Get to know the trading ABCs
Understanding the "trading language" is essential to get yourself familiar with the financial markets and eventually learn the basics of the trading process; thus, definitions are crucial, especially in this fast-paced industry.
To this extent we've prepared a simple yet broad glossary from A to Z (almost!) with the most popular trading and market terms to help you get started.
Let's jump right in!
Ask Price, also known as the "offer" price, this term represents the price at which a stock can be bought from a trader. This is usually greater than the market price.
Bid Price refers to the price at which the trader is willing to pay for a stock.
Bull/Bear Market
The term "bull" refers to
a stock price with upward tendencies. A "bull market" is a market in which
prices are rising.
On the other hand, a "bear market" sees prices falling - these are usually
associated with market or Index falls.
Contract for Differences (CFDs) is a form of derivative providing exposure to price changes of an underlying asset, allowing traders to forecast the asset's price movement without actually owning the instrument.
Decentralized markets or assets are not controlled by governments parties (or have no owner in general). These include virtual/digital currencies, such as Bitcoin, Ethereum, Dogecoin and others.
ETFs are a type of securities designed to track indexes, commodity price and other assets which can be bought and sold on a stock exchange in the same way that a regular stock can. ETFs can even be designed to follow certain investment strategies.
Futures
Are financial derivative
contracts that require the buyer or seller to buy or sell (respectively) an
asset at a defined future date and fixed price. These can be to predict an
asset's direction as well as to protect the trader against losses caused by unfavourable
price changes.
Growth
Stocks
Companies that have a high
capital value rather than a high-income yield are considered growth stocks.
This causes their stock value to surge faster than the broader stock market.
Hedge is an investment or trade that is aimed to minimise risk exposure when unpredicted and undesirable price changes occur.
Inflation happens when there's an increase in the price of goods and services over a specific period of time. When this occurs, usually the currency of the specific market falls. Inflation is measured using the Consumer Price Index (CPI) and the Wholesale Price Index (WPI).
Leverage refers to the ratio of the amount used in a transaction to the required deposit. It is the percentage you can trade from your available capital, enabling traders to trade notional values higher than their available capital.
Margin Call is used to describe the alert provided to traders when the capital in their account falls below the minimum amount required to keep a position open.
NFP
Nonfarm Payrolls measure
the number of jobs in the United States (excluding farm workers and some other
employment classifications). This is measured on the first Friday of the month
by The Bureau of Labor Statistics (BLS) through surveying private & public
sector employers regarding their payrolls.
Open
& Overnight Position
Open position refers to a
trade that has not been closed whereas an overnight position is a trade that
has stayed open until the next day.
Pip stands for "percentage in point" or "price interest point," which is a small change in a currency quote.
Quote refers to the most recent price at which a stock or a currency is traded.
Resistance level is a technical analysis concept that indicates when an asset has reached a price level at which traders are not willing to continue buying. This causes the price to stop increasing. The opposite occurs in support level.
Spread indicates the difference between the bid and ask
price.
Swap or "rollover fee" is charged when a trader leaves a
position open overnight.
Technical analysis studies previous price action in an attempt to analyze patterns and predict future market movements by studying and using technical indicators and chart patterns.
Unemployment rate refers to the percentage of people in the workforce who are unemployed but are able and willing to work.
Volatility measures how much price changes over a specific time period.
WTI stands for West Texas Intermediate and refers to a specific crude oil grade and one of three primary oil benchmarks used by traders to invest in oil contracts, futures, and derivatives.
Yield is the income generated from an investment, usually in the form of interest or dividend payments.
Want to learn more about popular trading terms associated with CFD trading?
Visit ForexTB's glossary page and find everything you need before you Start Trading!
