The YAL Academy
Every term, in plain words.
The vocabulary of trading, defined without jargon and without hand-waving. Each entry says what the thing is, how it is worked out, and the one part that most often trips people up.
Trading involves risk. You could lose more than your deposit.
457 terms, free, and nothing behind a sign-up
457 terms, in plain words
A
- Account balanceThe cash figure on a trading account after every completed transaction, moved only by deposits, withdrawals, closed positions and posted charges, and unaffected by positions still open.
- Account currencyThe single currency an account is denominated in, into which every result, charge and financing adjustment is converted before it reaches the balance.
- Accrued interestInterest a bond has earned since its last coupon payment but not yet paid out, added to the purchase price so the seller keeps what accrued while holding it.
- Adjustable pegA fixed exchange rate that the issuing authority reserves the right to reset, holding a currency inside a stated band until policy or reserves make a new central rate necessary.
- Advance-decline lineA running total of how many shares rose minus how many fell each session, read as a measure of how broadly an index move is supported.
- Algorithmic tradingTrading in which the decisions, the sizing or the routing are expressed as coded rules, so identical inputs produce an identical instruction every time without a person intervening.
- All-in costEvery charge attached to a position added together, spread, commission and financing, stated as one figure for the complete round turn rather than as separate lines.
- All-time highThe highest price an instrument has ever traded at, measured across its whole recorded history rather than a window, and superseded the moment it is exceeded.
- AppreciationA rise in the market value of one currency against another, produced by demand rather than by official decision, and always the exact mirror of a fall in the other.
- ArbitrageHolding the same economic exposure long in one place and short in another to capture a price difference, with the two legs offsetting so the position carries no market direction.
- Aroon indicatorA pair of lines measuring how recently a price series set its highest high and its lowest low within a lookback window, each scaled between nought and one hundred.
- Ascending triangleA chart formation in which highs stall along one roughly horizontal level while lows step upward beneath it, compressing price into a narrowing space against that ceiling.
- Ask priceThe price at which a market will sell an instrument, and therefore the price a buying instruction is filled at, always the higher of the two sides of a quotation.
- Asset classA group of instruments sharing how they are priced, traded and settled, which is why costs, hours and specifications differ far more between two classes than within one.
- At the moneyAn option whose strike sits at or near the current price of the underlying, so it holds no intrinsic value and whatever it is worth is time value alone.
- AuctionA trading mechanism that gathers orders over a window and matches them all at one price, used by exchanges to open and close a session rather than trade it continuously.
- Audit trailAn audit trail is the chain of dated records that lets a figure on an account statement be traced back to the instruction that was sent and the fill that answered it.
- AussieDealer shorthand for the Australian dollar quoted against the US dollar, one of a handful of desk nicknames that persist because they are faster to say than a currency code.
- AuthorisationAuthorisation is the permission a financial regulator grants to a named legal entity to carry on specified activities, held as a present tense condition that can be varied, restricted, suspended or withdrawn.
- Automated tradingTrading in which software places the orders directly, so a rule that has been coded and switched on acts on the market without a person confirming each instruction.
- Average directional index (ADX)An indicator scoring how strongly a market is trending without saying in which direction, built from two directional movement lines and smoothed across a lookback period.
- Average entry priceAverage entry price is the size weighted mean of the prices at which the parts of one position were opened, and it moves every time a further tranche is added at a different price.
- Average true range (ATR)A measure of how far an instrument typically travels in one period, averaging the true range of recent bars so that gaps between them are counted rather than ignored.
- Averaging downAveraging down is adding to a position that has already moved against its opening price, which lowers the average entry of a long position and increases the total exposure in the same action.
- Awesome oscillatorA momentum histogram plotting the difference between a short and a long simple moving average of each bar's midpoint, so it compares recent momentum against a longer baseline.
B
- BacktestingRunning a fixed set of trading rules over stored historical prices to record what that rule would have produced, which measures the rule against one past sample and nothing else.
- Balance of tradeThe value of a country's exports of goods and services less the value of its imports over the same period, published by its statistics agency on a monthly or quarterly cycle.
- Bank of JapanThe Bank of Japan is Japan's central bank, responsible for monetary policy in the yen, and it is the institution whose decisions and outlook reports move every pair the yen sits in.
- Bar chartA price chart drawing each period as one vertical line spanning its high and low, with a short tick to the left for the opening price and a tick to the right for the close.
- Base currencyThe first currency named in a pair, always one single unit of it, against which the rate states how many units of the second currency that one unit costs.
- Basis pointOne hundredth of one percentage point, used so that a change in a rate, a yield or a fee can be stated without the ambiguity the word percent carries.
- Bear marketA sustained decline in prices, conventionally marked once a market has fallen about twenty percent below a recent peak, though that threshold is a reporting convention rather than a defined term.
- Bearish engulfingA two candle formation in which a falling candle's body completely covers the body of the rising candle before it, read by chart traditions as a possible turn after an advance.
- BetaA measure of how far an asset's returns have moved with a benchmark's returns over a past window, where a beta of one describes an asset that moved with the benchmark on average.
- Bid priceThe price a buyer is prepared to pay, and therefore the price at which a holder of a long position sells out of it, always the lower of the two sides of a quote.
- Bid-ask spreadThe distance between the bid and the ask on one instrument at one moment, which is the first cost a position carries and is incurred the instant the position opens.
- Big figureThe leading digits of a currency quote that dealers leave unspoken because they rarely change during a session, also called the handle.
- Black swan eventAn event outside the range past data suggested was possible, carrying an extreme market impact, and rationalised convincingly only after it has happened, from the argument set out by Nassim Nicholas Taleb.
- Block tradeA transaction large enough that working it through the visible order book would move the price, so it is negotiated privately and printed to the exchange once agreed.
- Bollinger BandsA moving average drawn with two bands a chosen number of standard deviations above and below it, so the bands widen when recent closes have been dispersed and narrow when they have been tightly grouped.
- Bond yieldThe return a bond offers at its current market price, which moves in the opposite direction to that price and is the figure macro comparisons use rather than the fixed coupon.
- Bracket orderA bracket order is a pair of resting instructions attached to one position, one above the market and one below it, arranged so that whichever deals first cancels the other.
- Break even pointA break even point is the price at which a position's gain exactly covers the cost of opening and closing it, so the position finishes level rather than ahead.
- Breakaway gapA gap that opens as price leaves a range or a chart pattern, classified by where in a move it appears rather than by anything visible in the gap itself.
- BreakoutA move carrying price beyond a level that had been containing it, such as the edge of a range or a trend line, after which chart traditions treat that level as broken.
- BrokerA firm authorised to arrange or execute transactions in financial instruments for clients, which in retail CFD trading is also the party on the other side of every contract it writes.
- Bull marketA sustained rise in prices, conventionally dated from a recovery of about twenty percent above a recent low, though the threshold is journalistic shorthand rather than a defined term.
- Bullish engulfingA two candle formation in which a rising candle's body completely covers the body of the falling candle before it, read by chart traditions as a possible turn after a decline.
- Buy limit orderAn instruction to open a long position only at a stated price or lower, which rests below the current market and executes only if price falls to the level.
- Buy sideThe institutions that deploy capital, pension funds, asset managers and insurers among them, as distinct from the sell side firms that price, execute and research on their behalf.
- Buy stop orderAn instruction to open a long position once price rises to a stated level, which rests above the current market and converts into a market order the moment the level trades.
C
- CableCable is the dealing room name for the sterling to US dollar exchange rate, GBP/USD, after the nineteenth century telegraph cable that first carried the quote across the Atlantic.
- CandlestickA candlestick draws one period of trading as a single mark: a body spanning the opening and closing prices, with thin wicks reaching to the extremes traded inside that period.
- Carry tradeA carry trade holds a higher yielding currency against a lower yielding one, so the interest rate differential between them is credited or debited daily while the position stays open.
- Cash indexA cash index instrument tracks the current level of a stock index itself rather than a dated future, so it carries no expiry and attracts a daily financing adjustment instead.
- Central bankA central bank sets a country's official interest rate and manages its money supply, which makes its scheduled decisions the largest single influence on that currency and its government bonds.
- Central bank interventionCentral bank intervention is the buying or selling of a currency by the monetary authority itself, undertaken to move or defend its exchange rate rather than to make money.
