Adjustable Peg definition
An adjustable peg is a currency peg that allows for adjustment based
on economic conditions. It represents a midpoint between a floating
and pegged currency. ...
Average rate option definition
An average rate option is a type of option contract in which the
pay-out depends on the average price of an underlying asset over a
period....
At the money definition
At the money is a term used in options trading when the strike price
of an option is equal or very close to the currency market...
Asset definition
An asset is a resource that has economic value and can be owned or
controlled by an individual, corporation or country, with the
expectation that it...
Ask price definition
The ask price is the price at which a seller is willing to sell an
asset in the financial market, such as a stock or a...
Arbitrage definition
Arbitrage refers to the practice of simultaneously purchasing and
selling the same asset in different markets to take advantage of its
price discrepancies. Learn more about...
Appreciation definition
In trading and investment, the term appreciation refers to an
increase in the value of an asset, such as stock, commodity, bond,
or currency, relative to...
Aggregate definition
Aggregate in trading and investment refers to the total sum of a
group of financial assets held by an investor, such as stocks,
bonds, and other...
Bull market definition
A bull market in securities trading is an appreciating market.
Typically, a bull market is associated with rising asset prices and
positive investor sentiment. Learn more about...
Broker definition
In the trading and financial world, a broker is an intermediary who
facilitates the exchange of financial instruments between buyers and
sellers. Learn more about brokers....
Bretton Woods definition
In trading, a breakout refers to when the price of a currency,
stock, or commodity suddenly moves outside a previously defined
level of support and resistance. Learn...
Breakout definition
In trading, a breakout refers to when the price of a currency,
stock, or commodity suddenly moves outside a previously defined
level of support and resistance. Learn...
Breakeven point definition
In trading, the breakeven point is the price level at which a trader
neither makes a profit nor incurs a loss on a trade. Learn more
about...
Black Scholes model definition
The Black Scholes model is a mathematical model used to price
options contracts in financial markets. Learn more about the Black
Scholes model....
Bid price definition
The bid price in financial trading is the highest price that a buyer
is willing to pay for a particular asset, such as a stock,
currency,...
Bear market definition
A bear market in securities and commodities trading is a declining
market. The reverse of a bear market is a bull market. Learn more
about bear...
Basket definition
A basket refers to a collection of securities that are grouped
together and traded as a single unit. Check the benefits of
investing in baskets! ...
Basis definition
In trading and investment, basis refers to the difference between an
asset’s spot price and its futures price for delivery on a
predetermined date. Basis is...
Bank rate definition
Bank rate refers to the interest rate charged a country’s central
bank when it lends money to a commercial bank. Learn how bank rates
affect financial...
Barrier option definition
A barrier option is a type of option contract that becomes active or
inactive depending on the price of the underlying asset crossing a
certain barrier...
Back office definition
Back office refers to the administrative and support functions of a
financial institution that are responsible for trade settlement and
clearing. Learn more about back office....
Bollinger Bands definition
Bollinger Bands are a popular technical indicator that maps a visual
envelope onto a price chart, with a distance of two standard
deviations from the moving...
Base currency definition
When forex trading, the base currency refers to the first currency
in a currency pair. Learn more about base currencies....
Cash and carry definition
Cash and carry is a trading strategy where an investor purchases an
asset and simultaneously sells a futures contract on the same asset.
Learn its benefits...
Cash settlement definition
Cash settlement is a process used in financial markets to settle a
transaction without the physical delivery of an underlying asset.
The payment is instead made...
Carry definition
In trading and investment, ‘carry’ refers to the cost of maintaining
a financial position over time. Check benefits & limitations of
the carry trade!...
Carry-over charge definition
The carry-over charge is the interest rate that is charged or earned
when a trading position is held open overnight. It is also known as
the...
Cable definition
Cable refers to the exchange rate between the US dollar (USD) and
the British pound (GBP) in the forex market. Learn how you can trade
cable! ...
