Glossary
Trading & investing glossary
Plain-language definitions of the terms you will meet when comparing brokers, each linked to a full explanation.
115terms
Showing 115 terms
A
5 terms- AML (anti-money laundering)The laws and procedures that require financial firms to detect and report attempts to disguise illegal money as legitimate. For clients, it means identity checks, questions about the source of funds and occasional delays on large transactions.Read the full guide →
- API tradingPlacing and managing orders from your own software using a broker's programming interface.Read the full guide →
- ASIC (Australian Securities and Investments Commission)Australia's corporate and financial services regulator. It licenses brokers operating there and has imposed leverage limits on retail CFD trading.Read the full guide →
- ATR (average true range)An indicator showing how far an asset typically moves in a single period, including gaps between periods. It measures the size of price swings, not their direction, and is often used to judge how wide a stop-loss might need to be.Read the full guide →
- Ask priceThe lowest price at which a seller will currently sell. It is the price you pay when you buy at market.Read the full guide →
B
5 terms- Base currencyThe first currency in a pair, such as the euro in EUR/USD. The quote tells you how many units of the second currency it takes to buy one unit of this one.Read the full guide →
- Bid priceThe highest price a buyer will currently pay. It is the price you receive when you sell at market.Read the full guide →
- Bollinger BandsA chart overlay made of a moving average with an upper and lower line drawn a set number of standard deviations away, typically two. The bands widen when prices swing more and narrow when the market is quiet.Read the full guide →
- BondA loan to a government or company that pays regular interest and returns the original amount on a set date. Its price rises and falls with interest rates and with the issuer's perceived ability to repay.Read the full guide →
- Bond yieldThe annual return an investor earns on a bond at its current market price, shown as a percentage. When a bond's price falls its yield rises, and the other way round.Read the full guide →
C
14 terms- CFD (contract for difference)A derivative that pays the difference between the opening and closing price of an asset, without owning it.Read the full guide →
- CFTC and NFAIn the United States, the Commodity Futures Trading Commission is the government regulator of futures and forex markets. The National Futures Association is the industry self-regulatory body that registers firms and enforces conduct rules on its behalf.Read the full guide →
- CPI (consumer price index)A monthly measure of how the prices of a typical shopping basket of goods and services change over time. It is the most widely quoted gauge of inflation, and its release often moves currencies and bond prices.Read the full guide →
- Call optionAn option giving the buyer the right, not the obligation, to buy an asset at the strike price before expiry. Its value tends to rise when the asset's price rises.Read the full guide →
- Candlestick chartA chart where each bar, or candle, shows the open, high, low and close for one time period. The thick body shows the open-to-close range and the thin lines, called wicks, show the extremes.Read the full guide →
- Carry tradeA strategy of borrowing in a currency with low interest rates to hold a currency with higher rates, aiming to earn the difference. It can lose heavily if exchange rates move the wrong way or many traders exit at once.Read the full guide →
- Central bankThe public institution that manages a country's or currency area's money supply and sets its main interest rate, such as the Federal Reserve or the European Central Bank. Its decisions on rates strongly influence currency values and borrowing costs.Read the full guide →
- ChargebackA reversal of a card payment that the cardholder disputes with their issuing bank. Brokers may have rules about deposits that are reversed, and card issuers set their own conditions and time limits.Read the full guide →
- Circuit breakerA rule that temporarily pauses trading in a stock or an entire market after the price falls by a set percentage in a short time. The pause is meant to give participants time to take in news and calm sharp panic selling.Read the full guide →
- Copy tradingA service that automatically replicates the trades of another trader in your own account.Read the full guide →
- Cross rateAn exchange rate between two currencies that does not include the US dollar, such as EUR/GBP or AUD/JPY. It can be worked out from each currency's rate against the dollar.Read the full guide →
- Crypto CFDA contract for difference that follows the price of a coin such as Bitcoin, without you owning it or holding a wallet. Because it is leveraged and prices can swing sharply, losses can build rapidly, and some jurisdictions restrict it for retail clients.Read the full guide →
- Currency conversion feeA markup or fee charged when money or trades are converted between currencies.Read the full guide →
- CySEC (Cyprus Securities and Exchange Commission)The financial regulator of Cyprus, an EU member. Many brokers hold a CySEC licence and use it to serve clients in other European countries under EU passporting rules.Read the full guide →
D
7 terms- Dealing deskA broker's internal team or system that sets prices and takes the opposite side of client trades instead of sending them to the wider market. Accounts described as no dealing desk (NDD) route orders outward.Read the full guide →
