ADR (American Depository Receipts)
American Depository Receipts are used for trading securities of foreign firms within the USA and have been used since 1927. Just like the securities of US companies, ADRs are denominated in US dollars. In this way they are also freely traded in Europe. ADRs may be listed on stock exchanges and are an instrument to attract capital on the American and international markets. ADRs can have different names according to the requirements of a particular market.
AMEX (American Stock Exchange)
AMEX is a stock exchange which grew from a small set of stock market traders into the second biggest stock exchange in the USA. It is characterized by its listing of firms which are only in the development stage (SMEs – small and medium size enterprises). There are two main indices on the exchange: AMEX Major Market Index and AMEX Market Value Index.
Arbitrage is the acquisition of a certain good at the smallest price possible on the market, whilst simultaneously selling it elsewhere for a much higher price in order to make a profit. In a Forex context, this process allows traders to make profit in a short time span on the back of short-term price disparancies between currency rates.
All or none
A command which a client gives a broker. If the trader indicates All or none, it means that the broker can execute orders only to the fullest extent of their conditions (e.g. buying a specific amount when it’s available and not just part of the amount). If the order cannot be executed in full, it will not be executed at all.
Ask is the price which the broker offers the trader to purchase a specified financial instrument. It is broadly understood as the price for which a seller is ready to part with his good. As a currency quote, it is the price indicated on the right. The Ask price is always higher than the Bid price.
A situation when the stocks of one issuer are successively bought / sold as their value decreases or increases. At the same time, the average at which the stock was bought or sold price is retained.
Basis is the difference in price between the futures price and the price of the underlying asset. Over time, the basis is subject to certain changes. This implies that the price which was guaranteed by the hedger can differ from the cash price at the time of purchase of the futures contract. The longer the time between the process of opening and closing the futures position, the higher the guaranteed price.
A Basis point is a unit of measurement which is equal to one hundredth of a percent. When interest rates are calculated it is necessary to remove all ambiguity: in this case the unit becomes the base point. For example, an increase of the base rate from 7% to 7.2% would imply a 20 base point change.
Base Interest Rate
The Base Interest Rate (base rate) is a percentage value that central banks set as a guide for the financial sector as to define the price of credit in a country. The base rate depends on supply and demand for credit. Other banks borrow money from the central bank at the base rate and then set their own rates for their customers. A certain country’s base rate has a direct influence on the value of said country’s currency. This makes monitoring its changes a useful indicator for traders of forex.
Balance is the amount on a trading account, taking into account all completed transactions and trading operations, whilst also including non-trading operations for making deposits and withdrawals of funds from an account. Balance does not include open positions. Balance can be equal to Equity if there are no open positions on the account. In this instance, balance is calculated by: Balance = Deposit – Withdrawal.
A Beneficiary is someone who receives income from property which he uses as collateral when signing an agreement. Amongst other things it could be income from the rental of property or the transfer of stocks for the broker to use. Beneficiaries are defined by issuing banks as the holder of a credit letter. Moreover, a beneficiary could be someone who receives an insurance payment from an insurer.
Big Board is trader slang for the New York stock exchange. The exchange is the largest in the world in terms of the total cost of companies’ shares which from part of the listing. At this exchange the largest amount of stocks in the world are traded and over 3,000 corporations are quoted.
Break is used to signify the sharp rise and fall of prices. This is an indicator of monetary imbalances, whereby credit and debit are not equal. When this happens, it is necessary to receive additional information (e.g. from a counter broker) to complete trading operations.
Bretton Woods Agreement
In 1944 in Bretton Woods in the USA, members of the United Nations signed an agreement to establish a currency exchange rate system for economically developed nations. The US dollar became the reserve currency since, following the end of World War Two, the USA could guarantee the exchange of their currency for a fixed amount of gold. To support a system of international payments, the IMF (International Monetary Fund) was created. However, the Bretton Woods agreement did not take into account the fact that countries would seek to accumulate as big a dollar reserve as possible. This meant that the US could be put in a situation where it couldn’t cover the reserves using its gold. When Western Germany and France began to exchange their dollar reserves for gold in 1971 the US abandoned the obligations that they had assumed since 1994.
A broker carries out clients’ orders and fulfils the function of a middleman between the sellers and buyers of securities. In most cases, the client pays the broker for their services in the form of commission. There is also such a thing as a Floor/Pit Broker.
A trader or an investor who acts with the belief that the market and prices on a certain financial instrument (currency pair, stock, etc.) will rise. They open trades by buying (long position).
Backwardation is the purchase of futures contracts at a price less than the cost of the contracts with immediate delivery of the asset.
The most liquid of shares from the biggest companies which have stable indicators for returns over a long period of time. These shares are market indicators and price movements on them set the market trend. The term came from gambling whereby the most valuable chip in a casino is blue.
A Budget Deficit is a situation where the expenditure of a state’s budget exceeds that of its income. The reasons for a budget deficit can vary from cost reduction to redirect cash flows for the development of a certain segment, to there being an ineffective financial system and fiscal policy of a state. The main worry for states with a budget deficit is inflation leading to negative consequences for the said state’s economy. Although it also can have some positive consequences as it can stimulate demand and thus stimulate economic growth.
