Trading Tools

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...

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 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...

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...

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....

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...

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...

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...

The Black Scholes model is a mathematical model used to price options contracts in financial markets. Learn more about the Black Scholes model....

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,...

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...

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! ...

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 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...

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 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 are a popular technical indicator that maps a visual envelope onto a price chart, with a distance of two standard deviations from the moving...

When forex trading, the base currency refers to the first currency in a currency pair. Learn more about base currencies....

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 is a process used in financial markets to settle a transaction without the physical delivery of an underlying asset. The payment is instead made...

In trading and investment, ‘carry’ refers to the cost of maintaining a financial position over time. Check benefits & limitations of the carry trade!...

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 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 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...

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 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...

A coupon in trading and investment refers to the interest payment a bond issuer makes to bondholders. Learn more about reinvesting coupon payments! ...

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,...

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 refers to the risk of loss that occurs when a counterparty fails to fulfil their obligations under a financial contract....

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. ...

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...

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...

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...

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...

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 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....

A central bank is a financial institution that manages a country’s currency issuance, money supply, and banking system....

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 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...

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 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...

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....

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...

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...

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 refers to a reduction in the value of a currency through the intervention of its government or central bank....

In finance, derivatives are a type of financial contract that derives its value from an underlying asset or group of assets....

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...

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...

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 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...

In trading and investment, exposure refers to the degree of risk an investor has in a particular asset or market....

Euroclear is a financial services company that provides streamlined securities settlement to financial institutions....

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...

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 (EPS) is a useful measure based on the profitability of a company divided by the number of outstanding shares. While equity prices will...

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...

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...

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....

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 refers to the use of government spending, borrowing, and taxation to influence the economy. Governments can enact fiscal policies to stimulate or slow down...

The Federal Reserve System, commonly known as the Fed, is the central banking system of the United States....

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....

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 is a government-issued currency that is not backed by a physical commodity but instead by the government that issued it....

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 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 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, 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, 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, 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, abbreviated to GDP, is a measure of the monetary value of all the goods and services produced within a country’s borders in a...

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, 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 is a trading strategy where traders use financial instruments or strategies to reduce the risks associated with an investment position....

Hyperinflation refers to a situation when prices rises rapidly and uncontrollably, diminishing the purchasing power of a currency, leading to its devaluation....

The term ‘head and shoulders’ refers to a technical analysis chart pattern traders use to identify potential price reversals in an asset....

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 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 are financial contracts between two parties who agree to exchange interest rate payments based on a notional principal amount over a predetermined period....

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...

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 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 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...

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...

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....

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 in investment refers to an investor or organisation’s financial obligations or debts. They can be short-term or long-term....

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 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...

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...

A lot is a standard unit of a financial instrument being traded....

Leverage is an investment strategy that uses borrowed funds to gain exposure to larger trading positions. Learn more about leverage. ...

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 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 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 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....

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 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 is an importance concept for leveraged equity traders. The amount of equity held in a margin account must always exceed this minimum level, or...

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...

A not held basis order is a type of market or limit order where a client gives a broker discretion as to timing and the final...

Net income is the total amount of profits made by a company after all costs and expenses are deducted. It is listed in the company’s earnings...

Net asset value (NAV) is the market value of a mutual fund or ETF’s assets, minus liabilities. NAV is calculated at the end of each trading...

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 or PPP is a method of standardising metrics such as gross domestic product or average income according to the spending power of the...

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...

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 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...

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....

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...

A quote is a live market price or the most recent closed price at which a deal has taken place. Bid quotes and ask quotes show...

Quantitative easing is a monetary policy implemented by central banks to increase the money supply by buying government bonds or other financial assets....

The quote currency is the second currency listed in a currency pair....

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 is an essential part of trading and involves calculating and managing the various risks your investments are exposed to. Practices such as the risk...

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 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...

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...

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 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, or real estate investment trust, is a company or group of companies that operates, owns, or finances income-generating real estate. ...

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 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 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 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...

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...

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 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 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...

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 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 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, 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 is the price of a particular stock at a certain time. Shares are traded on exchanges, meaning there is great transparency and a single...

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 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...

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...

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 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 is the use of price data to guide investment decisions. Technical analysts identify trends and time their trading to benefit from positive market conditions,...

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...

Undervaluation is an important concept in fundamental analysis. Finding undervalued assets is the method value investors use to make long-term investments which they expect to rise...

A unit trust is a type of mutual fund where investor money is pooled and managed by a portfolio manager. The eventual pooled fund is then...

Vanilla options are call or put options with no additional features. They give holders the right, but not the obligation, to buy an asset at a...

Volatility is a measure of price variability in either direction. Volatility is one of the main contributors to market risk as it can result in assets...

Vega is a fictitious Greek letter used to show the impact of a 1% change in the implied volatility of the underlying asset on options prices....

The yield curve is a graphical representation of the different yields for a debt issuer (at a fixed credit rating) over multiple expiry dates. The yield...

Yield is the income earned on an investment over a certain period. It is expressed as a percentage based on the initial invested amount. Learn more...

Zero coupon bonds are bonds that do not pay a regular coupon. Instead, investors receive the difference between the discounted price and par, a figure which...