Trading Terms of Glossary
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After-Hours Trading
After-hours trading refers to the buying and selling of securities outside of regular U.S. market hours. It includes two main sessions: the pre-market session, which runs from 4:00 AM to 9:30 AM Eastern Time (ET), and the after-market session, from 4:00 PM to 8:00 PM ET. These extended trading hours allow investors to respond to corporate earnings announcements, economic news, and global events that occur outside the standard trading day. After-hours trading often involves lower liquidity and higher price volatility compared to regular market hours.
Arbitrage
Arbitrage refers to the practice of taking advantage of price discrepancies between two or more markets to earn a risk-free profit. It typically involves buying an asset at a lower price in one market and simultaneously selling it at a higher price in another. True arbitrage opportunities are rare and often short-lived, as market efficiency tends to eliminate price differences quickly.
Ask Price
The ask is the price a seller is willing to accept for a financial instrument. It is the higher of the two prices quoted and represents the buying price for traders.
ATR (Average True Range)
ATR is a technical indicator that measures market volatility by calculating the average range between high and low prices over a set period. It helps traders assess how much an asset typically moves during a given timeframe.
Automated Trading
Automated trading, also known as algorithmic trading, is the use of computer programs to place trades based on predefined instructions.
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Balance
In CFD trading, balance refers to the total amount of realized funds in a trading account. It reflects the profit or loss from closed positions and does not include any unrealized gains or losses from open trades. The balance only changes when a position is closed, a deposit or withdrawal is made, or a fee or commission is applied.
Base Currency
Base currency can refer to either the first currency listed in a currency pair (e.g., EUR in EUR/USD), or the primary currency used for accounting and reporting purposes by financial institutions and businesses.
Basis Point
A basis point (bp) is a unit of measurement equal to 0.01%, commonly used to express changes in interest rates, yields, or percentages.
Bear Market
A market condition where prices are falling or expected to fall, often driven by widespread pessimism and negative sentiment.
Bid Price
The bid is the price a buyer is willing to pay to purchase a financial instrument. It is the lower of the two prices quoted and represents the selling price for traders.
Broker
A broker is a firm or individual that facilitates the trading of financial instruments by acting as an intermediary between traders and the market. Brokers accept orders on behalf of clients who do not have direct access to exchanges and typically earn a fee or commission. Many also provide services such as trade execution, market analysis, trading platforms, and educational tools.
Bollinger Bands
Bollinger Bands are a technical indicator consisting of a simple moving average (SMA) with an upper and lower band plotted two standard deviations above and below it. They help identify volatility and potential support or resistance levels in price action.
Bull Market
A market condition where prices are rising or expected to rise, typically supported by strong investor confidence and optimism.
Buy Limit
A pending order to buy at a price lower than the current market price. It is triggered when the market falls to the specified price.
Buy Stop
A pending order to buy at a price higher than the current market price. It is triggered when the market rises to the specified price.
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Candlestick
A candlestick is a charting tool that shows an asset’s price movement within a specific time period. Each candlestick displays the open, high, low, and close prices, helping traders identify patterns and assess potential short-term market trends.
Closing Price
The closing price is the final price at which an asset is traded before the market closes for the day. It serves as a key reference point for tracking daily and long-term price movements, often compared with previous closes or the opening price.
Commission
Commission is a fee charged by a broker for executing a trade. In CFD trading, it may apply when opening or closing a position, and is one of the costs associated with trading.
Commodities
Commodities are raw materials or primary goods that are used in the production of other goods and services. In trading, popular commodities include gold, silver, oil, and copper, which can be speculated on through instruments like CFDs.
Contract for Difference (CFD)
A contract for difference (CFD) is a derivative product that allows traders to speculate on the price movements of financial instruments without owning the underlying asset. CFDs are available across various markets, including shares, forex, commodities, indices, and bonds. They are typically traded on margin, offering increased exposure through leveraged positions.
Contract Size
Contract size refers to the standardized amount of an asset represented in a single trade. It varies by market and instrument type. For example, a standard forex contract typically represents 100,000 units of the base currency, while a gold futures contract may represent 100 ounces of gold.
Currency Pair
A currency pair shows the exchange rate between two currencies. The first currency is the base currency, and the second is the quote currency, which indicates how much of it is required to buy one unit of the base. Currency pairs are typically expressed using ISO codes, such as EUR/USD or USD/JPY.
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Day Trading
Day trading is a short-term trading strategy where all positions are opened and closed within the same trading day. Day traders aim to profit from intraday price movements, often placing multiple trades per day. This approach relies heavily on technical analysis and may involve the use of leverage, which can amplify both potential gains and losses.
