Trading Terms Glossary for Trading Terminology

Private electronic trading platforms where institutional investors can trade large blocks of securities anonymously. Oil markets typically show contango when storage costs and interest rates cause longer-dated contracts to trade at a premium. A market situation where futures prices for distant delivery months are higher than prices for nearer delivery months. A regulatory mechanism that temporarily halts trading when a security or market index moves by a predetermined percentage. Commodity Futures Trading Commission – the US federal agency that regulates commodity futures and options markets.

Trendline

By taking a position on a grey market, you’re taking a position on a company’s potential market cap ahead of its initial public offering (IPO). A gearing ratio is a measure used by investors to establish a company’s financial leverage. Futures contracts represent an agreement between two parties to trade an asset at a defined price on a specified date in the future. A floating exchange rate is different to a fixed – or pegged – exchange rate, which is entirely determined by the government of the currency in question.

Trading plan definition

The grey market refers to the trading of stocks or other securities in an unofficial capacity, typically before they are issued on official markets. These prices help manage expectations and hedge against price volatility in financial markets. Longer periods generally allow for greater market exposure, potentially smoothing out short-term volatility and benefiting from the average convergence of prices.

Interest rates definition

Complete trading dictionary with 300+ terms, market concepts, and financial jargon. This is the result of fast moving markets, volatile stocks, and spreads. Many times these stocks have very large floats, are very well capitalized, and trade slowly. These stocks often have a low float (few shares available to trade).

It is the basic act of any market transaction – when an order has been completed, it is often referred to as ‘filled’ or as the order having been executed. Fiat currency – see full definition The Federal Reserve bank, or the ‘Fed’ for short, is the central bank in charge of monetary and financial stability in the United States.

This category focuses on stock market terminology used in chart reading and market prediction. VWAP is the average price at which a stock has traded throughout the day, weighted by volume. It is widely used to protect traders from excessive losses during adverse price movements.

• Complete trading dictionary with 300+ terms, market concepts, and financial jargon.
• A trading strategy that attempts to make many small profits on small price changes throughout the day.
• They are the most basic and common type of chart used by forex traders.
• It is calculated by dividing the expected profit from a trade by the expected loss if the trade goes against the trader’s position.
• Risk management is the process of identifying potential risks in your investment portfolio, and taking steps to mitigate accordingly.

Liquidity

Synthetic replication refers to a type of exchange traded fund (ETF) that doesn’t hold any of the underlying securities featured on its benchmark. Super-contango is when the spot price for a commodity is trading dramatically below the futures price. It is a fixed price that the underlying asset can be bought or sold at under the pre-agreed contract.

The Z-Score is a financial model developed by Edward Altman to predict bankruptcy risk. In stocks, it often refers to dividend yield, while in bonds, it represents interest. Yield measures the Trading Terminology income return from an investment relative to its market value or cost.

Traders use support levels to make decisions about entering long positions, setting stop-loss orders, or determining potential areas of price stability. It represents a specific price level or zone at which an asset’s price tends to find buying interest and potentially reverse a downtrend or experience a temporary halt in its decline. Recognizing swing lows is an essential skill for traders looking to identify trend reversals or establish price targets.

• Preference sharePreference or preferred shares are shares in a company that have a fixed rather than a variable dividend.
• When the price moves above a resistance level or below a support level with increased volume, potentially indicating the start of a new trend.
• An option is a financial instrument that offers you the right – but not the obligation – to buy or sell an asset when its price moves beyond a certain price with a set time period.
• Limit orders provide traders with control over the price at which they enter or exit a trade, but there is no guarantee of execution if the market does not reach the specified price.
• You should consider whether you understand how over-the-counter derivatives work and whether you can afford to take the high level of risk to your capital.

Even if a company performs multiple secondary offerings, they are always called secondary (not third, fourth, etc). That number is typically the float, although there are 3 ways the number of shares can change. This could be, for example, 10 million shares. If they are bullish, they expect the stock to go up.

They are usually seen on the stock market after weekends and holidays, but they can also occur in the forex market after major news events. For example, a trader might look at GDP growth, inflation, and political stability to gauge a currency’s strength. An agreement to buy or sell a set amount of a currency at a specified price, to be settled at a set date in the future or within a range of future dates. For example, after GBP/USD makes a big move up, traders might use Fibonacci retracement to predict where it might pull back to. Extensions forecast potential areas where the price may hit, following a price swing and retracement.

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Each investment within a portfolio carries its own risk, with higher potential return typically meaning higher risk. Portfolios may be built using exchange traded funds (ETFs) which track the performance of a stock index or other underlying security. An out of the money options contract has not yet reached the value of its strike price, meaning it has no intrinsic value and will expire worthless. Once a nominal share price has been set, the company cannot sell any shares for an amount below that nominal value.

Equity definition

Pivot points are levels used by traders to determine overall market trends across different timeframes. Highly liquid stocks trade frequently with narrow spreads, while illiquid assets may be harder to sell at fair value. In the stock market, assets include equities, bonds, mutual funds, and even alternative investments like real estate. You have the option to trade stocks instead of going the options trading route if you wish. Making money trading stocks takes time, dedication, and hard work.

Vix (volatility index)The Chicago Board Options Exchange (CBOE) Volatility index (Vix for short) reflects how volatile traders expect the market to be over the coming year. Value at risk (VAR)VAR attempts to assess the odds of losing money on a portfolio of, say, shares. Trailing stop-lossA conventional stop-loss will ensure you get out of the market at a fixed price above or below your initial trading price. Tangible book value per shareBook value (also known as equity, shareholders’ funds, or net asset value) is the value of all a company’s assets, minus its liabilities.

Bull and Bear Markets

FTSE 100The FTSE 100 is Britain’s ‘blue-chip’ stock index.But its makeup means it is more of a global index than a snapshot of UK plc. Free cash flow per shareFree cash flow per share takes the annual cash flow available to pay dividends and divides by the number of ordinary shares in issue. Free cash flowFree cash flow is a pure measure of the cash a company has left once it has met all its operating obligations. FlippingFlipping is when you make an offer on a property and then either look to secure a new buyer at a higher price before you close on the deal, or wait for it to rise in value, then sell on.

Asset classes definition

Price elasticityIn general, the higher the price of a product the lower the demand for it. Ponzi schemePonzi schemes are a type of illegal ‘rob Peter to pay Paul’ operation named after Charles Ponzi who took deposits from 40,000 US investors on the promise of fabulous returns PIK noteA “payment-in-kind” (PIK) note (or loan) is a way for companies to borrow money. Payback periodThe payback period measures how long a project or investment takes to repay any initial outlay.

EUR/GBP is a cross currency pair representing the exchange rate between Euros and British Pounds. An options strategy where an investor owns shares and sells call options on those same shares to generate income. The risk that the other party in a financial transaction will default on their contractual obligation. Gold and the US Dollar often have negative correlation – when the dollar weakens, gold prices typically rise. A CPI reading of 3.2% means consumer prices increased 3.2% compared to the same month last year. A measure of inflation that tracks the average change in prices paid by consumers for goods and services.

In trading, it is often used in the context of weighted average share prices. The pattern observed in options pricing where implied volatility differs between options with different strike prices. Financial ratios used to assess the value of a company’s stock, such as the P/E ratio, price-to-book ratio, and EV/EBITDA. Also known as the ‘fear index,’ the VIX measures expected volatility in the stock market based on S&P 500 index options. An options contract where the seller does not hold the underlying asset or sufficient collateral to cover potential losses.