Blue-sky Laws are what they call a collection of laws which regulate the activity of market participants for securities in the USA. Not all of the laws are used by every US state.
A trader, investor or speculator who tries to force prices down: i.e. to cause a fall in the market or quotes of a specific asset. A Bear Market is a widely used term used to mean a fall in the market. A Bear Raid is a term used to mean that there is the intention to force the market downwards.
A Block house is a company which offers middle-man services to find buyers and sellers of large shareholdings. The block house broker doesn’t participate directly in the deal, only helping with the necessary processes of it.
Balance of Payments
The Balance of Payments is an indicator which shows the total economic operations of a state with other countries within an indicated period. A balance of payments report contains complete information about the funds which a state receives from other countries and vice versa. A current balance of payments indicates and includes the operations for the balance of services, the balance of income from investment and wages, the balance of transfers and others.
Buying Power is an amount of money which an investor has in order to purchase securities, taking Margin into account. In other words, the buying power is investors’ money which is on a broker’s account, plus extra funds which can be obtained. The development of a market is limited by the scope of existing buying power. In a general sense, buyer power is a synonym for purchasing power: an economic indicator which defines the amount of goods or services one can acquire with a certain currency.
Buy means to acquire a financial asset by opening a long position (and thus expecting the price of the asset to rise) or closing a short position (buying a good back at a lower price than it was sold for).
Buy on close
Buy on close is a purchase of an asset at its final quote price. From this, an acquisition of a financial asset during trading at a price which doesn’t differ too much from that of the close price is also known as a buy on close. Close price is understood as the cost of an asset at the end of the trading day.
The domestic financial market of the UK is known as the Bulldog Market. This name is down to the well-known British dog breed, the British Bulldog. Similarly, terms are actively used for the American (the Yankee) and Japanese (the Samurai) markets.
Bid is the price at which a trader can sell a financial instrument. Market orders, positions are closed, pending orders and Stop Loss and Take Profit are all executed at the Bid price.
Balance of Trade
Balance of Trade is a value which defines a country’s international trade: it is the difference between how much a country imports and how much it exports. The difference between the two is a measure of a country’s trade competitiveness. If a country exports more than it imports, then the said country’s currency will strengthen and is good for its economy. If the country imports more than it exports, the country is said to be uncompetitive. If the values are equal, a net balance is said to be formed.
A Currency Basket is several specially selected currencies whose aggregated value defines the weighted average rate for a currency that isn’t part of the basket. The purpose of a currency basket can vary: to define a conditional price of a currency; to protect against risks of a multi-currency clause; or to be used as a par value. Depending on its purpose, the currency basket can include currencies in different relative amounts, a currency’s inclusion on a constant basis or changing depending on different market factors.
CPI (Consumer Price Index)
The CPI (Consumer Price Index) is a monthly report issued by states such as the USA and it indicates the level of inflation and also the level of expenditure on goods and services within the country. The CPI shows the average price of consumer products and services from representative groups, i.e. the price of an average shopping basket of household goods.
Currency Intervention is one of the most important currency instruments for any state. To affect the rate of its national currency, the Central bank of a country either buy or sells currency or gold against other key world reserve currencies. State currency reserves are usually used for such interventions. Thanks to currency interventions, a currency’s rate is corrected.
Cable is what the currency pair GBPUSD has been called since the 19th century, since, back then, the New York and London stock exchanges were connected by a trans-Atlantic cable. Regarding its trade volume, this instrument is only surpassed by EURUSD and USDJPY and is considered as having high liquidity as the pair contains the first and third reserve world currencies. By the same token, trading using the cable is highly volatile.
A call option is a contract which allows its holder to purchase an option (underlying asset) over the course of a limited amount of time at a pre-agreed price. After receiving a request to buy the call option, the seller can sell it and in which case the buyer will pay him a premium. As such, the risk for the investor who wants to buy the call option is limited by this premium.
Commission is a fee which a trader or investor pays a broker for fulfilling an order. As a rule, the commission is the fundamental source of income for companies who offer clients access to currency markets.
Contango is the surcharge on a quote charged by a seller in the futures market for the delay in settling a transaction. The term Contango can also be used to mean a fee paid by an investor to a broker for the delay in fulfilling their obligations.
A Contract for Difference (CFD) is a financial instrument which allows the seller and buyer to calculate the cost an underlying asset without delivery, paying each other the difference between the amount shown in the contract and that of the actual quotation of the asset. The majority of underlying assets are futures, stocks, precious metals, stock indexes and more. It’s possible to make a profit on both the growth and the fall of the market.
Cross rates are the relation of two currencies against each other, based on the rate of each of them against a third currency. For example, the Bank of England sells or purchases euros for yen. To calculate the cross rate of the EURJPY, the bank will use the dollar quotes for the two pairs, EURUSD and USDJPY. As such, the Ask and Bid quotes of EURJPY will be calculated as follows: Bid EURJPY = Bid EURUSD x Bid USDJAPY; Ask EURJPY = Ask EURUSD x Ask USDJPY.