Derivative
A derivative is a financial instrument whose value is based on the price of an underlying asset, such as a stock, currency, commodity, or index. It does not confer ownership of the underlying asset.
Diversification
Diversification is a risk management strategy that involves spreading investments across different asset classes, industries, or regions to reduce the impact of poor performance in any single area.
Dividend
A dividend is a portion of a company’s profits paid to its shareholders, typically on a regular basis. It represents a return on investment for equity holders.
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Equity
In finance, equity generally refers to ownership of an asset after subtracting any associated debt — for example, equity in a company or property.
In CFD trading, equity more specifically refers to the current value of a trading account. It includes the account’s balance along with any unrealized profits or losses from open positions. On platforms like MetaTrader, equity reflects the real-time value of your account and plays a key role in margin calculations and risk monitoring.
Exchange
An exchange is a structured and regulated marketplace where financial instruments such as stocks, commodities, and derivatives are traded. It provides a transparent environment for buyers and sellers to execute transactions. The terms "exchange" and "market" are often used interchangeably.
Exchange-Traded Fund (ETF)
An exchange-traded fund (ETF) is an investment product that tracks the performance of a specific index, sector, commodity, or asset class and is traded on a stock exchange like a regular stock. ETFs offer diversified exposure and are commonly used by investors to access a broad market segment through a single position.
Exposure
In trading, exposure refers to the level of risk or market involvement an investor or trader has at a given time. It may describe the total value of open positions, the potential for loss or gain, or the portion of capital allocated to a specific market, asset, or strategy.
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Fiat Currency
A fiat currency is a government-issued currency that is not backed by a physical commodity like gold or silver. Its value is derived primarily from the trust and confidence of the public in the issuing authority, typically a central bank or government.
Fibonacci Retracement
Fibonacci retracement is a technical analysis tool that uses horizontal lines based on key percentage levels to identify potential support and resistance areas. Traders use these levels to help determine entry and exit points, as well as where to place stop-loss and limit orders.
Financial Market
A financial market is a platform or system where financial instruments—such as stocks, bonds, currencies, or derivatives—are bought and sold. It serves as a medium for investors to trade assets, with prices driven by supply and demand. The term "market" can refer to both physical exchanges and electronic trading environments.
Free Margin
Free margin refers to the funds in a trading account that are not tied up in margin for open positions and are available to open new trades. It is calculated as the difference between equity and used margin.
Foreign Exchange (Forex)
Forex, or foreign exchange, is the global market for buying and selling currencies. It is a decentralised, over-the-counter market involving banks, financial institutions, brokers, and other participants. As the most liquid financial market, it plays a key role in international trade and investment.
Futures Contract
A futures contract is a standardized agreement between two parties to buy or sell an asset at a predetermined price on a set future date. These contracts are traded on exchanges and are commonly used for hedging or speculation.
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Gearing
Another term for leverage, referring to the use of borrowed funds to increase exposure to a financial position. It amplifies both potential gains and losses.
Gross Exposure
Gross exposure is the total value of all open long and short positions in a portfolio, without offsetting them. It reflects the overall size of a trader’s market exposure, regardless of direction.
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Hedge
A hedge is a strategy used to reduce potential losses by taking an offsetting position in a related asset. Hedging helps manage risk in a portfolio by limiting exposure to adverse market movements—for example, by going short to protect an existing long position.
High-Frequency Trading (HFT)
High-frequency trading is a form of algorithmic trading that uses powerful computer systems to execute a large number of orders at extremely high speeds. HFT strategies aim to capitalize on small price movements and market inefficiencies, often holding positions for very short periods.
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Indices
Indices are groups of stocks or financial assets that reflect the performance of a specific market, sector, or economy. They are commonly used as benchmarks and can be traded through instruments like ETFs, futures, or CFDs, offering broad market exposure without owning individual assets.
Initial Margin
Initial margin is the minimum amount of capital required to open a leveraged position. It acts as a security deposit to cover potential losses and is calculated based on the size and risk of the trade.
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Leverage
Leverage allows traders to increase their market exposure by using borrowed funds, enabling control of a larger position with a smaller amount of capital. It is typically expressed as a ratio (e.g. 1:30 or 1:400) and can magnify both potential gains and losses.
Liquidity
Liquidity refers to how easily an asset can be bought or sold in the market without causing a significant change in its price. High liquidity means there is strong market interest, making it easier to enter or exit positions quickly.
Liquidity Provider
A liquidity provider is a financial institution, such as a bank or specialized firm, that regularly offers executable two-way prices (bid and ask) for financial instruments. In CFD trading, liquidity providers supply the pricing and market depth that brokers use to execute client orders.