- Demo accountA practice account funded with virtual money so you can learn a platform without risk.Read the full guide →
- Depth of market (DOM)A live display of waiting buy and sell orders at different price levels, along with their sizes. A thick book near the current price suggests a trade can be filled with little price impact.Read the full guide →
- DivergenceA mismatch between price and an indicator, for example price reaching a new high while RSI fails to. Traders treat it as a hint that momentum may be weakening, not as proof of a reversal.Read the full guide →
- DiversificationSpreading money across different assets, sectors or regions so that one poor performer does less damage to the whole portfolio. It can reduce risk from individual holdings but does not protect against a broad market decline.Read the full guide →
- DividendA payment from a company to its shareholders, usually from profits.Read the full guide →
- DrawdownThe fall in an account's value from a peak to a later low, usually shown as a percentage. Maximum drawdown is the largest such fall over a period and shows how painful the losing stretches were.Read the full guide →
E
7 terms- ECN accountAn account model that passes orders to a network of liquidity providers and typically charges a commission on top of a raw spread.Read the full guide →
- ESMA (European Securities and Markets Authority)The EU body that coordinates securities regulation across member states. It has used temporary product-intervention powers to restrict how CFDs are sold to retail clients, including caps on leverage.Read the full guide →
- ETF (exchange-traded fund)A fund that holds a basket of assets and trades on an exchange like a share.Read the full guide →
- Ex-dividend dateThe first day on which a newly bought share no longer comes with the upcoming dividend, which goes to those who owned it before. The share price usually opens lower by about the dividend amount.Read the full guide →
- Execution modelThe way a broker handles your orders: either by taking the other side itself through a dealing desk, or by passing them to outside liquidity providers through STP or ECN routing. The model affects spreads, speed and possible conflicts of interest.Read the full guide →
- Expense ratioThe yearly fee a fund charges, shown as a percentage of the amount invested.Read the full guide →
- Expert advisor (EA)An automated trading program that runs on MetaTrader platforms.Read the full guide →
F
6 terms- FCA (Financial Conduct Authority)The UK regulator that authorises and supervises financial firms, including forex and CFD brokers. Its public register lets you check whether a firm is authorised and what it may do.Read the full guide →
- FINMA (Swiss Financial Market Supervisory Authority)Switzerland's independent financial regulator, which supervises banks, insurers and securities firms. A broker with a Swiss banking or securities licence is overseen by it.Read the full guide →
- Fibonacci retracementA charting tool that draws horizontal lines at set percentages, such as 38.2% and 61.8%, of a previous price move. Traders watch those lines as possible areas where a pullback might pause, though there is no guarantee prices respect them.Read the full guide →
- Fractional sharesA portion of a single share, letting you invest a fixed amount instead of buying a whole unit.Read the full guide →
- Free marginThe part of your account equity not tied up as margin for open positions. It shows how much room you have to open new trades or absorb losses on existing ones.Read the full guide →
- Futures contractA standardised agreement to buy or sell an asset at a fixed price on a future date, traded on an exchange.Read the full guide →
G
2 terms- GDP (gross domestic product)The total value of goods and services an economy produces in a given period, usually reported quarterly. Rising GDP signals growth, while two consecutive quarters of decline is a common rule of thumb for a recession.Read the full guide →
- GTC order (good till cancelled)An order that stays active until it is filled or you cancel it, rather than expiring at the end of the day. Brokers may still cap how long a GTC order is kept, such as 30 or 90 days.Read the full guide →
H
1 termI
4 terms- Inactivity feeA charge applied by some brokers when an account has no trading activity for a set period.Read the full guide →
- Index fundA fund that aims to match the performance of a market index by holding its constituents, rather than trying to beat it. Because there is little active selection, fees are usually lower than for actively managed funds.Read the full guide →
- InflationThe general rise in prices across an economy, which means each unit of money buys less than before. Central banks usually aim for a low, steady rate, often around 2% a year.Read the full guide →
- Investor compensation schemeA fund that repays eligible clients up to a limit if an authorised firm fails and cannot return their assets.Read the full guide →
K
1 termL
4 terms- LeverageBorrowed exposure that lets you control a position larger than your deposit. It magnifies both gains and losses.Read the full guide →
- Limit orderAn order to buy or sell at a specified price or better. It may not execute if the market does not reach that price.Read the full guide →
- LiquidityHow easily an asset can be bought or sold without moving its price. High liquidity usually means tight spreads.Read the full guide →
- LotA standard trade size in forex. One standard lot is 100,000 units of the base currency; mini and micro lots are smaller.Read the full guide →