- Central Bank of the UAEThe Central Bank of the UAE is the monetary authority for the dirham, and because the dirham is pegged to the US dollar its policy rate tracks the dollar's rather than being set against domestic conditions.
- Chart patternA chart pattern is a shape read from the arrangement of highs and lows on a price chart, such as a triangle, a flag or a head and shoulders.
- Choppy marketA choppy market moves sideways with frequent reversals and little follow through, so a direction established in one bar is commonly given back over the next few.
- Circuit breakerA circuit breaker is a rule that halts trading once a price has moved beyond a stated threshold, imposed by a venue on every participant at once and lifted on a published schedule.
- ClearingClearing is the step between a matched trade and its settlement, confirming terms, netting obligations and, on an exchange, replacing the two parties with a central counterparty.
- Client money segregationClient money segregation is the requirement that a licensed firm hold money belonging to clients in accounts separate from its own, reconciled regularly against what is owed to them.
- Clone firmA clone firm is an unauthorised operation that presents itself using the name, registration number or branding of a genuinely licensed firm, so that a verification check appears to succeed.
- Close priceThe close price is the last price traded before a period ended, whether that period is a one minute bar, a daily session or an exchange's official closing auction.
- Closing a positionClosing a position means entering the equal and opposite contract in the same instrument with the same firm, so the two net to nothing and the difference between the prices is realised.
- ColocationColocation is the practice of housing trading equipment in the same facility as the systems it communicates with, bought for one property only: the time a signal spends travelling.
- CommissionCommission is a charge a broker applies for executing an order, quoted per lot or as a percentage of notional value, and charged separately from the spread rather than inside it.
- Commitment of Traders reportThe Commitment of Traders report is a weekly breakdown of open interest in United States futures markets by category of participant, published each Friday for positions held the previous Tuesday.
- CommodityA commodity is a physical good traded in standardised units where one unit is interchangeable with another of the same grade, so its price prices a quantity of the material rather than a claim on a company.
- Commodity currencyA commodity currency belongs to an economy whose exports are dominated by raw materials, so its exchange rate has tended to move with the price of what that country sells.
- ComplaintA complaint is an expression of dissatisfaction that a licensed firm is obliged to record, investigate and answer within a published time limit, with a route of escalation beyond the firm.
- CompoundingCompounding is the effect of applying a percentage change to a base that has already been changed, so a sequence of gains and losses does not net out to the sum of its percentages.
- Conduct rulesConduct rules are the obligations a licensed firm owes in how it deals with clients, covering execution, communications, conflicts and records, and they bind the firm's process rather than any market outcome.
- Confirmation biasConfirmation bias is the tendency to notice evidence that supports a view already held and to discount evidence against it, which is why an open position changes how a chart looks.
- Conflict of interestA conflict of interest is a situation in which a firm's own interest and a client's could point in different directions, which a licensed firm must identify, manage, and disclose where it cannot manage it.
- Consensus forecastA consensus forecast is the central estimate of a survey of economists taken before a data release, and it is the number an outcome is judged against rather than the previous reading.
- ConsolidationConsolidation is a phase in which price moves sideways inside a defined band after a directional move, with successive highs and lows contained rather than extending.
- Consumer price index (CPI)The consumer price index measures the average change in the prices households pay for a fixed basket of goods and services, and it is the most watched inflation release.
- ContangoContango describes a futures curve in which later delivery months cost more than nearer ones, a shape normally explained by the storage, insurance and financing of holding the physical asset.
- Contract for difference (CFD)A contract for difference settles in cash the difference between an instrument's opening and closing price, calculated on the full contract value, with nothing delivered and no title passing.
- Contract sizeContract size is the quantity of the underlying that one contract covers, such as the units of base currency in a standard lot, or the ounces in one gold contract.
- Contract specificationA contract specification is the published sheet of fields that define one instrument as it is dealt on a platform, including contract size, tick size, minimum volume, trading hours and margin requirement.
- Core inflationCore inflation is a price index calculated with the most volatile components removed, usually food and energy, published so that a persistent trend can be read without the noise those components add.
- Corporate actionA corporate action is an event initiated by a listed company that changes the terms or the price of its shares, such as a dividend, a split, a rights issue, a merger or a delisting.
- CorrectionA correction is a fall that interrupts a rising market without ending it, conventionally cited once the decline from a recent high reaches about a tenth of its value.
- CorrelationCorrelation measures how closely the returns of two markets have moved together over a chosen window, on a scale from perfectly opposite through unrelated to perfectly aligned.
- Cost of carryCost of carry is the net cost of holding something over time: financing, storage and insurance on one side, any income or convenience the holding yields on the other.
- Counter currencyThe counter currency is the second currency written in a pair, the one the rate counts out, and the currency any result on that pair arrives in before conversion.
- CounterpartyThe counterparty is the party on the other side of a contract, and on a contract for difference that party is the broker itself rather than an exchange or another client.
- Cross rateA cross rate is an exchange rate between two currencies with no US dollar on either side, historically assembled by combining each currency's separate dollar rate.
- Cup and handleA cup and handle is a chart pattern in which a rounded recovery back towards a prior high is followed by a shallow drift lower before that high is tested again.
- Currency pairA currency pair prices one currency in terms of another, base first and counter second, the rate stating how many units of the counter one unit of the base costs.
- Currency pegA currency peg fixes one currency's rate against another currency or a basket, held there by a central bank standing ready to buy or sell its own currency at that rate.
- Currency swapA currency swap exchanges principal and interest in one currency for principal and interest in another, and the same word names the daily financing on a position held overnight.
D
- Day tradingOpening and closing positions within a single session so that none is carried overnight, which avoids financing adjustments and pays the spread more often.
- Daylight savingDaylight saving is the seasonal clock change some jurisdictions apply, which moves a trading session against every clock that did not change while leaving the session itself untouched.
- Dead cat bounceA short recovery inside a decline that then continues, named from the observation that a falling object can bounce without having stopped falling.
- Deal ticketThe record of one executed transaction, carrying the instrument, direction, size, price, timestamp and reference number that identify it uniquely afterwards.
- Dealing deskA broker's internal desk that takes the other side of client orders and manages the resulting exposure itself, instead of passing every order out to an external provider.
- DeflationA sustained fall in the general price level, which raises the real value of money and of existing debt, and which central banks treat as harder to reverse than inflation.
- DeltaThe rate at which an option's price changes for a small change in the price of the underlying, quoted as a number between minus one and one.
- Demo accountAn account running the same platform and the same quote stream as a funded one, in which every fill is produced by a simulator rather than obtained from a market.
- DepreciationA fall in one currency's value against another driven by trading rather than by an official decision, which is exactly what separates it from a devaluation.
- Depth of marketThe ladder of resting buy and sell interest at each price level around the current quote, showing how much size stands where rather than only the best price on offer.
- Descending triangleA chart formation whose successive highs fall toward a level where lows keep stopping, drawn as a downward sloping upper line converging on a flat lower one.
- DevaluationAn official reduction of a currency's fixed rate by the authority that sets it, arrived at as a decision and announced, rather than produced by trading.
- DivergenceDivergence is the case where price makes a further extreme and an indicator computed from that price does not, which technical traditions read as a weakening of the move rather than as a signal to act.
- DiversificationSpreading exposure across positions whose results do not move together, so that the variability of the whole is lower than the average variability of its parts.
- DividendA distribution of a company's profits to its shareholders, declared by the board for a stated amount per share, and under no obligation to be repeated.
- Dividend adjustmentA cash entry a provider applies to an open CFD when the underlying goes ex-dividend, crediting the long side and debiting the short side so the price drop lands on neither.
- DojiA candle whose open and close finish at or very near the same price, drawn as a cross, describing a period that ended where it began.
- Dollar indexA single number tracking the US dollar against a fixed basket of other currencies, so dollar strength can be read without choosing one pair to read it in.
- Donchian channelTwo lines plotting the highest high and the lowest low of a chosen number of past periods, with a midline between them, mapping the range price has occupied.
- Double bottomTwo lows made at approximately the same level with a rally between them, counted as complete only once price closes above the high of that intervening rally.
- Double topTwo highs made at approximately the same level with a dip between them, counted as complete only once price closes below the low of that intervening dip.
- DovishDescribing a policymaker or a statement that leans toward looser monetary policy, weighting growth and employment more heavily than the risk of rising inflation.
