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CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

Glossary of trading terms

A - B - C - D - E - F - G - H - I - L - M - N - O - P - Q - R - S - T - U - V - W - Y

Take a look at our list of the financial terms associated with trading and the markets.

From beginners getting acquainted with the world of investing to experts with decades of experience, all traders need to learn – or review – the meanings behind a huge number of terms on an almost daily basis.

We’ve put our 45 years of experience in trading to good use, defining and explaining a comprehensive list of trading vocabulary.

Acquisition definition

When one company decides to take over another one, it is referred to as an acquisition. The acquiring company will do this by purchasing either the majority or entirety of the ownership stake of the company being taken over.

Acquisition - see full definition

ADR definition

An American Depositary Receipt (or ADR, for short) is a way in which US investors can trade shares of non-US companies without using their local exchanges.

ADR - see full definition

Alerts definition

IG alerts – also known as trading alerts – allow you to set specific criteria and be notified immediately once that criteria has been met. There are three main types: economic announcements, price alerts and indicator alerts.

Alerts - see full definition

Alpha definition

Alpha is the measurement of an investment portfolio’s performance against a certain benchmark –usually a stock market index. In other words, it’s the degree to which a trader has managed to ‘beat’ the market over a period of time. The alpha can be positive or negative, depending on its proximity to the market.

Alpha - see full definition

Amortisation definition

Amortisation is the process of spreading the repayment of a loan, or the cost of an intangible asset, over a specific timeframe. This is usually a set number of months or years, depending on the conditions set by banks or copyright agencies. Amortisation will often incur interest payments, set at the discretion of the lender.

Amortisation - see full definition

Annual general meeting (AGM) definition

An annual general meeting (AGM) is a yearly gathering between the shareholders of a company and its board of directors. Generally, this is the only time that the directors and shareholders will meet throughout the year, so it is a chance for the directors to present the company’s annual report.

Annual general meeting (AGM) - see full definition

Arbitrage definition

Arbitrage in trading is the practice of simultaneously buying and selling an asset to take advantage of a difference in price. The asset will usually be sold in a different market, different form or with a different financial product, depending on how the discrepancy in the price occurs.

Arbitrage - see full definition

Ask definition

The ask refers to the price at which you can buy an asset or security from a seller. It can be variously referred to as ask, the ask, or asking price.

Ask - see full definition

Asset classes definition

An asset class is a category of financial instrument - these can be physical assets or financial assets. The instruments are grouped into asset classes based on whether they show similar characteristics, behave in the same way on the market, or are governed by the same laws and regulations.

Asset classes - see full definition

Assets definition

An asset is an economic resource which can be owned or controlled to return a profit, or a future benefit. In financial trading, the term asset relates to what is being exchanged on markets, such as stocks, bonds, currencies or commodities.

Assets - see full definition

At the money definition

At the money (ATM) is a term used to describe an options contract with a strike price that is identical to the underlying market price. At the money options see a lot of trading activity, because they are so close to becoming profitable.

At the money - see full definition

Auction definition

An auction market is an environment that facilitates competition between buyers and sellers. In an auction market, buyers indicate the maximum price that they are willing to pay for an asset, while sellers express the lowest price that they would be comfortable accepting.

Auction - see full definition

Automated trading definition

Automated trading – also known as algorithmic trading – is the use of algorithms for making trade orders.

Automated trading - see full definition

Averaging down definition

When a trader purchases an asset, the asset’s price drops, and if the trader purchases more, it is referred to as averaging down.

Averaging down - see full definition

Base currency definition

In trading the term base currency has two main definitions: the first currency quoted in a forex pair, or the accounting currency used by banks and other businesses.

Base currency - see full definition

Base rate definition

A base rate is the interest rate that a central bank – such as the Bank of England or Federal Reserve – will charge commercial banks for loans. The base rate is also known as the bank rate or the base interest rate.

Base rate - see full definition

Basis point definition

A basis point is a unit of measurement used to quantify the change between two percentages – it can also be referred to as ‘bp’, which is pronounced ‘bip’ or ‘beep’. A basis point is equal to one hundredth of one percent, or 0.01%.

Basis point - see full definition

Bear definition

Bears are traders who believe that a market, asset or financial instrument is going to head in a downward trajectory. In that regard, they hold an opposite view to bulls, who believe that a market is going to head upwards.

Bear - see full definition

Bear market definition

When the market is on a sustained downward trajectory, with little optimism from traders to bring about a rally, it is referred to as a bear market.

Bear market - see full definition

Bearish definition

Being bearish in trading means you believe that a market, asset or financial instrument is going to experience a downward trajectory. Being bearish is the opposite of being bullish, which means that you think the market is heading upwards.

Bearish - see full definition

Beta definition

A financial instrument’s beta is a measure of its risk or volatility when compared to the wider market.

Beta - see full definition

Bid price definition

In trading and investing, the bid is the amount a party is willing to pay in order to buy a financial instrument.

Bid price - see full definition

Blue chip stocks definition

Blue-chip stocks are the shares of companies that are reputable, financially stable and long-established within their sector. Over time, the companies that are considered blue chip tend to change, so the exact definition of what is required for blue-chip status can be vague. However, a company that is considered blue chip will tend to be at or near the very top of its sector, feature on a recognised index, and have a well-known brand.

Blue chip stocks - see full definition

BoE definition

The BoE is a popular shortening of the Bank of England, the central bank of the United Kingdom.

BoE - see full definition

Bollinger bands definition

Bollinger bands are a popular form of technical price indicator. They are made up of an upper and lower band, set either side of a simple moving average (SMA). Each band is plotted two standard deviations away from the SMA of the market, and they are capable of highlighting areas of support and resistance.

Bollinger bands - see full definition

Bond trading definition

Bond trading is one way of making profit from fluctuations in the value of corporate or government bonds. Many view it as an essential part of a diversified trading portfolio, alongside stocks and cash.

Bond trading - see full definition

Bonds definition

Bonds are a form of financial investment that involve lending money to an institution for a fixed period of time. They usually come in two varieties: corporate bonds and government bonds, depending on the type of institution you are lending to.

