indicates how close your account is to a margin call. Calculated as Equity/Initial Margin and shown in %. When Margin Level drops below 100% you will not be able to open new positions. And if it drops to 50% all your open positions will be closed and working orders canceled automatically.


Minimum Trade Size

The minimum amount of the financial instrument that may be traded.


Market Order

Is the default option to buy or sell an investment immediately at the best available current price.


Margin Call

A requirement from a broker or dealer for additional funds or other collateral to bring the margin up to a required level – thereby guaranteeing performance on a position that has moved against the customer.

Non-Farm Employment Change

Change in the number of employed people during the previous month, excluding the farming industry; Also known as Non-Farm Payrolls, NFP. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.


NON-FARM PAYROLLS (NFP)

Estimated change in the number of employed people during the previous month, excluding the farming industry and government.

Open P&L

The sum of profit and loss from all your open positions.


Overnight Interest

Is either credited or debited from your account when positions are held overnight. This will take place at the end of every trading session.


Overnight Interest Time

Is the time the overnight interest is credited or debited from your account.


Over The Counter (OTC)

Used to describe any transaction that is not conducted over an exchange.


Overnight Position

An open position that is not closed at the end of a trading day and is kept overnight.

PIP (or Points)

The 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.


PPI – Producer Price Index

Change in the price of finished goods and services sold by producers; It’s a leading indicator of consumer inflation – when producers charge more for goods and services the higher costs are usually passed on to the consumer.


Profit/Loss

The sum of profit and loss from all your open positions.

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

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.

Rollover Date

Prices of CFDs are derived from their relevant future contract. Since future contracts have an expiration date, open positions on 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 either be credited or debited accordingly.


Rate

The price of one currency in terms of another.


RESISTANCE (RESISTANCE LEVEL)

Is a 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; It’s the primary gauge of consumer spending, which accounts for the majority of overall economic activity.


Rollover

The process of keeping a position open beyond its expiry.

Stop Loss (S/L)

Is an order placed with a broker to sell a security when it reaches a certain price. Stop loss orders are designed to limit an investor’s loss on a position in a security.


Stop Order

Is an 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.


Short (or short position)

Is a directional trading or investment 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 the he will purchase the shares in the open market and return the shares to the broker which he borrowed them from.


Standard Deviation

Is a 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 a high standard deviation indicates that the data points are spread out over a wider range of values.


SUPPORT or SUPPORT LEVEL

Refers to the price level below which, historically, an asset has had difficulty falling. It is the level at which buyers tend to enter the asset.


Spread

The difference between the buy price and the sale price in a market quotation.


Swissy

A slang term for the Swiss Franc.

Take Profit (T/P)

Is a type of order that specifies the exact price at which to close out an open position for a profit.


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.

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.


Unemployment Claims

The number of individuals who filed for unemployment insurance for the first time during the past week; Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country’s monetary policy.

Volume

The number, or value, of securities traded during a specific period.


Volatility

A statistical measure of a market or a security’s price movements over time, it is calculated by using standard deviation.

News, opinions and current events

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