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Glossary of all the cryptocurrency terms you need to know
If you want to live in a world of cryptocurrencies, you need to know at least the main cryptocurrency terms. The CryptoAddicted team, based on the experience gained in these years and after an adequate research on several sites and cryptocurrency related forums on the web, has collected a glossary of all the terms you may find around and that can help you better understanding this world.
General Cryptocurrency Terms
Generally any crypto-currency other than Bitcoin or Ethereum. (Though some Bitcoin folks would probably still say Ethereum is an altcoin). Claim a lot of Altcoin from the CryptoAddicted Faucets List.
Blockchain is distributed ledger, secured by cryptography. It is essentially public databases that everyone can access and read, but the data can only be updated by the data owners. Instead of the data is stored on a single centralized server, the data is copied across thousands and thousands of computers worldwide. More detailed information available on Wikipedia Blockchain.
The process of moving crypto-currency ‘offline’, as a way of safekeeping your coins from hacking. There are a variety of ways to do this, but some methods most commonly used:
- Printing out the QR code of a software wallet and storing it somewhere safe, such as a safety deposit box.
- Moving the files of a software wallet onto a USB drive and storing it somewhere safe.
- Using a hardware wallet.
A Cryptocurrency Faucet is a website that grants to you to earn a free small amount of bitcoins (named satoshis) or other altcoins. Read more on What is a Bitcoin Faucet and visit the Crypto Faucets List.
A situation where a blockchain splits into two separate chains. Forks generally happen in the crypto world when new ‘governance rules’ are built into the blockchain’s code. More information available on Hard Fork Wikipedia.
A device that can securely store crypto-currency. Hardware wallets are often considered as the most secure way to hold crypto-currency. Two of the most popular hardware wallet models are: Ledger Nano S and Trezor.
A High Yield Investment Program is a website that grants to you to earn a very high interests of your deposit funds. Hyips require to you to send a deposit in Bitcoin or in US dollar and, after a specific period, they will return your money with a quantity of interest that can go from 0.1% to well over 10%.
Initial Coin Offering, somewhat similar to an IPO in the conventional business world. Startups issue their own tokens essentially by a crowdfunding for bitcoin, ethereum and other currencies.
The process of trying to ‘solve’ the next block. It requires obscene amounts of computer processing power (CPU and GPU) to do effectively, but is rewarded with a specific amount of a minable cryptocurrency. You can leverage on a pool, like Minergate, or on cloud, like Genesis Mining or others.
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A computer especially designed for processing proof-of-work blockchains, like Ethereum. They often consist of multiple high-end graphic processors (GPUs) to maximize their processing power.
A computer that possesses a copy of the blockchain and is working to maintain it.
Proof-of-stake. The proposed future consensus algorithm to be used by Ethereum. Instead of mining in its current form, people that own ETH will be able to ‘lock up’ their ether for a short amount of time in order to ‘vote’ and generate network consensus. The plan is that these stakeholders will be rewarded with ETH by doing so.
Proof-of-work. The current consensus algorithm used by Bitcoin. This algorithm is used to confirm transactions and produce new blocks to the chain. With PoW, miners compete against each other to complete transactions on the network and get rewarded.
The satoshi is currently the smallest unit of the bitcoin currency recorded on the block chain. It is a one hundred millionth of a single bitcoin. The unit has been named in collective homage to the legendary creator of Bitcoin, Satoshi Nakamoto.
A scaling solution for blockchains. Typically, every node in a blockchain network houses a complete copy of the blockchain. Sharding is a method that allows nodes to have partial copies of the complete blockchain in order to increase overall network performance and consensus speeds.
Storage for crypto-currency that exists purely as software files on a computer. Software wallets can be generated for free from a variety of sources. See the listed Software Wallets.
Refers to the ‘currency’ of projects built on the ethereum network that have raised money via issuing their own tokens. Examples: Golem (GNT) and Augur (REP).
Someone that owns huge amount of crypto-currency and can influence its price.
Cryptocurrency terms about Trading
Taking advantage of a difference in price of the same commodity on two different exchanges. Often mentioned when it comes to comparing BTC prices on Korean exchanges against US exchanges.
All-Time-High. When a crypto-currency reaches a maximum against another coin, generally US dollar.