Bonds - see full definition

Book value definition

While book value reflects what a business is worth according to its financials (its books), market value is the worth of a company according to financial markets – also known as its market capitalisation. The calculation for market value is the current market price per share multiplied by the total number of outstanding shares.

Book value - see full definition

Bottom line definition

A company’s bottom line is an important factor in share trading. Variously, it can be used to refer to the net earnings or earnings per share (EPS) of a business.

Bottom line - see full definition

Brent crude definition

Brent crude – also referred to as Brent blend – is one of three major oil benchmarks used by those trading oil contracts, futures and derivatives. The other two major benchmarks are West Texas Intermediate (WTI) and Dubai/Oman, though there are many smaller oil varieties traded as well..

Brent crude - see full definition

Broker definition

A broker is an independent person or a company that organises and executes financial transactions on behalf of another party. They can do this across a number of different asset classes, including stocks, forex, real estate and insurance. A broker will normally charge a commission for the order to be executed.

Broker - see full definition

Bull definition

Bulls are speculators who believe that a market, instrument, or sector is going on an upward trajectory. This belief puts them at odds with bears, who take a pessimistic view on a market’s direction.

Bull - see full definition

Bull market definition

When a market, instrument or sector is on an upward trend, it is generally referred to as a bull market.

Bull market - see full definition

Buy definition

Buying a financial instrument means taking ownership of it from someone else, whether it is a commodity, stock or another asset.

Buy - see full definition

Cable definition

Cable in forex is the nickname of the GBP/USD currency pair. It represents the British pound against the US dollar, and it is one of the most popular pairs on the currency market.

Cable - see full definition

Call option definition

A call option is a contract the gives the buyer the right but not the obligation to buy a specific an asset at a specific price, on a specific date of expiry. The value of a call option appreciates if the asset's market price increases.

Call option - see full definition

Capital expenditure definition

Capital expenditure, or CAPEX, is the term used for the money spent by businesses on physical assets. It’s an important part of understanding a company’s accounts.

Capital expenditure - see full definition

Capital gains definition

Capital gains are the profits made from the buying and selling of assets. They are made when traders sell assets – like shares or commodities – for more than they originally paid for them. The opposite of a capital gain is a capital loss.

Capital gains - see full definition

Capital gains tax definition

Capital gains tax (or CGT), is the tax levied by the government on the profits made from financial asset sales. CGT regulations and levels vary from country to country.

Capital gains tax - see full definition

Capital loss definition

When a trader sells an asset at a lower price than they initially paid for it, they have incurred a capital loss. As such, capital loss is the opposite of capital gain: the profit made when an asset is sold for more than originally paid.

Capital loss - see full definition

Cash flow definition

Cash flow is the amount of money coming into and going out of a company’s accounts, as reported in earnings announcements. It can refer to a single project or the entire business.

Cash flow - see full definition

CFDs definition

Contracts for difference, or CFDs, are a type of financial derivative used in CFD trading.

CFDs - see full definition

Chartist definition

A chartist is a trader who relies predominantly on charts to help them understand a financial instrument’s historical price movements, in order to better predict and to speculate on its future performance. They are also commonly known as technical analysts, or technical traders.

Chartist - see full definition

Closing price definition

A closing price is the last level at which an asset was traded before the market closed on any given day. Closing prices are often used as a marker when looking at movements over a longer term. They can be compared to previous closing prices, or the opening price to measure an asset’s movement over a single day.

Closing price - see full definition

Commission definition

Commission is the charge levied by an investment broker for making trades on a trader’s behalf.

Commission - see full definition

Commodity definition

A commodity is a basic physical asset, often used as a raw material in the production of goods or services.

Commodity - see full definition

Concentration ratio definition

An industry’s concentration ratio is the size of a certain number of firms in an industry compared to its total size. It is used to calculate one or more firms’ dominance of their sector.

Concentration ratio - see full definition

Contracts for difference definition

CFD trading is the speculation on financial markets via contracts for difference (CFDs), a form of financial derivative.

Contracts for difference - see full definition

Convexity definition

Bond convexity is a measure of the relationship between a bond’s price and interest rates. It is used to assess the impact that a rise or fall in interest rates can have on a bond’s price – which highlights a bond holder’s exposure to risk.

Convexity - see full definition

Cost of carry definition

Cost of carry is the amount of additional money you might have to spend in order to maintain a position. This can come in the form of overnight funding charges, interest payments on margin accounts and forex transactions, or the costs of storing any commodities on the delivery of a futures contract.

Cost of carry - see full definition

Covered call definition

A covered call is a call option trading strategy. It involves holding an existing long position on a tradeable asset, and writing (selling) a call option against the same asset, with the aim of increasing the overall profit that a trader will receive.

Covered call - see full definition

CPI definition

CPI stands for consumer price index, an average of several consumer goods and services that are used to give an indication of inflation.

CPI - see full definition

Crystallisation definition

Crystallisation means selling an asset in order to realise capital gains or losses. When an investor buys an asset, any increase or decrease in the market price will not automatically translate to profit or loss – this is only realised after the position has been closed.

Crystallisation - see full definition

Currency appreciation definition

Currency appreciation is when one currency in a forex pair increases in value relative to the other currency in the pair. Forex traders often talk about one currency ‘strengthening’ in relation to another, meaning that it would cost more to buy, or that it can buy more of another currency when sold.

Currency appreciation - see full definition

Currency depreciation definition

Currency depreciation is the decline of a currency’s value relative to another currency. It specifically refers to currencies in a floating exchange rate – a system in which a currency’s value is set by the forex market, based on supply and demand.

Currency depreciation - see full definition

Currency futures definition

A currency future is a contract that details the price at which a currency could be bought or sold, and sets a specific date for the exchange.

Currency futures - see full definition

Currency options definition

A currency option is a type of options contract that gives the holder the right, but not the obligation, to buy or sell a currency pair at a given price before a set time of expiry. To get this right, the holder of the option pays a premium to the seller (known as the option’s writer).