Cash and Carry
Cash and Carry is the sale of a futures whilst simultaneously purchasing a security of the same instrument. The security is used to cover the short position, securing a balance at the conclusion of a repo or when receiving a loan.
Cash is the currency of a state in a tangible form. Cash is money (coins or bank notes) which are in free circulation amongst the general population and are used in the trading of goods and services. The issuance of currency is for the most part executed by central banks and the Treasury. In states where there is a developed market economy, the share of cash accounts for 3 to 8% of all payments.
Shares are common when they allow their holder to receive dividends, if, of course, the decision to issue dividends has been taken by at the stockholders’ meeting. Despite the fact that dividends are paid using part of a company’s remaining profit after privileged stockholders have been paid, privileged stock in Russia often cost less than their common counterpart.
A Confirmation is a document which defines all the details of a concluded contract for securities on the market; details such as the date of the payment, conditions of the agreement and commission amongst other things. Confirmation is also understood as a written document which confirms a trader’s telephone order. It is a written notification from a broker to the trader that the order was fulfilled.
Cover is used when we’re talking about the acquisition of a contract or stock to compensate a short position which was opened earlier. Suppose that a trader acquires a futures contract on gold, following which a call option for the good was sold with the same delivery date. In this instance, the option position of the trader would be considered covered.
A Closing Purchase is when a short position is reduced or closed on a particular financial instrument. Closing Purchase is also used to mean the acquisition of an option by an investor to compensate for the same option that was sold earlier.
A Complete Transaction is two reverse transactions on a trading platform (purchasing an asset and then selling it on or selling an asset and then buying it) using whatever amount of funds. In other words, a complete transaction is the opening and closing of a position.
Clearing is a type of counter trade which implies the clearing of transactions on securities which are carried out on the basis of mutual requirements and obligations.
A Clearing House is a part of the stock market which settles client transactions. For example, a clearing house registers clients’ trades and conducts clearing. A clearing house also processes payment as a result of clearing.
Convergence is a situation in a trade when the price of the underlying asset shifts towards that of the futures contract and vice-versa.
CBOE (Chicago Board Options Exchange)
The Chicago Board Options Exchange was formed in the 1970s with the purpose of facilitating the trading of standard options.
CME (Chicago Mercantile Exchange)
The Chicago Mercantile Exchange provides opportunities and space to trade futures and options. The exchange supervises and implements trading rules, the dissemination of market information and supports the clearing mechanism.
DAX (Deutsche Akzien Index)
The DAX is the most important German index and includes the quotes of 30 of the largest German companies. There is also the DAX 100 which calculates dividends for stock, assuming their income will be reinvested. The index was created in the summer of 1988 and is calculated on the back of prices from the XETRA exchange.
Declaration Date is the day when a company’s Board of Directors declares how much and when the next dividends will be paid. Former shareholders receive dividends from them in the period after the announcement and before the Ex-stock Dividend date.
The term Devaluation is used to mean a central bank’s manipulation of the value of its country’s currency in order so that it decreases in relation to other currencies or the gold standard. This can be done covertly or overtly. When a devaluation takes place overtly, the central bank announces the devaluation, if covertly, it ceases to withdraw currency from circulation in order to decrease its real value.
Diversification is the spreading of capital across various assets with different risk levels so as to minimize total risk and reduce financial losses. Investors invest money in securities from different issuers and in doing so form a portfolio of investment. If some shares turn out to be loss making, then other, profitable shares cover the losses, thereby reducing the losses to a minimum and thus diversify the risks.
A part of income, received by a company, which is distributed amongst stockholders relative to their share or other types of stocks which are owned by them. Dividends can be paid once a year (final dividends) or once every few months (interim dividends). The decision about the order and magnitude of the dividend is made by each company independently.
A dealer is a market participant who completes trading operations by attracting and using funds from a private investor or company.
The dollar is the currency unit of the USA and as such is one of the founding reserve currencies in the world. As such, it isn’t surprising that the term Dollar is first and foremost used to mean the American dollar. However, there are other countries which use this monetary unit for their own currencies, such as Australia, Canada and New Zealand.
DJIA (Dow Jones Industrial Average)
The Dow Jones Industrial Average is the oldest American index and by using it one can follow the US manufacturing sector situation with the DJIA serving as a kind of economic indicator for the region. The Dow Jones index is determined using the weighted average stock price of the US’ 30 largest companies.
On the financial markets, generally, delivery is the transfer of a financial asset or a good from a seller to a buyer following the conclusion of a forward contract. In a narrower context, delivery is a Forex trade in which both sides agree to accept and ensure the delivery of currencies according to agreed conditions.
Day trading is conducting trades on the financial markets in one session over the course of the day. It means that the positions opened on this day are not carried overnight to the next day and next trading session.
Expiration Date is used to mean the final day on which an option or futures contract is valid. The expiration date for a futures contract is defined in advance and this date is a month before the contractual delivery date of the asset.
