Glossary

Bar Chart

A style of chart used in technical analysis, where the top of the vertical line represents the highest price traded in a particular instrument, and the bottom part displays the lowest price. The closing price is shown on the right side of the bar, and the opening price is shown on the left side of the bar. A single bar normally represents one day of trading.

Base Currency

The first currency quoted in a currency pair (for example in the GBP/USD currency pair, GBP is the base currency while USD is the quote currency).

Base Rate

The lending rate determined by the central bank of a given country.

Base Point

Typically one hundredth of 1%, for example an interest rate cut of 50 basis points is equal to 0.5%.

Bear Market

A market distinguished by falling prices and negative sentiment.

Bid

The highest price a buyer is willing to pay for a product is referred to as the ‘bid’. Also see Ask and Offer.

Bid Price

The price at which the buyer is willing to purchase at.

Bid-offer Spread

The difference between the buying price (offer/ask) and selling price (bid) of a product.

Bull Market

A market distinguished by rising prices. Bullish investors have a positive opinion about a market, believing that prices will continue to rise.

Bullion

Precious metals such as gold, silver, platinum or palladium in the form of bars or ingots.

Buy Limit Order

A conditional trading order that indicates a security may be purchased only at the designated price or lower. Also see Take-profit order.

Buy Position

A position in the market that would profit from a rising market price, or make a loss should prices fall.

Buy Stop - Entry Order

When you buy a security that is entered at a price above the current offer price. It is triggered when the market price touches or goes through the specified stop price.

Candlestick Chart

As with a bar chart, this graph shows the high, low, opening and closing prices, and the shape of the candle reflects the relationship between these prices. The candles are either green or red, depending on whether the closing price is higher than the opening price (green) or below it (red). The main body, or ‘wax’, represents the range between the opening and closing price and the ‘wicks’ show the highs and lows. It shows a visual representation of the prevailing trend and current market sentiment.

Capital

The wealth, either monetary or in assets, owned by an individual or company.

Carry Cost

The cost incurred as a result of holding a position (e.g. The carry cost incorporated into the price of a commodity future consists of insurance costs, storage costs, interest charges and other related costs).

Carry Trade

A strategy in which a trader sells a certain currency with a low interest rate and uses the funds to purchase a different currency yielding a higher interest rate, attempting to capture the difference between the rates. Common low yielding currencies include the USD and JYP and common high yielding currencies include the AUD and NZD.

Cash Market

The actual, underlying market on which derivatives contracts are based.

Cash Price

The price of an asset for immediate delivery. In other words, the actual price of an instrument right now. This term is often used for stock indices, whereas the synonymous term of spot is more often applied to forex and commodity prices. Also see Spot rate.

Central Bank

A government or quasi-governmental organisation that manages a country's monetary policy. For example, the UK\'s central bank is the Bank of England, and the US central bank is the Federal Reserve.

Channel

An upward or downward trend on a chart where the boundaries are marked by two straight lines. A break above or below the channel lines signals a potential change in trend.

Charting

A range of techniques that use past price charts, along with other indicators, to anticipate future price movements.

Close Out

Selling a buy position or buying back a sell position, which closes the position, so that you no longer have any exposure to changes in the market price.

Closed Position

An equal and opposite transaction (for instance buying 1000 BT shares then selling 1000 BT shares) which results in the position automatically being closed.

Closing Price

The closing price is the last price for a tradable instrument at the time the market closes.

Commission

A fee charged by a broker or agent for carrying out transactions/orders.

Consumer Price Index (CPI)

An index that measures changes in the price of goods and services purchased by consumers. The figure measures the average change over time in the price of a sample of various common goods and services purchased by typical urban households.

Contract (Unit or Lot)

The standard trading unit on certain exchanges. For stock index, forex and commodity positions, it is the amount of base currency profit or loss per point movement in the market.

Controlled Risk

A position which has a strictly limited maximum loss by virtue of a guaranteed stop. Also see Limited risk.

Core Inflation

A measure of inflation that excludes items that are subject to volatile price movements. Vegetable prices are an example of items where prices fluctuate widely based on seasonal conditions. These products are excluded from the calculation as they can give a false measure of inflation because prices can diverge from the overall trend.

Cross Currency

A pair of currencies traded in forex that do not include the US dollar, for example EUR/JPY.

