Glossary

Confused by all the terminology surrounding spread betting and the financial markets? Check out our clear and concise trading glossary.

A

American-style option

An option contract that may be exercised at any time before it expires.

Ask

The price at which a financial instrument is bought. The ask price is the higher end of the InterTrader.com quote. Also known as the 'offer' price.

B

Base Currency

For foreign exchange trading, currencies are quoted in terms of a currency pair. The first currency in the pair is the base currency. For example, in a USD/JPY currency pair, the US dollar is the base currency. Also may be referred to as the primary currency.

Beige Book

A summary compiled by the Federal Reserve Bank which reports on economic conditions throughout specific areas of the USA.

Bid

The quoted price where a customer can sell a currency pair. Also known as the 'bid price' or 'bid rate.'

Bid/Ask Spread

The point difference between the bid and ask (offer) price.

C

Call

A call option gives the option buyer the right to purchase a particular currency pair at a stated exchange rate.

Counterparty

The counterparty is the person who is on the other side of an OTC trade. For retail customers, the dealer will always be the counterparty.

CPI

The Consumer Price Index is a measure of the average change in price over a year in a given basket of goods typically representing an average family. It is the main inflation statistic.

Cross-rate

The exchange rate between two currencies where neither of the currencies are the US dollar.

Currency pair

The two currencies that make up a foreign exchange rate. For example, USD/JPY is a currency pair.

D

Day Trade

A trade that is opened and closed in the same day.

Dealer

A firm in the business of acting as a counterparty to foreign currency transactions.

Durable Goods

These are goods that serve a function and last a reasonable length of time. Typically washing machines, televisions etc

E

Euro

The common currency adopted by eleven European nations (i.e., Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain) on January 1, 1999.

European-style option

An option contract that can be exercised only on or near its expiration date.

Expiration

This is the last day on which an option may either be exercised or offset.

F

FOMC

The Federal Open Market Committee is made up of twelve presidents or governors from the various Reserve Banks in the USA. They meet regularly to decide, amongst other things, what US interest rates should be.

Forward transaction

A true forward transaction is an agreement that expects actual delivery of and full payment for the currency to occur on a future date. This term may also be usedto refer to transactions that the parties expect to offset at some time in the future, but these transactions are not true forward transactions and are governed by the federal Commodity Exchange Act.

G

GDP

Gross Domestic Product is the total value of all goods and services produced within a country.

GNP

Gross National Product is the same as GDP plus all income generated from overseas investments and companies located abroad.

G7

G stands for group. G7 is the Group of 7. These are the 7 leading industrial nations of the world : USA, UK, Japan, France, Germany, Canada and Italy.

G10

G stands for group. G10 is the Group of 10. These are the 10 leading industrial nations of the world : USA, UK, Japan, France, Germany, Canada, Italy, Sweden, Netherlands and Belgium.

H

Hedge

Opening one or more new transactions in order to mitigate the risk of the transactions opened before.

Hedge Trading

Hedge is an investment which occurs in the reverse directions and open positions of an existing trade. This can be a partial or complete hedge and even it creates the same effect, it cannot end a position. Some investors are satisfied with this property and they use it as an open trade rather than considering the hedge's sufficiency (trading) out of the stock market. Except that the hedge transaction creates an open position in long or short term, acts like an open trade and has to be ended on future dates, it should be noted that these hedge transactions will have the same effect as closing a transaction or ending.

Housing Starts

The number of houses which have started to be built.

I

Initial Jobless Claims

The weekly change in unemployment.

Interbank market

A loose network of currency transactions negotiated between financial institutions and other large companies.

Interest

The use charge of a currency.

J

JPN225

short for the NIKKEI index.

K

Kiwi

refers to NZD/USD.

L

Leading Indicators

A predictable amalgamation of other key economic figures.

Leverage

AThe ability to control large dollar amount of a commodity with a comparatively small amount of capital. Also known as 'gearing.

Limit Order

An order which is given for buying at a certain price or lower than that price or selling at a certain price or higher.

M

Margin

A dealer who makes price offer and is ready for buying or selling at the prices that he/she offered.

Money Market

Financial markets in which financial instruments with high liquidity and very short maturities (90 days and less for the international markets) are traded.

Monetary Policy

Stands for the decisions made to manage the attainability and cost of the money to reach the targets as economic growth, employment increase and price stability.