The euro is the official currency of the European Currency Union and the common currency of Eurozone countries (19 countries). According to ISO standards it is denoted by EUR or €. The euro came into non-cash circulation on 1st January, 1999, whilst euro bank notes and coins appeared three years later. This is one of the most liquid of all world currencies and is managed by the European System of Central Banks (ESCB), headed by the ECB.
EMS (European Monetary System)
The European Monetary System was organized in 1979 to support currency stability and foster the movement towards economic convergence. States who took part in the system had to limit the volatility of their currency within a 2.25% limit on either side. The EMS mechanism laid down an exchange rate mechanism, formed the ECU (European Currency Unit) and aligned the European Monetary Cooperation Fund. This European monetary system lasted until the end of 1998 and was replaced by the Euro at the beginning of 1999.
Equity Market is the system of economic relations between buyers and sellers of shares. Shares are traded on the stock market or are used for over the counter trading.
Equity is the funds on an account at the present moment. Equity includes both profits and losses on positions which are open at the time of its calculation. To calculate equity, use the formula: Equity = Balance + Credit + (Floating Profit – Floating Losses).
ECU (European Currency Unit)
The ECU was founded in 1979 and was an index of foreign currency which included up to 10 European currencies. The ECU fulfilled a function of a being a monetary unit for the countries which made up the EEC (European Economic community). It was the predecessor to the euro. The ECU was used until 1999 and the currency was only in electronic form.
Fill or Kill Order
A Fill or Kill Order is used on the stock market by a trader to indicate to a broker to complete an operation by buying or selling a certain asset at a specified moment in time. If the command isn’t fulfilled with the indicated requirements, it will be automatically killed (cancelled). In sending this documented request to execute the order or to cancel it, the trader indicates the price range of the asset, the time when the position should be closed, the amount of the traded asset and more.
Foreign Exchange (Forex) is the largest and most liquid financial market in the world. The good in this market is currency. The price of currency is defined by the level of supply and demand and is formed on the basis of an agreement between market participants.
Floating Profit or Loss
Floating Profit or Loss is the profit or loss that a trader has when they hold an open position. It floats (changes) since it changes in correspondence with the open position(s). Thanks to floating profit or loss, a trader can keep track of how their open positions are doing and see when he should close them. When all positions are closed the indicator ceases to change and shows the traders fixed deposit.
The Futures Market is a market where the derivatives of an underlying asset (currency, stocks, etc.) are traded. Futures contracts (futures), contracts which are fulfilled at a later point in time with a pre-set expiry date, are traded on this market. Futures can be physical (delivery) or cash-settled.
Available funds to trade on an account. These funds are not being used as collateral in trades on the financial market. These funds can be used in any operation, including their withdrawal or to open a new position. The formula to calculate Free Margin is Free Margin = Equity – Margin.
Federal Reserve System
The Federal Reserve (the Fed) is an organization in the USA which is made up of 12 reserve banks. The Federal Reserve fulfills the function of a central bank and it is managed by its Board of Governors. The Federal Reserve has the power to control the activities of financial holding companies, banks which are part of the Fed, foreign banks operating in the USA and also the international operations of American banks. The Federal Reserve sets the monetary policy for the USA.
A futures contract (futures) is a derivative of a financial asset or good and by whose conditions the delivery takes place at a concrete date in the future. Futures characteristically have strict conditions about the type and quantity of the good, allowing only minimal deviations. Futures contracts specify certain conditions about payment of overheads and transportation costs.
Growth Stock is what they call a company’s shares which have good profit indicators (higher than average) over a certain period of time (generally a few years) or shares which have a good potential for growth in the near future. The main demarking aspect of this stock’s growth is that its value often rises much faster than that of other stock. However, a rapid decline in the value of such stock is also possible. Furthermore, stockholders for such companies either receive no share dividend whatsoever, or receive only a small dividend since profit is invested in the company’s development, especially when the company is relatively new.
GDP (Gross Domestic Product)
Gross Domestic Product is the total production of goods and services within a country over the course of a year. It includes the profit and income of non-residents and foreign companies in the country, but doesn’t include the financial production value for people and companies situated outside of the country.
GNP (Gross National Product)
Gross National Product is the aggregated income of the economy of a country over a year, including only the production value of residents of that country (inside and outside of the country’s territory). However, non-residents’ income received inside the country is not included in GNP values.
GTC Open Order
A GTC (Good Till Cancelled) Open Order is the purchase or sale of an asset on the financial market which remains valid at a certain price offered by the broker to the client until executed or cancelled.
A GAP is a large jump between two bars on the price chart of a financial instrument. It may or may not be visible looking at the minute timeframe.
G7 (The Group of Seven)
The member states of the G7 are the leading industrialized states which form a group called the Group of Seven (G7). The member states of the G7 are the UK, USA, Germany, Japan, France, Canada and Italy. The heads of state for each of these members convene to discuss and resolve periodically occurring issues which affect international economic policy.
Hedged Margin is funds which are necessary to open and support an open locked (hedged) position; open positions on the same instrument in different directions. The size of the hedged margin for locked positions can be found in the contract specifications for each instrument on our site.
