Glossary
of terms at CFI

A glossary of technical words and trading definitions giving their meanings

Glossary Of Terms

Annual Return

Annual return in terms of trading terminology, is the return on trading funds that a trader or trading portfolio generates over a specific trading period, expressed as an annual percentage. The rate of annual return is expressed as a percentage of the total value of the fund or portfolio (the init ...

Ask Price

The ask price (also known as the offer), is the lowest price that a seller is willing to offer (sell) goods or services. In this definition, it is related to financial instruments or products such as securities, commodities, or foreign exchange to name a few. When viewing financial price quotes ...

Assets

Assets are defined as resources with an economic value that a country, company or individual possesses and is expecting them to produce economic benefit in the future. Assets are listed on balance sheets and are bought or created to help increase an entity’s value or in the future, increase cas ...

Base Currency

In the foreign exchange markets, currency prices are displayed or quoted as currency pairs such as GBP/USD or EUR/USD. The base currency, sometimes known as the transaction currency, is the first currency displayed in the price quotation. The second currency displayed is known as the quote currenc ...

Bearish

Bearish is a term used to describe how a trader feels about the direction of a certain financial market or the actual direction a market may already be moving in. If a trader has a bearish bias towards a specific market or financial instrument, they believe that the future direction of the pric ...

Bid Price

The bid price is the highest price that a buyer (the bidder) is willing to pay for goods or services. In this definition, it is related to financial instruments or products such as securities, commodities, or Forex to name just a few examples. When viewing financial price quotes, these will be ...

Bonds

Bonds are fixed-income instruments, and in basic terms, represent a loan made by an investor to a borrower who in most cases will either be a country’s government or a corporate entity. Bonds are utilized by governments and corporate entities to raise capital to finance operations or major project ...

Breakouts

A  breakout is when the price of a financial instrument or asset trades below a level of support or above a level of resistance. Breakouts demonstrate the possibility but not a certainty for the price of the asset or instrument to start a new movement in the direction of the breakout. As an e ...

Bullish

Bullish is a term used to describe how a trader feels about the direction of a certain financial market or the actual direction a market may already be moving in. If a trader has a bullish bias towards a specific market or financial instrument, they believe that the future direction of the pric ...

Buy

Buying a financial instrument is the act of taking a [long position] on the instrument, speculating that the price of the instrument will rise. The buying rate of the [instrument] is referred to as the [asking] or offer price. Traders who have bought a financial instrument are commonly referred ...

Capitalization (Market Cap)

Capitalization, otherwise known as ‘market cap” from a financial perspective, refers to the market value of the outstanding shares of a company that trades openly. At the same time, it can then serve as a measurement of the company’s net worth via the public eye. It can also then be used as a form ...

Capitalization-Weighted

 A capitalization-weighted index can also be referred to as a market-value-weighted index. This is a form of a stock market index whose different elements are weighted according to the total market value of the outstanding shares. The method for calculating the price-weighted average ...

Carry Trade

 This is a currency trading strategy that benefits from the differentials between a currency offering a low borrowing interest rate and a currency offering a high lending interest rate. In essence, the trader will borrow/buy ‘low’ and lend/sell ‘high’. Carry trades strategies are some of t ...

Commodity Currency

Commodity currency refers to the types of currencies that move in parallel with the price of global commodity products like raw materials and natural resources such as agricultural goods. In the foreign exchange markets, commodity currency refers to currencies such as the South African rand and ...

Contracts For Difference (Cfd’s)

 Contracts for difference, otherwise known as CFDs, commonly refer to an agreement between two parties that permits them to trade on the price movements of various financial instruments. CFDs are a well-favored method of derivative trading and allow the trader to speculate on the rising or ...

Counter Currency

The counter currency, otherwise known as the quote currency, is the second currency listed within a currency pair. When a trader buys a currency pair, they are selling the counter currency and if they are selling a currency pair, they are buying the counter currency. The unit of measurement ...