Lot
A lot is a standardized unit used to define the size of a trade in financial markets. The trade size represented by one lot varies depending on the asset class. In forex trading, a standard lot typically equals 100,000 units of the base currency. Other assets may have different lot sizes based on market conventions and contract specifications.
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Margin
Margin is the amount of funds required in a trading account to open and maintain a leveraged position. It serves as a security deposit to cover potential losses and is determined by the broker’s margin requirements.
Margin Call
A margin call is a broker’s request for additional funds or collateral when a trader’s account equity falls below the required margin level. It ensures there is sufficient capital to support open leveraged positions and limit the risk of default.
Market Data
Market data refers to real-time information related to trading activity, including prices, bid/ask quotes, and volume. It is provided by trading venues and distributed to market participants to support informed trading decisions across instruments like stocks, indices, forex, and commodities.
Market Depth
Market depth refers to the volume of buy and sell orders at various price levels for a particular asset. It shows the liquidity and order flow in the market, helping traders assess how much price may move in response to large trades.
Margin Level
Margin level is a percentage that indicates the health of a trading account by comparing equity to used margin. It helps determine whether sufficient funds are available to maintain open positions.
Market Maker
A market maker is an individual or institution that continuously provides buy and sell quotes for a financial instrument, helping to maintain liquidity and smooth market functioning by ensuring there is always a counterparty available.
Market Order
A market order is an instruction to buy or sell a financial instrument immediately at the best available price. It prioritizes speed of execution over price certainty.
Moving Average (MA)
A moving average is a widely used technical analysis indicator that smooths out price data by averaging it over a specific time period. It helps traders identify trends by reducing the noise from short-term price fluctuations.
Moving Average Convergence Divergence (MACD)
The MACD is a momentum indicator that uses the relationship between two moving averages to identify shifts in trend strength and direction. It is commonly used to spot potential entry and exit points around key price levels.
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Negative Balance Protection
Negative balance protection is a risk control feature that prevents traders from losing more money than they have in their trading account. It ensures that account balances cannot fall below zero, even in cases of extreme market volatility or price gaps.
Notional Value
Notional value refers to the total underlying value of a leveraged position, based on the asset’s current price and trade size. It represents the full market exposure, not the amount of capital actually invested. For example, a 1-lot forex trade in EUR/USD typically has a notional value of 100,000 EUR.
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OTC Trading
OTC (over-the-counter) trading refers to transactions conducted directly between two parties, without being routed through a centralized exchange. It is commonly used for trading derivatives, currencies, and other instruments outside formal exchange venues.
Open Position
An open position is an active trade that has not yet been closed, meaning it can still incur a profit or a loss. Positions remain open until they are closed by the trader or by a stop or limit order. They can be long or short, depending on the trader’s market view.
Order
An order is an instruction to open or close a trade at a specified price. In CFD trading, common order types include Limit Orders, Stop Orders, and Market Orders, allowing traders to control entry and exit points under different market conditions.
Overbought / Oversold
Overbought and oversold are technical analysis terms used to identify potential turning points in the market. An asset is considered overbought when its price has risen too far, too quickly—often beyond its fair value—suggesting a possible pullback. Conversely, an asset is oversold when its price has dropped significantly due to heavy selling pressure, potentially indicating a rebound as buyers return.
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Pending Order
A pending order is a trade instruction set in advance to be executed when the market reaches a specified price. It allows traders to open or close positions automatically at predefined levels. Common types include limit orders and stop orders.
Pip / Point
A pip is a standard unit of measurement in forex trading that represents the smallest price movement in most currency pairs. On trading platforms like MetaTrader, the term point is often used interchangeably with pip to refer to the smallest quoted price increment of any instrument—not just forex pairs.
Position
A position represents a trader’s exposure to a financial instrument, either through a long (buy) or short (sell) trade. Positions can be open—still active and subject to profit or loss—or closed, with the outcome realized.
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Quote
A quote is the latest available price at which an asset can be bought or sold. It reflects the most recent agreement between buyers and sellers and indicates the current market value of the instrument.
Quote Currency
The quote currency is the second currency in a currency pair and represents how much of it is needed to purchase one unit of the base currency. It is also known as the counter currency.
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Resistance Level
A resistance level is a price point where upward movement tends to slow or reverse due to increased selling pressure. It often acts as a barrier that an asset struggles to break through, and traders may use it as a signal to take profit or manage risk.