CPI definition
CPI stands for Consumer Price Index, and it is a key economic
indicator that measures the average change in prices, over time, of
goods and services...
CME definition
The CME stands for the Chicago Mercantile Exchange, a global
derivatives and futures exchange recognised as one of the largest
and most influential in the world. Learn...
CBOE definition
CBOE stands for the Chicago Board Options Exchange, one of the
largest options exchanges in the world. It provides a platform for
the trading of equity...
Coupon definition
A coupon in trading and investment refers to the interest payment a
bond issuer makes to bondholders. Learn more about reinvesting
coupon payments! ...
Currency definition
A currency is a unit of exchange that is used to facilitate
transactions between countries and regions. Currency comes in the
form of paper money, coins,...
Currency basket definition
A currency basket is a portfolio of currencies that are weighted
together in a certain proportion. It is used as a benchmark for
measuring the performance...
Credit risk definition
Credit risk refers to the risk of loss that occurs when a
counterparty fails to fulfil their obligations under a financial
contract....
Counterparty definition
A counterparty in trading refers to the other party involved in a
financial transaction. This can be an individual, a company, a
financial institution, or government. ...
Cost of living index definition
The cost of living index is a key economic indicator that measures
the average change in prices, over time, of goods and services
purchased by households...
Contract definition
A contract is a legally binding agreement between two parties to buy
or sell an underlying asset or financial instrument, such as a
commodity, stock, or...
Contract expiration date definition
In trading, the contract expiration date is the date when a futures
or options contract expires and is no longer valid. Check how expiry
date affects...
Compound option definition
A compound option is a type of option contract that gives the holder
the right, but not the obligation, to buy or sell another option
at...
Commission definition
In trading and investment, a commission refers to a fee charged by a
broker or other financial institution for executing a trade or
providing other financial...
Central rate definition
Central rate refers to the fixed exchange rate set by a country’s
central bank for its currency, relative to another currency or a
basket of currencies....
Central bank definition
A central bank is a financial institution that manages a country’s
currency issuance, money supply, and banking system....
Cash definition
In trading and investment, cash refers to money that is readily
available for use, such as physical currency or funds held in a bank
or brokerage...
Call option definition
Call options are popular financial derivatives. They give the holder
the right, but not the obligation, to buy an asset at a
pre-determined price on a...
Contract for difference definition
A contract for difference (CFD) is an agreement to exchange the
difference in price between an asset on its start date and at the
end of...
Cash flow definition
Cash flow is the movement of money coming and going into a company’s
account. This is reported in its earnings announcement. It can
either refer to...
Commodities definition
A commodity is a physical asset that is typically used as raw
material in the manufacturing process that can be traded. Learn more
about commodities....
Day order definition
A day order is an instruction a trader gives to a broker to buy or
sell a security. It is a type of order that is...
Discount rate definition
The discount rate is the interest rate that central banks charge
financial institutions to borrow funds. In trading and investing, it
is used to measure the...
Direct quotation definition
A direct quotation refers to the method of quoting the price of one
unit of a foreign currency in terms of the domestic currency....
Devaluation definition
Devaluation refers to a reduction in the value of a currency through
the intervention of its government or central bank....
Derivatives definition
In finance, derivatives are a type of financial contract that
derives its value from an underlying asset or group of assets....
Delivery date definition
In trading and investment, the delivery date refers to the date on
which the underlying asset of a futures or forward contract is
delivered from the...
Deficit definition
In trading and investment, deficit refers to the negative balance in
an account or portfolio. Deficit occurs when the outgoing sum of
money is greater than...
Dividend definition
Dividends are regular payments made by companies to share profits
with their stockholders. They are determined by the company’s board
of directors. Learn more about dividends....
Day trading definition
Day trading is a short-term investment strategy. It involves buying
and selling financial instruments within the same trading day.
Traders close out all positions before the...
Exposure definition
In trading and investment, exposure refers to the degree of risk an
investor has in a particular asset or market....