Currency Correlation Coefficient

Currency correlation refers to the relationship between two different currency pairs. A positive correlation means that the currency pairs move together in sync, whereas a negative correlation implies that the currency pairs each move in a different direction, away from each other. If a relativ ...

Day Order

A day order is when a trader informs their broker to buy or sell a financial [instrument] at a predetermined price while putting an expiry date at the close of the day. If this order is not triggered by the end of the day, it is canceled and removed from pending orders. Day orders are good for ...

Day Trading

Day trading refers to traders who focus on short-term trading, entering and exiting positions over a day and benefiting from fast-moving markets. It’s worth that this form of trading is not suitable for individual investors who do not possess both time and capital as it is a high-risk form of t ...

Decentralized

A decentralized market utilizes a digital platform to allow traders to trade directly between themselves, rather than through a traditional centralized exchange. Company stocks that are traded through stock exchanges such as the Nasdaq, the NYSE, or LSE, would be an example of centralized marke ...

Direct Market Access (Dma)

 Direct market access or DMA is used when traders place trades directly in the electronic order books of exchanges. This process is facilitated digitally. DMA is not commonly used by the majority of brokers and traditionally, one would contact a broker by telephone or submit a request online. ...

Downtrend

A downtrend refers to when the price action of a [financial instrument] moves to a lower price point over time. The price may fluctuate upwards and downwards during this time, but a downtrend occurs when these fluctuations amount to have a decline in the price overall throughout the time fram ...

Drawdown

Drawdown is used by traders to measure any decline in investments over a specific time period and is important as a measure of historical risk when investors look at various stocks and investment funds. It is normally expressed as a percentage and measures the peak to trough movement (the decline) ...

Entry Point

Entry point refers to the price at which a trader [sold] or [bought] a financial [instrument] and therefore entered a trade. For a trader to profit, they must enter and exit their positions at the most profitable price points. Traders will commonly undertake [fundamental analysis] to determine ...

Equities

Equities, in the simplest terms, can be described as shares in the ownership of a company. Equities, along with [bonds], are the most common means by which a company will raise finance from the markets. However, they differ from bonds, which are loans made to the company and do not constitute a ...

Exchange-Traded Funds (Etfs)

Exchange-traded funds or etfs are investment funds that trade onvarious stock exchanges. etfs trade over a session (the course of one day of trading) and trading closes at its net asset value. the investment funds can comprise of various assets such as commodities, [bonds], or stocks and can only ...

Execution

Execution in financial trading terms refers to the finalisation of an order by a trader to either buy or sell an [instrument] with a broker. In simpler terms, the order has to be completed and not just initiated. Only when the order has been [filled] is it deemed as executed. By simply ini ...

Exit Point

The exit point is the time that a trader decides to close their position. Knowing when to take or bank profits that were earned is one of the most crucial factors of trading. Locating the perfect exit point is not a clear-cut process and can become quite troublesome for traders. There is no sin ...

Exotic Currency Pair

A currency pair is referred to as “exotic” when it consists of one major currency and one currency from a developing or emerging nation. An example of this is the USD/TRY, a currency pair that consists of the US dollar as the base currency and the Turkish lira as the counter currency. Another ...

Filled

 In trading terminology, the term ‘filled’ refers to when an order placed by a trader has been returned as completed. For example, if a trader submits an order to a broker to buy 100 lots of gold at 1728.50, this order would only be completed and therefore classified as filled when the broker ...

Financial Markets

Financial markets, broadly speaking, are any place where governments and organizations can go to obtain financing, or traders can buy and sell [financial instruments]. The financial markets play a pivotal role in a country’s economic health, allowing governments and companies to access funding for ...

Forex

The EURUSD pair slipped 0.28% to 1.1790 on Wednesday, July 7. Prior to the release of minutes from the FOMC’s June 15-16 monetary policy meeting, the euro rate slid to 1.1781. After the release, the euro strengthened to 1.1821. The minutes brought no surprises. The regulator made it abundantly cle ...

