Glossary

A

• Ask Price

  The price at which the market sells a currency or asset. It is the price a buyer needs to pay to acquire the asset.

• Asset

  A financial or tangible item with value that can be owned or controlled and has the potential to generate future economic benefits.

• Asset Index

  A list of all the underlying assets available for trading, often provided by a broker or financial institution.

B

• Bar Chart

  A type of financial chart that displays the open, high, low, and close prices for a specific time period as vertical bars.

• Bear Market

  A market condition characterized by declining prices, pessimism, and a general downward trend in the financial markets.

• Bid Price

  The price at which the market is willing to buy a currency or asset. It is the price a seller can expect to receive when selling the asset.

• Bitcoin

  A decentralized digital currency created in early 2009 by an unknown person or group of people using the pseudonym Satoshi Nakamoto. It operates on a decentralized peer-to-peer network and uses blockchain technology for secure transactions.

• Bitcoin Cash

  A peer-to-peer cryptocurrency that was created as a result of a hard fork from the original Bitcoin blockchain in August 2017. It increased the block size capacity, allowing for faster and cheaper transactions.

• Blockchain

  A decentralized and distributed digital ledger that records transactions across multiple computers, ensuring security, transparency, and immutability of data. It is the underlying technology behind cryptocurrencies and various other applications.

• Bollinger Bands

  A technical analysis tool that consists of a simple moving average (SMA) and two standard deviation bands plotted above and below it. The bands dynamically adjust based on price volatility. Bollinger Bands are used to identify price extremes, potential trend reversals, and volatility contractions or expansions.

• Breakout

  A price movement where the market price of an asset breaks through a previously established support or resistance level, signaling a potential change in the prevailing trend. It is often accompanied by increased volatility and trading volume.

• Broker

  An intermediary or firm that facilitates the buying and selling of financial assets on behalf of clients in exchange for a commission or fee. Brokers can operate in various financial markets, such as stocks, forex, and cryptocurrencies.

• Bull Market

  A market condition characterized by rising prices, optimism, and a general upward trend in the financial markets. It is typically associated with investor confidence and strong economic indicators.

• Buy Order

  An instruction given by a trader to a broker or exchange to purchase a specific quantity of an asset at a designated price. The buy order will be executed when the market price reaches or falls below the specified price level.

C

• Candlestick Chart

  A type of financial chart that displays the open, high, low, and close prices for a specific time period as rectangular “candlesticks.” Each candlestick provides visual information about price movements and helps traders analyze market trends and patterns.

• Carry Trade

  A trading strategy where an investor borrows funds at a low-interest rate to invest in an asset or currency that offers a higher interest rate. The goal is to profit from the interest rate differential between the two currencies or assets.

• Central Bank

  The monetary authority of a country or group of countries responsible for controlling and managing the money supply, implementing monetary policies, and regulating commercial banks. Central banks play a crucial role in stabilizing economies, controlling inflation, and influencing interest rates and currency values.

• Chart

  A graphical representation of price movements, volumes, or other relevant data for a financial asset. Charts help traders visualize and analyze market trends, patterns, and potential trading opportunities.

• Close

  The final price at which an asset or security trades at the end of a trading session or a specified time period. It is often used as a reference point for calculating returns, determining profit or loss, and analyzing price movements.

• Commission

  A fee or charge paid to a broker or financial institution for executing a trade or providing other financial services. The commission can be a fixed amount or a percentage of the trade value.

• Commodities

  Marketable goods or primary products, such as metals, energy resources, agricultural products, or natural resources, that are traded in financial markets. Commodities serve as raw materials for industries and can be subject to price fluctuations based on supply and demand dynamics.

• Consumer Price Index

  A measure of the average price level of a basket of goods and services typically consumed by households. It is used to track inflation and assess changes in purchasing power over time.

• Contract

  In the commodities market, traders engage in contracts to trade assets. These contracts establish standardized rules and specifications, facilitating easier speculation.

• Contract For Difference (CFD)

  A derivative financial instrument that allows traders to speculate on the price movements of an underlying asset without owning the asset itself. CFDs enable traders to profit from both rising and falling markets through buying (going long) or selling (going short) positions.

• Correlation

  Correlation, in trading, measures the connection between two assets. A positive correlation suggests that Security B tends to move in the same direction as Security A, while a negative correlation indicates opposite movement.

• Crude Oil Inventories

  Crude oil inventories refer to the stockpiles of crude oil, gasoline, and distillate held within a country.