Currency options - see full definition

Currency peg definition

A currency peg is a governmental policy of fixing the exchange rate of its currency to that of another currency, or occasionally to the gold price. It can sometimes also be referred to as a fixed exchange rate, or pegging.

Currency peg - see full definition

Dark pools definition

Dark pools are networks – usually private exchanges or forums – that allow institutional investors to buy or sell large amounts of stock without the details of the trade being released to the wider market.

Dark pools - see full definition

Day order definition

A day order is a type of order, or instruction from a trader to their broker, to buy or sell a certain asset.

Day order - see full definition

Day trading definition

Day trading is a strategy of short-term investment that involves closing out all trades before the market closes.

Day trading - see full definition

Debentures definition

In the UK, a debenture is an instrument used by a lender, such as a bank, when providing capital to companies and individuals. It enables the lender to secure loan repayments against the borrower’s assets – even if they default on the payment.

Debentures - see full definition

Debt ratio definition

Debt ratio is an indication of how much debt a company is holding, when compared to the value of its assets. It can also be applied to individuals: in which case it is the cost accrued by their debt compared to total income each year.

Debt ratio - see full definition

Delta definition

Delta is a measure used in options trading to assess how the price of an options contract changes as the price of the underlying asset moves. It can also sometimes be referred to as a hedge ratio.

Delta - see full definition

Depreciation definition

Depreciation is the term given to the decline in an asset’s value, either due to market conditions or other factors like wear and tear. It is the opposite of appreciation.

Depreciation - see full definition

Derivative definition

Derivatives are financial products that derive their value from the price of an underlying asset. Derivatives are often used by traders as a device to speculate on the future price movements of an asset, whether that be up or down, without having to buy the asset itself.

Derivative - see full definition

Digital options definition

A digital option is a type of option that offers the opportunity of a fixed payout if the underlying market price exceeds a pre-determined limit, called the strike price.

Digital options - see full definition

Direct market access (DMA) definition

Direct market access (DMA) is a way of placing trades directly onto the order books of exchanges. As a result, DMA offers traders flexibility and transparency when trading. But due to the risks and complexities involved, it is usually recommended for advanced traders only.

Direct market access (DMA) - see full definition

Dividend definition

A dividend is the portion of profit that a company chooses to return to its shareholders, usually expressed as a percentage.

Dividend - see full definition

Earnings per share definition

Earnings per share (EPS) is an important metric in a company’s earnings figures. It is calculated by dividing the total amount of profit generated in a period, by the number of shares that the company has listed on the stock market.

Earnings per share - see full definition

EBITDA definition

EBITDA is a way of evaluating a company’s performance without factoring in financial decisions or the tax environment. The literal meaning of EBITDA is ‘earnings before interest, taxes, depreciation and amortisation’.

EBITDA - see full definition

EBITDAR definition

EBITDAR is the abbreviation of ‘earnings before interest, taxes, depreciation, amortisation and restructuring or rent costs’. It is used to analyse a company’s financial performance and profit potential where the company is undergoing a restructure or if its rent expenses are higher than average.

EBITDAR - see full definition

ECB definition

When traders talk about the ECB, they are referring to the European Central Bank, the central bank for the Eurozone.

ECB - see full definition

Equity definition

In trading, equity can mean several different things. However it usually comes down to the ownership of an asset without any debt involved.

Equity - see full definition

Equity options definition

Equity options are a form of derivative used exclusively to trade shares as the underlying asset.

Equity options - see full definition

ETF definition

ETF stands for exchange traded fund, a type of investment security that is bought and sold on exchanges.

ETF - see full definition

ETP definition

Exchange traded products, or ETPs, are a variety of financial instruments that are traded throughout the day on national exchanges.

ETP - see full definition

Exchange definition

An exchange is an open, organised marketplace for commodities, stocks, securities, derivatives and other financial instruments. The terms exchange and market are often used interchangeably, as they both describe an environment in which listed products can be traded.

Exchange - see full definition

Exchange delivery settlement price (EDSP) definition

EDSP stands for exchange delivery settlement price, and refers to the price at which exchange-traded derivative contracts are settled. Stock exchanges use EDSP to calculate the amount that each party to an options or futures contract owes at the time of that contract’s expiry.

Exchange delivery settlement price (EDSP) - see full definition

Execution definition

In trading, execution is the completion of a buy or sell order from a trader. It is carried out by a broker.

Execution - see full definition

Expiry date definition

The point when a trading position automatically closes is known as the expiry date (or expiration date).

Expiry date - see full definition

Exposure definition

In trading, exposure is a general term that can mean three things: the total market value of your trades at open, the total amount of possible risk at any given point, or the portion of a fund invested in a particular market or asset

Exposure - see full definition

Fair value definition

Fair value has two meanings to investors. Generally, it is used to mean the value attributed to a stock by an individual investor or broker but in futures trading, it can refer to the predicted price of a market which is reflected in the cost to open a position.

Fair value - see full definition

FCA definition

The FCA, or Financial Conduct Authority, is the United Kingdom’s financial regulatory body. It is the successor to the FSA, or Financial Services Authority.

FCA - see full definition

Federal Reserve definition

The Federal Reserve bank, or the ‘Fed’ for short, is the central bank in charge of monetary and financial stability in the United States. It is part of a wider system – known as the Federal Reserve system – with 12 regional central banks located in major cities across the US.

Federal Reserve - see full definition

Fiat currency definition

A fiat currency is a national currency that is not pegged to the price of a commodity such as gold or silver. The value of fiat money is largely based on the public’s faith in the currency’s issuer, which is normally that country’s government or central bank.

Fiat currency - see full definition

Fibonacci retracement definition

A Fibonacci retracement is a key technical analysis tool that uses percentages and horizontal lines, drawn onto price charts, to identify possible areas of support and resistance. Identifying these areas is useful to traders since it can help them decide when to open and close a position, or when to apply stops and limits to their trades.