Someone still holding an altcoin after a pump and dump crash. Can also just refer to someone holding a coin that is sinking in value with few future prospects.
An expectation that price is going to decrease.
Bollinger bands are based on the volatility of a price calculated as a moving average on G days (often 20) to which the value of the standard deviation, multiplied by a given F factor (often around 2), is added or subtracted.
An expectation that price is going to increase.
Using a depth chart, traders can see the current limit buy and sell points.
Websites where you can buy and sell cryptocurrencies. Some popular exchanges are: HitBTC, Coinbase, Cryptopia, Poloniex, Bit-Z, Binance, OKEx and many others.
Government-issued currency, such as the US dollar or Euro.
Fear Of Missing Out. The overwhelming sensation that you need to get on the train when the price of something starts to skyrocket.
Fear, Uncertainty, and Doubt. Baseless negativity spread intentionally by someone that wants the price of something to drop.
Someone that is spreading FUD.
A margin trade that profits if the price increases.
A margin trade that profits if the price decreases.
Limit order / limit buy / limit sell
Orders placed by traders to buy or sell a crypto-currency when the price meets a certain amount. They can be thought of as ‘for-sale’ signs. These orders are what are bought and sold against when traders place market orders.
Moving Average Convergence Divergence. A trend indicator that shows the relationship between two moving averages of prices.
Type of trading where the risk, and the consequent gain or loss, is magnified by the use of financial leverage
The total value held in a crypto-currency. It is calculated by multiplying the total supply of coins by the current price of an individual unit.
Market order / market buy / market sell
A simple purchase or sale on an exchange at the current price. Market buys purchase the cheapest price available on the order book, and market sells fill the most expensive buy order on the books.
Shilling / pumping
Someone essentially advertising another crypto-currency.
A crypto-currency with extremely low volatility that can be used to trade against the overall market.
Pump And Dump
The recurring cycle of an altcoin getting a ton of attention, leading to a fast price increase, and then of course followed by a huge crash.
Return on Investment. The percentage of how much money has been made compared to an initial investment. (i.e., 100% ROI means someone doubled their money).
Trend Analysis or Technical Analysis. Refers to the process of examining current charts in order to predict which way the market will move next.
Cryptocurrency terms about Ethereum
Decentralized Autonomous Organization. An investor-directed venture capital fund built on the Ethereum network that was hacked in June 2020. The hack stole about a third of the DAO’s funds and led to Ethereum being hard-forked the following month. The DAO is often cited as one of Ethereum’s biggest stumbles thus far.
Decentralized Application. This refers to an application that uses an Ethereum smart contract as it’s back-end code.
Enterprise Ethereum Alliance. A coalition of startups and corporations trying to figure out the best way to use this dang thing.
ERC20 is a technical standard used for smart contracts on the Ethereum blockchain for implementing tokens
A measurement of how much processing is required by the ethereum network to process a transaction. Simple transactions, like sending ether to another address, typically do not require much gas. More complex transactions, like deploying a smart contract, require more gas.
The amount of ether to be spent for each gas unit on a transaction. The initiator of a transaction chooses and pays the gas price of the transaction. Transactions with higher gas prices are prioritized by the network.
Gwei is a denomination of ether (ETH). Gas prices are most often measured in Gwei. 1 Ether = 1000000000 Gwei.
MyEtherWallet. A free site that can generate ethereum software wallets for you.
Code that is deployed onto the Ethereum blockchain, often directly interacting with how money flows.
A potential future event wherein Ethereum’s market cap surpasses Bitcoin’s market cap, making Ethereum the most ‘valuable’ crypto-currency.
The smallest denomination of ether. 1 Ether = 1000000000000000000 Wei
Cryptocurrency terms: Memes
Long ago, someone on a bitcoin forum got drunk and made a post with this typo in the place of ‘hold’. A meme was born.
In the crypto world, it is referring to a price going up astronomical levels.
Glossary database does not contain any word or phrase that begins with the letter “GLOSSARY”.
This glossary contains definitions of the many terms, phrases and abbreviations used in the world of options trading and is a continual work in progress. To start using the glossary, click on the above alphabetical hyperlink corresponding to the first letter of the term you wish to understand.
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Glossary of trading terms
Take a look at our list of the financial terms associated with trading and the markets.