• Cryptocurrency

  A digital or virtual currency that uses cryptography for secure financial transactions, control the creation of additional units, and verify the transfer of assets. Cryptocurrencies operate independently of central banks and traditional financial institutions. Examples include Bitcoin, Ethereum, and Ripple.

• Currency Pair

  A currency pair consists of a base currency and a quote currency (or counter currency). It represents the comparative value of one currency against another, serving as a basis for trading decisions.

• Currency Risk

  Currency risk refers to the potential adverse consequences associated with fluctuations in exchange rates. It involves uncertainties that can impact financial transactions involving different currencies.

D

• Day Trading

  A trading strategy where traders open and close positions within the same trading day, aiming to profit from short-term price fluctuations. Day traders often use leverage and employ technical analysis tools to identify entry and exit points for their trades.

• Deflation

  A sustained decrease in the general price level of goods and services in an economy over time. Deflation is often accompanied by reduced consumer spending and economic activity. It can have various causes, such as decreased money supply, reduced demand, or increased productivity.

• Derivative

  A financial contract or instrument whose value is derived from an underlying asset or group of assets. Derivatives enable traders and investors to speculate on price movements, hedge against risks, or gain exposure to specific markets or assets without owning the underlying assets themselves. Common types of derivatives include options, futures contracts, and swaps.

• Dollar Cost Averaging

  An investment strategy where an investor regularly invests a fixed amount of money into a particular asset or portfolio at regular intervals, regardless of the asset’s price. By investing consistently over time, the investor aims to reduce the impact of short-term market fluctuations and potentially benefit from the long-term growth of the asset.

• Double Bottom

  Pattern observed in technical analysis charts.

• Dow Jones Industrial Average (DJIA)

  A stock market index that represents the performance of 30 large publicly-traded companies in the United States. The DJIA is widely followed as an indicator of the overall health and direction of the U.S. stock market.

E

• Economic Indicators

  Economic indicators are data points or measurements that provide insights into the overall state of the economy. They act as a gauge, potentially influencing the value of assets based on the country’s performance.

• Elliott Wave Theory

  A technical analysis approach that suggests financial markets move in repeating patterns, known as waves. These waves consist of alternating upward and downward price movements and are used to predict future price movements based on past patterns. The Elliott Wave Theory is based on the idea that investor psychology and crowd behavior drive market cycles.

• Ethereum

  A decentralized blockchain platform and cryptocurrency that supports smart contracts and decentralized applications (DApps). It was proposed in late 2013 and launched in 2015 by Vitalik Buterin. Ethereum allows developers to build and deploy applications on its platform using its native cryptocurrency called Ether (ETH).

• European Central Bank

  The European Central Bank (ECB) functions as the central bank for the euro, the common currency of Europe. Its primary objective is to preserve the purchasing power of the euro and ensure price stability across the eurozone. The eurozone encompasses 17 European Union and 5 non-European Union countries that have adopted the euro since 1999.

• Exchange

  A marketplace or platform where various financial instruments, such as stocks, bonds, commodities, or cryptocurrencies, are bought and sold. Exchanges provide a centralized and regulated environment for trading and facilitate price discovery, liquidity, and transparency.

• Exchange Rate Risk

  Exchange rate risk involves the potential financial loss that may occur due to adverse fluctuations in exchange rates.

• Exotic Currency

  Exotic currencies refer to lesser-known or less frequently traded currencies that are not among the major currency pairs. They typically have lower liquidity and trading volumes compared to major currencies.

F

• Fibonacci Channel

  Fibonacci channels are a technical analysis tool used to identify potential levels of support and resistance in financial markets. By analyzing peak and valley formations, Fibonacci channels help traders make predictions about future trend directions. The key to effectively using Fibonacci channels is accurately identifying significant peaks and valleys. Once these key points are determined, traders can project support and resistance lines into the future, providing insights for weeks and months ahead. It’s crucial to consider only significant tops and bottoms as the foundation for a channel, incorporating notable price swings. The widest swing within the chosen time frame serves as a trigger line.

• Forex

  Short for “foreign exchange,” it refers to the global decentralized market where currencies are traded. Forex trading involves buying, selling, and exchanging currencies with the aim of profiting from fluctuations in their exchange rates. The forex market operates 24 hours a day, five days a week, and is the largest and most liquid financial market in the world.