Fibonacci retracement - see full definition

Fill definition

Fill is the term used to refer to the satisfying of an order to trade a financial asset. It is the basic act of any market transaction – when an order has been completed, it is often referred to as ‘filled’ or as the order having been executed. However, it is worth noting that there is no guarantee that every trade will become filled.

Fill - see full definition

Financial instrument definition

A financial instrument is a monetary contract between two parties, which can be traded and settled. The contract represents an asset to one party (the buyer) and a financial liability to the other party (the seller).

Financial instrument - see full definition

Financial market definition

Market can have several meanings within investments. Generally it is defined as a medium through which assets are traded, with their value determined by supply and demand.

Financial market - see full definition

Fixed costs definition

Fixed costs are the costs incurred by a company that do not vary with the scale of production. They are one of two main types of cost associated with companies’ balance sheets: the others are variable costs.

Fixed costs - see full definition

Floating exchange rate definition

A floating exchange rate refers to a currency where the price is determined by supply and demand factors relative to other currencies. A floating exchange rate is different to a fixed – or pegged – exchange rate, which is entirely determined by the government of the currency in question.

Floating exchange rate - see full definition

FOMC definition

The FOMC, or Federal Open Market Committee, is the branch of the Federal Reserve bank that is in charge of short and long-term monetary policy decisions.

FOMC - see full definition

Force open definition

The ‘force open’ function on the trading platform allows you to enter a new trade in the opposite direction to an existing trade on the same market.

Force open - see full definition

Forex broker definition

A forex broker is a firm that buys and sells currencies on behalf of retail traders, usually via a forex trading platform. Like stockbrokers, they charge a fee – though usually in the form of a spread instead of commission – in order to execute orders placed by their clients.

Forex broker - see full definition

Forex definition

Forex is how market participants convert one currency to another. It can variously be referred to as foreign exchange, FX, or currencies.

Forex - see full definition

Forex trading definition

Forex trading is the act of taking part in the forex market in order to speculate and attempt to make a profit. It can also be known as FX trading, foreign exchange or currencies trading.

Forex trading - see full definition

Forward contract definition

A forward contract is a contract that has a defined date of expiry. The contract can vary between different instances, making it a non-standardised entity that can be customised according to the asset being traded, expiry date and amount being traded.

Forward contract - see full definition

Fundamental analysis definition

Fundamental analysis is a method of evaluating the intrinsic value of an asset and analysing the factors that could influence its price in the future. This form of analysis is based on external events and influences, as well as financial statements and industry trends.

Fundamental analysis - see full definition

Futures contract definition

Futures contracts represent an agreement between two parties to trade an asset at a defined price on a specified date in the future. They are also often referred to simply as ‘futures’.

Futures contract - see full definition

Gamma definition

Gamma is a derivative of delta: the relationship between a derivative’s price and the price of its underlying asset. Specifically, gamma is the movement of delta in regard to the price of the underlying asset.

Gamma - see full definition

GDP definition

GDP stands for gross domestic product, or the total value of the goods and services produced in a country over a specified period. It is used as an indicator of the size and health of a country’s economy.

GDP - see full definition

Gearing ratio definition

A gearing ratio is a measure used by investors to establish a company’s financial leverage. In this context, leverage is the amount of funds acquired through creditor loans – or debt – compared to the funds acquired through equity capital.

Gearing ratio - see full definition

Gross margin definition

Gross margin is a way of measuring the amount of profit a company can make from its revenue.

Gross margin - see full definition

Handle definition

In trading, the term ‘handle’ has two meanings, depending on which market you are referring to. In most markets, it means the whole numbers involved in a quote price, without the decimals included. In forex, it refers to the part of the quote that you see in both the buy and sell price.

Handle - see full definition

Hawks and doves definition

Hawks and doves are terms used by analysts and traders to categorise members of Central Bank committee ahead of their votes on monetary policy.

Hawks and doves - see full definition

Hedge definition

A hedge is an investment or trade designed to reduce your existing exposure to risk. The process of reducing risk via investments is called 'hedging'.

Hedge - see full definition

Heikin Ashi definition

Heikin Ashi is a type of chart pattern used in technical analysis. Heikin Ashi charts are similar to candlestick charts, but the main difference is that a Heikin Ashi chart uses the daily price averages to show the median price movement of an asset.

Heikin Ashi - see full definition

Helicopter money definition

Helicopter money is the term used for a large sum of new money that is printed and distributed among the public, to stimulate the economy during a recession or when interest rates fall to zero. It is also referred to as a helicopter drop, in reference to a helicopter scattering supplies from the sky.

Helicopter money - see full definition

High frequency trading definition

High frequency trading (or HFT) is a form of advanced trading platform that processes a high numbers of trades very quickly using powerful computing technology. It can be used to either find the best price for a single large order, or to find opportunities for profit in the market in real time.

High frequency trading - see full definition

Ichimoku Cloud definition

The Ichimoku Cloud is a technical analysis indicator that defines support and resistance levels, gauges momentum and provides trading signals. In Japanese, it is called the ‘Ichimoku Kinko Hyo’ which roughly means ‘one look equilibrium chart’ – because with just one look, traders can receive a range of information.

Ichimoku Cloud - see full definition

In the money definition

In the money (ITM) is defined by an option’s state of ‘moneyness’ – the underlying asset’s status when compared to the price at which it can be bought or sold (its strike price). Specifically, in the money means that an option* on an underlying asset has gone beyond its strike price, giving it an intrinsic value of more than $0.

In the money - see full definition

Index definition

In trading, an index is a grouping of financial assets that are used to give a performance indicator of a particular sector. The plural term is indices.

Index - see full definition

Indices trading definition

Indices trading is the means by which traders attempt to make a profit from the price movements of indices.

Indices trading - see full definition

Inflation definition

Inflation is the increase in the cost of goods and services in an economy. As that in turn means that each unit of the currency’s economy is worth less of any good or service, inflation can also be viewed as a devaluing of currency.

