Trading Terms

An alert is an automated notification on a trading platform that fires when a market condition you set is met.

Arbitrage is a trading strategy that profits from a price difference for the same asset, or closely related assets, across different markets.

An auction is a market mechanism where buyers and sellers compete to trade an instrument by submitting prices.

Balance is the cash in a trading account after deposits, withdrawals, and closed trades.

A bear is a trader or investor who expects a market, sector, or instrument to fall, and a bearish view is that same expectation of lower prices.

A bear market is a sustained period of falling prices across a financial market.

The bid is the highest price a buyer will pay for an instrument.

A black box is an automated trading system that generates buy and sell orders from pre-programmed rules, algorithms, or mathematical models.

Bollinger Bands are a technical indicator, developed by John Bollinger, that plots a middle moving average with an upper and a lower band around it.

A broker is a financial intermediary that connects traders to markets and executes their buy and sell orders.

A bull is a trader or investor who expects a market, sector, or instrument to rise, and a bullish view is that same expectation of higher prices.

A bull market is a sustained period of rising prices across a financial market.

Buy and sell are the two basic actions in trading.

A bar chart is a price chart that shows the open, high, low, and close of an instrument for each time period.

A call option is a derivative contract that gives the buyer the right, but not the obligation, to buy an underlying asset at a set strike price before or on expiry.

A candlestick is a single mark on a price chart that shows the open, high, low, and close for one time period.

A candlestick chart is a chart that plots the open, high, low, and close prices of an instrument over a chosen time period.

Capitulation is a phase of heavy, panic-driven selling at the end of a sustained market decline.

Clearing is the process that runs between the moment a trade is executed and the moment it settles.

A clearing house is the institution that sits between executed trades and sees them through to settlement.

Commission is a fee a broker, exchange, or intermediary charges for executing an order.

A commodity is a basic physical good used in production, consumption, or trade.

Consolidation is a phase where price moves sideways instead of trending up or down.

A covered call is an options strategy that pairs owning an asset with selling a call option on that same asset.

A cup and handle is a bullish chart pattern made of a rounded base followed by a smaller pullback.

Confirmation is the use of extra market evidence to verify a trading idea before you open or close a position.

Day trading is the practice of buying and selling instruments inside a single trading day.

A deal is an executed transaction in which a buyer and seller agree to exchange an instrument at a set price and quantity.

A dealer is a person or firm that buys and sells instruments using its own capital.

Delta is an options Greek that measures how much an option's price is expected to move when the underlying asset moves by one unit.

Delta One is a class of financial product whose price moves almost one-for-one with an underlying asset, index, basket, or security.

A derivative is a financial contract whose value comes from an underlying asset, market, index, or rate.

Diversification is the practice of spreading trading or investment capital across different instruments, asset classes, sectors, strategies, or regions.

Drawdown is the peak-to-trough decline in account balance or equity over a period.

Divergence is a technical analysis signal that appears when the price of an instrument and a technical indicator move in opposite directions.

An economic calendar is a trading tool that lists scheduled economic events, data releases, central bank meetings, and policy announcements.

Engulfing is a candlestick pattern that forms when the body of one candle completely covers the body of the candle before it.

An exchange is a centralised marketplace where financial instruments are bought and sold.

Execution is the completion of a buy or sell order in the market.

An expiry date is the final date on which a trading contract or instruction remains valid.

Exposure is the amount of financial risk tied to an open trade, asset, currency, sector, or portfolio.

Fibonacci retracement is a charting tool that uses set percentage levels to measure how far price has pulled back within a larger move.

A fill is the execution of an order: the point at which a buyer and seller are matched and the trade completes at the fill price.

Flat means you hold no open position in a market.

Fundamental analysis is a method of valuing a financial instrument by studying the factors that drive its worth.

Gamma is an options Greek that measures how fast an option's delta changes when the underlying price moves by one unit.

A gap is a price area on a chart where an instrument opens well above or below its previous close, with little or no trading in between.

Given is a dealer term for a trade completed when a seller accepts the buyer's bid price.

GMT is Greenwich Mean Time, the time at the Greenwich meridian used as a common reference across global markets.

A grey market is an unofficial market where securities are bought and sold outside a formal exchange.

A hammer candlestick is a single-candle pattern that can signal a bullish reversal after a price decline.

A handle is the whole-number part of a price quote, with the smaller decimals stripped off.

A hanging man candlestick is a single-candle pattern that can signal a bearish reversal after a price rise.