- Dow theoryA set of principles drawn from Charles Dow's editorials, holding that market movement runs in trends of three different lengths and that the averages must confirm one another.
- DrawdownThe fall from a peak in an account's value to the lowest point reached before a new peak is set, usually stated as a percentage of that peak.
- DurationA measure of how far a bond's price moves when its yield changes, expressed in years, rising with the time to maturity and falling as the coupon grows.
E
- Earnings per shareEarnings per share states a company's profit for a period as an amount of money per ordinary share in issue, which is the form most reported results and valuation measures take.
- Earnings seasonEarnings season is the concentrated few weeks after each quarter ends in which most listed companies publish results, so scheduled single-share volatility clusters into a short window.
- Economic calendarAn economic calendar lists scheduled data releases, central bank decisions and official speeches with their exact release times, the previous reading and the consensus estimate for each.
- Economic indicatorAn economic indicator is a published statistic describing part of an economy, such as output, prices, employment or sentiment, on a fixed schedule and a defined methodology.
- Elliott wave theoryElliott wave theory describes price as repeating sequences of five waves in the direction of the larger trend followed by three against it, nested at every scale of chart.
- Emerging market currencyAn emerging market currency belongs to an economy classified as developing by index providers, and typically trades with thinner depth, wider spreads and greater sensitivity to global funding conditions.
- EquityEquity is an account's balance adjusted for the running profit or loss on every open position, so it states what the account would be worth if all positions closed at the current quotation.
- European Central BankThe European Central Bank sets monetary policy for the euro area, taking one decision that applies to every member economy, which is the constraint that shapes how its announcements are read.
- ExchangeAn exchange is a regulated venue that concentrates buying and selling interest in listed instruments into one order book, publishes the resulting prices, and applies the same rules to every participant.
- Exchange rateAn exchange rate states the price of one currency in terms of another: how many units of the second currency one single unit of the first currency costs.
- Exchange traded fund (ETF)An exchange traded fund holds a defined basket of assets and issues listed shares against it, so a stake in the whole basket changes hands on an exchange throughout the session.
- ExecutionExecution is what turns an instruction into a trade: the order reaches a counterparty or venue, is accepted at a price, and comes back as a fill with a time stamp.
- Execution onlyExecution only is a regulatory status describing a firm that carries out the instructions it is given and makes no recommendation about what to deal, in which direction or in what size.
- Exotic currency pairAn exotic currency pair sets a heavily traded currency against one from a smaller or less traded economy, and characteristically quotes with a wider spread and thinner depth than a major.
- ExpectancyExpectancy is the average result per trade a set of rules produced over a sample of closed trades, combining how often it won with how much it won and lost.
- Expense ratioAn expense ratio is the annual cost of running a fund, expressed as a percentage of its assets and deducted continuously from those assets rather than billed to the holder.
- Expiry dateAn expiry date is the day a dated contract ceases to exist, on which any position still open is settled at a final price or rolled into the next contract month.
- Exponential moving average (EMA)An exponential moving average smooths a price series while weighting recent observations more heavily than older ones, so it turns faster than a simple average of the same length.
- ExposureExposure is the money value of the market a position covers, measured on the full contract value rather than on the sum posted as margin against it.
- Extended hoursExtended hours are the pre-market and post-market windows in which listed shares can still be dealt electronically, outside the exchange's main continuous session.
F
- FakeoutA move that breaks a watched price level convincingly enough to look like a breakout, then reverses back through it, leaving the level intact and the break unconfirmed.
- Federal funds rateThe rate at which banks in the United States lend reserve balances to one another overnight, and the rate the Federal Reserve steers as its main instrument of monetary policy.
- Federal Open Market Committee (FOMC)The committee inside the United States Federal Reserve that sets the target range for the federal funds rate and directs the central bank's holdings of securities.
- Federal ReserveThe Federal Reserve is the central bank of the United States, and its rate setting committee takes the decision that anchors the dollar and, through it, prices in nearly every other market.
- Fibonacci extensionA drawing tool that projects levels beyond the end of a completed price swing, at distances set by ratios above one drawn from the Fibonacci sequence.
- Fibonacci retracementA grid of horizontal lines drawn across a completed price swing at fixed proportions of its height, used to measure how far a pullback against that swing has travelled.
- FillThe price and the time at which an order was actually executed, which for an immediate order is whatever the market can do at that instant rather than the price last displayed.
- Fill or killA condition attached to an order requiring it to be executed in full and at once, or cancelled outright, so that nothing rests and no part position is left behind.
- FinfluencerA finfluencer is a social media account that publishes financial commentary or trading content to an audience, and whose posts fall inside financial promotion rules wherever the account is promoting a product.
- First printA first print is the initial published estimate of an economic statistic, produced against a deadline from incomplete source data and expected to be restated as the remaining data arrives.
- Fiscal breakeven priceA fiscal breakeven price is the oil price at which an oil exporting government's revenue covers its planned spending, which converts a commodity price into a statement about that state's budget.
- Fiscal policyA government's use of taxation, spending and borrowing to influence demand in its own economy, decided by the finance ministry and the legislature rather than by the central bank.
- Fixed exchange rateAn exchange rate that a country's authorities hold at a stated level, or inside a stated band, against another currency or a basket, maintained by intervention rather than by the market.
- Flag patternA short consolidation drifting against a sharp preceding move, bounded by two roughly parallel lines, which chartists read as a pause inside that move rather than the end of it.
- Flash crashA very fast and very deep price fall followed by a partial recovery within minutes, produced by liquidity withdrawing faster than orders arrive rather than by news about the asset.
- Flat positionA state in which an account carries no open exposure to an instrument, so nothing revalues on a tick, no collateral is held against it and no unrealised result is running.
- Floating exchange rateAn exchange rate left to supply and demand in the market rather than held at a level by the authorities, so it moves continuously and has no official value on any given day.
- Foreign exchangeThe market in which one currency is bought with another, quoted in pairs and dealt over the counter across a global network of banks and brokers rather than on a central exchange.
- Forward contractA private agreement between two parties to exchange an asset on a stated future date at a price fixed today, negotiated directly rather than standardised and listed on an exchange.
- Forward guidanceForward guidance is a central bank's published description of how policy is likely to develop, treated as a policy instrument in its own right because expectations move rates long before a decision does.
- Free floatThe portion of a company's shares genuinely available to trade, once holdings locked away by founders, governments, strategic owners and insiders have been excluded from the total in issue.
- Free marginThe part of an account's equity that is not currently held as collateral against open positions, and therefore the buffer standing between the account and a close out.
- Fundamental analysisStudy of the economic and financial facts behind a price, from interest rates and growth to company earnings and physical supply, aimed at an estimate of what an instrument is worth.
- Funded accountA funded account is the stage of a proprietary trading firm arrangement reached after an evaluation is passed, in which a participant trades the firm's simulated capital under its rules for a share of any profit.
- Futures contractA standardised, exchange traded agreement to buy or sell a set quantity of an asset on a stated date, margined daily and cleared through a house that stands between both sides.
G
- GammaGamma measures how quickly an option's delta changes as the price of the underlying moves, so it describes the curvature of the option's value rather than its slope.
- GapA gap is the blank space on a chart left when a session opens away from the previous session's close, meaning no trading took place at the prices in between.
- GappingGapping describes a market moving from one price to another with no trading in between, so an order resting in the skipped range fills at the next available price instead.
- Gearing ratioGearing ratio relates a contract's full value to the margin held against it: losses are calculated on that full value and are not limited to the amount deposited.
- Golden crossA golden cross is recorded when a shorter moving average crosses above a longer one on the same chart, a crossing chart readers conventionally treat as a change of trend.
- Good for dayGood for day is a time in force instruction that leaves an order working until the close of the current trading day, after which any unfilled part is cancelled automatically.
- Good til cancelled (GTC)Good til cancelled is a time in force instruction that leaves an order working across sessions until it fills or is cancelled, rather than expiring with the session.
- GreenbackGreenback is dealing room shorthand for the United States dollar, taken from the green ink printed on the reverse of the notes the US Treasury issued during the Civil War.
- Gross domestic product (GDP)Gross domestic product measures the total value of goods and services produced within a country over a period, the broadest single reading of whether an economy grew or shrank.