M
11 terms- MACD (moving average convergence divergence)An indicator built from the gap between a faster and a slower moving average of price, commonly 12 and 26 periods, plus a smoothed signal line. Traders read the gap and its crossovers as a gauge of whether momentum is building or fading.Read the full guide →
- MAS (Monetary Authority of Singapore)Singapore's central bank and its integrated financial regulator. It licenses and supervises capital-markets firms operating in Singapore.Read the full guide →
- MarginThe deposit your broker sets aside to keep a leveraged position open.Read the full guide →
- Margin callA warning, or an automatic action, when your account equity falls too low to support open leveraged positions.Read the full guide →
- Margin levelYour account equity divided by the margin currently used, shown as a percentage. A falling margin level means less buffer is left, and brokers set a threshold at which they issue a margin call or close positions.Read the full guide →
- Market makerA firm that quotes both buy and sell prices. Some brokers act as market maker for their clients' trades.Read the full guide →
- Market orderAn order to buy or sell immediately at the best available price, which may differ from the price you saw.Read the full guide →
- MetaTrader (MT4 and MT5)A pair of widely used trading platforms, MetaTrader 4 and MetaTrader 5, offered by many forex and CFD brokers. They provide charts, indicators, one-click trading and support for automated programs.Read the full guide →
- MiFID IIThe European Union's main rulebook for investment firms, in force since 2018. It covers areas such as best execution, cost disclosure, client categorisation and the information firms must give to customers.Read the full guide →
- Moving averageThe average price over a set number of recent periods, recalculated as each new candle forms. It smooths out day-to-day noise so the underlying direction of a trend is easier to see.Read the full guide →
- Mutual fundA pooled investment that gathers money from many people and invests it in a mix of assets run by a manager. Unlike ETFs, units are usually bought and sold once a day at the fund's end-of-day value.Read the full guide →
N
2 terms- NFP (non-farm payrolls)A monthly US report from the Bureau of Labor Statistics counting how many jobs were added, excluding farm workers and a few other categories. It is released on a regular schedule, usually the first Friday of the month, and often causes sharp, short-lived price swings.Read the full guide →
- Negative balance protectionA rule or policy that stops retail clients from losing more than the money in their account.Read the full guide →
O
3 terms- OCO order (one cancels the other)A pair of linked orders, often a take-profit and a stop-loss, where filling one automatically cancels the other. It lets you set both an exit target and a protective exit at the same time.Read the full guide →
- OptionA contract that gives the buyer the right, but not the obligation, to buy or sell an asset at a set price before a date.Read the full guide →
- Order bookThe running list of all unfilled buy and sell limit orders for an asset on an exchange, sorted by price. When a buy and a sell order match, they trade and leave the book.Read the full guide →
P
8 terms- PassportingThe right of a firm authorised in one European Economic Area country to offer services in other member states without a separate licence in each. UK firms lost this automatic right after Brexit.Read the full guide →
- PipThe standard small unit of a currency price move, usually the fourth decimal place (0.0001), or the second for pairs with the yen.Read the full guide →
- Pipette (fractional pip)One tenth of a pip, shown as the fifth decimal place in most currency prices (or third for yen pairs). Many brokers quote prices to the pipette for finer pricing.Read the full guide →
- Position sizingDeciding how large a trade should be, often based on the amount of money you are willing to lose if it fails and the distance to your stop-loss. It controls risk more directly than the choice of entry point.Read the full guide →
- PremiumThe price paid for an option contract.Read the full guide →
- Price gapA jump in price where the market opens well above or below the previous close, leaving a blank space on the chart. Gaps often follow news released while the market was shut, and orders such as stop-losses may fill at a worse price than set.Read the full guide →
- Professional clientA client category with fewer regulatory protections, available to those who meet experience and wealth criteria.Read the full guide →
- Put optionAn option giving the buyer the right, not the obligation, to sell an asset at the strike price before expiry. Its value tends to rise when the asset's price falls.Read the full guide →
Q
2 terms- Quantitative easing (QE)A policy in which a central bank creates money to buy bonds, aiming to push long-term interest rates lower and encourage lending when ordinary rate cuts are no longer enough. Reversing it by letting bonds run off or selling them is called quantitative tightening.Read the full guide →
- Quote currencyThe second currency in a pair, such as the dollar in EUR/USD. Prices and profits on that pair are expressed in this currency.Read the full guide →
R
6 terms- RSI (relative strength index)A chart indicator that scores recent price momentum on a scale from 0 to 100, usually over 14 periods. Many traders treat readings above 70 as stretched upward and below 30 as stretched downward, but a reading is a description of recent movement, not a forecast.Read the full guide →
