Glossary

Arbitrage is the practice of buying an asset with the intention of quickly selling it to take advantage of price differences. An example of this would be buying an item from eBay for £1, only to repost it for £2. 

Ask (or asking price) refers to the amount a seller offers an asset for at any given point. It’s effectively the price paid for an asset determined by the seller.

Assets are items of high value that can be bought or sold to make a profit. Financially speaking, it is what is traded on platforms such as stocks, commodities and currencies.

The Bank of England is a central bank that aims to provide financial stability in the UK. It overseas the country’s monetary policy.

Basis points are units to measure a move between two percentages. One basis point (‘bip’) is equal to 0.01%, so if unemployment falls from 4% to 3.5%, that is a change of 50 basis points.

Bearish is a term used to describe a falling market that is surrounded by negative sentiment.

Bid or the bid price is the amount that a trader is prepared to pay for a certain asset.

Bullish is a term used to describe a market that is rising in price and surrounded by positive sentiment.

Buy (price) is a level in which you can open a position trading long or close a position on a short trade. 

Cable is a term used to describe the forex pair GBP/USD, referring to the British pound’s value against the US dollar.

A closing price is the final price level in a day that an asset traded at.

Commission is an amount taken by brokers in order to process trades. Commissions, also known as spreads, are paid by traders when opening positions, and they’re almost always taken automatically.  

Commodities are often raw materials such as oil or gold and are considered physical assets.

Contracts for difference are financial derivatives common in trading. They allow traders to benefit from the price movements of an asset without actually owning it. CFDs are agreements to either pay or collect the difference in price of an asset from when the contract was opened to when it was closed. Although similar to spread betting, CFDs do have some key differences, most notably related to how they’re taxed. 

Daily rolling contracts are long-term derivatives in spread betting where positions remain open and do not expire. 

The DAX 30 (also known as Germany 30 or just DAX) is a stock index compromising of the top 30 companies in Germany that are listed on the Frankfurt Stock Exchange. 

Day trading is a trading strategy that involves buying an asset with the intention of selling it again before the close of markets at the end of the same day. The idea is based on taking advantage of small fluctuations in the market.   

A form of trading where traders anticipate the movement of a certain market without actually purchasing an asset itself.

A dividend is an amount of money or stock paid out to shareholders by a company, giving them a share of profits. For instance, Apple may decide to give its shareholders £1 per share, meaning 100 Apple shares will earn £100 in dividends. 

The Dow Jones index (also know as just the Dow or Wall Street) is a US index compromising of 30 large publicly owned companies. The Dow’s performance is often taken as an indication of how the wider US economy is performing as a whole. 

The European Central Bank is the centralised bank for those countries within the EU (European Union) that use the euro. It is the ECB’s job to monitor monetary policy.

The European Union is a political and economic union between 28 countries that all agree to common laws and rules following EU policy. One of its greatest benefits is the admittance of free travel and free trade among all member states.

Equities is another term for stocks or shares and refers to an individual company that has shares available to be publicly traded.

The Expert Advisor feature of the Meta Trader platform allows positions to be opened and closed automatically based on parameters that are set. It can be used to multiple markets simultaneously, which would otherwise be difficult to do manually. 

Fair value refers to natural market prices where there’s an equilibrium between supply and demand and an asset is therefore traded at its real market value. Fair value does not take into account an asset’s equity and is simply defined as the current price in the market.

The Federal Reserve Bank is the US central bank. It’s in charge of regulating and implementing monetary policy, as well as generally overseeing financial stability across the country.

The Financial Conduct Authority is a regulatory body in the UK for the financial industry. At ETX, we are regulated by the FCA, who have fully authorised us to provide spread betting and CFD trading and they track that the products we are offering remain fair to our clients.

Forex, short for foreign exchange, is a financial market where traders can trade currency pairs such as the most popular; GBP/USD and EUR/USD. 

Funding is the act of depositing currency into a trading account. After funding an account, trades can then be made.

Futures are long-term spread betting derivative that involves two parties agreeing a ‘contract’ (usually) on a commodity. The two parties agree a price for an asset, which will eventually be traded at a predetermined date in the future. It effectively involves traders speculating on how a market will change in the future.