- Group of Seven (G7)The Group of Seven, or G7, is a forum of advanced economies whose finance ministers and central bank governors meet regularly and whose currencies dominate foreign exchange volume.
- Growth stockA growth stock is a share in a company whose earnings are expanding faster than the market average, priced at a premium to what those current earnings alone would support.
- Guaranteed returnA guaranteed return is a promise of a fixed profit from trading, which no licensed firm may make and no market can deliver, because a return that is certain is not a return produced by taking risk.
- Guaranteed stopGuaranteed stop is an industry term for a stop the offering broker undertakes to fill at exactly the stated level, including through a gap, usually for a premium.
- Gulf Standard TimeGulf Standard Time is the fixed offset ahead of Coordinated Universal Time used in the United Arab Emirates and Oman, and it has never shifted seasonally.
H
- HammerA single candle with a small body near the top of its range and a lower wick at least twice the body's length, forming after a decline.
- Hanging manA candle with a small body near the top of its range and a long lower wick that appears after an advance, sharing its geometry exactly with the hammer.
- Hard currencyA currency that is freely convertible, traded in deep markets and widely accepted for settlement outside its own country, which is why counterparties hold it willingly.
- Harmonic patternA price structure of four connected swings whose turning points sit at specified Fibonacci ratios of one another, named by shape: Gartley, bat, butterfly, crab and their variants.
- HawkishDescribing a central banker, a statement or a policy stance leaning towards tighter monetary policy, meaning higher interest rates or less stimulus, usually because inflation is the greater concern.
- Head and shouldersA chart formation of three consecutive peaks in which the middle peak is the highest, with a neckline drawn through the two lows that separate them.
- HedgingHolding a second position whose result moves opposite to an existing exposure, so part of the first position's variation is offset while both remain open.
- Heikin AshiA candle chart built from averaged prices rather than traded ones, which smooths a series into longer unbroken runs of one colour and hides the actual open and close.
- High frequency tradingAutomated trading in which the time taken to receive data and send an order is the decisive input, measured in microseconds and dependent on sitting close to the matching engine.
- Historical volatilityA measure of how much a price actually moved over a past window, calculated as the standard deviation of its returns and usually restated as an annual percentage.
- Hit the bidDealer shorthand for selling at the price a buyer is already showing, so the deal happens at the bid rather than at the higher ask.
- Holding periodThe time between the fill that opens a position and the fill that closes it, which decides how many overnight financing charges it carries on top of its one-off costs.
I
- Ichimoku Kinko HyoIchimoku Kinko Hyo plots five calculated lines and a shaded cloud on one chart, so that trend, support and resistance and momentum are read from a single picture rather than from several separate indicators.
- IlliquidA market is illiquid when little resting interest sits near the current price, so the quoted spread is wide, a modest order moves the price, and getting out costs more than getting in appeared to.
- Implied volatilityImplied volatility is the volatility figure that, fed into an option pricing model, returns the option's traded price, so it states what the market is charging today for movement that has not happened yet.
- In the moneyAn option is in the money when exercising it immediately would produce a positive amount: a call whose strike sits below the current price of the underlying, or a put whose strike sits above it.
- IndexAn index is the output of a published rule that measures a defined list of companies as one number, republished continuously in points against a base date, and it is a calculation rather than an asset anyone can hold.
- Index CFDAn index CFD is a contract settled in cash against the level of a stock index, so a position follows the index without any share, fund unit or futures contract changing hands.
- Index weightingIndex weighting is the rule deciding how much each constituent counts toward an index level, and it changes the behaviour of the same list of companies more than the membership of the list does.
- InflationInflation is the rate at which the general level of prices rises over time, reported as the percentage change in a basket index against the same month a year earlier, and it is the variable most central bank mandates are written around.
- Initial marginInitial margin is the amount set aside from an account when a position opens, calculated as a percentage of the contract's full value and held, not spent, for as long as the position stays open.
- Initial public offering (IPO)An initial public offering is the first sale of a company's shares to outside investors, after which those shares are admitted to an exchange and priced continuously by whoever is willing to deal in them.
- Inside barAn inside bar is a price bar whose entire high to low range sits within the range of the bar before it, marking a period that did not extend beyond the previous one in either direction.
- Interbank marketThe interbank market is the network of bilateral dealing between large banks that produces the reference prices for foreign exchange, with no exchange, no central order book and no official closing price.
- Interest rateAn interest rate is the price of money over time, quoted as a percentage a year, and the rate a central bank sets for overnight lending anchors nearly every other rate denominated in that currency.
- Interest rate differentialAn interest rate differential is the gap between the interest rates of two currencies, and it is the quantity the overnight adjustment on a currency position is calculated from.
- Intrinsic valueIntrinsic value is the part of an option's premium that would survive if all remaining time to expiry vanished, equal to the amount by which the option is in the money and never less than zero.
- Inverse ETFAn inverse ETF is a listed fund built with derivatives to return the opposite of its benchmark over one stated period, almost always a single day, and its return over longer stretches is not the mirror of the benchmark's.
- Inverse head and shouldersAn inverse head and shoulders is a chart shape of three troughs, the middle one the deepest, joined by a neckline drawn across the two peaks that separate them.
- Investment gradeInvestment grade is the band of credit ratings covering borrowers an agency judges least likely to default, running from the top rating down to BBB minus or its equivalent, with everything below it classed as high yield.
- ISM manufacturing indexThe ISM manufacturing index is a monthly survey of United States purchasing managers in which a reading above fifty says more firms reported expansion than contraction in the month just ended.
J
- Japanese candlestickJapanese candlestick charting draws each interval as a body spanning the open and the close, with thin shadows reaching to the high and the low of the same interval.
- JawboningJawboning describes officials trying to move a market with public statements alone, most often a finance ministry or central bank commenting on the level or speed of a currency's move.
- Jobless claimsJobless claims count applications for unemployment insurance in the United States, published every Thursday, which makes them the most frequent regular reading available on a labour market.
- JOLTS reportPublished monthly by the US Bureau of Labor Statistics, the JOLTS report counts job openings, hires, quits and layoffs, describing a month that the payrolls release has already covered.
K
- Kelly criterionThe Kelly criterion is a formula that returns the fraction of capital to stake on a repeated bet, given a win probability and a fixed reward to risk ratio.
- Keltner channelA Keltner channel is a pair of bands drawn a chosen multiple of the average true range above and below a moving average, so the channel widens and narrows with volatility.
- Key levelA key level is a price a market has turned at more than once, marked on a chart from earlier highs, lows, closes or round numbers rather than calculated.
- Key reversalA key reversal is a single bar that extends past the previous bar's extreme and then closes back through it, read by chart readers as a turn compressed into one bar.
- Kijun-senKijun-sen is the slower of the two base lines in the Ichimoku system, plotted as the midpoint between the highest high and the lowest low of a longer lookback window.
- KiwiKiwi is the dealing room nickname for the New Zealand dollar, and on a desk it usually means the New Zealand dollar against the US dollar specifically.
- Know your customer (KYC)Know your customer names the identity verification and ongoing due diligence that anti money laundering law requires a regulated firm to complete before opening an account and to repeat afterwards.
L
- Lagging indicatorA lagging indicator reports a change only after it has already occurred, because every value it prints is computed from data that has already been published or prices that have already traded.
- Last lookLast look is the brief window in which a liquidity provider may accept or reject a request to deal on a price it streamed, after the request arrives and before any trade exists.
- LatencyLatency is the delay between an instruction being sent and it being acted on, accumulated from several separate sources along the path an order takes rather than arising as one quantity.
- Leading indicatorA leading indicator is one whose changes have historically arrived before the thing it describes, whether that is a turn in the economy or a turn on a price chart.
- Level 2 dataLevel 2 data shows the buy and sell interest resting at each price behind the best bid and offer, rather than the top of the book alone.
- LeverageUnder leverage, profit and loss are calculated on a contract's full value while only a percentage of that value is posted as margin, so a loss is not limited to the amount deposited.
- Leveraged ETFA leveraged ETF is a listed fund built with derivatives to return a stated multiple of its benchmark's move over a single day, applied to a fall exactly as to a rise.
- Limit orderA limit order names the worst acceptable price and can only be filled at that price or better, which controls the price obtained and gives up the certainty of being filled.
- Line chartA line chart plots a single price for each interval, conventionally the close, and joins those points, so it shows the shape of a move without the highs and lows traded inside it.
