Trading Glossary

The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (interest arbitrage) deals, over the period of each deal.

An adjustment can be defined as the impact of a company paying out dividends on the ex-date. The share price takes a slight dip, because money flows out of the company and to the shareholders. The dividend adjustment occurs at the close of business before the ex-dividend date.

The Bank of China is one of China's four largest state-owned commercial banks. It is a subsidiary of the People’s Bank of China. However, it maintains close relations in management, administration, and cooperation in several areas with the subsidiary.

The Bank of England (BoE) is the central bank for the United Kingdom, acting as the government's bank and lender of last resort. With headquarters in the City of London, it issues currency and oversees monetary policy. It is the UK equivalent of the Federal Reserve in the United States.

A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar; the opening price, which is marked with a horizontal line to the left of the bar; and the closing price, which is marked with a horizontal line to the right of the bar.

The first currency in a currency pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF (U.S. Dollar/Swiss Franc) rate equals 1.6215, then one USD is worth CHF 1.6215. In the forex market, the US dollar is normally considered the base currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British pound, the euro and the Australian dollar.

The base rate, or base interest rate, is the interest rate that a central bank – like the Bank of England or Federal Reserve – will charge to lend money to commercial banks. Adjusting the base rate helps a central bank regulate the economy by encouraging or discouraging spending as required.

Traders who expect prices to rise and who may be holding long positions.

The Bundesbank (German Federal Bank) is the Federal Republic of Germany’s central bank. Established in 1957, It is the most influential member of the European System of Central Banks (ESCB). Like the European Central Bank (ECB), the Bundesbank is based in Frankfurt, Germany.

Taking a long position on a product.

The GBP/USD (Great British Pound/U.S. Dollar) pair. Cable earned its nickname because the rate was originally transmitted to the US via a transatlantic cable beginning in the mid 1800s when the GBP was the currency of international trade.

The Canadian dollar, also known as Loonie or Funds.

Cleared funds refers to the balance in a trading account and means that these funds are ready to be traded with. Once funds have cleared, they are free from any obligation and can be used to either make a trade or be withdrawn. If funds aren’t cleared, they might be pending, which will limit what a trader can do with them.

A clearing house is an organisation, institution or third party that settles a financial obligation between a buyer and seller. It’s the job of a clearing house to ensure that all parties in a financial transaction honour the agreements that they’ve committed to and settle them as such.

A closed position is a trade that is no longer active and has been closed by a trader. To close a position, you need to trade in the opposite direction to when you opened it.

The process of stopping (closing) a live trade by executing a trade that is the exact opposite of the open trade.

A closing price is a market’s final price level before it closes for the day. A market’s closing price is used as the price level shown on a typical line chart.

A contract for difference (CFD) is a financial contract in which you agree to exchange the difference in the settlement price between the open and closing trades on a particular asset. CFDs enable traders and investors to speculate on whether a market will go up or down, and profit from the price movement without owning the underlying asset.

Controlled risk is where the amount of risk on a trade is capped at a certain level, typically through a guaranteed stop-loss order. This enables you to set the maximum possible amount you can lose on a trade, giving you full control of your risk.

A corporate action is an effort made by a public company to alter or change its securities (equity or debt). Corporate action is agreed on by the company’s board of directors with authorization from shareholders.

Refers to corporations in the market for hedging or financial management purposes. Corporates are not always as price sensitive as speculative funds and their interest can be very long term in nature, making corporate interest less valuable to short-term trading.

The second listed currency in a currency pair, also known as quote currency.

Speculators who take positions in commodities and then liquidate those positions prior to the close of the same trading day.

Day trading takes advantage of small, short-term changes in the market to buy and sell a financial instrument multiple times within one trading day. Day trading typically has a lower success rate than other methods of trading, but it can pay off for well-educated, well-funded traders.

A deal, also known as a trade, is the name given to any forex transaction. The most common deal is a spot contract, a purchase or sale of a foreign transaction based on the exchange rate at that current moment. Other deals include forward contracts, window forwards, limit orders, stop loss orders, and fx swaps.

A dealer is a financial institution working with their country’s regulatory body to trade foreign currencies. Most dealers are banks who trade securities on their own behalf and in such large amounts that they help maintain liquidity in the market and regulate bid and ask quotes.

The dealing spread is the difference between the bid (sell) price and the ask (buy) price for different currency pairs. It is also known as the ‘spread’ or ‘bid-offer spread’ and is represented by the number of pips between the bid price and the ask price.

Like bull and bear market descriptors, dovish is one of two ways to describe monetary policy from the Federal Reserve. A dovish policy advocates for low interest rates aimed at reducing unemployment and stimulating economic growth.

The Dow Jones Industrial Average is an equity index. It tracks the performance of thirty large public firms quoted on the NYSE and NASDAQ in the USA. The index also gets called the DJIA and DJIA 30. Many financial brokers refer to the index as the US30 on trading platforms.

Price action consisting of lower lows and lower highs.

The term dry powder refers to the amount of cash reserve or liquid securities kept readily on hand by an investor to cover potential future costs and obligations. Dry powder includes any and all marketable securities that can be liquidated on short notice.

Symbol for the US Dollar Index.

Measures the annualized rate of inflation in the compensation and benefits paid to civilian workers and is seen as a primary driver of overall inflation.

A monthly index produced by the OECD. It measures overall economic health by combining ten leading indicators including average weekly hours, new orders, consumer expectations, housing permits, stock prices and interest rate spreads.

A share bought in which the buyer forgoes the right to receive the next dividend and instead it is given to the seller.

An expiration date for derivatives – such as options or futures contracts – is the last day that the contract is valid. Either before or on this day, traders usually decide what to do with their financial position.

An exporter is a person, company, or country, that sends goods or services to a counterparty in another country. Exporting is a global trade function whereby goods produced in one country get moved to another country to trade or sell.