Financial Dictionary

Expand your trading knowledge with our free financial dictionary, an essential educational tool for getting familiarized with the most common terms of online trading.

After-Hours Trading?

After-hours trading starts at 4 PM U.S. Eastern Time after the major U.S. stock exchanges close. The after-hours trading session can run as late as 8 PM, although volume typically thins out much earlier in the session.

  • After-hours trading starts at 4 p.m. and ends at around 8 p.m.
  • Stock are not as liquid during after-hours trading.
  • The spread between the bid and the ask may be wider in after-hours trading
Assets

An asset is a resource (financial or other) owned by an individual, company or country that has economic value or from which it expects to provide value in the future.

Assets Management

Asset management is the direction of all or part of a client’s portfolio by a financial services institution or an individual. Institutions offer investment services along with a wide range of traditional and alternative product offerings that might not be available to the average investor.

Available for Withdrawal

The amount of money you are able to withdraw, which equals to your current equity minus money necessary for maintaining your account out of margin call risk in case of existing open positions.

Balance

Your account’s value excluding P&L from open positions – it equals the funds you deposited into your account and your P&L from closed positions.

Bull Market

A bull market refers to a market that is on the rise. It is typified by a sustained increase in market share prices. In such times, investors often have faith that the uptrend will continue over the long term.

Bear Market

A market characterized by falling prices amid investor pessimism (opposed to the Bull market).

Bid Price

The bid is the purchase price on the market, the price at which the market is ready to buy a certain asset. At this price, the trader can sell the asset. This is displayed on the left side of the quote.

Blockchain Explanation

A blockchain, originally block chain, is a growing list of records, called blocks, that are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a blockchain is resistant to modification of the data

Current Trading Hours

Daily hours in which an instrument is available for trading. All times shown are GMT.

Currency

A unit of exchange issued by a country’s government or central bank. This unit is the basis for trade.

Capital

Capital is a term for financial assets, such as funds held in deposit accounts and/or funds obtained from special financing sources.

CFD (CONTRACT FOR DIFFERENCE)

Is a contract between two parties, typically described as “buyer” and “seller”, stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time (if the difference is negative, then the buyer pays instead to the seller). In effect, CFDs are financial derivatives that allow traders to take advantage of prices moving up (long positions) or prices moving down (short positions) on underlying financial instruments.

CPI – Consumer Price Index

Change in the price of goods and services purchased by consumers; Consumer prices account for a majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates out of respect for their inflation containment mandate.

Central Bank

A central bank is the institution that manages the currency, money supply, and interest rates of a state and oversees their commercial banking system. The central Bank of the US is the Federal Reserve and the whilst the German one is called Bundesbank.

Close (Position)

The process of closing a transaction that will terminate the open transaction.

Currency Pair

The two currencies that form a currency quote, for example USD / CHF.

Cable

Slang for the Forex Currency pair GBP/USD.

Dividends

A dividend is a distribution of a portion of a company’s earnings, decided by the board of directors, paid to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.

Day Trading

Represents act of buying and selling a financial instrument within the same day or even multiple times over the course of a day.

Dow Jones Industrial Average (DJIA)

The Dow Jones Industrial Average (DJIA) is an index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange (NYSE) and the NASDAQ. The Dow Jones is named after Charles Dow, who created it in 1896, and his business partner, Edward Jones.

Dollar

Dollar is the name of more than 20 currencies, including those of Australia, Canada, Hong Kong, Jamaica, Liberia, Namibia, New Zealand, Singapore, Taiwan, and the United States. The U.S. dollar is also the official currency of the Caribbean Netherlands, East Timor, Ecuador, El Salvador, the Federated States of Micronesia, the Marshall Islands, Palau, and Zimbabwe. One dollar is generally divided into 100 cents.

Euro

The official currency of the Member States of the European Union (EU). It was introduced in 1999, and in 2002 the euro coins and paper banknotes were introduced.

Exchange Rate

An exchange rate is the value of one nation’s currency versus the currency of another nation or economic zone. For example, how many U.S. dollars does it take to buy one euro?

Execution

In trading: Making a Buy or Sale order on behalf of a trader by a broker.

Equity

Your current account’s value – it equals your balance plus any P&L from open positions.

Free Margin

The sum of funds you have available to use as initial margin for new positions. Calculated by subtracting the margin used by your current open positions from your equity.