- LiquidationLiquidation is the closing of open positions to turn them back into cash, either at the holder's own instruction or automatically by the firm once account equity falls to a stated level.
- LiquidityLiquidity is the ease with which size can be dealt close to the prevailing price, and it shows in the spread, the depth at each level and how fast a book refills.
- Liquidity providerA liquidity provider streams two way prices that a broker can deal on, and the quote shown on a retail platform is usually the best of several such streams aggregated together.
- Long positionA long position gains as the price of the instrument rises and loses as it falls, and where the contract is calculated on full value the loss is not limited to the amount deposited.
- LoonieLoonie is the dealing room name for the Canadian dollar, taken from the bird on its one dollar coin, and by extension for the US dollar against Canadian dollar rate.
- Loss aversionLoss aversion is the finding that a loss of a given size registers more strongly than a gain of the same size, which is the account usually offered for holding adverse positions and closing favourable ones early.
- Loss limitA loss limit is a threshold fixed in advance, stated as an amount or as a percentage of the account, at which a trading plan calls for dealing to stop for a defined period.
- LotA lot is the standard unit in which trading volume is expressed, so an order is sized in lots and the exposure that produces depends entirely on the instrument's contract size.
- Lot sizeLot size names two different things in common usage: the volume entered on an order ticket, counted in lots, and the quantity of the underlying that one lot represents.
M
- MACDMACD tracks the distance between two exponential moving averages of the same price series, plotting that distance, a smoothed version of it, and the gap between the two.
- Major currency pairMajor currency pairs carry the US dollar on one side and one of a small group of heavily traded currencies on the other, a boundary set by convention rather than by any rulebook.
- Managed accountA managed account stays in the client's name while a third party holds written authority to trade it, so the owner still carries every loss the trading produces.
- MarginMargin is collateral held while a position stays open, not a payment for it: losses are calculated on the full contract value and are not limited to the amount deposited.
- Margin callA margin call is a notification that account equity has fallen close to the collateral open positions require, and it is a warning rather than the automatic closing that can follow.
- Margin close-outMargin close-out is the automatic closing of open positions by the firm once account equity falls to a stated proportion of the margin those positions require.
- Margin levelMargin level states account equity as a percentage of the margin currently in use, the single figure a firm's warning and close-out thresholds are measured against.
- Margin requirementA margin requirement is the percentage of a contract's full value that has to be posted and held while the contract is open, set per instrument by the counterparty.
- Mark to marketMarking to market revalues an open position at the current market price, which is how unrealised profit and loss on a running position is kept up to date.
- Market capitalisationMarket capitalisation multiplies a company's share price by the number of shares in issue, giving the market's current valuation of the whole company rather than of one share.
- Market depthMarket depth describes how much quantity rests at each price on both sides of a market, which decides how far a large order pushes the price before it fills.
- Market makerA market maker quotes a two-way price and stands ready to deal on its own account at both sides of it, taking the other side of a client's position rather than passing it on.
- Market orderA market order asks for execution now at whatever price is available, so it fixes the timing of a trade and never the price.
- Market riskMarket risk is the exposure to loss from prices moving, the one risk that remains after credit, liquidity and operational risks have been separated out.
- Market sentimentMarket sentiment describes the prevailing disposition of participants towards an instrument or a market, inferred from surveys, positioning data and price behaviour rather than measured directly.
- MartingaleA martingale is a staking scheme in which the size is doubled after every loss so that one win recovers the whole sequence, and it requires unlimited capital and no ceiling on the stake to work.
- MaturityMaturity is the date on which a contract's obligations fall due and the contract ends, after which nothing further is owed under it.
- Mean reversionMean reversion is the proposition that a series tends to return towards a central value after moving away from it, a property some series show and others do not.
- MetaTrader 5MetaTrader 5 is a multi-asset trading platform published by MetaQuotes, supplied by brokers who run their own servers behind it and set the prices and conditions it displays.
- Minor currency pairMinor currency pairs are actively traded pairs with no US dollar on either side, such as euro against sterling, and are also called crosses.
- MomentumMomentum measures how fast a price has moved over a chosen lookback, and every momentum indicator is a restatement of prices that have already printed.
- Monetary policyMonetary policy is how a central bank steers credit conditions in its economy, mainly by setting a policy rate and by operating on the size of its balance sheet.
- Money flow index (MFI)The money flow index is an oscillator that weights price movement by volume, scoring the balance of buying and selling pressure on a scale from zero to one hundred.
- Money managementMoney management is the set of conventions traders use to decide position size and how much of an account is exposed at once, separate from any view about direction.
- Moving averageA moving average is the average of a fixed number of recent prices, recalculated on every new bar, which smooths a price series by lagging it.
- Multi-timeframe analysisMulti-timeframe analysis reads one instrument on more than one chart interval at the same time, using the longer interval for context and the shorter one for detail.
N
- Negative balance protectionNegative balance protection limits a retail account's liability to the funds held in it, so a deficit left after a gapping close out is written off rather than owed.
- Net asset value (NAV)Net asset value is everything a fund holds less what it owes, divided by the fund shares in issue, and it is a calculation struck at a valuation point rather than a quote.
- Net positionA net position is what remains in one instrument once long and short size have been offset against each other, stated as a single direction and a single quantity.
- NettingNetting collapses offsetting obligations into a single one, whether that means reducing long and short size in an instrument to one position or many payments between two parties to one transfer.
- Nominal valueNominal value is the face amount stated on a security, the principal a bond repays at maturity and the base its coupon is calculated on, and it is not the price the security trades at.
- Non-farm payrollsNon-farm payrolls counts the jobs added or lost across the United States economy outside farming, published monthly by the Bureau of Labor Statistics and watched closely across every market.
- Notional valueNotional value is the full value of a contract, its price multiplied by the units it covers, and profit and loss are calculated on that figure rather than on the money posted against it.
- NowcastingNowcasting estimates the present state of an economy from data that arrives faster than the official statistic, updating the estimate mechanically as each new release lands.
O
- Offer priceThe offer price is the price at which a seller is willing to deal, the higher of the two sides of a quote, and therefore the price a buyer pays.
- Offsetting transactionAn offsetting transaction is an equal and opposite deal in the same instrument with the same firm, which either closes the original position outright or leaves a matched pair standing beside it.
- Oil benchmarkAn oil benchmark is a crude grade at a named delivery point whose traded price is used to price other cargoes, Brent and West Texas Intermediate being the most quoted.
- One cancels the other (OCO)A one cancels the other pair links two working orders so that the moment one of them executes, the other is withdrawn automatically and can no longer fill.
- One click tradingOne click trading is a platform mode that sends an order the instant the bid or the offer is clicked, with no confirmation step between the click and a live instruction.
- OPECOPEC is the Organization of the Petroleum Exporting Countries, a group of oil producing states that coordinates production quotas among its members in order to influence the oil price.
- Open interestOpen interest is the number of futures or options contracts opened and not yet closed, offset or delivered, counted once for each contract rather than once for each side.
- Open positionAn open position is a contract entered and not yet closed, so it still moves with the market, still holds collateral and still attracts financing for each night it survives.
- Opening auctionAn opening auction sets the first official price of an exchange session by collecting orders during a call period and matching them all at the single price that trades the largest volume.
- Opening priceThe opening price is the first price of an interval, whether that interval is a bar on a chart or an exchange session whose open is struck in an auction.
- OrderAn order is an instruction to deal that names an instrument, a direction and a size, and either executes on receipt or waits until a stated condition is met.
- Order bookAn order book is the list of unexecuted buy and sell orders at each price, sorted best to worst, showing the quantity waiting at every level of a market.
- Order flowOrder flow is the stream of buy and sell orders arriving at a venue, studied as a record of what was transacted rather than a picture of where price has been.
- Order routingOrder routing is the path an order takes between the platform it was sent from and the place it is executed, and the rules a firm applies when choosing that path.
- OscillatorAn oscillator is an indicator that moves within fixed limits or around a centre line, describing how fast and how far price has moved recently rather than which way the trend runs.
- Out of sample testingOut of sample testing holds back part of a price record while a rule is being shaped, then runs the finished rule over the held back part, so the result is measured on data the rule never saw.
- Out of the moneyAn option is out of the money when exercising it at the current price would be worth nothing, which leaves its intrinsic value at zero and its whole premium as time value.