From beginners getting acquainted with the world of investing to experts with decades of experience, all traders need to learn – or review – the meanings behind a huge number of terms on an almost daily basis.
We’ve put our 45 years of experience in trading to good use, defining and explaining a comprehensive list of trading vocabulary.
When one company decides to take over another one, it is referred to as an acquisition. The acquiring company will do this by purchasing either the majority or entirety of the ownership stake of the company being taken over.
An American Depositary Receipt (or ADR, for short) is a way in which US investors can trade shares of non-US companies without using their local exchanges.
IG alerts – also known as trading alerts – allow you to set specific criteria and be notified immediately once that criteria has been met. There are three main types: economic announcements, price alerts and indicator alerts.
Alpha is the measurement of an investment portfolio’s performance against a certain benchmark –usually a stock market index. In other words, it’s the degree to which a trader has managed to ‘beat’ the market over a period of time. The alpha can be positive or negative, depending on its proximity to the market.
Amortisation is the process of spreading the repayment of a loan, or the cost of an intangible asset, over a specific timeframe. This is usually a set number of months or years, depending on the conditions set by banks or copyright agencies. Amortisation will often incur interest payments, set at the discretion of the lender.
Annual general meeting (AGM) definition
An annual general meeting (AGM) is a yearly gathering between the shareholders of a company and its board of directors. Generally, this is the only time that the directors and shareholders will meet throughout the year, so it is a chance for the directors to present the company’s annual report.
Arbitrage in trading is the practice of simultaneously buying and selling an asset to take advantage of a difference in price. The asset will usually be sold in a different market, different form or with a different financial product, depending on how the discrepancy in the price occurs.
The ask refers to the price at which you can buy an asset or security from a seller. It can be variously referred to as ask, the ask, or asking price.
Asset classes definition
An asset class is a category of financial instrument – these can be physical assets or financial assets. The instruments are grouped into asset classes based on whether they show similar characteristics, behave in the same way on the market, or are governed by the same laws and regulations.
An asset is an economic resource which can be owned or controlled to return a profit, or a future benefit. In financial trading, the term asset relates to what is being exchanged on markets, such as stocks, bonds, currencies or commodities.
At the money definition
At the money (ATM) is a term used to describe an options contract with a strike price that is identical to the underlying market price. At the money options see a lot of trading activity, because they are so close to becoming profitable.
An auction market is an environment that facilitates competition between buyers and sellers. In an auction market, buyers indicate the maximum price that they are willing to pay for an asset, while sellers express the lowest price that they would be comfortable accepting.
Automated trading definition
Automated trading – also known as algorithmic trading – is the use of algorithms for making trade orders.
Averaging down definition
When a trader purchases an asset, the asset’s price drops, and if the trader purchases more, it is referred to as averaging down.
Base currency definition
In trading the term base currency has two main definitions: the first currency quoted in a forex pair, or the accounting currency used by banks and other businesses.
Base rate definition
A base rate is the interest rate that a central bank – such as the Bank of England or Federal Reserve – will charge commercial banks for loans. The base rate is also known as the bank rate or the base interest rate.
Basis point definition
A basis point is a unit of measurement used to quantify the change between two percentages – it can also be referred to as ‘bp’, which is pronounced ‘bip’ or ‘beep’. A basis point is equal to one hundredth of one percent, or 0.01%.
Bears are traders who believe that a market, asset or financial instrument is heading in a downward trajectory. In that regard, they hold an opposite view to bulls, who believe that a market is going upwards.
Bear market definition
When the market is on a sustained downward trajectory, with little optimism from traders to bring about a rally, it is referred to as a bear market.
Being bearish in trading means you believe that a market, asset or financial instrument is going to experience a downward trajectory. Being bearish is the opposite of being bullish, which means that you think the market is heading upwards.
A financial instrument’s beta is a measure of its risk or volatility when compared to the wider market.
In trading and investing, the bid is the amount a party is willing to pay in order to buy a financial instrument.
Blue chip stocks definition
Blue-chip stocks are the shares of companies that are reputable, financially stable and long-established within their sector. Over time, the companies that are considered blue chip tend to change, so the exact definition of what is required for blue-chip status can be vague. However, a company that is considered blue chip will tend to be at or near the very top of its sector, feature on a recognised index, and have a well-known brand.