By definition, a hedge is a barrier that acts as a limit or restriction; it is no different in Forex. A hedge is an action which is designed to limit / lessen risks connected with price movements. A hedge is also known as risk insurance. For example, implementing risk insurance for losses on a short position for an instrument by opening a long position on the derivative of said instrument.
A situation when a Put (Call) option reaches a higher (lower) price than the cost of its base instrument.
Investment is the use of funds to receive profit or to increase the assets of a company. However, it’s worth mentioning that investment doesn’t always bring income; only when investments are made in profitable projects or stocks will they bring profit. It is therefore important to weigh up the potential risks. As a rule, the riskiest investments are always the most profitable.
An insider is a person which, thanks to their job role, is privy to important information about the financial markets which most other market participants don’t have access to. Most insiders are top managers of banks, major shareholders and those on a company's board of directors: people who have access to secret information on the financial market and who can use this information to their own advantage. There are various laws to regulate the activities of insiders. Each currency market participant can monitor the actions of insiders and take the signals they give into account. However, according to many analysts, insider decisions are not always correct.
IPO (Initial Public Offering)
The Initial Public Offering is when a company goes public and offers its shares for sale. As a rule, securities put out for an IPO belong to companies who are trying to attract investor attention. If you are investing in the stock of such a company then you are prepared to take a risk.
When online and working on a trading platform, a trader sees the dealer’s quote’s feed for each individual financial instrument. These quotes and their price changes appear in the trading terminal without having to request them. This method of providing quotes is called Instant Execution. The trader, using the information provided by the quote’s feed, makes trades.
Kerb can signify both the unofficial stock market on which trading operations are processed after market closure, as well as informal deals. As a general rule, such operations are processed by brokers on the order of clients when, for some reason or other, their orders couldn’t be processed on the stock market. Originally, the Kerb was what the market called deals which took place outside of the official New York Stock Exchange in the second half of the 19th century.
Krona is the name of the currency used by Denmark, Iceland, Czech Republic, Sweden and Norway. In forex, for example, there are currency pairs such as the Australian Dollar / Swedish Krona (AUDSEK) and the Swiss Franc / Norwegian Krona (CHFNOK).
Listed Stocks details the stocks which are approved for trading on the stock markets. Before becoming listed, a stock goes through an approval procedure called listing. Only companies which have been checked to make sure they fulfill all of the necessary requirements (such as size of capitalization, amount of sales, number of securities in circulation and others) are allowed to be traded.
A Long Position is a trade which opens by buying a trading instrument (Buy). If they say that traders have opened a long position on the dollar, it means that many market participants have opened trades to buy US dollars. A trade which involves the sale of a trading instrument is known as Short Position.
Leverage is an amount of money which a broker provides traders with to complete trades in large amounts on financial markets. By using leverage, a trader increases his deposit amount by several tens of times. Leverage is expressed as a ratio between the amount of the trader’s funds for use and the amount provided by the broker: 1:10, 1:100, 1:500, etc. As part of leverage, traders can use the funds provided by the broker as they would their own funds.
Locked positions are positions of equal size on the same account on the same instrument but in opposite directions (buying and selling). For example, a trader opens a trade to sell EURUSD of one lot. After a while, the price starts to go against the expectations of the trader and the trader decides to open an opposite position, buying the same amount of the trading instrument. As a result, his losses on the first position are fixed.
LIBOR (London Interbank Offered Rate)
The LIBOR is the average interbank rate from banks which lend funds to each other on the London interbank market. The term of each loan ranges from days to years.
An abstract name, adopted for use on the trading platform to designate the amount of a base currency or shares used in a deal. For example, one standard lot of EURUSD is equal to 100,000 units of the base currency. You can find precise information on lot sizes for all instruments in the Contract Specifications section.
Low price signifies the lowest amount that a certain good has cost over a specified time period. The price depends on fundamental factors such as the relationship between demand and supply. On the stock market, the low price is understood as the lowest price a share has cost according to trade outcomes in a single trading period.
An amount of funds which a dealer keeps in reserve as a guarantee to support open positions. Each instrument is divided into a marginal group. Accordingly, the size of the margin is determined by which marginal group it belongs to, the amount of open positions and the account type. You can see which group a trading instrument belongs to by looking at the Contract Specifications.
Marginal Trading is used as part of leverage, and thanks to which a client can make trading operations using amounts which significantly exceed the amount on their trading account.
A Margin Account is any trading account opened with a broker which has the opportunity to use leverage.
Market Makers are over the counter trade participants who directly set market liquidity and support it. They can be both sellers and buyers.
The time when financial markets open for trading and are updated after the weekend or holidays is called the Market Opening. The opening of the market is linked to the working days in the region of trade. We can say that Forex works around the clock since trading regions open one after another, starting with Asia, and Forex continues trading in each session.
Maintenance is the minimum required amount of funds that a trader must have on their account. The size of this amount is set by the National Association of Dealers according to share prices and stock markets. Maintenance can also be understood as the requisite amount of requests to purchase an instrument, thereby supporting its price.
A Managed Float is an intervention by a state on the market with the aim of changing currency values in a particular direction. It is also known as a dirty float.