Inflation - see full definition

Interest definition

In finance, interest can have more than one definition. Firstly it refers to the charge levied against a party for borrowing money, which can be either a cost or a means of making profit for a trader. Secondly, it can mean the portion of a company’s stocks held by a particular shareholder.

Interest - see full definition

Interest rates definition

The amount that a lender charges to a borrower for the loan of an asset, usually expressed as a percentage of the amount borrowed. That percentage usually refers to the amount being paid each year (known as annual percentage rate, or APR) but can be used to express payments on a more or less regular basis.

Interest rates - see full definition

Intrinsic value definition

Intrinsic value is a way of describing the perceived or true value of an asset. This is not always identical to the current market price because assets can be over- or undervalued. Intrinsic value is a common part of fundamental analysis, which investors use to assess stocks, as well being used in options pricing.

Intrinsic value - see full definition

Investment capital definition

A trader’s investment capital is the portion of financial resources they have available for trading. It could be in the form of money or other assets.

Investment capital - see full definition

Investor definition

An investor is any person who devotes capital to an investment in the hope that they will see a return from it. However, in the investment community, investors tend to have a different attitude to investing than traders.

Investor - see full definition

IPO definition

When a company embarks on an IPO (which stands for initial public offering) it goes public on a stock exchange. This can also be known as floating, flotation, or just ‘going public’.

IPO - see full definition

Leverage definition

Leverage is a concept that can enable you to multiply your exposure to a financial market without committing extra investment capital.

Leverage - see full definition

Leveraged products definition

Leveraged products are financial instruments that enable traders to gain greater exposure to the market without increasing their capital investment. They do so by using leverage.

Leveraged products - see full definition

Liabilities definition

A company’s liabilities are the debts and obligations represented on its balance sheet. They are the opposite of assets.

Liabilities - see full definition

LIBOR definition

LIBOR, or the London Interbank Offered Rate, is a benchmark that dictates daily interest rates on loans and financial instruments around the world.

LIBOR - see full definition

Limit order definition

A limit order is an instruction to your broker to execute a trade at a particular level that is more favourable than the current market price.

Limit order - see full definition

Limit up / limit down definition

Limit up and limit down are the maximum amounts a commodity future may increase (limit up) or decrease (limit down) in any single trading day.

Limit up / limit down - see full definition

Liquidity definition

Liquidity is used in finance to describe how easily an asset can be bought or sold in the market without affecting its price – it can also be known as market liquidity. When there is a high demand for an asset, there is high liquidity, as it will be easier to find a buyer (or seller) for that asset.

Liquidity - see full definition

Long definition

When used in trading, long refers to a position that makes profit if an asset’s market price increases. Usually used in context as ‘taking a long position’, or ‘going long’.

Long - see full definition

Lot definition

A lot is a standardised group of assets that is traded instead of a single asset.

Lot - see full definition

M2 definition

M2 is a classification of money supply. It includes M1 – which is comprised of cash outside of the private banking system plus current account deposits – while also including capital in savings accounts, money market accounts and retail mutual funds, and time deposits of under $100,000.

M2 - see full definition

Maintenance margin definition

Maintenance margin is the amount that must be available in funds in order to keep a margin trade open. It is also known as the variation margin.

Maintenance margin - see full definition

Margin call definition

A margin call is the term for when a broker requests an increase maintenance margin from a trader, in order to keep a leveraged trade open.

Margin call - see full definition

Margin definition

In trading, margin is the funds required to open and maintain a leveraged position.

Margin - see full definition

Margin deposit definition

Deposit margin is the amount a trader needs to put up in order to open a leveraged trading position. It can also be known as the initial margin, or just as the deposit.

Margin deposit - see full definition

Market capitalisation definition

Market capitalisation is the total market value of a company’s shares on the market. It is often abbreviated to market cap. Market capitalisation is an easy way for investors to determine a company’s size, which can help to assess the risk of investing in its shares.

Market capitalisation - see full definition

Market data definition

Market data refers to the live streaming of trade-related data. It encompasses a range of information such as price, bid/ask quotes and market volume. Trading venues provide reports on various assets and financial instruments, which are then distributed to traders and firms. Market data is available across thousands of global markets, including stocks, indices, forex and commodities.

Market data - see full definition

Market maker definition

A market maker is an individual or institution that buys and sells large amounts of a particular asset in order to facilitate liquidity.

Market maker - see full definition

Market order definition

A market order is an instruction from a trader to a broker to execute a trade immediately at the best available price.

Market order - see full definition

Market value definition

While the market value reflects what a business is worth according to market participants, book value reflects what a business is worth according to its financials (its books). The calculation for the book value of a company is its total tangible assets minus its liabilities.

Market value - see full definition

Merger definition

When two or more companies decide to combine and become one entity, it is called a merger.

Merger - see full definition

MetaTrader definition

MetaTrader is an electronic trading platform which is popular among traders around the world.

MetaTrader - see full definition

Moving average convergence/divergence (MACD) definition

The moving average convergence/divergence (MACD) is a technical analysis indicator that aims to identify changes in a share price's momentum. The MACD collects data from different moving averages to help traders identify possible opportunities around support and resistance levels.

Moving average convergence/divergence (MACD) - see full definition

Moving average definition

A moving average (often shortened to MA) is a common indicator in technical analysis, used to examine price movements of assets while lessening the impact of random price spikes.

Moving average - see full definition

Multilateral trading facilities definition

Multilateral trading facilities (MTFs) offer traders and investment firms an alternative to traditional exchanges. They allow trading of a wider variety of markets than most exchanges, including assets that may not have an official market.

Multilateral trading facilities - see full definition

Multiplier effect definition

The multiplier effect is the term used to describe the impact that changes in monetary supply can have on economic activity. When an individual, government or company spends money it has a trickle-down effect to businesses and individuals. The resulting impact can be much wider than the initial action.

Multiplier effect - see full definition

Net change definition

Net change is the difference between the closing price of the current trading session, compared to the closing price of the previous trading session. Net change can be positive or negative, as it represents whether the markets are up or down on the previous day.