• Forward Deal

  A forward deal refers to a financial transaction with a settlement date that occurs after the spot value date. In other words, it involves an agreement to buy or sell an asset at a future date, typically beyond the immediate delivery or settlement. Forward deals are commonly used by investors and businesses to manage their exposure to price fluctuations and secure future transactions at predetermined terms. These deals offer flexibility in terms of timing and pricing, allowing parties to lock in favorable conditions or hedge against potential risks.

• Fundamental Analysis

  A method of analyzing securities or assets by examining the underlying economic, financial, and qualitative factors that could impact their value. Fundamental analysis involves evaluating a company’s financial statements, industry trends, management team, competitive advantages, and macroeconomic indicators to determine the intrinsic value of an asset and its potential for future growth or decline.

• Futures Contract

  A standardized financial contract between two parties to buy or sell an asset at a predetermined price and date in the future. Futures contracts are traded on exchanges and are used by traders and investors to speculate on price movements, hedge against risks, or gain exposure to various assets or markets.

G

• Gap

  A gap refers to a situation where a market quickly shifts from one accurately quoted price to another, significantly different and correctly quoted price. Gaps can be triggered by diverse factors, including economic figures, company announcements, political events, natural disasters, and more. Nevertheless, the consequence is that the execution of a stop loss, limit, or new order may occur at a level that deviates from the trader’s desired price.

• Gas

  Fee required for executing transactions within the Ethereum network. It serves as a metric to measure computational operations on the EVM. Gas units are set amounts based on the complexity of the task and are paid in ether, denominated in GWei.

• Gold

  Commodity highly sought after for its conductivity, malleability, and durability, making it a popular choice for jewelry and various electronic products. It was once used as a standard for monetary exchange until the adoption of the fiat system in the US in 1971.

• Gross Domestic Product

  The overall value of goods and services generated within the United States, irrespective of ownership of assets or the nationality of labor used in production. GDP growth is calculated in real terms, eliminating the impact of inflation on output expansion.

H

• Hedging

  A risk management strategy used to offset potential losses by taking an opposite or offsetting position in a related or correlated asset. Hedging aims to protect against adverse price movements and reduce the impact of market volatility on a trader’s or investor’s portfolio. It can involve using derivatives, such as options or futures contracts, to mitigate risks.

• Hedge Funds

  Hedge funds are professionally managed investment portfolios that employ aggressive investment strategies in pursuit of high returns for investors. Despite their name, hedge funds aim to maximize the profitability of investor capital. They have the flexibility to engage in various financial instruments within the foreign exchange market, including spot contracts, futures contracts, and swaps.

• Hyperinflation

  An economic phenomenon characterized by an excessive and rapid increase in price levels due to the devaluation of a nation’s currency. This situation typically arises when the money supply grows significantly without corresponding gross domestic product (GDP) growth, leading to an imbalance between the supply and demand for money.

I

• Index

  An index tracks the performance of a stock portfolio representing a specific market segment. Examples: DAX, ASX200, Dow Jones.

• Inflation

  A sustained increase in the general price level of goods and services in an economy over time. Inflation reduces the purchasing power of money, as each unit of currency buys fewer goods and services. Moderate inflation is considered healthy for an economy, but high or hyperinflation can have adverse effects on economic stability and consumer confidence.

• Initial Coin Offering (ICO)

  A fundraising method used by cryptocurrency startups and projects to raise capital. In an ICO, the project issues and sells its native tokens or coins to investors in exchange for established cryptocurrencies, such as Bitcoin or Ethereum. ICOs are often used to fund the development of new blockchain-based platforms, applications, or services.

• Initial Margin

  Initial margin is the collateral deposit required to enter a trade, protecting against potential losses. It ensures system integrity.

• Interest Rate

  The percentage of principal charged or paid for the use of borrowed money, usually expressed as an annual percentage rate (APR). Interest rates are set by central banks and can influence borrowing costs, investment decisions, and inflation levels.

• Interest Rate Differential

  Interest rate differential (IRD) is the variance in interest rates between similar currencies. It affects currency valuations.

• Interest Rate Risk

  Interest rate risk is the potential for losses due to rate fluctuations. It impacts bonds and loans. Risk can be managed through strategies like hedging and diversification.

• Investment

  Process of investing money in the market.

J

• Japanese Yen

  Currency of Japan, major traded currency.

K

• Key Pair

  Pair of private and public keys used in cryptography.

L

• Leverage

  Ratio of transaction amount to required deposit, amplifying investment.