Forex

The term Forex is short for foreign exchange and refers to the buying and selling of currency on the foreign exchange market. Foreign exchange trading originated in Amsterdam, more than 500 years ago and is now the largest traded financial market, with trillions of dollars being traded every da ...

Fundamental Analysis

 Fundamental analysis is a market analysis technique for determining the intrinsic value of a [financial instrument] and all the components that can influence its price. Fundamental analysis is used by traders and analysts globally to try and establish the correct value of a financial inst ...

Futures

Futures are financial contracts that obligate the buyer and seller of the contract to complete a trade for a [financial instrument] at a set price and date in the future. The price and date are written into the contract and the transaction must occur regardless of the current price of the underlyi ...

Good Till Canceled Order

A good till canceled order, commonly referred to as a GTC order, is an open order used by traders to [buy] or [sell][financial instruments]. As the name “good till canceled” suggests, this type of order is valid until the order is either filled or is canceled by the trader who placed it. GTC&nb ...

Hedging

Hedging is a risk management strategy that mitigates the risk of loss due to price fluctuations by offsetting against it. It is especially common when trading instruments that experience [volatile] price movements and that are heavily influenced by dynamic market conditions. The simplest means ...

High-Frequency Trading

High-frequency trading, often referred to as hft, refers to algorithmic trading undertaken by systems of powerful computers that can process extremely high volumes of transactions in milliseconds. High-frequency trading employs computers to scan mass amounts of assets and market data across the ...

Illiquidity

Illiquidity describes when a trader is unable to trade an [instrument] in the market in a straightforward manner. The primary cause of illiquidity is a lack of supply and demand for the instrument which indicates a possible lack of traders. An instrument may have opened trading with [liquidity] ...

Indices

The term “indices” is the plural of the word “index”, and in trading terms, an index is a way of tracking the performance of a group of [assets] by a standardized method. Indices usually track and measure a basket of stocks and can either be a broad mix to capture the whole market or more speci ...

Inflation

Inflation is generally quoted in percentages and is the measure of the average price at which a select basket of goods and services in a country rises over a specific period. Inflation demonstrates the rise in prices in a country and therefore the reduced purchasing power of the country’s curre ...

Instrument

Financial instruments are anything that can be used for trading, mainly for speculation or hedging purposes. These include, but are far from limited to Stocks, Forex, Commodities, Indices, ETFs. The reason for the existence of such a vast range of financial instruments is that traders and broke ...

Interest Rates

Interest rates are the rate at which a lender is prepared to charge for the use of financial services. The interest rate charged is normally expressed as a yearly percentage amount and known as the annual percentage rate or APR. While interest rates are most commonly associated with cash-relate ...

Intrinsic Value

The worth of a [financial instrument] or asset is referred to as intrinsic value. Intrinsic value is also sometimes referred to as the equilibrium price. It is in the best interest of a trader to know the intrinsic value of an instrument so that they can assess whether it is currently overvalue ...

Margin Call

At cfi you trade with what is called a margin account. margin is the term used when we refer to the money required to open and maintain a leveraged position in a trading account. we use the term margin call to describe the notification sent to a trader to inform them that the margin/funds in their ...

Margin Deposit

The margin deposit is also known as the initial margin, deposit margin or simply the deposit. if you trade forex, equities, commodities, or indices with a broker using leverage or 'on margin', it means you are ultimately borrowing money as you will be using [leverage] on your trades. to start borr ...

Market Capitalisation

Market capitalization, also known as market cap, is the total value of a publicly traded company's stock. market capitalisation is one of the most accurate ways to measure a company's size within the stock market. before buying a company stock you should find out everything you can about that comp ...

Market Depth

The market depth provides an indication of the liquidity for a trading product. It is presented in the form of a real-time electronic list of buy/sell orders lined up to be transacted on a trading platform. It is useful because it indicates to traders how many bids and offers have been placed for ...

Market Index

A market index, stock index, or stock market index is a method used to track the performance of a group of financial products uniformly. The stock market index is an indication of the value of a segment of the stock market and helps investors compare actual stock prices with past prices to evaluat ...