- RegulatorA government-authorised body that licenses and supervises financial firms and enforces client-protection rules.Read the full guide →
- RequoteA message from a broker saying the price you requested is no longer available and offering a new one for you to accept or reject. It tends to happen during fast markets or with slow connections.Read the full guide →
- Resistance levelA price area where a rising market has previously stalled or turned back, often because sellers became active. A clear move above it is often called a breakout.Read the full guide →
- Retail clientThe standard client category for individuals, which receives the strongest regulatory protections.Read the full guide →
- Risk-reward ratioA comparison of how much you stand to lose on a trade, measured to your stop-loss, with how much you aim to gain, measured to your target. A ratio of 1:2 means the target is twice as far away as the stop.Read the full guide →
S
17 terms- STP executionStraight-through processing: orders are routed to liquidity providers without a dealing desk intervening.Read the full guide →
- Segregated client accountsBank accounts that keep client money separate from the broker's own funds.Read the full guide →
- Settlement (T+1)The point when a share trade is finalised and ownership and cash actually change hands. T+1 means one business day after the trade; the US and Canada use it for stocks, while other markets may take longer.Read the full guide →
- Sharpe ratioA measure of return earned per unit of volatility, calculated by taking the return above a risk-free rate and dividing it by the standard deviation of returns. A higher number means smoother results for the return achieved, though it relies on past data.Read the full guide →
- Short sellingSelling an asset you do not own, usually borrowed, in the hope of buying it back cheaper later. Because a price can keep rising, losses on a short position have no fixed upper limit.Read the full guide →
- SlippageThe difference between the expected price of an order and the price at which it actually fills.Read the full guide →
- SpreadThe gap between the bid and ask price. It is a cost you pay each time you open and close a trade.Read the full guide →
- StablecoinA cryptocurrency designed to hold a steady value, usually by tracking a currency such as the US dollar. Its stability depends on the reserves or mechanism behind it, and some have lost their peg.Read the full guide →
- Stock (share)A unit of ownership in a company. Shareholders may receive dividends and generally have voting rights, and the price changes with the company's results and market sentiment.Read the full guide →
- Stock indexA calculated number that tracks the combined performance of a group of shares, such as the S&P 500 or the DAX. You cannot buy an index directly, but funds, futures and CFDs can follow it.Read the full guide →
- Stop-limit orderAn order that becomes a limit order once a trigger price is hit. It prevents a fill at a much worse price, but if the market jumps past your limit the order may not execute at all.Read the full guide →
- Stop-loss orderAn order that closes a position when the price reaches a chosen level, limiting the loss on a trade.Read the full guide →
- Stop-outThe level at which a broker automatically closes positions to prevent further losses on a leveraged account.Read the full guide →
- Strike priceThe price at which an option can be exercised.Read the full guide →
- Support levelA price area where a falling market has previously stopped or bounced, often because buyers stepped in there. If price drops through it, traders may start to see it as broken.Read the full guide →
- Swap (rollover)The interest charged or earned for holding a leveraged position overnight.Read the full guide →
- Swap-free accountAn account that does not charge or pay overnight interest on positions held past the daily cut-off. It was developed for clients whose religious beliefs forbid interest, and some brokers charge a flat administration fee instead.Read the full guide →
T
6 terms- Take-profit orderAn order that closes a position when it reaches a chosen profit target.Read the full guide →
- Tick valueThe money gained or lost when a futures contract moves by its smallest price increment.Read the full guide →
- Tier-1 regulatorAn informal label for a financial regulator seen as having strict rules, active enforcement and strong client protections. There is no official list, so different websites may group regulators differently.Read the full guide →
- Tracking differenceHow far a fund's return falls short of, or exceeds, the index it follows over a period.Read the full guide →
- Trailing stopA stop-loss that follows the price at a fixed distance as the trade moves in your favour, and stays put when price reverses. If price falls back by that distance, the position is closed.Read the full guide →
- Two-factor authenticationA second proof of identity, such as an app code, required in addition to your password.Read the full guide →
V
2 terms- VaR (value at risk)An estimate of the largest loss a portfolio is likely to suffer over a set period at a given confidence level, such as 95% over one day. It says nothing about how bad the losses can be in the remaining few percent of cases.Read the full guide →
- VolatilityHow much and how quickly a price moves. Higher volatility raises both opportunity and risk.Read the full guide →
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