Net change - see full definition

Net income definition

Net income is the total amount of profit (often known as earnings) made by a company, listed in its earnings report.

Net income - see full definition

Non-current assets definition

Non-current assets represent a company’s long-term investments, for which the full value won’t be realised during the accounting year. This can also include items that don’t have an inherent value – intangible assets, for example – or assets with no fixed expiry such as property or land.

Non-current assets - see full definition

Non-farm payrolls definition

Non-farm payrolls are a monthly statistic representing how many people are employed in the US, in manufacturing, construction and goods companies. They can also be known as non-farms, or NFP.

Non-farm payrolls - see full definition

Off book definition

An ‘off-book’ trade refers to the process of trading shares away from an exchange or regulated body. They are usually executed via the over-the-counter (OTC) market. Off-book transactions are made directly between two parties, outside or ‘off’ of the order books.

Off book - see full definition

Offer price definition

Offer is the term used when one trader expresses an intention to buy an asset or financial instrument from another trader or institution.

Offer price - see full definition

On exchange definition

On exchange is a term used to mean that a trade is taking place directly on an order book. It differs from at quote, which is a trade made at the price quoted by a market maker.

On exchange - see full definition

On-balance volume definition

On-balance volume (OBV) is a form of technical analysis which enables traders to make predictions about future price movements based on the asset’s previous trading volume. OBV is mostly used in shares trading, because the volume has an especially large influence on the way share prices move.

On-balance volume - see full definition

OPEC definition

OPEC is the Organisation of the Petroleum Exporting Countries. It was founded in 1960 by Saudi Arabia, Venezuela, Iraq, Iran and Kuwait. The other countries that have joined OPEC since are Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon, Angola, Equatorial Guinea and the Republic of the Congo – bringing OPEC’s membership to 14, as of January 2019.

OPEC - see full definition

Open definition

Open has several definitions within investing. It can refer to the daily opening of an exchange, and an order or position that has not yet been filled or closed.

Open - see full definition

Open positions definition

An open position is a trade which is still able to generate a profit or incur a loss. When a position is closed, all profits and losses are realised, and the trade is no longer active. Open positions can be either long or short – enabling you to profit from markets rising as well as falling.

Open positions - see full definition

Option definition

An option is a financial instrument that offers you the right – but not the obligation – to buy or sell an asset when its price moves beyond a certain price with a set time period.

Option - see full definition

Option spread definition

There are three main types of options spread strategy: vertical, horizontal and diagonal.

Option spread - see full definition

Order book definition

In trading, an order is a request sent to a broker or trading platform to make a trade on a financial instrument.

Order book - see full definition

Order definition

In trading, an order is a request sent to a broker or trading platform to make a trade on a financial instrument.

Order - see full definition

OTC definition

OTC stands for over-the-counter, and refers to a trade that is not made on a formal exchange. It is often also referred to as off-exchange trading.

OTC - see full definition

Out of the money definition

Out of the money is one of three terms used in options trading, referring to an underlying asset’s price in relation to the price at which it can be bought or sold (its strike price).

Out of the money - see full definition

Overexposure definition

Overexposure in trading is the term used to describe the mistake of taking on too much risk. Typically, it’s when a trader makes the technical blunder of investing too much capital in a single position or market.

Overexposure - see full definition

P/E ratio definition

The price-to-earnings ratio, or P/E ratio for short, is a method of measuring a company’s value. The P/E ratio is calculated by dividing the company’s market value per share by the earnings per share (EPS).

P/E ratio - see full definition

Parent company definition

A parent company is one which has a controlling or majority interest in another company, which gives it the right to control the subsidiary’s operations. Parent companies can be directly involved in the management of their subsidiaries, or they can have a more hands-off approach.

Parent company - see full definition

Parity definition

The term parity can be used in a few ways when trading, but always as an expression of equality.

Parity - see full definition

Pip definition

A pip is a measurement of movement in forex trading, defined as the smallest move that a currency can make.

Pip - see full definition

Pip value definition

Pip value is the value attributed to a one-pip move in a forex trade.

Pip value - see full definition

PMI definition

A purchasing managers index (PMI) is an economic indicator comprised of monthly reports and surveys from private sector manufacturing firms. The index surveys product managers, who are the individuals that buy the materials needed for a company to manufacture its products.

PMI - see full definition

Portfolio definition

A portfolio refers to group of assets that are held by a trader or trading company. Assets in a portfolio can come in many forms, including stocks, bonds, commodities or derivatives.

Portfolio - see full definition

Position definition

A position is the expression of a market commitment, or exposure, held by a trader. It is the financial term for a trade that is either currently able to incur a profit or a loss – known as an open position – or a trade that has recently been cancelled, known as a closed position. Profit or loss on a position can only be realised once it has been closed.

Position - see full definition

Power of attorney definition

Power of attorney gives another person the ability to act on your behalf. In trading, this means they can take over your trading accounts.

Power of attorney - see full definition

Profit and loss definition

A profit and loss (P&L) statement is a financial report that provides a summary of a company’s revenue, expenses and profit. It gives investors and other interested parties an insight into how a company is operating and whether it has the ability to generate a profit.

Profit and loss - see full definition

Pullback definition

A pullback is a temporary pause or dip in an asset’s overall trend. The term is sometimes used interchangeably with ‘retracement’ or ‘consolidation’. However, a pullback should not be confused with a reversal, which is a more permanent move against the prevailing trend.

Pullback - see full definition

Put options definition

A put option is a contract that gives the buyer the right but not the obligation to sell an asset at a specific price, at a specific date of expiry. The value of a put option increases if the asset's market price depreciates.

Put options - see full definition

Quantitative easing definition

Quantitative easing (or QE, for short) is an economic monetary policy intended to lower interest rates and increase money supply. It saw an increase in profile and use after the 2008 financial crash and subsequent recession.

Quantitative easing - see full definition

Quote currency definition

The quote currency is the second currency listed in a forex pair. It is also known as the counter currency.