Cross Rate

An exchange rate between two currencies, both of which are not the official currency of the country in which it is quoted. Also refers to currency quotes that don’t involve the US dollar.

Crossed Price

A situation where the bid price exceeds the offer price. This is usually indicative of an issue on the venue or of the market being in an auction period.

Daily Chart

Charts that encapsulate the daily price movement of an instrument, for example a currency pair, index or share.

DAX 30

A market capitalisation weighted index of the top 30 companies listed on the Frankfurt Stock Exchange in Germany. This is referred to as the ’Germany 30’ on our website and trading platform.

Day Order

An order to buy or sell an instrument that will expire automatically at the end of the day if it’s not executed on the day the order has been placed.

Day Trading

The process of entering and closing out trades within the same day or trading session.

Dealing Spread

The difference between the buying and selling price of a contract.

Deposit

The funds required to initiate and maintain an open spread betting or CFD trading position. Since spread bets and CFDs are traded on margin, the deposit is only a fraction of the full value of the trade and is not the total amount that can be lost on a trade.

Depreciation

A fall in the value of an asset.

Dividend

That part of a company’s profit after tax that is distributed to its shareholders. Dividends are usually distributed in cash, but can also take the form of stocks. Also known as payouts.

Dividends

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

Dove

The opposite of hawk, a dove refers to an economic policy advisor supporting monetary policies with lower interest rates as a means of encouraging economic growth.

Dow Jones Industrial Average (DOW)

The Dow is the second oldest stock market index in the US and the most widely used indicator of the overall condition of the US stock market. It measures the performance of a selection of 30 blue-chip, publicly owned companies in the US.

Downtrend

A price trend characterised by a series of lower highs and lower lows.

Economic indicator

A government-issued statistic that indicates current economic growth and stability. Common indicators include employment rates, gross domestic product (GDP), inflation and retail sales.

Electronic Currency Network (ECN)

A virtual exchange for FX transactions.

Ex-dividend date

The first trading day on which the buyer of a share is no longer entitled to payment of the current dividend.

Execute and eliminate order

A limit order to execute at the current market price or worse. If the order is not filled in its entirety down to the specified order level then any remaining balance will be cancelled.

Exposure

The level of an investment which is at risk. The higher the exposure, the bigger the potential loss or gain.

Fibonacci

Technical analysis ratios used in trading to identify future price movements – named after mathematician Leonardo Fibonacci. The most popular Fibonacci tools are retracements and extensions.

Financial Conduct Authority (FCA)

The authority responsible for supervising financial services firms in the UK. One of the FCA’s roles is to regulate the conduct of brokers and dealers in securities, options, shares, spread bets and CFDs so clients get a fair deal.

Flexible spread

The difference between the bid and offer price that a broker can adjust according to market conditions. Also known as dynamic spread, floating spread or variable spread.

Floating profit/ loss

Current profit/loss on open positions calculated at current prices.

Free margin

Funds on the trading account which may be used to open a position. It’s calculated as account value less necessary margin.

FTSE 100

A market capitalisation weighted index of the top 100 companies listed on the London Stock Exchange. This is often used as an indicator to assess the broader UK market.

Good-for-day (day order)

An order type that will expire if not filled by the end of the day. See also Order to open, Good-till-cancelled, Fill.

Good-till-cancelled (GTC)

Unlike good-for-day orders, GTC orders remain active on the account waiting for a fill unless cancelled before being filled. See also Order to open, Good-for-day, Fill.

Gross domestic product (GDP)

GDP is the value of goods and services produced in a country including exports, minus imports made. It's a measurement of a country’s overall economic activity, and can also be a gauge for its standard of living.

Guaranteed stop-loss order (GSLO)

A stop-loss order is an order to buy or sell when the market reaches the 'stop\' price, which allows you to limit your losses. Unlike a standard stop-loss order, a guaranteed stop-loss order (GSLO) is unaffected by slippage or gapping and guarantees the price your trade will be closed out at. There is a premium to pay when placing the GSLO with us; however we will refund this in full if the trade is closed out without the GSLO being executed.

Hedge

A way of reducing the risk of losses that may occur if interest rates, share prices or foreign exchange rates move in the wrong direction. This usually involves the use of CFD or futures contracts.

Holding costs

Positions that are held open past 17:00 New York time will incur holding costs. These holding costs will be calculated based on the total size of the position. Also see Financing costs.