Bollinger bands definition
Bollinger bands are a popular form of technical price indicator. They are made up of an upper and lower band, set either side of a simple moving average (SMA). Each band is plotted two standard deviations away from the SMA of the market, and they are capable of highlighting areas of support and resistance.
Bond trading definition
Bond trading is one way of making profit from fluctuations in the value of corporate or government bonds. Many view it as an essential part of a diversified trading portfolio, alongside stocks and cash.
Bonds are a form of financial investment that involve lending money to an institution for a fixed period of time. They usually come in two varieties: corporate bonds and government bonds, depending on the type of institution you are lending to.
Book value definition
While book value reflects what a business is worth according to its financials (its books), market value is the worth of a company according to financial markets – also known as its market capitalisation. The calculation for market value is the current market price per share multiplied by the total number of outstanding shares.
Bottom line definition
A company’s bottom line is an important factor in share trading. Variously, it can be used to refer to the net earnings or earnings per share (EPS) of a business.
Brent crude definition
Brent crude – also referred to as Brent blend – is one of three major oil benchmarks used by those trading oil contracts, futures and derivatives. The other two major benchmarks are West Texas Intermediate (WTI) and Dubai/Oman, though there are many smaller oil varieties traded as well..
A broker is an independent person or a company that organises and executes financial transactions on behalf of another party. They can do this across a number of different asset classes, including stocks, forex, real estate and insurance. A broker will normally charge a commission for the order to be executed.
Bulls are speculators who believe that a market, instrument, or sector is going on an upward trajectory. This belief puts them at odds with bears, who take a pessimistic view on a market’s direction.
Bull market definition
When a market, instrument or sector is on an upward trend, it is generally referred to as a bull market.
Buying a financial instrument means taking ownership of it from someone else, whether it is a commodity, stock or another asset.
Cable is one of a few slang terms for different currency pairs; in this case referring to British pound sterling against the US dollar. This may also be shown as GBP/USD or GBPUSD. Occasionally, people also refer to the price of the British pound as cable.
A call option is a contract the gives the buyer the right but not the obligation to buy a specific an asset at a specific price, on a specific date of expiry. The value of a call option appreciates if the asset’s market price increases.
Capital expenditure definition
Capital expenditure, or CAPEX, is the term used for the money spent by businesses on physical assets. It’s an important part of understanding a company’s accounts.
Capital gains definition
Capital gains are the profits made from the buying and selling of assets. They are made when traders sell assets – like shares or commodities – for more than they originally paid for them. The opposite of a capital gain is a capital loss.
Capital gains tax definition
Capital gains tax (or CGT), is the tax levied by the government on the profits made from financial asset sales. CGT regulations and levels vary from country to country.
Capital loss definition
When a trader sells an asset at a lower price than they initially paid for it, they have incurred a capital loss. As such, capital loss is the opposite of capital gain: the profit made when an asset is sold for more than originally paid.
Cash flow definition
Cash flow is the amount of money coming into and going out of a company’s accounts, as reported in earnings announcements. It can refer to a single project or the entire business.
A chartist is a trader who relies predominantly on charts to help them understand a financial instrument’s historical price movements, in order to better predict and to speculate on its future performance. They are also commonly known as technical analysts, or technical traders.
Closing price definition
An asset’s closing price is the last level at which it was traded on any given day. This price is often determined by an auction.
Commission is the charge levied by an investment broker for making trades on a trader’s behalf.
A commodity is a basic physical asset, often used as a raw material in the production of goods or services.
Concentration ratio definition
An industry’s concentration ratio is the size of a certain number of firms in an industry compared to its total size. It is used to calculate one or more firms’ dominance of their sector.
Contracts for difference definition
Contracts for difference, or CFDs, are a type of financial derivative used in CFD trading.
Bond convexity is a measure of the relationship between a bond’s price and interest rates. It is used to assess the impact that a rise or fall in interest rates can have on a bond’s price – which highlights a bond holder’s exposure to risk.
Cost of carry definition
The cost of maintaining an investment position is often referred to as the cost of carry or carrying charge. It can come in many forms, including interest on margins or the loans used to make the trade, or the cost of storage and insurance associated with holding a commodity.