Quote currency - see full definition

Quote definition

In trading, the quote is the price at which an asset was last traded, or the price at which it can currently be bought or sold.

Quote - see full definition

Rally definition

A rally is a period in which the price of an asset sees sustained upward momentum. Typically, a rally will occur after a period in which prices have been flat, trading in a narrow band, or experiencing a decline.

Rally - see full definition

Random walk theory definition

Random walk theory is a financial model which assumes that the stock market moves in a completely unpredictable way. The hypothesis suggests that the future price of each stock is independent of its own historical movement and the price of other securities.

Random walk theory - see full definition

Range definition

Range is the difference between a market’s highest and lowest price in a given period. It is mostly used as an indicator of volatility: if a market has a wide range, it's a sign that it was volatile over the period analysed.

Range - see full definition

Rate of return definition

Rate of return (ROR) is the loss or gain of an investment over a certain period, expressed as a percentage of the initial cost of the investment. A positive ROR means the position has made a profit, while a negative ROR means a loss. You will have a rate of return on any investment you make.

Rate of return - see full definition

Ratio spread definition

A ratio spread is a strategy used in options trading, in which a trader will hold an unequal number of buy and sell options positions on a single underlying asset at once.

Ratio spread - see full definition

Reserves definition

Reserves are the liquid assets set aside for future use by an individual, central bank or business. Usually they are in the form of currency or a commodity, such as gold. For traders, reserves will usually be kept as cash that can be accessed quickly.

Reserves - see full definition

Resistance level definition

A resistance level is the point on a price chart at which an upward price trajectory is impeded by an overwhelming inclination to sell the asset. If a market price is nearing a resistance level, a trader may opt to close their position and take the profit, rather than risk the price falling back.

Resistance level - see full definition

Reversal definition

A reversal is a turnaround in the price movement of an asset: when an upward trend (or a rally) becomes a downward one (a correction), or vice versa. They can also often be referred to as trend reversals.

Reversal - see full definition

Rights issue definition

A rights issue is when a company offers its existing shareholders the chance to buy additional shares for a reduced price. Usually the discounted price will stand for a specified time frame, after which it is returned to normal.

Rights issue - see full definition

Risk management definition

Risk management is the process of identifying potential risks in your investment portfolio, and taking steps to mitigate accordingly.

Risk management - see full definition

Risks definition

In trading, risks are the ways in which an investment can end up losing you money.

Risks - see full definition

RNS definition

The Regulatory News Service, or RNS, is responsible for disseminating regulatory and non-regulatory information on behalf of UK businesses and publicly listed companies. Operating as part of the London Stock Exchange (LSE), the RNS provides businesses with information that can help them to comply with their disclosure obligations.

RNS - see full definition

ROCE definition

Return on capital employed, or ROCE, is a long-term profitability ratio that measures how effectively a company uses its capital. The metric tells you the profit generated by each dollar (or other unit of currency) employed.

ROCE - see full definition

Rollover definition

In trading, a rollover is the process of keeping a position open beyond its expiry.

Rollover - see full definition

RSI definition

RSI stands for the relative strength index. It is a key tool used in technical analysis, assessing the momentum of assets to gauge whether they are in overbought or oversold territory.

RSI - see full definition

Scalp definition

A scalp in trading is the act of opening and then closing a position very quickly, in the hope of profiting from small price movements.

Scalp - see full definition

SEC definition

The SEC stands for the US Securities and Exchange Commission. It is a government agency set up to regulate markets and protect investors in the United States, as well as overseeing any mergers and acquisitions.

SEC - see full definition

Sectors definition

Sectors are divisions within an economy or market, useful for analysing performance or comparing companies with similar outputs and characteristics.

Sectors - see full definition

SETS definition

SETS stands for the Stock Exchange Electronic Trading Service, the London Stock Exchange’s digital order book.

SETS - see full definition

Share buyback definition

Share buyback, or share repurchase, is when a company buys back its own shares from investors. It can be seen as an alternative, tax-efficient way to return money to shareholders. Once shares are repurchased they are considered cancelled, but they can be kept for redistribution in the future.

Share buyback - see full definition

Share price definition

A share price – or a stock price – is the amount it would cost to buy one share in a company. The price of a share is not fixed, but fluctuates according to market conditions. It will likely increase if the company is perceived to be doing well, or fall if the company isn’t meeting expectations.

Share price - see full definition

Shares definition

Shares are the units of the ownership of a company, usually traded on the stock market. They are also known as stocks, or equities.

Shares - see full definition

Shares trading definition

Shares trading is the buying and selling of company stock – or derivative products based on company stock – in the hope of making a profit.

Shares trading - see full definition

Short definition

In trading, short describes a trade that will incur a profit if the asset being traded falls in price. It is also often referred to as going short, shorting or sometimes selling.

Short - see full definition

Short selling definition

Short selling is the act of selling an asset that you do not currently own, in the hope that it will decrease in value and you can close the trade for a profit. It is also known as shorting.

Short selling - see full definition

Slippage definition

When the price at which an order is executed does not match the price at which it was made, it is referred to as slippage.

Slippage - see full definition

Smart order router definition

A smart order router (SOR) is an automated process used in online trading that follows a set of rules when looking for trading liquidity. The goal of an SOR is to find the best way of executing a trade.

Smart order router - see full definition

SNB definition

SNB stands for Swiss National Bank, the central bank for Switzerland.

SNB - see full definition

Socially responsible investing definition

Socially responsible investing is the process of selecting assets to buy based on their social impact as well as on their potential financial returns. It is also known as sustainable investing, socially conscious investing, green investing and ethical investing. Socially responsible investing is closely linked to impact investing, which seeks to make tangible positive change.

Socially responsible investing - see full definition

Spot definition

In trading, spot refers to the price of an asset for immediate delivery, or the value of an asset at any exact given time. It differs from an asset’s futures price, which is the price for delivery at some date in the future, or its expected price.

Spot - see full definition

Spread definition

In finance, the spread is the difference in price between the buy (bid) and sell (offer) prices quoted for an asset.