An integrated system with rules for the trading of financial assets and instruments, goods and services.
A Market Order is an immediate command from a client to their broker to purchase or sell a financial asset at the market value.
The Margin Level is the relation between a trader’s funds and the margin (expressed as a percentage). The margin level shows the current risks, allowing them to be lessened. By paying attention to the margin level, a trader can see whether he has enough funds to open a new position or to keep an open position open. The margin level can be calculated using the following formula: Margin Level = (Equity / Necessary Margin) x 100%.
The NASDAQ stock index shows the current state of the high-tech sector in the US and also reflects the affect that political and economic events have on the sector. Founded in 1979, NASDAQ stood for National Association of Securities Dealers Automated Quotations. Today, most attention is focused on the NASDAQ-100 which is calculated on the basis of the hundred largest US companies which operate in areas of software production, biotechnology, communications, and others.
NSCC (National Securities Clearing Corporation)
The National Securities Clearing Corporation was created in 1977 as a result of an amalgamation of the subsections of the New York and American stock exchanges and also the National dealer’s association for securities. Through the NSCC, brokerages, exchanges and other clearing organizations are able to carry out mutual settlements. The modern-day NSCC, along with the Depository Trust Company, is the largest service provider for financial market calculations in the world.
NFA (National Futures Association)
The National Futures Association is a self-regulating organization and watchdog for the US financial market and one of the key futures market organizations in the USA. The NFA protects investors and monitors the futures industry to defend it from fraudulent activities. The NFA maintains a high level of transparency for all investors. The organization is independent and is supported by membership fees and sales charges.
Necessary Margin is the amount of money which a trader needs to open a position of a particular size. The Necessary Margin is a kind of guarantee that the trader places on a broker’s or dealing center’s account. The size of the necessary margin depends on the leverage provided: the less the leverage, the higher the necessary margin required and vice versa.
A Nontrading Operation is any action connected to the transfer of money: making deposits on transitory and trading accounts, the withdrawal of funds and credit operations. For the carrying out of nontrading operations, brokers have specific rules and regulations which set out the conditions to make deposits and withdrawals.
NYSE (New York Stock Exchange)
Founded at the end of the 18th century, the New York Stock Exchange is the oldest trading floor in the USA. Until it appeared in 1792, New York’s brokers for the most part completed their deals in cafes, just as they did in Europe. Today the NYSE is not only the most important stock exchange for the world’s largest economy, but is also the largest exchange in the world.
The NASDAQ is an automated system that provides real-time trading quotations for securities (mostly for stocks of high-tech companies). The NASDAQ was established in1971 and is today is one of the most influential stock markets in the world and its values can be seen throughout all media reporting on finance and markets.
An Out-of-the-money Option is when, during trading, the option is worth less than was paid for it. For example, you predict that the price of an asset will rise, but it falls. Your forecast doesn’t come true and you lose money on the option. The option can fluctuate in and out of the money: i.e. be profit making (in-the-money) at one point and loss making (out-of-the-money) at another before the option expires.
An Omnibus Account is a futures merchant’s account for carrying out immediate stock market operations and on which one or several deals are combined together. An Omnibus Account is opened in another company by the futures merchant and provides for the processing of stock market operations in the name of the account holder.
An overnight deal is one where an operation that has taken place on one working day is carried over to the next. If the trade takes place on a Friday, the overnight lasts from Friday to Monday inclusive. In essence, an overnight is the changeover of a position to the next day. In banking, an overnight can mean a one-day credit line, extended from one bank to another.
An option is a contract between two investors on the condition of which one investor either acquires or sells an underlying asset for a specified price over a specified time which is agreed in advance. The second investor either sells or purchases the asset in accordance with the contract. In other words, the option can be an agreement to buy or sell a trading instrument.
OPEC (Organization of Petroleum Exporting Countries)
The Organization of Petroleum Exporting Countries, often called the OPEC cartel, was formed in 1960 to regulate prices and the supply of oil on the world oil market. In the beginning, the organization comprised of 7 companies which operated in the sphere of oil refinery and the derivatives of its resale. Today 12 member states make up OPEC and between them they account for 80% of the world’s oil reserves and provide around 40% of the total world production; giving the organization monopoly status in this market. However, disagreements between OPECs members do not always allow the cartel to operate smoothly.
On the Forex currency market, an order is a pending command in the trading platform made by the client or by the company on behalf of the client. When the price reaches the level specified in the command, the trade will automatically open or close.
Offset is the closure of a position which opens a purchase or sale of an instrument so as to hold an equivalent but opposite position. For example, a trader opens a short position on EURUSD: an offset for this would be a long position of the same amount on the same instrument.
Offshore is a term which concerns tax collection. Offshore zones are territories or states where foreign capital accumulates due to special tax breaks for companies registered in such countries.
Penny Stock is stock whose price doesn’t exceed 5 USD each and is typically used for highly speculative trading. Such stock belongs to small companies which have not yet garnered a reputation on the market and so transactions using these securities are associated with increased risks for investors.