- Outcome biasOutcome bias is judging a decision by the result it happened to produce rather than by the information available when it was taken, which rates a lucky decision well and a sound one badly.
- Over the counter (OTC)Over the counter describes a trade agreed directly between two parties rather than through an exchange, so the terms are set bilaterally and each side carries the other as its counterparty.
- OverboughtOverbought describes a market that has risen far and fast enough for a bounded oscillator to sit above a conventional threshold, which is a statement about speed rather than about value.
- OverfittingOverfitting is shaping a rule until it describes the particular record it was developed on, including the parts of that record produced by chance, which is why the result does not survive new data.
- Overnight financingOvernight financing is the credit or debit applied to a position still open at a provider's daily cut off, covering the cost of funding the contract's full value for one more day.
- Overnight positionAn overnight position is any position still open when the trading day rolls at the provider's cut off, which is the moment financing is applied and the settlement date moves forward.
- OversoldOversold describes a market that has fallen far and fast enough for a bounded oscillator to sit below a conventional threshold, which is a statement about speed rather than about value.
- OvertradingOvertrading is dealing more often or in larger size than a method calls for, which multiplies transaction costs against a set of positions the method never asked to be taken.
P
- Parabolic SARParabolic SAR prints a trail of dots that follows a directional move and tightens towards price each period, jumping to the other side of the chart once price crosses it.
- Partial fillA partial fill executes only part of an order's quantity, because the volume available at prices the order accepted ran out before the whole of it could be matched.
- Pegged currencyA pegged currency is one whose exchange rate the issuing authority holds at a fixed level, or inside a narrow band, against another currency or a basket of them.
- Pending orderA pending order is an instruction to deal at a price the market has not reached yet, held inactive until the quote trades at that level or until the order expires.
- PennantA pennant is a short converging pause that forms after a sharp directional move, its highs stepping down and its lows stepping up over a handful of periods before the market resolves.
- People's Bank of ChinaThe People's Bank of China is China's central bank, and it manages the renminbi within a band around a daily reference rate rather than letting the currency float freely.
- Performance claimA performance claim is a statement about past trading results used to promote a product or a person, and it is a regulated communication that has to be fair, clear, not misleading and capable of being evidenced.
- PetrodollarPetrodollar names US dollar revenue earned from selling crude oil, and by extension the long standing convention under which internationally traded oil is invoiced and settled in dollars.
- PipA pip is the conventional increment a currency pair is quoted in, the fourth decimal place for most pairs and the second for pairs quoted against the yen.
- Pip valuePip value is what one pip of movement is worth in money on a given position, found by multiplying the size of one pip by the number of units the position covers.
- Pivot pointA pivot point is a reference level calculated from the previous period's high, low and close, published with a ladder of support and resistance levels derived from the same three numbers.
- PointPoint names the smallest unit a price is quoted in, so its size differs by instrument: a tenth of a pip on a currency quote, one unit on a stock index.
- Portfolio heatPortfolio heat totals the amount at risk across every open position at once, measured as what each would lose at its own stop and expressed as a share of account equity.
- Position sizingPosition sizing decides how many units a position covers, most often by working back from the distance to its protective level and the amount of equity being put at risk.
- Position tradingPosition trading holds one view for weeks or months, so financing and the size of the eventual move matter far more to the result than entry timing or the spread paid.
- Power of attorneyA power of attorney is a written authority letting a named third party act on an account, and its scope is set by the document rather than assumed, with trading and withdrawal rights granted separately.
- Precious metalA precious metal is a naturally occurring metal held largely for its scarcity and durability rather than consumed by industry, the traded set being gold, silver, platinum and palladium.
- Price actionPrice action is the practice of reading a market from the movement of price itself, working from bars, candles and levels rather than from indicators calculated out of them.
- Price improvementPrice improvement is a fill obtained at a better price than the one requested or displayed, which on a market or stop order is slippage that fell in the order's favour.
- Producer price index (PPI)The producer price index measures the change in prices received by domestic producers for their output, which places it earlier in the chain than the prices households eventually pay.
- Profit and lossProfit and loss is the money result of a position or an account, unrealised while a position is open and written to the balance as a realised amount when it closes.
- Proprietary trading firmA proprietary trading firm, in the retail sense of the phrase, sells an evaluation that a participant attempts for a fee, and shares a stated portion of any profit recorded on the simulated account that follows.
- PullbackA pullback is a move against the prevailing direction that pauses a trend without ending it, usually shallow and brief before the earlier direction resumes.
- Purchasing managers index (PMI)A purchasing managers index converts a monthly survey of firms into a single diffusion reading, where the fifty mark separates a majority reporting improvement from a majority reporting deterioration.
- Purchasing power parityPurchasing power parity is the proposition that an exchange rate settles where an identical basket of goods costs the same in two countries once converted at that rate.
- Put optionA put option gives its buyer the right, but not the obligation, to sell an underlying asset at a stated price by a stated date, in return for a premium.
- PyramidingPyramiding adds to a position that is already showing a gain, so the holding grows in stages while its average entry price moves towards the current market price.
Q
- Quantitative easingQuantitative easing is a central bank's purchase of government bonds with newly created reserves, used to push longer term interest rates down once its policy rate is near its floor.
- Quantitative tighteningQuantitative tightening shrinks a central bank's balance sheet, usually by letting bonds mature without reinvesting the proceeds, which drains reserves from the banking system and reverses quantitative easing.
- Quantitative tradingQuantitative trading derives its entry, exit and sizing rules from statistical work on historical data, so the decision comes from a tested rule set rather than a discretionary reading.
- Quarterly earningsQuarterly earnings are a listed company's three monthly report of revenue, profit and guidance, released on a scheduled date that is routinely the most volatile session in that share's quarter.
- QuoteA quote is the two prices an instrument is available at right now: the bid, at which it can be sold, and the ask, at which it can be bought.
- Quote currencyThe quote currency is the second currency in a pair, the one a rate is counted in, so pip value and any result on the pair are denominated in it.
R
- RallyA rally is a sustained rise in price over a stretch of time, whether it recovers ground given up earlier or extends a market that was already climbing.
- RangeRange means two things on a chart: the distance between the high and the low of a period, and the condition in which price keeps turning back inside a band instead of travelling in one direction.
- Range tradingRange trading is an approach that treats the edges of a sideways band as its reference points, working on the expectation that price returns towards the middle rather than leaving the band.
- Rate decisionA rate decision is the scheduled announcement in which a central bank's committee sets its official policy rate, published alongside a statement that explains the vote and frames what the committee expects next.
- Realised profit and lossRealised profit and loss is the amount written to an account balance when a position is closed, being the difference between the opening and closing prices on the size traded, after the costs charged to that position.
- RebalancingRebalancing returns a portfolio or an index to its intended weights by trimming what has grown past them and adding to what has fallen below, either on a fixed calendar or once a drift threshold is crossed.
- RecessionA recession is a broad and sustained decline in economic activity, popularly reported as two consecutive quarters of falling output but formally dated on a wider set of measures than output alone.
- ReconciliationReconciliation is the routine comparison of what a firm's own records say it owes clients against what the bank says is actually held in the client accounts, with any shortfall corrected the same day.
- Recovery scamA recovery scam is a second approach made to somebody who has already lost money, offering to retrieve it for an upfront fee, and it targets exactly the people a first fraud has already identified.
- Rectangle patternA rectangle pattern is a stretch of chart in which price travels between a roughly horizontal ceiling and a roughly horizontal floor, drawn once each boundary has turned the market back more than once.
- RejectionRejection describes price reaching a level and being pushed back inside the same interval, leaving a long wick and a close some distance from the extreme it touched.
- Relative strength index (RSI)The relative strength index compares the average size of a market's recent gains with the average size of its recent losses and reports the comparison on a bounded scale from zero to one hundred.
- Renko chartA Renko chart adds a new brick only once price has travelled a fixed distance, so the horizontal axis measures movement rather than elapsed time and quiet periods produce nothing at all.
- Repo rateA repo rate is the interest on a repurchase agreement, which is a short term loan of cash secured against securities, and in several economies it is also the name given to the central bank's official policy rate.
- RequoteA requote is a dealer's reply that the price an order asked for is no longer available, offering a fresh price which has to be accepted or declined before anything is executed.
