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Updated on: 16 April 2018

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Since navigating through the dense environment of the trading business can be confusing enough, the last thing on your mind should be having to deal with all the alien jargon that will simply add salt to the wound. To prevent that situation, here is the complete jargon glossary you need.

CFD (Contract for Difference) – It is a 2-party contract involving a seller and a buyer, which both agree on exchanging the difference in value of a specific asset, over a given period of time. In this case, the buyer doesn’t have to purchase the asset in order to control it, nor does he have to invest an amount equivalent to the asset’s value.

Margin – The amount of money you need to invest in order to control a given asset. The margin represents a certain percentage of the asset’s full value and it serves to show the amount of money you risk losing. Although, with CFDs, you can lose more than your investment.

Leverage/Gearing – The market exposure you get by using the margin. The leverage will allow you to control a given X position only by investing a margined amount of money, representing a percentage of the X’s value.

Spread – The difference between the Ask/Sell and the Bid/Buy prices.

Ask/Sell/Offer – The price offered by the seller, which you need to pay in order to gain control over the asset. It is the higher limit of the spread.

Bid/Buy – The price at which you can sell the asset towards other buyers. It is the lower limit of the spread.

Open position – The act of placing a trade, regardless of its nature.

Close position – The act of closing the trade, regardless whether the predicted outcome has been achieved or not.

Long – The act of buying an asset, predicting that its value will climb, allowing you to resell it later on for profit.

Short – The act of selling an asset, predicting that its value will fall, allowing you to repurchase later cheaper and wait for it to climb again.

Pip/point – A single unit of a given price. The spread (the difference between the ask and the bid price) is measured in pips.

Holding costs/Overnight fees – A regular fee applied to all trading positions that are being hold open after the market is closed (5 PM New York time).

Hedging – A risk management technique relying on selling your position at a given price and a given moment in the future, in case you suspect the market will move in the opposite direction of what you have predicted.

Stop-loss – An instruction placed into the system to automatically close your position if a specified price is being reached or surpassed, with the purpose of cutting the losses.

Limit-profit – An instruction placed into the system to automatically closed your position when the goal price is being reached or surpassed, with the purpose of guaranteeing cashing in the profit.

Slippage – A phenomenon that occurs during high volatility markets, when an asset’s price jumps or drops too fast for a stop-loss or limit-profit order to be executed in time.

Guaranteed stop-loss/Guaranteed limit-profit – A command prompt that functions exactly like regular stop-loss and limit-profit orders, with the difference being that, in this case, the action is guaranteed to be successful, regardless of any market slippages.

Trailing stop – It is a special limit-profit type of order that only closes your position if the market moves against your predictions. It allows you to set automatic thresholds for the trailing stop order to take into account when the market moves to your direction, which the system will see as reference points when deciding to close your position during market drawbacks.

New order – An automatic command prompt that will open a new position when the market reaches a price specified in advance.
Gapping – The sudden and abrupt movements of the market, either in one direction or another, causing the price to skip the prices in between 2 given values (the one before the gap occurs and the one after it ends).

Charts/graphs – Visual representations registering price movements over given periods of time. It is used for all types of assets and its main role is to help identify patterns and place market predictions based on the information being displayed.

Trading platform – The software used to engage in the trading activity.

Quote – The price being offered on the market, for a specific asset.

Positive/negative settlements – The act of closing your position either with a profit, or with a loss.

Futures – Financial contracts between 2 parties, obligating the buyer to purchase a specific asset at a given price and at a given moment in the future. Futures are usually used as hedges.

Fix return rate – A fix price that is impassible to market fluctuations. The asset delivering a fix return rate will not be influenced by market movements, regardless of their direction.

Variable return rate – A variable price that is influenced by the movements of the market.

Rollover – Extending your position beyond its expiration date by opening a new position after closing the old one.

Underlying market – The totality of prices that serve as reference points for quotes. As the underlying market shifts, causing the underlying asset prices to change, the quotes will change accordingly, for each case in particular.

Spread betting – Placing a bet on those assets that have variable return rates.

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