• LIBOR

  London Inter-Bank Offered Rate, widely accepted reference rate.

• Limit Order

  An instruction given by a trader to a broker or exchange to buy or sell an asset at a specific price or better. A limit order will only be executed at the specified price or a more favorable price, ensuring that the trader does not pay more or receive less than desired.

• Liquidity

  The ease with which an asset can be bought or sold in the market without causing significant price movements. Liquidity is influenced by trading volume, market depth, and the presence of active buyers and sellers. Highly liquid markets allow for efficient and timely execution of trades, while illiquid markets may experience wider bid-ask spreads and slippage.

• Litecoin

  Cryptocurrency similar to bitcoin, created in 2011.

• Long Position

  Beneficial position as market price rises.

• Lot

  Unit of measurement for transaction amount.

M

• MACD

  Moving Average Convergence/Divergence, indicator used in technical analysis.

• Margin

  Initial collateral deposit for a position or forex trade.

• Margin Call

  Demand for additional funds to cover open trade positions.

• Market Order

  An instruction given by a trader to a broker or exchange to buy or sell an asset at the best available price in the market. Unlike a limit order, a market order does not specify a particular price, and the trade is executed immediately at the prevailing market price.

• Momentum

  Rate of change in asset price, used in technical analysis.

• Monetary Policy

  Process by which a monetary authority controls money supply.

• Moving Average

  A widely used technical analysis indicator that calculates the average price of an asset over a specified period. Moving averages smooth out price fluctuations and help identify trends by creating a line on a chart that represents the average price over time. Common types of moving averages include simple moving averages (SMA) and exponential moving averages (EMA).

N

• NEM

  Cryptocurrency and asset management platform.

• Net Position

  Unsettled currency bought or sold without offsetting transactions.

• Nonfarm Payroll Employment

  Estimate of payroll jobs at nonfarm businesses and government agencies.

O

• Open Position

  Active trade that has not been closed.

• Options

  A derivative financial instrument that provides the buyer with the right, but not the obligation, to buy (call option) or sell (put option) an underlying asset at a specified price within a predetermined period. Options allow traders and investors to profit from price movements, hedge against risks, or generate income through premium collection.

• Over The Counter

  Market conducted directly between dealers without a regulated exchange.

• Overnight Position

  Position held until the next trading day.

P

• Penny Stocks

  Stocks of small companies with low market capitalization and typically traded at a low price per share. Penny stocks are considered highly speculative and can be subject to manipulation and high volatility. Investors often trade penny stocks in the hope of significant price appreciation, but they also carry substantial risks.

• Pip

  Smallest value change in a currency pair’s exchange rate.

• Portfolio

  A collection of investments, such as stocks, bonds, mutual funds, or other financial assets, held by an individual or entity. Portfolios are designed to achieve specific investment goals, diversify risk, and generate returns. They are often managed and monitored to ensure alignment with the investor’s objectives and risk tolerance.

• Position

  Net exposure in a currency, either flat, long, or short.

• Price Action

  Price movement of a security represented in charts and graphs.

• Producer Price Index

  Monthly report detailing purchasing price of consumer goods.

Q

• Quote Currency

  Second currency in a currency pair.

R

• Real Estate Investment Trust (REIT)

  A company or trust that owns, operates, or finances income-generating real estate properties. REITs allow investors to invest in real estate without directly owning or managing the properties. They distribute a significant portion of their taxable income to shareholders in the form of dividends. REITs offer a way to diversify an investment portfolio and gain exposure to the real estate market.

• Relative Strength Index

  Price oscillator used in technical analysis to measure strength of prices.

• Resistance Level

  A price level at which an asset or security has historically encountered selling pressure and struggled to break through. Resistance levels are often viewed as psychological barriers or areas of supply, where the number of sellers exceeds the number of buyers. Traders and investors pay attention to resistance levels as they can indicate potential price reversals or significant hurdles for upward price movements.

• Retail Sales

  Estimate of total sales of goods by retail establishments.

• Reward-To-Risk Ratio

  Ratio of expected returns to predetermined risk of loss.

• Ripple

  Cryptocurrency and real-time payment platform.

• Risk Capital

  Amount of money one is willing to lose.

• Risk Management

  The process of identifying, assessing, and prioritizing risks in order to minimize potential losses and maximize returns. Risk management involves analyzing the potential impact of risks, implementing strategies to mitigate or hedge against them, and regularly monitoring and reviewing risk exposures. It is an essential aspect of financial planning and investment decision-making.