Market Maker

A market maker, sometimes abbreviated to mm, is a company or person who quotes two-sided markets for a financial instrument, providing bids and offers. This term came from fixing market prices at levels needed for supply and demand to work harmoniously. To manage their risk and to generate a stead ...

Minor Currency Pair

A minor currency pair is a pair of currencies from large, strong economies that do not include the US Dollar. The most popular and most traded minor currency pairs include the Pound, the Euro, and the Yen because, besides the US Dollar, these are the three most traded currencies. The euro (EUR) ...

Moving Averages

A moving average is a technical analysis indicator that blends specific price points of a financial instrument over a set period of time. The number of data points then gets divided, to give you a single moving line. It is one of the more popular technical indicators because it helps traders deter ...

Order

An order or trade order is a client’s instruction to their brokerage firm to buy or sell a financial asset on their behalf. Orders are usually placed through an online [trading platform] such as CFI’s MetaTrader 5 trading platform. The two major types of orders that every investor should famili ...

Over The Counter (Otc)

OTC trading, also known as over-the-counter trading or off exchange trading, describes a transaction that is not conducted via a formal exchange. OTC trading creates plenty of opportunities for traders to partake in the forex, commodities, indices, and equities markets although it does carry a hig ...

Paper Trading

The term ‘paper trading’ originated from when traders on the stock market wanted to practice trading before trading with real money and would write their investments on paper and follow the market movements. Paper trading is also sometimes called virtual trading or demo account trading and ...

Pip

The term pip stands for point in percentage and is the measurement of the smallest price move that a currency can make. Take your time to understand this term in detail as it is especially important for forex traders. A pip measures the fluctuation in the exchange rate between the bid and ask pric ...

Position Trader

Position traders, sometimes also known as “buy and hold” traders, employ the longest-term trading style out of all trading styles, and may hold their trades for months or even years. This trading approach is reserved for individuals with an excellent understanding of the fundamentals and are very ...

Price Action

Price action is a form of technical analysis used to identify buy or sell opportunities when trading stocks, commodities, indices, equities, or anything with data. When traders talk about price action, they are referring to the fluctuations in the price of financial products. Technical traders gau ...

Price-Weighted Index

A price-weighted index is a stock index where the companies in the index form a fraction of the total index relative to that company's stock price per share. To calculate a price-weighted index in its simplest form you take the price of the total members' stock prices and divide them by the tot ...

Product (Trading Product)

CFI provides traders access to over 7000 Stocks, Foreign Exchange pairs (Forex), Commodities, Indices, and ETFs across 18 Global Markets. The different products are available across a range of platforms including MetaTrader 5 and cTrader. CFI is always looking to expand the range of products avail ...

Purchasing Managers Index (Pmi)

The purchasing manager's index (PMI), is an indicator of the economic health from across 19 industries consisting of mainly manufacturing and service sectors. The index is compiled of surveys from senior executives such as business owners and supply chain managers at more than 400 companies. These ...

Quote Currency

When trading foreign currency exchange, you will always see currencies represented in pairs. The first currency quoted in the pair is the base currency (also known as the primary currency). The second currency in the pair is the quote currency (also known as the counter currency). You buy when ...

Range Trading

The term “range trading” refers to areas in the financial markets when a market moves steadily between two prices or levels (or support and resistance areas) for a decisive period. These ranges can be used to provide trading opportunities in times when a market is not displaying an obvious long-te ...

Ranging Trend

The term ranging trend refers to the price action of a financial asset trading around the same highs and lows numerous times in a row. When a price hits the same [support] and [resistance] levels a minimum of three times in a row it is referred to as a ranging market. Traders will keep an eye o ...

Resistance Levels

The terms support and resistance levels are by far the two most commonly used terms in technical analysis. Technical analysis is the most widely used trading analysis approach by traders and investors and entails the use of various charting tools to generate short-term trading ideas. It is a techn ...