There are two types of option: put and call. A Put option allows the trader to make an order for a specified amount of an underlying asset (e.g. shares of a company) in advance and at an agreed price over the course of a previously agreed amount of time. As such the contract includes these 4 unalterable conditions by which a deal should take place if a trader would like to acquire an option.
A Pending Order is a request made by a trader to a broker to say at which price level a position should be opened or closed. Experienced traders don’t advise trading on the Forex market without using pending orders since they help to avoid significant losses.
Partnership is a form of organization and means of conducting business, a joint enterprise, which is owned by a few private and legal entities. However, a partnership doesn’t imply equality for all parties involved: one or another part or participant can have more or less say.
Premium can mean: 1) A sum which exceeds the nominal payment on a bond. 2) An amount paid to the seller to compensate for the cost of trading (buy or sell) an option for a futures contract.
A positive financial outcome for a trading or speculative operation, or the investment of funds, which exceeds that of initial investment.
A Point or a Pip is the smallest amount a price of a financial instrument can change. The smallest value in a currency pair quote is also called a pip.
A below ground level area in a stock or futures exchange where buy and sell orders are placed. As a physical part of the stock exchange, only traders are allowed to trade here.
For the completion of an effective trade on the stock market, a trader needs to know about current quotes. Quoting is information provided to clients by dealers and Market Makers. Quoting allows traders to conduct technical and fundamental analyses.
A Quote is the price of an instrument at a certain moment. It is an indication of the price at which the seller is ready to part with his asset. On the stock exchange, prices change quickly. Quotes are formed on the back of several factors, such as interest rates, inflation, political events, amongst other things. A currency quote is expressed as the cost of one currency against that of another.
On each instrument in the trading terminal there is a constantly updated quote. This is known as the Quote’s feed. The quote’s feed aids a trader by always providing up to date information on instruments and thus helping traders to make the most informed decisions.
Range is the difference between the maximum (max.) and minimum (min.) prices for a trading instrument over a certain period of time. As a general rule, traders select a time frame in which to work (an hour, day, week, etc.) and keep an eye on the instrument over this time period. The corridor, or channel, in which the price moves (including the max. and min. price) is considered as the range.
Rate can mean several things depending on the type of asset. For currency pairs: the value of one unit of the base currency expressed in the quote currency. For CFDs: the unit cost of the underlying asset in the contract.
An agreement to sell an asset which includes the commitment to repurchase it at a pre-determine price.
A rollover is when a contract expiration date is extended.
The reference rate is a benchmark upon which interest rates for financial operations are set. In Forex, the benchmark rate is understood as the interest rate which is the basis for defining the value of securities and interest rate swaps.
Stock is a type of share which is issued by a joint-stock company. The holder of a stock has the right to receive a share of the company’s profit. Moreover, if the joint stock company folds, the owner of the shares has the right to demand part of the company’s assets. The stock can be divided into common and privileged. Those who have common stock receive both profit and can take part in the running of the organization. Owners of privileged stock can’t influence the decisions of shareholders during meetings but still get a large percentage of the profits.
Securities Act of 1933
The Securities Act of 1933 was passed in the USA to protect investors from fraud when working with stocks, bonds and other securities. US congress wanted to regain investor trust on the securities market and so the law prohibits fraudulent activities on the stock market and also serves to inform investors about all of the stocks that are for sale: the law dictates the obligatory registration of all securities for sale in the USA.
SEC (Securities and Exchange Commission)
The Securities and Exchange Commission is the principal regulator for the American stock market and sets the regulations for the registration of securities, whilst also fulfilling the role of watchdog for stock exchange activities. Created in 1933, the SEC was tasked with winning back the trust of stock market investors which was shattered after the Great Depression. Today the commission is responsible for implementing laws for stock markets and securities.
A Short Position is opening a trade with a sale. On the stock exchange, a short position is the sale of one stock, which the seller doesn’t have, for the later purchase of said stock at a more favorable price when the market situation has shifted. For example, you open a short position, selling oil at $50 a barrel, and in a week the price of oil falls. Accordingly, at the closure of the deal, you purchase oil for cheaper than you sold it and, thus, make a profit.
A Server Log-file is a file created by the server and records information sent by a client to the dealer with precision to the second. The sever logs information about requests, orders, outcomes and their processing.
Society for Worldwide Interbank Financial Telecommunications. The Society for Worldwide Interbank Financial Telecommunications is an international computer system which passes on payment instructions and messages.
A Swap is the difference in credit interest rates for currencies used in trades. The interest is added (if it is positive) to the account or taken from it (if negative) when a trading position is left open overnight.
Swaption is a futures or an option to enter into an interest rate swap. It is gives the right to conclude a contract for interest rate differences on a specified date in the future.
Special Drawing Rights
Special Drawing Rights are an artificially created means to calculate payments that are intangible and are based only on digital bank accounts. They are used by the IMF to increase its reserves, its credit operations and to regulate deficits and balance of payments for countries which form part of the IMF. The rate of special drawing rights is calculated every day on the basis of the rates of four key currencies.
A purchase or sale of a financial asset which offers delivery of an instrument in one working day is called a Spot trade. It means that the participants of the trading operation have a prior agreement as to the price and date (i.e. the specific spot) by which the trade will be made.