Gapping is when a price changes significantly from one point to the next, without any trades taking place in between. It often happens when a market reopens after a period of closure. For instance, if Apple closes at £10, and then it begins trading the next time the market opens, at £25, that would be an extreme case of gapping.

Gearing is the ratio between a company’s debt and its equity.

A good-for-day order is a regular order that will remain active for the day.

A good-till-cancelled order is a regular order that will remain active until it’s either filled or cancelled.

A Guaranteed Stop is a risk management tool offered by most firms that close positions once a market falls below a predetermined price, limiting the losses in the process. Although very similar to stops, Guaranteed Stops also help protect traders against gapping and slippage. Most brokers offer this feature for a fee - however, we offer free Guaranteed Stops for retail clients on selected markets.  

Find out more about Guaranteed Stops. 

Hedging is the act of offsetting risk by placing additional trades. For instance, if 10 shares in Apple are bought at £2 a share, and the price of Apple falls to £1, money will be lost on the initial investment. Instead of accepting a loss and selling the shares at £1, a hedge would mean opening a sell position on 10 Apple shares at £1. That way, if the share continues to drop, some losses will be recouped from the ‘sell’ trade. If Apple rises back passed the £3-mark, the initial trade of 10 Apple shares at £2 will see a positive return on investment.

This equally works the other way around by opening a sell position even when the initial investment is in profit, so that a positive return is secured even if the price suddenly goes against that initial trade.

Find out more about hedging. 

An index is a group of assets that are combined to give an overall price. Traders can then trade and speculate on how the combined market will fluctuate. An example is the FTSE 100, which takes the top 100 companies in terms of market capitalisation listed on the London Stock Exchange at any given point. 

Inflation is the price rise of goods and services in an economy. Inflation is often seen as an indicator to how well an economy is performing, with the BoE currently setting a 2% inflation target for the UK.

An initial public offering is the process of a company going public onto a stock exchange, and its shares being publicly available to buy.

Find out more about IPOs.

Leverage is the potential amount of exposure a trader can have on a certain market, without having to invest additional financial capital. Despite the fact that leverage offers traders a lot more investment into a market, it can also leave them with added risk as well.

LIBOR (London Interbank Offered Rate) provides an average interest rate for banks loans on a daily basis. It is based on five currencies; US dollar, euro, pound, yem and the Swiss franc.  

A limit is the opposite to a stop in that it caps, or rather allows for an automatic ‘cash out’ on trades. Limits close positions when a predetermined price is hit and can be applied to any open position with the purpose of capitalising on market growth - without the need to manually close the position.

Liquidity is a term used to reflect the ease of buying and selling an asset without affecting its price. 

Long trading (going long) is the act of buying an asset in the hope its price increases, as opposed to opening a sell position. 

MT4 stands for Meta Trader 4 and is one of the trading platforms that we offer to our clients.

Margin refers to the amount ‘borrowed’ to a trader from a broker to enter markets, open and maintain positions. Buying an asset in real life would price a lot of would-be traders out of the market, but trading on margin allows for the trading of valuable assets at a fraction of its cost, while still having the potential to benefit from the high potential profits – and equally losses.

Market capitalisation is the total amount of money that a company’s shares are worth on the market. It is often used to determine the market share that a company has on an industry. An example would be Apple shares being worth £1 trillion in total of a £5 trillion industry, giving them 20% market share.

A moving average is a technical indicator that mitigates the effect of random price variants when determining how a price has fluctuated over a certain period of time.

The New York Stock Exchange (NYSE) is the largest and oldest stock exchange in the US. Located on Wall Street in Manhattan, New York, it has been operating since 1792.

The Nikkei 225 is a popular index for the top 225 equities listed on the Tokyo Stock Exchange.

Nonfarm payrolls (NFPs) are figures released every month that report on US employment – excluding agricultural and (local) governmental workers. NFPs are considered largely indicative of how the US economy is performing and are released on the first Friday of every month. 

Notional value refers to the total value of a transaction, taking into account other values that add equity. For instance, Apple may announce it’s offering an extra one-off dividend payment of, say, £10 per share. So, if one Apple share is worth £20, the notional value would be £20 plus the £10 that the shareholder knows they’ll receive shortly. This is compared to market value, that only takes the price of an asset that can be sold on the markets; in this case it would be the £20 for the Apple share. 