Scalper

Scalpers are the kind of traders that hold their trades for a few seconds to a few minutes at most. A forex scalper’s main aim is to capture small profits repeatedly during the busiest times of a trading day and can place anywhere between 10 to 100 trading positions in a single day. Scalping is ...

Signals (Trading Signals)

Trading signals are trading ideas or suggestions for financial instruments that are used to identify the right trading opportunities at the right time.  There are different ways traders can receive trading signals, often they will be sent through SMS, email, or push notifications. It is al ...

Slippage

Slippage is the difference between the price at which you expect your order to be filled and the actual price it is filled at. Slippage can occur because of market volatility and can work either in your favor or against you.   Key takeaways: Slippage occurs due to market volatility. ...

Spread

The spread is one of the most common and most important terms used when discussing trading terminology. The spread is the difference between the sell (bid) and the buy (offer) prices of a financial instrument like currency pairs, indices, equities, and commodities. The spread for financial inst ...

Stock Market Index

A stock market index, also known as a stock index, is a way of measuring the performance of the stock market or a section of it. it helps investors to gauge the overall performance of the market by comparing past stock prices with current price levels. for example, a national index shows the perfo ...

Swaps

A swap, also known as a rollover charge, is the interest you pay or earn for a trade that you keep open overnight. It is usually the interest rate differential between the two currencies in the currency pair being traded, and it is determined based on whether your position is long or short.

Take-Profit

Take-profit (t/p) and stop-loss (s/l) orders are widely used as trading risk management techniques. The point at which you are willing to sell a stock and take the profit on your trade position is called a take-profit point. For example, let us say that there has been a large move upward, and t ...

Technical Analysis

The two most common forms of analysis used by traders are fundamental analysis and technical analysis. Sometimes, these are used in combination with each other and other times, separately. It all depends on your trading style and strategy. Technical analysis makes it easier to identify support ...

Trade Trigger

Whether you trade forex, commodities, or equities with CFI, there are hundreds of opportunities to place a trade whenever markets are open, therefore knowing what a trade trigger is and when to enter a trade is vital. The biggest challenge is usually deciding when to place a trade and when ...

Trading Capital

Trading capital refers to the funds a trader has available for them to buy and sell various assets on the global financial markets. Without trading capital, it is not possible to be a trader.   Many brokers, including CFI, allow you to start trading with no minimum deposit. A trader ...

Trading Plan

The first thing to be clear on when deciding when to enter a trade is your trading plan. only enter trades that align with your trading plan, because they will give you higher profit potential and you will be able to manage your risk better. knowing what kind of trader, you are, and what your ...

Trading Platform

A trading platform is software that allows traders and investors to execute trades in the financial markets. It acts as the intermediary between the traders and the brokers. Brokers tend to offer a trading platform to access the financial markets, free of charge. The best trading platforms come ...

Trailing Stop Order

Trailing stop orders are a special type of stop-loss order that trails with price fluctuations that come with the financial markets. Instead of being set at an absolute amount, the stop-loss price is at a certain percentage. If the price moves up, the stop-loss order moves up with the price. When ...

Trend

 Trends are an important aspect of trading and technical analysis. At any point in time, the market is either trending up, trending down, or ranging. They form across multiple timeframes with one timeframe showing a trend while a smaller one could be showing an opposite trend. Identifyi ...

Virtual Trading

Virtual trading is another term for demo account trading. A demo account is a virtual account used mostly by beginner traders (or experienced traders looking to practice new strategies) before committing to a live account to ensure they feel confident before trading with real money. A demo acco ...

Volatility

If the price of the asset is unstable and changes frequently, with big spikes from time to time, the asset is said to have high volatility. On the other hand, if the price is consistent and stable over a long period, the asset is said to be less volatile. As a new trader, you must decide if tradin ...

Yield

A yield is a return generated from an investment over a particular period, usually in the form of interest or dividend payments. Yields are typically expressed in percentage.  Yield is commonly mentioned across a variety of products including: Bond yield Dividend yield Stock yiel ...

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