One subject
Liquidity
27 glossary terms and 3 market guides cover this across the academy. Each one links to its own page, and nothing is repeated here.
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The glossary
27 terms belong here.
Alphabetical, each defined in one sentence on its own page.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
The market guides
3 guides answer a question about it.
Standalone reference answers, entered laterally rather than worked through.
- Asia Pacific sharesMarketsThe Tokyo, Hong Kong, Seoul, Taipei, Mumbai and Sydney venues, their sessions and their daily limits.
- Market capitalisation and free floatMarketsHow both size measures are calculated, why providers weight on float, and what a small float does.
- Share liquidity and the opening auctionMarketsWhy turnover concentrates at both ends of the day, and how a call auction strikes its price.
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