Euroclear definition
Euroclear is a financial services company that provides streamlined
securities settlement to financial institutions....
Epsilon definition
In options trading, epsilon refers to the elasticity of an option’s
value, or how prone to small price changes in the underlying asset a
contract is. It...
Economic indicator definition
An economic indicator is a statistic that provides insight into the
performance of the economy or a particular market sector. They can
be broad measures or...
Earnings per share definition
Earnings per share (EPS) is a useful measure based on the
profitability of a company divided by the number of outstanding
shares. While equity prices will...
Equity definition
Equity can have different meanings depending on context. Usually,
equities refer to the total amount of money an owner of an asset
would receive after all...
Exchange definition
An exchange is an open and organised marketplace where securities,
cryptocurrencies, derivatives, commodities, and other financial
instruments are traded. The terms ‘market’ and ‘exchange’ tend to...
Futures contract definition
A futures contract is an agreement between two parties to buy or
sell an asset at a predetermined price on a predetermined date in
the future....
Forward contract definition
A forward contract is a private agreement between two parties to buy
or sell an asset at a predetermined price on a predetermined date in
the...
Fiscal policy definition
Fiscal policy refers to the use of government spending, borrowing,
and taxation to influence the economy. Governments can enact fiscal
policies to stimulate or slow down...
Federal Reserve System definition
The Federal Reserve System, commonly known as the Fed, is the
central banking system of the United States....
Fibonacci retracement definition
The Fibonacci retracement is a type of technical analysis
identifying where support and resistance levels are likely to occur.
Learn more about the Fibonacci retracement....
FTSE definition
The FTSE 100 and 250 indices are two widely used indices for the
London Stock Exchange. The 100 is more popular with indices traders
and portfolio...
Fiat currency definition
Fiat currency is a government-issued currency that is not backed by
a physical commodity but instead by the government that issued
it....
Financial market definition
Broadly speaking, financial markets refer to any marketplace where
the buying and selling of financial instruments take place. The
asset’s values are typically determined by supply...
Financial instrument definition
Financial instruments are the tools investors use to access markets.
The category is immensely varied and includes public and private
investments, debt, equities and forex, alongside...
Fundamental analysis definition
Fundamental analysis is a method used to evaluate the intrinsic
value of an investment by analysing economic and financial data. It
differs from technical analysis in...
Forex definition
Forex, short for foreign exchange, is the process that involves
converting one currency to another. It can also be referred to as
currency trading or FX....
Good Till Cancelled definition
Good Till Cancelled, abbreviated to GTC, is a trading order type
that instructs the broker to keep an order open until it is either
filled or...
Gross national product definition
Gross National Product, abbreviated to GNP, is a measure of the
monetary value of all the goods and services produced by a country’s
citizens, regardless of...
Gross Domestic Product definition
Gross Domestic Product, abbreviated to GDP, is a measure of the
monetary value of all the goods and services produced within a
country’s borders in a...
Gold standard definition
The gold standard was a monetary system in which the value of a
country’s currency was backed by a fixed amount of gold....
Gross margin definition
Gross margin, otherwise known as gross profit margin, refers to the
company’s sales minus its costs of goods sold. It is expressed as a
percentage of...
Hedging definition
Hedging is a trading strategy where traders use financial
instruments or strategies to reduce the risks associated with an
investment position....
Hyperinflation definition
Hyperinflation refers to a situation when prices rises rapidly and
uncontrollably, diminishing the purchasing power of a currency,
leading to its devaluation....
Head and shoulders definition
The term ‘head and shoulders’ refers to a technical analysis chart
pattern traders use to identify potential price reversals in an
asset....
Hard currency definition
A hard currency is a currency that is widely accepted as a medium of
exchange because of its high level of liquidity and stability....
High frequency trading definition
High frequency trading is a strategy used by specialist firms to
execute trades at great speed. To do this, they rely on dedicated
infrastructure that very...
