The Traders Glossary

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

Arbitrage – refers to the practice of buying an asset then selling it immediately to take advantage of a difference in price.

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

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

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 Market – When a market, instrument or sector is on an upward trend.

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

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.

Closing Price – is the last level at which an Asset was traded on any given time frame.

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

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

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.

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.

Equity – In trading, Equity can mean several different things. However it usually comes down to the ownership of an asset without any debt involved, we usually use the term “equity” when talking about total dollar value of a trading account.

ETF – stands for Exchange Traded Fund, a type of investment security that is bought and sold on exchanges.

Exchange – 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.

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

Exposure – 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.

Fiat Currency – 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.

Fibonacci Retracement – 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.

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.

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

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.

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.

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’.

Hedge – 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’.

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.

More Terms Coming Soon!

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.

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

Straddle A Straddle is a type of options trading strategy that allows traders to speculate on whether a market is about to become volatile or not, without having to predict a specific price movement. Straddles involve either buying or selling simultaneous call and put options with matching strike prices and expiration dates.

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

Scalp 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.

SEC – 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.

Short – 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.

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.

Trailing Stop – 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.

Trend – 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.

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

Volume – 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.

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.

More Terms Coming Soon!

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