Inflation

Increase in the general price of goods and services.

Inflation rate

A measure of inflation that occurs in a given period (a year or calendar quarter for example). The inflation rate shows us how quickly the general price of goods and services is rising.

Initial Public Offering (IPO)

The process by which a company is floated on the stock market for the first time. Offering shares to the investment public is a way of raising capital for further expansion. Also known as New issue.

Interest

Cash adjustments made to reflect the economic effect of owing or receiving the notional amount of equity controlled by a spread bet or CFD position.

Intraday trading

Trading where positions are opened and then closed out within the same trading day.

Japanese candlestick charts

Japanese candlestick charts are similar to bar charts in that each ‘candle’ shows the opening price, closing price, high price and low price for the period. The candles are either green or red, depending on whether the closing price is higher than the opening price (green) or below it (red). The main body, or ‘wax’, represents the range between the opening and closing price and the ‘wicks’ show the highs and lows.

Kiwi

A slang term often used to reference the New Zealand dollar (or NZD), which is New Zealand's base unit of currency.

Leverage

Leverage allows traders to gain a large exposure with a relatively small outlay. This has the effect of amplifying profit or loss. A leverage of 1:100 means that in order to open and maintain a position the necessary margin is one hundred times less than the transaction size.

Limit order

A limit order is an order to buy or sell a product at a specific price. A limit order to buy at a target price with Limit Markets is executed at the target price or lower, when the buy price is equal to or lower than the target price. A limit order to sell at a target price with Limit Markets is executed at the target price or higher, when the sell price is equal to or higher than the target price.

Liquid market

A liquid market has sufficient volume of two-way business for a large transaction to occur with little or no impact on price. Such a market will normally exhibit tight bid-offer spreads.

Liquidity

The level of continual buy and sell activity making up market demand and indicating the ease with which investors can undertake transactions.

Long position

A position taken in anticipation of a rising market. To go long means to open a ‘buy’ position.

Lot size

It is the standardised quantity of a financial instrument, such as base currency, underlying asset or shares, per contract.

Major currency pairs

The most heavily traded currency pairs in the FX market, including: EUR/USD, USD/JPY, GBP/USD and USD/CHF.

Margin

CFD trading requires investors to deposit a small percentage of the overall cost that would be required if they were to purchase outright the equivalent product in the physical market. Even though the investor’s outlay is small in comparison to the value of the whole position, the investor will still be exposed to the same potential profit and loss. This means that your potential return on investment is magnified, as are your potential losses. Sometimes called 'variation margin\'.

Market-making

The process of quoting a bid and offer based on speculation, expectation, supply and demand.

NASDAQ

The NASDAQ is the second largest stock exchange in the US and traditionally lists many technology companies, such as Microsoft. The movements of the NASDAQ can have a significant effect on UK markets, particularly the techMARK index of technology, media and telephony companies.

New York Stock Exchange (NYSE)

The largest and oldest stock exchange in the US.

Non-farm payrolls

A notable economic indicator normally released on the first Friday of every month by the US Department of Labor. It presents the number of people on the payrolls of all businesses, with the exception of agricultural, local government, private household and non-for-profit. The monthly figure can change significantly, and often leads to a high level of volatility in FX pairs such as EUR/USD, around the time of the release. Generally, a high reading is seen as positive (or bullish) for the US dollar, while a low reading is seen as negative (or bearish).

OCO (one cancels the other)

Lets you place a sell limit and sell stop order on the same stock at the same time. When either order is executed the other will automatically be cancelled. Also applies to a buy limit and buy stop order.

Offer

A current market price is made up of a level at which you can sell and a level at which you can buy. The level at which you can buy is always the higher of the two prices and is called the offer.

Open position

A long or short position which has not been closed out by an equal and opposite position.

Order / order to open

An instruction by a customer to a broker/trader to buy or sell should a specified price be reached. The order remains valid until executed or cancelled by the customer.

Pip

Normally used in reference to forex rates, a 'percentage in point\' is generally, though not always, the fourth decimal place, i.e. 0.0001. Traditionally a pip was the smallest point by which a forex rate could move, but this is no longer the case.

Portfolio

A collection of investments owned by an individual or company.

Position

An open trade that you have in the market.