Interest rate swaps definition
Interest rate swaps are financial contracts between two parties who
agree to exchange interest rate payments based on a notional
principal amount over a predetermined period....
Inflation definition
Inflation refers to the rate at which the price level of goods and
services in an economy increases over time. In other words, it
refers to...
Ichimoku Cloud definition
The Ichimoku Cloud is a group of technical indicators that shows
support and resistance levels, in addition to momentum and trend
direction. In Japanese, it translates...
Indices trading definition
Indices trading is a way through which traders attempt to take
advantage of the price movements of indices to make a profit. Learn
more about indices...
In the money definition
In-the-money is a term specific to options trading and describes an
option trading beyond its strike price that will not expire
worthless. Traders will not necessarily...
Intrinsic value definition
The intrinsic value of a business or asset is a measure of what they
are worth. Note it is not always the same as the market...
IPO definition
An Initial Public Offering (IPO) is when a private company goes
public on the stock exchange. This is also known as ‘going public’.
Learn more about IPOs....
Index definition
An index is a method of tracking how a group of assets are
performing in a standardised way. The plural form is indices. Learn
more about indices....
Liability definition
Liability in investment refers to an investor or organisation’s
financial obligations or debts. They can be short-term or
long-term....
Long definition
The term long refers to a position taken by an investor who buys an
asset with the expectation that its value will rise in the
future....
Liquidity definition
Liquidity in trading and investment refers to the ease with which a
financial asset can be bought or sold in the market without causing
a significant...
Limit order definition
A limit order is an instruction that allows an investor to specify
the maximum price they are willing to pay to buy a security and
the...
Lot definition
A lot is a standard unit of a financial instrument being traded....
Leverage definition
Leverage is an investment strategy that uses borrowed funds to gain
exposure to larger trading positions. Learn more about leverage. ...
Market maker definition
Market makers are traders, usually at large firms, that offer
continuous prices for both bid and ask quotes to the general market.
This improves liquidity and...
Margin definition
Margin refers to the deposit made by a trader when trading on
leverage. The balance of the margin account must be maintained above
a certain level,...
Mutual fund definition
Mutual funds are collective investment vehicles that pool investor
money and then invest it in public markets. They are typically made
up of a variety of...
Maturity definition
Maturity refers to the expiry of a debt instrument, normally a bond,
where investors are refunded the par value of the bond and coupon
payments cease....
Margin call definition
A margin call is a demand by a broker to pay additional collateral
to maintain a trading account. In leveraged trading, margin calls
occur when the...
Market capitalisation definition
Market capitalisation is a measure of a company’s total value based
on its market price per share multiplied by its number of
outstanding shares. Learn more about...
Maintenance margin definition
Maintenance margin is an importance concept for leveraged equity
traders. The amount of equity held in a margin account must always
exceed this minimum level, or...
Moving average definition
The moving average is a useful technical indicator obtained by
plotting price averages over a period. Many technical strategies
rely on the use of multiple shorter...
Principal definition
Principal is the initial value of an investment, or the amount of
money, borrowed in a loan. From the principle you can calculate both
the cost...
Purchasing Power Parity definition
Purchasing Power Parity or PPP is a method of standardising metrics
such as gross domestic product or average income according to the
spending power of the...
Pip definition
A pip is the smallest unit of measurement used to represent changes
in the value of a currency pair in the forex market. It is
typically...
Position definition
A position is an investment of any size in a public or private
security. Some positions are declared publicly and traded on
exchanges, whereas others might...
Parity definition
Parity refers to a state where two assets have equal value. It is
commonly used to describe the price level where a convertible bond
can beneficially...
P/E ratio definition
Price-to-earnings (P/E) ratio is a valuation ratio that compares a
company’s current share price to its earnings per share (EPS) to
determine its market value....
Put option definition
A put option is a contract that gives the buyer the right but not
the obligation to sell an underlying asset at a specific price
and...