Rollover
Rollover refers to the process of extending a trading position beyond its original expiry or settlement date. This can involve closing a current contract and opening a new one with a later expiry, or in spot forex, it may occur automatically at the end of the trading day to maintain the position. Rollovers are commonly used to avoid physical delivery, manage exposure, or maintain long-term positions in expiring markets.
RSI (Relative Strength Index)
RSI is a momentum-based technical indicator used to evaluate whether an asset is overbought or oversold. It measures the speed and magnitude of recent price changes on a scale from 0 to 100, helping traders identify potential reversal points.
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Scalp
Scalping is a trading strategy that involves opening and closing positions within a very short timeframe to capture small price movements. It typically relies on high trade frequency and tight spreads to generate cumulative gains.
Sell Limit
A pending order to sell at a price higher than the current market price. It is triggered when the market rises to the specified level.
Sell Stop
A pending order to sell at a price lower than the current market price. It is triggered when the market falls to the specified level.
Short
In trading, to go short means to sell an asset with the intention of buying it back later at a lower price. A short position profits when the asset's price falls. This strategy is also referred to as shorting or selling short.
Slippage
Slippage is the difference between the expected price of a trade and the actual price at which it is executed. It commonly occurs in fast-moving or low-liquidity markets and is most noticeable when using market orders. Slippage can result in a better or worse fill price than anticipated, depending on market conditions.
Spot
In trading, the spot price is the current market price of an asset for immediate settlement. It reflects the value of the asset at a specific moment, as opposed to a futures price, which is based on delivery at a later date.
Spread
The spread is the difference between the bid (buy) price and the ask (sell) price of an asset. It represents a key cost of trading and can vary depending on market liquidity and volatility.
Stop-Loss Order
A predefined price level where a trade will automatically close to limit losses.
Stop Out
A stop out occurs when a trader’s margin level falls below the broker’s minimum requirement, triggering the automatic closure of positions to prevent further losses. It is a risk control mechanism designed to protect the account from going into a negative balance.
Support Level
A support level is a price point where an asset tends to find buying interest, preventing it from falling further. Traders use support levels to identify potential entry points and to place stop-loss or limit orders to manage risk.
Swap
A swap is an overnight interest fee or credit applied when a trading position is held past the market close, also known as an overnight financing cost. The swap reflects the interest rate differential between the two currencies in a forex pair or the cost of holding leveraged positions in other instruments. Depending on the direction of the trade and the rates involved, a trader may either pay or receive the swap. Swaps are typically charged daily and can be larger on certain days, such as during weekend rollover.
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Take Profit Order
A take profit order automatically closes a trade once a specified profit level is reached. It ensures gains are secured at a predefined price, without requiring the trader to monitor the market continuously.
Technical Analysis
Technical analysis is the study of historical price movements and trading volume to forecast future market behavior. It relies on chart patterns, indicators, and statistical trends, based on the belief that market activity tends to repeat over time.
Trailing Stop
A trailing stop is a dynamic stop-loss order that adjusts automatically as the market moves in your favor. It helps lock in profits by following price movement, but remains fixed if the market reverses, triggering an exit when a set distance from the peak is breached.
Trendline
A trendline is a visual tool used in technical analysis to highlight the direction of a market trend. It is drawn across two or more significant price points to indicate support or resistance. Trendlines may be upward (uptrend), downward (downtrend), or horizontal (sideways), helping traders identify entry and exit opportunities.
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Value at Risk (VaR)
Value at Risk (VaR) is a risk management metric that estimates the maximum potential loss of a portfolio or position over a set time frame, under normal market conditions, at a given confidence level. It is widely used to quantify financial risk exposure.
Volatility
Volatility refers to the degree of variation in an asset’s price over time. High volatility indicates frequent and significant price movements, while low volatility suggests more stable price behavior. It is a key measure of market risk and uncertainty.
Volume
Volume represents the total quantity of an asset traded over a specific period. It reflects market activity and liquidity and is often used alongside price data to confirm trends or signal potential reversals.
VWAP (Volume-Weighted Average Price)
VWAP is a trading indicator that shows the average price of an asset, weighted by volume, over a specific time period. It helps traders assess whether a security was bought or sold at a fair price relative to market activity.
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Withdrawal
A withdrawal is the process of removing funds from a trading account. It reduces the available equity and free margin and is typically processed through the broker’s payment methods.
Whipsaw
Whipsaw refers to a market condition where price movements quickly reverse direction, often triggering stop-losses. It typically occurs in volatile or range-bound markets and can be frustrating for traders using trend-following strategies.
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Yield
Yield refers to the income return on an investment, typically expressed as an annual percentage. For bonds, it represents interest earned; for stocks, it refers to dividend yield. Yield can also help assess the profitability of holding an asset.
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