- ResistanceResistance is a price area where selling has appeared often enough to halt advances, so a market rising into it has previously stalled, turned back, or needed a second attempt to pass.
- RetracementA retracement is a move against the prevailing direction that gives back part of a prior advance or decline, measured as a proportion of the swing it is retracing.
- Revenge tradingRevenge trading is opening a position immediately after a loss in order to recover it, usually in larger size than the sizing rule permits and frequently in the instrument that produced the loss.
- ReversalA reversal is a change in a market's prevailing direction, where a sequence of rising highs and lows gives way to a falling one or the other way round, as distinct from a pause inside the existing move.
- RevisionA revision is a statistical agency's restatement of a figure it has already published, made as further source data arrives, and it is scheduled rather than an admission that the earlier number was wrong.
- Reward-to-risk ratioA reward-to-risk ratio compares the distance from an entry price to a target with the distance from that entry to a protective level, stating the first as a multiple of the second.
- Risk appetiteRisk appetite describes how willing participants are in aggregate to hold assets whose returns are uncertain, and it is inferred from what is being bought and sold rather than measured directly.
- Risk managementRisk management is the set of arrangements that determine how much can be lost on one position and across an account, covering size, protective levels, exposure to related instruments and the capital committed in total.
- Risk-on risk-offRisk-on risk-off names a market regime in which unrelated assets move as two blocs according to a single swing in appetite for uncertainty, rather than on the fundamentals particular to each of them.
- RolloverRollover carries a position past a date it would otherwise settle on: nightly, by moving a spot position's value date forward and applying a financing adjustment, or at expiry, by replacing an expiring contract with the next delivery month.
- Round turnA round turn counts one complete trade as a single unit, the opening and the closing together, and it is the basis on which commissions and futures volumes are frequently quoted.
S
- Safe haven currencyA safe haven currency is one that has tended to attract flows when risk appetite falls, the US dollar, the Swiss franc and the Japanese yen being the three most often described that way.
- Saudi Central BankThe Saudi Central Bank, known by the abbreviation SAMA, is the monetary authority of Saudi Arabia, and it holds the riyal at a fixed rate against the US dollar.
- ScalpingScalping is a style of trading that takes many positions in a session for very small price moves, holding each for seconds or minutes, which makes dealing costs the dominant term in the arithmetic.
- SectorA sector is a grouping of listed companies whose principal business is the same, such as energy or financials, used to compare like with like and to describe where an index move came from.
- Securities and Commodities Authority (SCA)The Securities and Commodities Authority is the federal regulator of securities and commodities activity in the United Arab Emirates, licensing firms, supervising their conduct and setting the client money rules they operate under.
- Segregated accountA segregated account is a bank account in which a licensed firm holds money belonging to clients apart from its own, identified at the bank as a client account and reconciled against what the firm owes.
- Sell limit orderAn instruction to sell at a stated price or higher, which rests above the current market and executes only if price rises to the level, so the price is controlled and the execution is not.
- Sell stop orderAn instruction that becomes an order to sell at the market once price trades down to a stated level, which rests below the current market and prioritises execution over price.
- Sentiment analysisSentiment analysis reads what participants already hold and expect, using surveys, futures positioning reports, options pricing and broker position data, rather than reading price or company fundamentals.
- SettlementSettlement is the moment the obligations created by a trade are discharged, when cash and title actually change hands, or, for a cash settled contract, when the difference is paid.
- Share CFDA share CFD settles in cash the difference between the opening and closing price of one listed company's shares, calculated on the full value of the contract, with no shares delivered and no shareholder rights attached.
- Sharpe ratioThe Sharpe ratio divides a return earned above the risk free rate by the volatility of that return, so two results can be compared by how much variability each one carried to get there.
- Short positionA short position gains if the price falls and loses if it rises, and in a contract for difference it is opened by selling first, with the intention of buying the same contract back later.
- Short sellingShort selling means selling something not owned in the expectation of buying it back lower, either by borrowing the actual security and returning it later or by taking the selling side of a derivative.
- Short squeezeA short squeeze is a sharp rise driven by short sellers closing, where each purchase made to close a short adds to the buying and pushes the price further against those still short.
- Simple moving average (SMA)A simple moving average is the mean of a fixed number of recent closing prices, recalculated as each new period ends, which smooths a series by giving every price in the window equal weight.
- SlippageSlippage is the difference between the price an order was expected to fill at and the price it actually filled at, and it occurs in both directions.
- Soft commoditySoft commodities are the grown agricultural markets, among them coffee, cocoa, sugar, cotton and the grains, as distinct from the hard commodities that are mined or drilled.
- Sovereign debtSovereign debt is borrowing by a national government, issued as bills and bonds whose yields become the reference rate against which almost everything else priced in that currency is measured.
- SpeculationSpeculation is taking market risk deliberately in pursuit of a gain from a change in price, as distinct from hedging, which takes a position to offset a risk already carried.
- Spot priceThe spot price is the price for immediate delivery, settled on the market's standard short value date, as distinct from a price agreed today for delivery on some later date.
- SpreadThe spread is the difference between the price at which an instrument can be bought and the price at which it can be sold at the same moment, and it is paid on entering and on leaving a position.
- StagflationStagflation is the combination of stagnant growth, rising unemployment and persistent inflation at the same time, a mix that leaves a central bank with no single response that improves both problems.
- Standard deviationStandard deviation measures how far a set of values sits from its own mean on average, expressed in the same units as the values themselves, which is why it can be added to and subtracted from a price.
- Standard lotA standard lot is the conventional full unit of dealing size, in foreign exchange one hundred thousand units of the base currency, from which mini, micro and nano lots are stated fractions.
- Stochastic oscillatorThe stochastic oscillator plots where the latest close sits inside the high to low range of a chosen lookback, on a scale from zero to one hundred, with a smoothed signal line drawn across it.
- Stock splitA stock split multiplies the number of a company's shares and divides the price by the same factor, so the value of a holding is unchanged while the price of one share falls.
- Stop distanceStop distance is the gap between the entry price and the level at which a position is set to close against itself, measured in the instrument's own increment rather than in money.
- Stop limit orderA stop limit order submits a limit order once a trigger price is reached, combining the trigger of a stop with the price control of a limit, which means it can go unfilled altogether.
- Stop loss orderA stop loss order rests at a level away from the market and becomes an instruction to close the position once that level is reached, so the loss is capped at the fill obtained rather than at the level itself.
- Stop out levelThe stop out level is the margin level, stated as a percentage, at which a firm begins closing open positions automatically because the equity supporting them has fallen too far.
- Stop runA stop run is a fast move through a level where protective orders are known to cluster, which triggers them and produces a burst of one sided volume before price frequently returns.
- SupportSupport is a price area where buying has repeatedly been sufficient to halt a decline, read from prior lows rather than calculated, and treated as a band rather than as a single line.
- Survivorship biasSurvivorship bias is the distortion introduced when only the cases that lasted are available to examine, so a sample assembled from what remains describes the survivors rather than the population.
- SwapSwap is the interest adjustment credited or debited on a position held past the daily cut off, derived from the interest rate differential behind the instrument and adjusted by the provider's own charge.
- Swing highA swing high is a peak on a chart, a bar whose high stands above the highs of a stated number of bars on either side of it, which means it can only be identified once those later bars exist.
- Swing lowA swing low is a trough on a chart, a bar whose low sits beneath the lows of a stated number of bars on both sides of it, so it is confirmed only after the bars to its right have printed.
- Swing tradingSwing trading holds positions for days to weeks to capture one move inside a larger trend, which brings overnight financing, weekend gaps and scheduled events into the arithmetic that intraday styles avoid.
- Systematic tradingSystematic trading follows rules fixed in advance for entry, size and exit, so the same market data produces the same decisions whoever is watching the screen and however they feel about it.
T
- Take profit orderA take profit order closes an open position once the market reaches a stated level in its favour, and being a limit order it fills at that level or better, never worse.
- Technical analysisTechnical analysis studies the record of past prices and volume for recurring structure, on the working premise that everything known about a market is already expressed in what it has traded at.
- Tenkan-senTenkan-sen is the faster of the two base lines in the Ichimoku system, plotted as the midpoint between the highest high and the lowest low of a short lookback window.
- Thin marketA thin market has few participants and little resting size at each price, so quoted spreads widen, ordinary orders move the price further than usual, and gaps open more readily.
