Glossary of Terms

A

Account Summary
The status and trading activity of your account. This will show your cash balance, available equity as well as funds free for trading

Ask
The price at which you can buy a specified instrument, also known as the offer.

B

Base Currency
With regard to forex, the Base Currency is the first named currency in a pair. For example EURUSD, EUR is the base currency and USD is the variable currency.

Basis point
One basis point is 0.01 percentage point. For example, an interest rate cut of 100 basis points is equal to 1 %.

Bear
Sentiment that a market is going to decline.

Bid
The price at which you can sell a specified instrument.

Bull
Sentiment that a market is going to rise.

C

Cable
A term used to describe the exchange rate between the UK British Pound vs the US Dollar.

Cash (spot price)
The cash price or can be known as spot, represents the current price of an asset for immediate delivery. For currencies, the settlement or value date is typically two days later.

Cash Balance
The current value of cash funds in your account

CFD
This is short for Contract For Difference. Instead of owning any physical stock or commodity, you settle the difference in the opening and closing price of the contract.

Closed positions
The positions which were active and are now no longer. Positions are closed by placing a trade of an equal and opposite amount in the same CFD contract.

Closing price
The price at which an open trade is closed resulting in a profit or loss.

Commission
A fixed commission or fee that is applied to a trade.

Commodities
Instruments that are related to the exchange of actual physical substances such as oil, grains and metals. The price of these can be bought or sold.

Contract size
For Fx trades this represents the notional value of the trade. For index and commodity trades, contract size is the unit in p+l for a point movement.

Cross rates
The currency exchange rate between two currencies, where the pair quoted is not deemed a major currency in the country that the cross rate is quoted.

D

Dividend
The part of a company’s profits distributed to shareholders. Some indices readjust after dividends are paid(ex-dividend). If you have a buy position, you are debited whereas if you have a sell position, you are credited the relevant amount. (See dividend example….)

F

Fill
The execution of any order.

Financing costs
For CFD positions held overnight, you will typically pay or receive financing based on whether they are long or short positions respectively. The amount depends on the value of the position held and the relevant exchange rates. For Forex positions, the financing amount is dependent on the short term interest rate differential between the currency pair traded.

G

Gap
Gap or gapping is used to describe a market situation where the subsequent price is larger than the normal pip movement for that market. This may happen in times of market volatility or when markets reopen.

GTC (Good till cancelled)
An instruction to trade that will remain active until either filled or cancelled.

H

Hedging
A trade that reduces the risk of an investment.

I

Initial margin requirement
The amount of funds required to be able to place a trade.

L

Leverage
Leverage(also known as gearing), allows you to hold a position greater in value than that of equity. For example, if you are required to have 0.5% of the value of a position, this would be 200 times leverage on your investment.

LIBOR
London Interbank offered Rate is the rate at which banks lend to each other.

Limit order
An instruction for a trade entry at a specified level that is more favorable for you than the current price.

Long position
To place a buy trade in anticipation of the instrument rising in value.

M

Mark-to-market
The valuation of existing positions to the current market prices.

Margin
The amount of capital that is required to be deposited with a broker before engaging in margin transactions.A margin transaction is the transaction in which the broker extends credit to the customer in a margin account.

O

One Cancels The other (OCO)
One cancels the other is a type of order, which allows you to place two separate instructions in the same market. When one is executed the other will automatically be cancelled.

Open positions
The current live trades which are active on your account.

P

Pip
A pip typically refers to the smallest significant move that an exchange rate could make. For example in GBPUSD it will be 0.0001.

R

Realized profit and loss (P&L)
The financial position of closed trades. The difference between the gain or loss of all positions closed.

S

Short position
To place a sell trade in anticipation of the instrument falling in value.

Slippage
The difference between the fill price of a stop order and the level of the initial instruction. This may occur in volatile markets.

Spread
The spread is the difference between the bid and offer (ask) prices of a given instrument.

Stop order
An instruction for a trade entry at a specified level that is less favorable for you than the current price.

U

Underlying
The actual security or commodity from which a futures price is derived.

Unrealized profit and loss (P&L)
The financial position of active open trades. The difference between the gain or loss of existing positions.