Futures

A way of trading financial instruments, currencies, or commodities for a specific price on a specific date in the future. Unlike options, futures give the obligation (not the option) to buy or sell instruments at a later date.

Foreign Exchange (Forex or FX)

The simultaneous buying of one currency and selling of another in an over-the-counter market.

Fundamental Analysis

An analysis based on economic and political data used to determine the future evolution of a financial instrument.

Free Trade Agreement (FTA)

A free trade agreement is a pact between two or more nations to reduce barriers to imports and exports among them. Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.

Gross Profit Margin

Gross profit margin is a metric used to assess a company’s financial health and business model by revealing the amount of money left over from sales after deducting the cost of goods sold. The gross profit margin is often expressed as a percentage of sales and may be called the gross margin ratio.

GDP – Gross Domestic Product

Change in the inflation-adjusted value of all goods and services produced by the economy; It’s the broadest measure of economic activity and the primary gauge of the economy’s health.

GTC (Good Till Cancelled) Order

An order to buy or sell an asset at a fixed price. The order remains active until it is canceled by the trader.

Hedging

The practice of conducting an investment activity to protect against loss in another investment activity, such as short selling to neutralize a previous purchase, or long buying to offset a previous short sale. While hedging reduces potential losses, it tends to reduce potential profits as well.

High/Low

The highest and lowest traded prices of the asset over a predefined time period.

Income

Income is money (or some equivalent value) that an individual or business receives in exchange for providing a good or service or through investing capital. Income is used to fund day-to-day expenditures. Investments, pensions, and Social Security are primary sources of income for retirees. For individuals, income is most often received in the form of wages or salary.

Interest Rate

The rate at which depository institutions lend balances held at the Central bank to other depository institutions overnight; Short term interest rates are the paramount factor in currency valuation – traders look at most other indicators merely to predict how rates will change in the future.

Initial Public Offer

The moment a private company offers for the first time shares to the public.

Initial Margin

Indicates the minimum equity required to open a new position.

Know Your Client (KYC)

The Know Your Client or Know Your Customer is a standard in the investment industry that ensures investment advisors know detailed information about their clients’ risk tolerance, investment knowledge, and financial position.

KYC protects both clients and investment advisors. Clients are protected by having their investment advisor know what investments best suit their personal situations. Investment advisors are protected by knowing what they can and cannot include in their client’s portfolio.

Leverage

Leverage is an investment technique that uses a small amount of money to make a much higher value investment.

Long (or long position)

Is the buying of a security such as a stock, commodity or currency with the expectation that the asset will rise in value.

Limit Order

Is an order to buy or sell at a specified price or better. A Buy Limit order (a limit order to buy) is executed at the specified limit price or lower (i.e., better). Conversely, a Sell Limit order (a limit order to sell) is executed at the specified limit price or higher (again, better). Unlike a market order, where you simply press “buy”/”sell” and let the market choose the price, you have to specify a price when using a limit order

Liquidity

The ability of a market to accept large transactions with little or no impact on price stability.

Maintenance Margin

The minimum amount of equity required to maintain your current open positions. If your equity level drops below this number, your open positions will be automatically closed.

Margin Level

Indicates how close your account is to a margin call. Calculated as Equity/Initial Margin and shown in %. When Margin Level drops below 100% you will not be able to open new positions. And if it drops to 50% all your open positions will be closed and working orders canceled automatically.

Margin Call

A requirement from a broker or dealer for additional funds or other collateral to bring the margin up to a required level – thereby guaranteeing performance on a position that has moved against the customer.

Market Order

Is the default option to buy or sell an investment immediately at the best available current price.

Minimum Trade Size

The minimum amount of the financial instrument that may be traded.

Non-Farm Employment Change

Change in the number of employed people during the previous month, excluding the farming industry; Also known as Non-Farm Payrolls, NFP. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity.

NON-FARM PAYROLLS (NFP)

Estimated change in the number of employed people during the previous month, excluding the farming industry and government.

Nasdaq

Nasdaq is a global electronic marketplace for buying and selling securities, as well as the benchmark index for U.S. technology stocks. Nasdaq was created by the National Association of Securities Dealers (NASD) to enable investors to trade securities on a computerized, speedy and transparent system, and commenced operations on February 8, 1971.

Non-Disclosure Agreement (NDA)

A non-disclosure agreement is a legally binding contract that establishes a confidential relationship. The party or parties signing the agreement agree that sensitive information they may obtain will not be made available to any others.

Open P&L

The sum of profit and loss from all your open positions.