- TickA tick is one update to an instrument's price: the smallest event in a market's record, carrying a new bid, a new ask or both, with the moment it arrived.
- Tick sizeTick size is the smallest amount an instrument's quoted price is allowed to move, set in the contract specification rather than by the market or by any individual firm.
- Tick valueTick value is the money a position gains or loses when its price moves by one minimum increment, found by multiplying the tick size by the quantity the contract covers.
- Time frameA time frame is the interval each bar or candle on a chart summarises, so an hourly chart draws one mark per hour of trading and a daily chart one per session.
- Time in forceTime in force is the instruction attached to an order saying how long it stays available to be executed before it is cancelled, from the instant of submission to an indefinite rest.
- Tracking differenceTracking difference is the gap between the return a fund delivered and the return its index reported over the same period, and it arises from structural causes rather than from error.
- Trade confirmationA trade confirmation is the record a firm issues after an order is executed, stating the instrument, the direction, the quantity, the price obtained, the time and the charges applied.
- Trade sizeTrade size is the quantity a position covers, entered as a volume in lots or units, and it is the figure that decides how much money each price movement is worth.
- Trading journalA trading journal is a contemporaneous record of positions and the reasoning behind them, written at the time rather than afterwards, so the record cannot be revised once the outcome is known.
- Trading planA trading plan sets out in advance, in writing, which markets a trader deals in, how positions are sized, what defines an entry and an exit, and how results are reviewed.
- Trading sessionA trading session is the stretch of hours during which a market is active, either an exchange's published hours or, in foreign exchange, one of the regional windows the day is conventionally divided into.
- Trading signalA trading signal is an instruction to open or close a specific position, distributed to subscribers by a third party, and it is the output of a decision with the deciding removed.
- Trailing stopA trailing stop follows the market at a set distance while a position moves in its favour and holds still when the market turns back, so its level ratchets one way only.
- Transaction costTransaction cost covers everything a position costs to open, hold and close: the spread crossed at each end, any commission, nightly financing, and slippage between the price requested and the price obtained.
- Treasury yieldA Treasury yield is the annual return implied by the price of a United States government security, and because price and yield move in opposite directions, a falling yield means a rising bond.
- TrendA trend is a market's sustained bias in one direction, conventionally identified by successive highs and lows that both progress the same way rather than by any single move.
- Trend channelA trend channel is a pair of parallel lines drawn to contain a directional move, one along the swing points the move has bounced from and one along the extremes on the opposite side.
- Trend lineA trend line is a straight line drawn through a series of rising lows or falling highs, used to describe the slope of a move and the level at which it has repeatedly turned.
- Triangle patternA triangle pattern is a stretch of chart in which highs and lows converge, so each swing covers less ground and the boundaries drawn through them meet at a point ahead of price.
- Trigger priceA trigger price is the level at which a resting instruction becomes active, and on a stop order it is the only price the order specifies, because everything after the trigger belongs to the market.
- True rangeTrue range is the largest of three distances measured on a single bar, the bar's own high to low, and each of its extremes to the previous close, so a gap between bars is counted rather than lost.
- Two-way priceA two-way price quotes both sides at once, the price at which the quoting firm buys and the price at which it sells, so neither side is set after the direction is known.
U
- Underlying assetThe underlying asset is the market a derivative takes its price from, the currency pair, index, commodity, share or fund whose movement decides the contract's result without ever being delivered.
- UndervaluedUndervalued describes a market whose price sits below an estimate of what it is worth, where that estimate is the output of a valuation method rather than anything observable on a screen.
- Unemployment rateThe unemployment rate is the share of a country's labour force that is without work and actively looking for it, measured by a household survey and published on a fixed monthly calendar.
- Unrealised profit and lossUnrealised profit and loss is the running result on positions still open, revalued at the price each could be closed at now, so it moves on every tick without touching the balance.
- UptickAn uptick is a price printed higher than the one immediately before it, the smallest recordable step upward in a market's sequence of prices.
- UptrendAn uptrend is a stretch of chart in which each significant high and each significant low sits above the one before it, so peaks and troughs are both progressing upward.
- US Dollar IndexThe US Dollar Index tracks the dollar against a fixed basket of six currencies in which the euro carries more than half the weight, scaled from a base period in the early nineteen seventies.
- Used marginUsed margin is the total collateral currently held against open positions, the portion of an account's equity that is committed to what is already open rather than available to support anything new.
V
- Value dateThe value date is the day a foreign exchange trade actually settles, conventionally two business days after dealing, and the date an open position is rolled forward to each night.
- Variation marginVariation margin is the money that moves to settle the change in a position's marked value since it was last valued, as distinct from the collateral posted when the position was opened.
- VegaVega measures how much an option's price changes when the volatility implied by the market rises or falls by one percentage point, with everything else about the option held still.
- VolatilityVolatility measures how widely a price has moved around its own average over a period, counting moves in both directions equally and saying nothing about which way the next one goes.
- Volatility indexA volatility index states how much movement the options market is pricing into an underlying market over a fixed forward window, conventionally the next thirty days, expressed as an annualised percentage.
- VolumeVolume counts how much changed hands in a period, measured in contracts or shares on an exchange and, where no central record of size exists, in price updates instead.
- Volume weighted average price (VWAP)Volume weighted average price divides the total value traded by the total volume over a period, so every price counts in proportion to how much dealt at it rather than counting once.
W
- Wedge patternA wedge pattern is a chart shape drawn where two converging lines both slope the same way, so a market's swings narrow while the whole range still drifts up or down together.
- Weighted indexA weighted index gives each member an influence set by a stated measure, usually its free float market value, so the same percentage move in a large member shifts the index far more.
- WhipsawA whipsaw is a sharp move that reverses almost immediately, so an entry taken on the first leg is undone by the second and stops can be triggered on both sides in quick succession.
- WickA wick is the thin line reaching above or below a candlestick's body, marking the highest and lowest prices traded in that period beyond the levels where it opened and closed.
- Williams %RWilliams %R reports where a period's close sits inside the high to low range of a chosen lookback, on an inverted scale reading zero at the top and minus one hundred at the bottom.
- Wire transferA wire transfer moves money directly from one bank account to another across the banking system's own settlement networks, rather than through a card scheme or a payment processor.
- Withdrawal blockA withdrawal block is the stage of a fraudulent scheme at which requests to take money out stop being met, usually behind a demand for a further payment described as a tax, a fee or a release charge.
- Working orderA working order is an instruction the broker has accepted and is holding live, waiting for its price or condition to be met, as distinct from one already filled or not yet placed.
X
- Ex-dividend dateThe ex-dividend date is the first day a share trades without the right to a dividend already declared, so the price customarily opens lower by roughly the amount being paid.
- XAGXAG is the currency code for one troy ounce of silver, which is why silver is quoted in the grammar of a currency pair, most often against the US dollar.
- XAUXAU is the currency code for one troy ounce of gold, so a quote against the US dollar states dollars per ounce rather than a rate between two currencies.
Y
- YardYard is dealing room shorthand for one thousand million units of a currency, borrowed from the French milliard so that a spoken amount cannot be heard as the wrong size.
- Year on yearA year on year figure compares a reading with the same period twelve months earlier, which cancels any pattern that repeats annually and is the form most inflation and growth headlines are quoted in.
- YieldYield states the income a holding pays over a year as a percentage of what it costs, so the same unchanged payments produce a higher yield whenever the price of the holding falls.
- Yield curveA yield curve plots the yields of one issuer's bonds against how long each has left to run, so its shape shows what the market charges to lend to the same borrower for longer.
- Yield curve inversionA yield curve inverts when a longer dated bond yields less than a shorter dated one from the same issuer, most often the ten year yield falling below the two year.
- Yield spreadA yield spread is the difference between two yields, quoted in basis points, and it isolates whatever separates the two securities, such as credit risk, country risk or the distance between two maturities.
Z
- Zero lower boundThe zero lower bound is the point past which a central bank cannot usefully cut its policy rate, because a depositor facing a charge can hold physical cash instead.
- Zig zag indicatorThe zig zag indicator connects successive swing highs and lows with straight lines, ignoring every move smaller than a stated threshold, so only the larger turns remain on the chart.
- Zone (supply and demand)A supply or demand zone is a band on a chart, not a single line, marking an area price left rapidly and which chartists read as holding unfilled orders.
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