Rollover definition
A rollover is an event where a financial asset, often nearing or at
expiry, is moved into an equivalent longer-dated one. For retirement
portfolios, rollovers are...
Risk management definition
Risk management is an essential part of trading and involves
calculating and managing the various risks your investments are
exposed to. Practices such as the risk...
Retail Price Index definition
The retail price index (RPI) is an unofficial inflation metric,
formerly used in place of the consumer price index in the UK but now
only used...
Resistance definition
Resistance refers to the downwards price pressure on an asset as it
approaches a resistance level. These may be fixed or calculated
graphically, and the more...
Reserve currency definition
A reserve currency is used as a store of value worldwide, a
safe-haven asset and facilitator of global trade. Normally these are
the most liquid currencies...
Recession definition
A recession is a decline in the economic output of an economy,
sustained over at least two quarters. Recessions have a strong
negative impact on the...
Range definition
Range is the difference between the high and low price of a given
asset over a time period. Range is used by technical analysts to
test...
REIT definition
REIT, or real estate investment trust, is a company or group of
companies that operates, owns, or finances income-generating real
estate. ...
Spot definition
Spot, short for on the spot, refers to cash transactions for forex
or other assets executed immediately and with instant settlement,
normally T+2. Spot trades are...
Short definition
Short selling is a method of profiting from negative moves in the
price of an asset. Simple in some asset classes, for equity traders
it requires...
Settlement definition
Settlement refers to the actual exchange of funds or assets that
takes place in the days immediately following an executed trade. On
exchanges and public markets,...
Spread definition
Spread is the difference between the bid and ask quotes for an
asset, and can be used as a measure of liquidity as well as the...
Support level definition
A support level is a price level at which buying activity supports
the price of an asset. A successful downwards break through a
support level is...
Stop loss order definition
A stop loss is a type of order where a trade will automatically be
exited if the market moves against you by more than a certain...
Standard and Poors definition
Standard and Poors is a ratings agency, one of the big three
alongside Moody’s and Fitch. As well as providing credit scores to
government and corporate...
Stagflation definition
Stagflation is the negative scenario in which high inflation is
accompanied by weak or no economic growth. Once stagflation sets in
it can be very difficult...
Strike price definition
The strike price is the level at which a derivative contract (such
as an option) is in the money, having intrinsic value. It represents
a price...
Short-selling definition
Short-selling is a trading strategy that involves selling borrowed
securities with the expectation of buying them back at a lower price
to make a profit....
Securities lending definition
Securities lending is a method of improving yield on a portfolio.
The lender receives a fee, split with their broker, in exchange for
loaning out to...
Scalp definition
Scalp, or scalping, is a trading strategy that focuses on opening
and closing a position quickly. Traders scalp to potentially profit
from the many small price...
Share price definition
Share price is the price of a particular stock at a certain time.
Shares are traded on exchanges, meaning there is great transparency
and a single...
Securities definition
A financial security, known as a security, refers to a negotiable
instrument that is fungible and holds some kind of monetary value.
Popular ones include stocks,...
Shares definition
Shares are units of ownership in a company. The two main types of
shares are preferred shares and common shares. They are also known
as equities...
LIFFE definition
The London International Financial Futures and Options Exchange
(LIFFE) is the former name of the ICE Futures Europe exchange. It is
one of the largest futures...
Tick definition
A tick is the smallest possible price move of an asset in a publicly
traded market, usually 0.01. For some extremely low-priced assets,
the tick may...
Theta definition
Theta is one of the ‘Greeks’ used to price options. Theta shows the
influence of time on the price of the option, and is greatest for...
Technical analysis definition
Technical analysis is the use of price data to guide investment
decisions. Technical analysts identify trends and time their trading
to benefit from positive market conditions,...
Time value definition
In options trading, time value refers to the portion of an option’s
premium that is ascribable to the amount of time remaining until it
expires. Time...
