The Ask is the market price for purchasing an instrument.
An asset, also known as an instrument, is a product which can be traded on the global financial markets. The list of assets includes currencies, commodities, stocks, bonds, and indices.
A bearish market has falling prices. It is a market which is perceived to be weak.
The Bid is the market price for the sale of an instrument.
A bond is a debt instrument issued for a specific time-period that is used for the purpose of raising capital.
A bullish market has rising prices. It is a market which is perceived to be strong.
CFD’s, or Contracts for Difference, are a type of derivative, like indices, or bonds, that offers investors leveraged trading on the changing value of an underlying asset, without actually owning the financial product.
The raw materials that are traded on the financial markets are called commodities. These include energy products like Crude Oil and Natural Gas, precious metals like Gold and Silver, and agricultural assets, such as Wheat, Coffee, and Sugar.
A derivative is a tradable contract that derives its value from the price of an underlying instrument. Underlying instruments for derivative contracts may include commodities, currencies, stocks or bonds. Derivatives are primarily used for hedging, to offset risk in a portfolio.
A dividend is the part of a company’s profits that is distributed to the shareholders.
A future is a contract for the execution of a transaction at a set date in the future. The price for the future transaction is agreed in the present.
Fundamental analysis is a means of assessing the price direction of an instrument, based on market indicators, such as the GDP report, climate news, political factors and other current events.
Hedging is a strategy for mitigating risk by opening a secondary position on the market to protect against potential losses, if the primary position closes unsuccessfully.
The world’s indices are the exchanges where a country’s stocks are traded, such as the Japanese NIKKEI, the German DAX, the English FTSE and the American NASDAQ.
Leverage is a way for an investor to boost their trading power and manage a greater position on the market with a nominal investment. An online broker may offer leveraged trading for up to 200 times the value of trader’s investment.
A long position refers to the purchase of an instrument, with the expectation that its market value is set to rise.
Lots are units of measurement. A single lot is the equivalent of 100,000 of the base currency.
The margin is the collateral required by a broker to be deposited by the trader in order that they can hold a position.
A margin call refers to a request by a broker for the investor to provide additional collateral to cover to a position that has moved against them.
An overnight position is a trade that remains open until the next business day.
A pip is the smallest measure of a currency. It is a 10 thousandth of a currency unit, and the fourth and final number after the decimal point. Pips are the means by which market profits and losses are quantified.
Range refers to when a price is trading between a set high and low and the instrument value remains within these set price boundaries.
A resistance serves as a ceiling for past or future price changes. It is the opposite of support.
A rollover is when an open position is closed at today’s price and simultaneously, a new position is opened for the next day’s price at a value that reflects the interest rate differential between both currencies.
A short position refers to the sale of an instrument, with the expectation that its market value is set to fall.
Slippage occurs due to changing market conditions and it is the difference between the requested price and the actual price that was obtained.
The spread is the difference between the bid and ask prices.
A stock is a percentage of a company and a stock holder is someone who owns a share of the company profits.
A stop loss order, also termed a stop order, is a risk management tool allowing a position to be closed, once it reaches a specific preset price. This protects against further losses on an open position if prices continue in an unfavourable direction for the investor.
A support serves as a floor for past or future price changes. It is the opposite of resistance.
A take profit order, also shortened to T/P, is a risk management tool allowing a position to be closed automatically, once it reaches a specific preset profit goal. This protects against profits being lost in an unanticipated reversal of price direction before the investor can close the position.
Technical analysis is a means of assessing the price direction of an instrument, based on price charts and historical performance.
A trailing stop lets a trade keep rising in value when the market price moves in the right direction for the investor. However, if the market price suddenly moves a preset amount in an unfavourable direction then the trade is automatically closed.
A trend is a price shift that results in a net change in value. An uptrend produces higher highs and lows and a downtrend produces lower highs and lows.
An uptick is a new price quote that is higher than the preceding one.
A volatile market is one that fluctuates a great deal. It presents more trade opportunities, due to greater market activity.
The percentage of profit on an investment.