OPEC stands for the Organisation of the Petroleum Exporting Countries, an organisation compromising of 14 nations. It was founded in 1960 in Baghdad by Iran, Iraq, Kuwait, Saudi Arabia and Venezuela to unify their petroleum policies and stabilise the supply for both consumers and producers. Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Libya, Nigeria, the Republic of Congo, United Arab Emirates, Indonesia and Qatar all later joined, with the latter two later leaving.

Open positions are trades that are currently live and can therefore still be affected by market price changes.

Out-of-hours is a term commonly used to refer to certain markets; ‘out-of-hours markets,’ where trading is possible despite it being outside of the regular market open/close times.

Overnight financing are fees taken by brokers on a daily basis to keep a position open overnight.

Parity refers to the act of two or more things in trading being equal. An example would be if the USD/GBP exchange rate offered $1 for every £1. The USD/GBP market would consequently be at a price level of 1.000.

A pip (percentage in point) is a measurement of price movement in forex trading. Although not technically still the case, it is widely considered to be the smallest rate a currency can move.

Pivot points are used in technical analysis, and highlight the high, low and close from a previous period to help determine the current period’s resistance and support levels.

Profit and loss is the amount of money a trader is either up or down after subtracting the current losses from the current profit of all open position.

A point is the largest measurement of price change and refers to a change in the price on the left side of the decimal. For instance, if the price of Apple is at 100.00 and rises to 150.00, that is a price change of 50 points. If it changes from 100.00 to 100.99, the price has not changed a full point. 

Range is the amount a market has moved from its lowest price to its highest price over a certain period of time. For instance, if the price of Apple starts the day at $50 and ends it at £40, its range for the day would be £10. 

Resistance levels are used in technical analysis. When a price level is rising, the resistance level is a point at which the price may reach a level where trading short will become appealing, thus the price will likely fall. 

Scalp, or scalping, is a trading strategy where positions are opened and closed in a matter of minutes, sometimes seconds, in an attempt to take advantage of small price changes. 

Sell (price) is the level in which you can enter the market by opening a short position, or the level in which you can close a position on a long trade. 

Shares are the units of a company that is offered/sold and traded on the stock market. Shares can also refer to equities or stocks as a whole.

Short trading, or shorting, is the act of selling an asset in the hope that its price falls and the position can then be closed by buying the same asset at a cheaper price. 

Slippage, or market slippage, is where a price level changes in the time it takes for a trade to be executed. Our TraderPro platform offers instant execution, entirely mitigating the effect of slippage.

Spread betting is a type of trading that is tax-free and offers a means of trading equities, forex, cryptos and indices. The amount won or lost depends on exactly how much a market price moves between the time a position is opened to the time it’s closed.

A stock index is another name for an index; a group of individual equities that are often related by geographical location. A stock index such as the Dow, compromising of 30 specific US companies, is often seen as an indicator into how the overall economy is performing, given that it’s a weighted average of all equities involved.

Spread in trading is the commission taken by brokers for executing trades on behalf of clients. The spread is the difference between the 'buy' and 'sell' price of a market, which will typically be higher and lower respectively than the actual value of the traded asset. 

Find out more about spread.

A stop loss in an order that once implemented will close an open position once, if ever, it falls to a predetermined price. Stops can be applied to new or existing positions.

Support levels are used in technical analysis. When a price is falling, the support level is a point where trading long at that price becomes more appealing, thus prices are likely to rise up.

Technical analysis is a technique used to attempt to predict how the markets will react based on past trends. Traders use a range of annotative tools to identify previous trends in markets and determine when they could occur again.

Tom-next is short for tomorrow and the next day and is a transaction in Forex where traders can open positions on two individual days; tomorrow and the day after.

TraderPro is our multi-award-winning platform. It was developed in-house by our very own team, and offers over 5,000 markets on an innovative, highly customisable and user-friendly platform.

Trade funds available is a term that may be seen on trading platforms. It refers to the amount of money that is available in an account to trade.

Trailing stops are used to close a trade as soon as a market moves against you. It will trail behind an open position as the price rises but will close the position when the price falls (a certain amount – fall in price will be set by you).

Volatility describes a market’s characteristic of being unpredictable, with its price likely to change significantly in either direction over a short period of time.

Wall Street is another term for the New York Stock Exchange, situation on Wall Street, Manhattan.