The spread is one of the basic concepts of the currency market, without knowledge of which it would be difficult to imagine the work of a trader. The spread is the difference between the price of selling and that of buying a financial instrument and is the fundamental source of income for brokers, who take a small part of the spread as a kind of commission for their services.
Stop Out is a signal given by the server to force close a position when a client doesn’t have enough free equity to support the open trade. The size of the Stop Out is set by each individual broker. If a few of a trader’s positions turn negative, a force close will take place on the trade incurring the biggest losses.
A Stop Loss is an order which allows a trader to complete a trade when their chosen instrument reaches a certain price. Stop Loss parameters can be set before or after the opening of a position. A stop loss allows the trader to avoid excess losses by automatically closing a position. The obligatory condition of setting up a stop loss is that the financial instrument’s price should not be lower than the current market price when purchasing and not higher when selling.
Straddle is a situation when a purchase or sale of an equal amount of Call and Put options is made and whose conditions are identical.
Strike Price is a fixed price in a contract at which a buyer of an option can acquire (Call) or sell (Put) the underlying security at expiry.
Securities are documents which affirm the property rights or the factual issuance of a loan by the holder. This relates to stocks such as bills, bonds, shares, options, futures, warrants and certificates.
Tokyo Stock Exchange
In terms of capitalization the Tokyo Stock Exchange is second only to that of New York and is one of the largest trading floors in the world. The exchange includes more than 2,000 Japanese companies. The Tokyo Stock Exchange is based on the weighted average of price quotes for 225 blue chip Japanese companies. The main index of the Tokyo Stock Exchange is the Nikkei 225 which is over 70 years old.
Generally, a Treasury is a financial state institution which collects taxes, duties and conducts other fiscal activities of a country. In a more narrow sense, a treasury is a fundamental subdivision of any financial organization that works to ensure the liquidity of the company. Operations to ensure the liquidity of the company are processed on the financial markets with direct participation of the treasury and by the dealing center (it could be part of the treasury or be an independent subdivision).
Any operation involving a financial asset (currency pair, stock, etc.) as part of work on the financial and currency markets. For example, the purchase or sale of stock.
A tick is an individual quote of a financial asset (currency, stock, etc.) provided by the information system. In other words, in the trading platform, a tick is any single change or movement in the quote upwards or downwards. It may change by one or more point.
A ticker is a unique number set in the trading platform for every operation, allowing any pending orders or open positions to be identified. You can see the ticker for each trade you complete in your transfer history.
A trader is someone who trades on the currency or stock market. A trader’s trading operations are made using their own funds (taking into account access to leverage) or using investor’s money which has been allocated for them to use. A trader makes money on the price changes of instruments which they trade. A trader analyses the situation on the financial market and, relying on the data from their analyses, makes trades.
The trend is the certain direction in which prices are going. The behavior of the trend is assessed when conducting a technical analysis. Trends can be downward (also known as bear trends), upward (known as bull trends) or sideways (empty trends or flats).As a general rule, when there’s a downward trend it’s recommended to open a position with a sale and when there’s an upward trend, buy. If there’s no trend, it’s better not to undertake any operations.
Take Profit is a trading command which allows profit to be fixed to a certain amount when the price reaches a certain level. This command helps to reduce risks. If a trader sets up a take profit command on a certain trading instrument, when the price of the instrument reached the specified price level, the position will be closed automatically. A take profit command can be set up at any time during an open position.
The Unemployment Rate is a macroeconomic indicator which shows a percentage value of the work-able population who are unable to find work.
Volatility is the range in which the price of a financial instrument fluctuates and is one of the most significant indicators to highlight the attractiveness of a trading instrument. Volatility shows the extent of risk involved in using an instrument since the higher the indicator, the bigger the range in which the rate changes over a specified amount of time.
Warrant has two meanings. It can be a type of derivative which allows the holder to acquire a set of securities before they are released onto the market. It can be an appendix to a security which gives the holder the right to additional preferences after a certain period of time.
WTO (World Trade Organization)
The World Trade Organization came about in 1994 to regulate international trade and to coordinate international relations between its members. Today the WTO encapsulates more than 150 states which aim to operate by a set of rules which include: equal rights for all members, information transparency, mutual concessions, fulfillment of obligations and support for restrictions.
The yield is an indicator of profitability and viability of your investment. By this unit of measurement, profit made over a yearly period is shown. Types of yield include internal, yearly, percentage, current, yield to maturity (for bonds), dividends (for stocks). Yield can depend on the means of trading (passive/active), as well as how the trader copes with the current market situation. One must always keep the probable risks under control when trading so as not to suffer large losses.
The yen is the national currency of Japan and as such is one of the financial community’s fundamental instruments. Not surprisingly, the yen is a one of the most important currencies in Forex. The international code for the currency is JPY. The yen was introduced into circulation 1871 with the purpose of replacing a complicated monetary system in which the country’s government and empire used both gold and bank notes as currency simultaneously. The yen acquired the status of an international currency in 1953.