Spread - see full definition

Stock analysis definition

Stock analysis is the method used by a trader or investor to examine and evaluate the stock market. It is then used to make informed decisions about buying and selling shares. Stock analysis can also be referred to as market analysis, or equity analysis.

Stock analysis - see full definition

Stock exchange definition

A stock exchange is a centralised location where the shares of publicly traded companies are bought and sold. Stock exchanges differ from other exchanges because the tradable assets are limited to stocks, bonds and exchange traded products (ETPs).

Stock exchange - see full definition

Stock index definition

A stock index is a group of shares that are used to give an indication of a sector, exchange or economy. Usually, a stock index is made up of a set number of the top shares from a given exchange.

Stock index - see full definition

Stock symbol definition

A stock symbol is an abbreviation used to identify publicly traded companies. When a company decides to go public, it will select the exchange to list on and then choose a unique stock symbol to differentiate itself from other companies on the exchange.

Stock symbol - see full definition

Stockbroking definition

Stockbroking is a service which gives retail and institutional investors the opportunity to trade shares.

Stockbroking - see full definition

Stop order definition

Stop orders are types of order that instruct your broker to execute a trade when it reaches a particular level: one which is less favourable than the current market price. They can also be known as stop-loss orders.

Stop order - see full definition

Straddle definition

A straddle in trading is a type of options strategy, which enables traders to speculate on whether a market is about to become volatile without having to predict a specific price movement. It involves either buying or selling simultaneous call and put options with matching strike prices and expiration dates.

Straddle - see full definition

Strike definition

In options trading, the strike is the price at which a contract can be exercised, and the price at which the underlying asset will be bought or sold. It is also known as the strike price.

Strike - see full definition

Support level definition

A support level is the price at which an asset may find difficulty falling below as traders look to buy around that level.

Support level - see full definition

Tangible assets definition

Tangible assets are the assets on a company's books and balane sheet that have a physical form. They comprise the machinery, office equipment and buildings used by a company (fixed assets) and of the materials that are used in producing products (current assets).

Tangible assets - see full definition

Technical analysis definition

Technical analysis is a means of examining and predicting price movements in the financial markets, by using historical price charts and market statistics. It is based on the idea that if a trader can identify previous market patterns, they can form a fairly accurate prediction of future price trajectories.

Technical analysis - see full definition

Tom-next definition

Tom-next is short for ‘tomorrow-next day’, which is a short-term forex transaction that enables traders to simultaneously buy and sell a currency over two separate business days: tomorrow, and the next day.

Tom-next - see full definition

Trading floor definition

A trading floor is the area of a business or an exchange where assets are bought and sold, most commonly associated with stock exchanges and futures exchanges. It is also often referred to as a trading pit.

Trading floor - see full definition

Trading plan definition

A trading plan is a strategy set by the individual trader in order to systemise evaluation of assets, risk management, types of trading, and objective setting. Most trading plans will comprise two parts: long-term trading objectives, and the route to achieving them.

Trading plan - see full definition

Trailing step definition

A market’s volatility is its likelihood of making major, unforeseen short-term price movements at any given time.

Trailing step - see full definition

Trailing stops orders definition

A trailing stop is a type of stop-loss that automatically follows positive market movements of an asset you are trading. If your position moves favourably but then reverses, a trailing stop can lock in your profits and close the position.

Trailing stops orders - see full definition

Treasury stock definition

Treasury stock is the portion of a company’s shares that it keeps in its own treasury. The shares do not count towards the total amount of outstanding shares listed, and neither pay dividends nor carry voting rights (because a company cannot pay itself, or own itself).

Treasury stock - see full definition

Trend definition

When a market is making a clear, sustained move upwards or downwards, it is called a trend. Identifying the beginning and end of trends is a key part of market analysis. Trends can apply to individual assets, sectors, or even interest rates and bond yields.

Trend - see full definition

Trending shares definition

A trending share is the term for when a company’s stock is undergoing a significant move in comparison to its underlying index. The trend can be either upwards or downwards.

Trending shares - see full definition

Unborrowable stock

Unborrowable stock is the stock that no one is willing to lend out to short sellers. When shares in a company become unborrowable, the traditional means of short selling them is impossible.

Unborrowable stock - see full definition

Value at risk (VaR) definition

A market’s volatility is its likelihood of making major, unforeseen short-term price movements at any given time.

Value at risk (VaR) - see full definition

Variable costs definition

Variable cost is a business expense which is subject to change when sales volumes change. This could mean that variable costs either increase or decrease depending on a company’s current output.

Variable costs - see full definition

VIX definition

VIX is short for the Chicago Board Options Exchange Volatility Index. It is a measure used to track volatility on the S&P 500 index, and is the most well-known volatility index on the markets.

VIX - see full definition

Volatility definition

A market’s volatility is its likelihood of making major, unforeseen short-term price movements at any given time.

Volatility - see full definition

Volume definition

In trading, volume is the amount of a particular asset that is being traded over a certain period of time. It is often presented alongside price information, as it offers an extra dimension when examining an asset’s price history.

Volume - see full definition

VWAP definition

VWAP is the abbreviation for volume-weighted average price, which is a technical analysis tool that shows the ratio of an asset's price to its total trade volume. It provides traders and investors with a measure of the average price at which a stock is traded over a given period of time.

VWAP - see full definition

West Texas Intermediate (WTI) definition

WTI stands for West Texas Intermediate (occasionally called Texas Light Sweet), an oil benchmark that is central to commodities trading. It is one of the three major oil benchmarks used in trading, the others being Brent crude and Dubai/Oman.

West Texas Intermediate (WTI) - see full definition

Working order definition

A working order is a general term for either a stop or limit order to open. It is used to advise your broker to execute a trade when an asset reaches a specific price.

Working order - see full definition

Yield definition

Yield is the income earned from an investment, most often in the form of interest or dividend payments. Yield is one of the ways in which investments can earn a trader money, with the other being the eventual closing of a position for profit.

Yield - see full definition

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