Position margin

The amount of equity that a CFD trader is required to pay in order to open a new position.

Profit and Loss (P&L)

Abbreviation of profit and loss; an account compiled at the end of an accounting period to show gross and net profit or loss. In spread betting and CFD trading, it shows money gained or loss incurred on a position.

Quarterly CFDs

A type of future with periodic expiries spaced three months apart. Prices are normally quoted for the next two or three quarter months. Also see Rollover.

Quote

The two-way market price for a given instrument; because it’s two-way, you can buy or sell, according to whether you think prices will rise or fall.

Quote currency

The second currency in a pair (for example USD is the counter currency in GBP/USD). Also see Base currency or variable currency.

Realised profit / loss

The amount of money you have made or lost on a position once it has been closed. Realised profit or loss will add to or subtract from your account cash balance.

Resistance level

A term used in technical analysis indicating a price level at which analysis suggests a predominance of selling – and hence a greater likelihood that the price will fail to break through the level.

Rollover

Closing an expiring futures position and reopening the position in the next tradeable future. In forex, the value of the process is measured by the interest rate differential between the two currencies. There’s usually a small cost for rolling over positions.

Running profit / loss

Shows how your open positions are performing: the unrealised money that you would gain or lose on your open positions if they were closed at prevailing market prices.

Scalping

A trading strategy that involves placing short-term trades, sometimes less than a minute long, usually to try and capture small price movements.

Sell limit / limit sell

A conditional trading order that indicates an instrument may be sold only at the designated price or higher.

Sell stop

An order to open a sell position at a price lower than the price at the moment of placing the order. It is subject to price depth ladder and can be slipped to the current market price.

Selling short

This is practice of selling shares that you do not own in the hope that the share price falls before you have to settle the contract. If the price does fall you can then buy the shares at the lower price and pocket the difference. Also see Shorting.

Shorting

A form of trading where the initial transaction is to sell, for example a CFD position taken in anticipation of a falling market. The position is closed with a buy trade. The trader will profit if the price falls and lose if it rises. When trading FX it refers to selling the base currency against the quote currency.

Slippage

The difference between the requested level of an order and the actual price at which it was executed. Slippage can occur during periods of higher volatility when market prices move rapidly or gap. Also see Fill and Gapping.

Spot price

The price quoted for immediate settlement or delivery of a currency, index, commodity or share (that is payment for and delivery of a product). It’s the current price at which a commodity or currency can be bought or sold at that specific time.

Spot rate

An exchange rate for immediate settlement.

Spread

The difference between the bid and the ask price of a security or asset.

Stop loss

An order placed to automatically close your position when the price reaches your specified stop-loss price. A stop-loss order is designed to limit a loss on a position. This is not always guaranteed, however, as market conditions may cause the trade to be exited at a slightly different price, due to market gapping or slippage. Also known as a stop order.

Take profit

An order to close an open position at a more profitable price compared to the price when placing the order.

Trade balance

This statistic reveals the difference between a country’s exports and imports of goods and services, such as cars, electronics, textiles, banking and insurance.

Trade size

The size of the underlying position that you are trading. Governs how much you make or lose on a trade for every point of movement in the price of the market.

Transaction costs

The costs you incur when trading financial products. These costs include commission (on shares), financing and spreads.

Trend

The general direction in which prices tend to move.

Trend lines

A straight line drawn across a chart that indicates the overall trend. In an upward trend, the line is drawn below, and acts as a support line; the opposite holds true for a downward trend. Once the asset breaks the trend line, the trend is considered to be invalid.

Two-way price

When both a bid (sell) and offer (buy) rate is quoted for a transaction.

Uptick

A price quoted that is higher than the previous quote.

Volatility

An explanation of how quickly the price of a market or instrument rises or falls. A highly volatile market can be risky for short-term investors as they risk buying at a peak or selling in a trough at a loss.

Wall Street

An alternative, well-known term for the New York Stock Exchange (NYSE), the largest stock exchange in the US.

Working an order

The process of having an order working that has not yet been executed. Also known as a pending order.

XD

XD is a symbol that is used to signify that a security or stock has gone ex-dividend.

Yard

A slang trading term for a billion units.

Yield

The income return earned on an investment. There are a number of different types of yield, and in some cases different methods of calculating each type. Yield refers to the dividends received or interest on a security and is usually an annual figure.