Overnight Interest

Is either credited or debited from your account when positions are held overnight. This will take place at the end of every trading session.

Overnight Position

An open position that is not closed at the end of a trading day and is kept overnight.

Profit

Profit describes the financial benefit realized when revenue generated from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity in question.

Profit/Loss

The sum of profit and loss from all your open positions.

PIP (or Points)

The term used in a currency market to represent the smallest incremental move an exchange rate can make. Depending on context, this is normally one basis point (0.0001) in the case of EUR/USD, GBP/USD, USD/CHF, and .01 in the case of USD/JPY.

PPI – Producer Price Index

Change in the price of finished goods and services sold by producers; It’s a leading indicator of consumer inflation – when producers charge more for goods and services the higher costs are usually passed on to the consumer.

Pre-Market

The pre-market is the period of trading activity that occurs before the regular market session.

PIVOT POINT

Is a technical analysis indicator used to determine the overall trend of the market over different time frames. The pivot itself is simply the average of the HIGH, LOW and CLOSING PRICES from the previous trading day.

Quote

An indicative market price that shows the highest bid and/or lowest ask price available on a security at any given time.

Quantitative Easing

Is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply.

Rollover Date

Prices of CFDs are derived from their relevant future contract. Since future contracts have an expiration date, open positions on such CFDs will be rolled over prior to the future contract expiration date, at the end of the asset’s specified trading day. A rollover adjustment will either be credited or debited accordingly.

Return on Investment (ROI)

Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of a number of different investments. ROI tries to directly measure the amount of return on a particular investment, relative to the investment’s cost.

Return on Assets—ROA

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company’s management is at using its assets to generate earnings. Return on assets is displayed as a percentage.

RESISTANCE (RESISTANCE LEVEL)

Is a chart point or range that caps an increase in the level of an asset over a period of time.

Rollover

The process of keeping a position open beyond its expiry.

Rate

The price of one currency in terms of another.

Stop Loss (S/L)

Is an order placed with a broker to sell a security when it reaches a certain price. Stop loss orders are designed to limit an investor’s loss on a position in a security.

Stop Order

Is an order to buy or sell a security when its price increases past a particular point, thus, ensuring a higher probability of achieving a predetermined entry or exit price, limiting the investor’s loss, or locking in the profit. Once the price surpasses the predefined entry/exit point, the stop order becomes a market order.

Short (or short position)

Is a directional trading or investment strategy where the investor sells shares of borrowed stock in the open market. The expectation of the investor is that the price of the stock will decrease over time, at which point the he will purchase the shares in the open market and return the shares to the broker which he borrowed them from.

SUPPORT or SUPPORT LEVEL

Refers to the price level below which, historically, an asset has had difficulty falling. It is the level at which buyers tend to enter the asset.

S&P 500 Index

The S&P 500 or Standard & Poor’s 500 Index is a market-capitalization-weighted index of the 500 largest U.S. publicly traded companies. The index is widely regarded as the best gauge of large-cap U.S. equities.

Spread

The difference between the buy price and the sale price in a market quotation.

Stock Market

The stock market refers to the collection of markets and exchanges where regular activities of buying, selling, and issuance of shares of publicly-held companies take place.

Swissy

A slang term for the Swiss Franc.

Trade Balance

Difference in value between imported and exported goods during the reported month; Export demand and currency demand are directly linked because foreigners must buy the domestic currency to pay for the nation’s exports. Export demand also impacts production and prices at domestic manufacturers.

Turnover

Turnover is an accounting concept that calculates how quickly a business conducts its operations. Most often, turnover is used to understand how quickly a company collects cash from accounts receivable or how fast the company sells its inventory.

Take Profit (T/P)

Is a type of order that specifies the exact price at which to close out an open position for a profit.

Technical Analysis

Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume. Unlike fundamental analysts, who attempt to evaluate a security’s intrinsic value, technical analysts focus on patterns of price movements, trading signals and various other analytical charting tools to evaluate a security’s strength or weakness.

Unemployment Claims

The number of individuals who filed for unemployment insurance for the first time during the past week; Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions. Unemployment is also a major consideration for those steering the country’s monetary policy.

Used Margin

Indicates the sum of the margin currently being used by your open positions. Calculated by adding all of the initial margins of your open positions.

Volume

The number, or value, of securities traded during a specific period.

Volatility

A statistical measure of a market or a security’s price movements over time, it is calculated by using standard deviation.

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