Hedging is a risk-management strategy that opens an offsetting position to reduce the potential loss on an existing trade or portfolio.

A horizontal line is a charting tool that marks one fixed price level across time.

An indicator is a technical-analysis tool that runs a calculation on market data such as price, volume, or open interest.

Latency is the time delay between a trader's action and the trading system's response.

A level is a specific price, or narrow price area, that traders mark on a chart to anticipate a market reaction.

Leverage is the use of margin from a broker to control a position larger than your own deposit would allow.

Liquidity is how easily an instrument can be bought or sold without moving its price much.

Long is a position that profits when the price of an instrument rises.

A lot is a standardised unit of trade size that sets how many units of an instrument you buy or sell in one transaction.

Liquidation is the forced closure of a leveraged position by a broker or exchange when your margin falls below the level required to keep the position open.

A limit order is an instruction to buy or sell an instrument at a set price or better.

Margin is the deposit you put up to open and hold a leveraged position.

A margin call is a broker's demand that you add funds or reduce exposure once your account equity falls below the required margin level.

Margin trading is the practice of using borrowed funds, or broker-provided leverage, to open positions larger than your own cash would allow.

A market maker is a firm or trader that quotes both a bid price and an ask price for an instrument and stands ready to trade at those prices.

Market price is the price at which an instrument can be bought or sold right now.

MetaTrader is a trading platform used to analyse markets, place orders, and manage open positions.

A moving average is a technical indicator that averages an instrument's price over a set number of periods and plots the result as a single line.

A market order is an instruction to buy or sell an instrument immediately at the best available price.

Offer is the lowest price a seller will accept for an instrument, and it is the price at which you buy.

Open is the first traded price of an instrument at the start of a session or chart period.

An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a set price by a set date.

An order is an instruction you send to a broker or trading platform to buy or sell an instrument.

An order book is a real-time list of the buy and sell orders waiting at each price for an instrument.

A pivot point is a support and resistance level calculated from the previous period's high, low, and close.

A point is a unit that measures how far the price of an instrument has moved.

A position is the amount of a financial instrument a trader currently holds in an account.

A portfolio is the full set of financial instruments a trader or investor holds.

A quote is the current price at which a financial instrument can be bought or sold.

A rally is a strong, sustained rise in the price of an instrument or market.

A range is the gap between the highest and lowest price an instrument reaches over a set period.

A reversal is a change in the direction of a price trend.

Risk assessment is the process of identifying and measuring how much you could lose on a trade before you open it.

Risk management is the overall process of controlling how much of your capital is exposed to loss across your trading.

Risk mitigation is the set of specific actions you take to reduce the potential loss on a position.

A rollover is the process of extending an open position past its original expiry or settlement date.

Scalping is a short-term trading strategy that aims to profit from small price moves by opening and closing positions very quickly.

A seller is a market participant who offers a financial instrument for sale.

Short is a position that profits when the price of an instrument falls.

A short put is an options position created by selling, or writing, a put option.

Short selling is the practice of selling an asset you do not own, having borrowed it, in order to profit if its price falls.

Slippage is the difference between the price you expected when you placed an order and the price the order actually filled at.

A spike is a sudden, sharp move in price, volume, or volatility over a short period.

Spot is the buying or selling of a financial instrument for immediate delivery at the current market price, known as the spot price.

Spread is the difference between the bid price, the highest price a buyer will pay, and the ask price, the lowest price a seller will accept.

Spread betting is a leveraged derivative that lets you speculate on whether a market will rise or fall without owning the underlying asset, such as a stock, index, forex pair, commodity, or bond.

A stop loss is an order that closes an open position once the market reaches a price you set in advance.

A swap is a contract in which two parties exchange cash flows or financial obligations on agreed terms.

A take profit is an order that closes an open position once it reaches a profit level you set in advance.

Technical analysis is a method of studying markets through past price movement, chart patterns, volume, and technical indicators.

A tick is the smallest price increment by which an instrument can move.

Trading is the buying and selling of financial instruments to profit from price movements, and a trader is the person who does it.

A trailing stop is a stop-loss order that follows the market at a fixed distance, set as a number of points, pips, or a percentage.

A trendline is a straight line drawn on a price chart to show the direction of a trend.

Upside is the potential upward move in the price of an instrument, or the profit that move could produce.

Volatility is a measure of how much and how fast the price of an instrument moves over a given period.

Volume is the total amount of an instrument traded over a set period.