S

• Scalping

  Short-term trading strategy aiming for small profits.

• Securities and Exchange Commission (SEC)

  A regulatory agency in the United States responsible for enforcing federal securities laws and regulating the securities industry. The SEC’s primary mission is to protect investors, maintain fair and orderly markets, and facilitate capital formation. It oversees securities exchanges, brokers, investment advisors, and public companies, ensuring compliance with disclosure requirements and preventing fraudulent practices.

• Sell Order

  Order to sell an asset at a downward price direction.

• Short Position

  Position where the base currency is sold, benefiting from price declines.

• Short Selling

  A trading strategy where an investor sells borrowed shares or assets with the expectation that their price will decline. The investor aims to buy back the shares at a lower price in the future, returning them to the lender and profiting from the difference. Short selling enables traders to profit from downward price movements and can be used to hedge against potential losses in a portfolio. However, it carries significant risks, as the price of the asset can rise, resulting in losses for the short seller.

• Slippage

  Difference between expected and actual fill price.

• Spot Price

  Current market price of an asset.

• Spread

  Difference between the bid and ask price of an asset.

• Stochastic

  Indicator comparing closing prices to high and low prices over a period.

• Stock Market

  A marketplace where shares of publicly traded companies are bought and sold. The stock market provides a platform for companies to raise capital through initial public offerings (IPOs) and for investors to trade securities. It serves as a barometer of economic health and investor sentiment, with various stock market indices, such as the S&P 500 or the Nasdaq Composite, representing the performance of specific groups of stocks.

• Stop-Loss Order

  An instruction given by a trader to a broker or exchange to automatically sell an asset if its price reaches a predetermined level. Stop-loss orders are used to limit potential losses and protect profits by triggering a sell order when the market moves against the trader’s position. They help manage risk and implement disciplined exit strategies.

• Strike Price

  Price at which an option is opened in the market.

• Swap

  Simultaneous buying and selling of the same currency amount at a forward exchange rate.

• Swing Trading

  Short-term trading strategy holding positions for more than a day.

T

• Take Profit

  Order to automatically close a position once a certain profit level is reached.

• Technical Analysis

  A method of evaluating financial markets and making trading decisions based on the analysis of historical price patterns, volume, and other market data. Technical analysis assumes that market trends and patterns repeat over time and that past price movements can provide insights into future price movements. It involves using various tools and indicators, such as trend lines, moving averages, and oscillators, to identify potential entry and exit points for trades.

• Tick

  Minimum price change, up or down.

• Trading Alerts

  Suggestions or signals indicating profitable underlying assets and directions.

• Trading Volume

  Total amount traded during a specific period.

• Trendline

  Line connecting high or low prices on an asset’s chart, representing a trend.

U

• U.S. Department Of The Treasury

  Government agency managing money resources of the United States.

• Unemployment Rate

  Percentage of unemployed people in the workforce.

V

• Volatility

  A measure of the price fluctuations or variability of an asset or market over a specific period. Volatility is often used as an indicator of risk and uncertainty. Higher volatility implies larger price swings, while lower volatility suggests more stable and predictable price movements. Traders and investors assess volatility to gauge the potential for profits or losses and to adjust their trading strategies accordingly.

W

• Wallet

  Storage method for cryptocurrencies.

• World Bank

  Group of international financial organizations providing assistance to member countries.

Y

• Yield

  The return on an investment, usually expressed as a percentage, relative to the amount invested. Yield can refer to various types of returns, such as dividend yield for stocks, coupon yield for bonds, or rental yield for real estate. It represents the income generated by an investment and is an important factor in evaluating its profitability and comparing different investment opportunities.

• Yield Curve

  A graphical representation of the yields or interest rates of bonds or other fixed-income securities plotted against their respective maturities. The yield curve provides insights into market expectations about future interest rates and economic conditions. It is commonly used as an indicator of economic health and can influence investment decisions, monetary policies, and market sentiment. Different shapes of the yield curve, such as upward sloping, flat, or inverted, can signal different economic and market conditions.

Z

• Zig Zag

  A technical analysis tool used to filter out market noise and highlight significant price movements or trends. The Zig Zag indicator connects the most significant highs and lows on a price chart, creating diagonal lines that help identify price reversals and trend changes. It smooths out minor fluctuations and focuses on significant price movements, assisting traders in identifying potential entry and exit points. The Zig Zag indicator is especially useful in identifying patterns and trends in charts.