N

Non-Farm Payroll

Generally released on the first Friday of the month, this figure is the monthly number of jobs created or lost in the non farming sector. This is regarded as the most important economic statistic, and a wildly different figure from that expected can cause financial markets to move very quickly.

Net Position

It stands for the difference between the total buying positions and selling positions in a parity.

O

Offer

See ask.

Open Order

An order to occur in transition to the determined price of a market.

Open position

Any transaction that has not been closed out by a corresponding opposite transaction.

Open Trades

A position which is not liquidated by physical payment or not closed with another equal sized and reverse directional trading.

P

Personal Income

This is an indication of the average salary.

Pip

The smallest unit of trading in a foreign currency price.

Position

Buying or selling transactions opened by the investor as to the changes in the prices.

Position Closing Order

An order given for closing an open position.

Q

Quote currency

The second currency in a currency pair is referred to as the quote currency. For example, in a USD/JPY currency pair, the Japanese yen is the quote currency. Also referred to as the secondary currency or the counter currency.

R

Recession

A case of slow or reverse directional economic growth in a country within a certain period of time.

Resistance Level

A price level at which you would expect selling to take place. Doji: A candlestick formation which represents the same opening and closing prices. It shows an instability in the market.

Retail customer

Any party to a forex trade who is not an eligible contract participant as defined under the Commodity Exchange Act. This includes individuals with assets of less than $10 million and most small businesses.

Rollover

The process of extending the settlement date on an open position by rolling it over to the next settlement date.

RPI

The Retail Price Index is a now somewhat obsolete statistic for UK inflation.

S

Security deposit

The amount of money needed to open or maintain a position. Also known as 'margin.'

Settlement

The actual delivery of currencies made on the maturity date of a trade.

Spot market

A market of immediate delivery of and payment for the product, in this case, currency.

Spot transaction

A true spot transaction is a transaction requiring prompt delivery of and full payment for the currency. In the interbank market, spot transactions are usually settled in two business days. This term may also be used to refer to transactions that the parties expect to offset or roll over within two business days, but these transactions are not true spot transactions and are governed by the federal Commodity Exchange Act.

Spread

The point or pip difference between the ask and bid price of a currency pair.

Sterling

Another term for British currency, the pound.

Strike price

The exchange rate at which the buyer of a call has the right to purchase a specific currency pair or at which the buyer of a put has the right to sell a specific currency pair. Also known as the 'exercise price.'

Swap

Bilateral Trade.

T

Take Profit

An order given for the purpose of gaining profit by closing an open transaction from a predetermined price.

Technical Analysis

A transaction that analyzes the market data, estimates the market movements that can occur in future with the help of charts, price trends and volume indicators.

Total Demand

Total demand for the goods and the services in the economy. Total internal and external offers for the total goods and services produced by the public and private sectors in a country. Trend: The set tendency of the prices. It is observed that the prices are in upper trend in case that the prices increase gradually, they are in the lower trend in case that the prices decrease.

Total Offer

The risk ratio that a bank takes in the spot and forward agreements signed with a specific customer.

Total Risk

An order given for the purpose of gaining profit by closing an open transaction from a predetermined price.

Trend

The set tendency of the prices. It is observed that the prices are in upper trend in case that the prices increase gradually, they are in the lower trend in case that the prices decrease.

Trend Lines

A line formed by joining the dip levels of the prices that are in the increase trend or joining the tip levels of the prices that are in the decrease trend. Breakage of these lines are perceived as trend conversion signal generally.

Triangle Formation

It is formed by intersecting the reverse directional two trend lines in a specific point in the parity. Generally one of these trend lines are formed in a middle - long term, the other is formed in a short term. The prices moving by breaking the point that the trends intersect, determines the direction of the new trend.

V

Value Date

Closing date of the performed transactions.

Volatility

An indicator obtained by measuring the changes of the prices in the market within a certain period of time with standard deviation. High volatility means higher risk since it is the indicator of the uncertainty in the market.

W

Whipsaw

Refers to a very high volatility market where price is moving similar to “whipsaw” at work. Price movement is followed by a sharp and quick reversal movement.

Working order

Stop or Limit orders that has been placed but not filled yet.

X

XAG/USD

Symbol for Silver Index.

XAU/USD

Symbol for Gold Index.

Y

Yield

Percentage based income return on an investment.

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