Covered call definition
A covered call is when a trader sells (or writes) call options in an asset that they currently have a long position on. They are also known as buy-writes.
CPI stands for consumer price index, an average of several consumer goods and services that are used to give an indication of inflation.
Crystallisation is the term used when a trader or business closes a position and then reopens an identical position immediately.
Currency appreciation definition
Currency appreciation is when one currency in a forex pair increases in value relative to the other currency in the pair. Forex traders often talk about one currency ‘strengthening’ in relation to another, meaning that it would cost more to buy, or that it can buy more of another currency when sold.
Currency depreciation definition
Currency depreciation is the decline of a currency’s value relative to another currency. It specifically refers to currencies in a floating exchange rate – a system in which a currency’s value is set by the forex market, based on supply and demand.
Currency futures definition
A currency future is a contract that details the price at which a currency could be bought or sold, and sets a specific date for the exchange.
Currency peg definition
A currency peg is a governmental policy of fixing the exchange rate of its currency to that of another currency, or occasionally to the gold price. It can sometimes also be referred to as a fixed exchange rate, or pegging.
Custodian has a particular significance in relation to IG’s platform. Here, we define custodian in general investing and explain what it means to you when trading with IG.
Dark pools definition
Dark pools are networks – usually private exchanges or forums – that allow institutional investors to buy or sell large amounts of stock without the details of the trade being released to the wider market.
Day order definition
A day order is a type of order, or instruction from a trader to their broker, to buy or sell a certain asset.
Day trading definition
Day trading is a strategy of short-term investment that involves closing out all trades before the market closes.
Debt ratio definition
Debt ratio is an indication of how much debt a company is holding, when compared to the value of its assets. It can also be applied to individuals: in which case it is the cost accrued by their debt compared to total income each year.
A derivative’s delta is defined as its price movement in relation to the change in price of its underlying asset. It can also sometimes be referred to as a hedge ratio, and is most often used when dealing in options.
Depreciation is the term given to the decline in an asset’s value, either due to market conditions or other factors like wear and tear. It is the opposite of appreciation.
Derivatives are financial products that derive their value from the price of an underlying asset. Derivatives are often used by traders as a device to speculate on the future price movements of an asset, whether that be up or down, without having to buy the asset itself.
Digital 100s definition
Digital 100s are a type of financial derivative, also referred to as binary options.
Digital 100s trading definition
Digital 100s trading is a type of trading that involves utilising digital 100 options.
Digital options definition
A digital option is a type of option that offers the opportunity of a fixed payout if the underlying market price exceeds a pre-determined limit, called the strike price.
A dividend is the portion of profit that a company chooses to return to its shareholders, usually expressed as a percentage.
When trading, DMA stands for direct market access. It’s a way of placing trades that offers more flexibility and transparency than traditional dealing (which is usually referred to as OTC, or over-the-counter). It’s suitable for advanced traders.
Earnings per share definition
Earnings per share (EPS) is an important metric in a company’s earnings figures. It is calculated by dividing the total amount of profit generated in a period, by the number of shares that the company has listed on the stock market.
EBITDA is a way of evaluating a company’s performance without factoring in financial decisions or the tax environment. The literal meaning of EBITDA is ‘earnings before interest, taxes, depreciation and amortisation’.
EBITDAR is the abbreviation of ‘earnings before interest, taxes, depreciation, amortisation and restructuring or rent costs’. It is used to analyse a company’s financial performance and profit potential where the company is undergoing a restructure or if its rent expenses are higher than average.
When traders talk about the ECB, they are referring to the European Central Bank, the central bank for the eurozone.
EDSP stands for exchange delivery settlement price, and refers to the price at which exchange-traded derivative contracts are settled. Stock exchanges use EDSP to calculate the amount that each party to an options or futures contract owes at the time of that contract’s expiry.
In trading, equity can mean several different things. However it usually comes down to the ownership of an asset without any debt involved.
Equity options definition
Equity options are a form of derivative used exclusively to trade shares as the underlying asset.
ETF stands for exchange traded fund, a type of investment security that is bought and sold on exchanges.
Exchange traded products, or ETPs, are a variety of financial instruments that are traded throughout the day on national exchanges.
An exchange is an open, organised marketplace for commodities, stocks, securities, derivatives and other financial instruments. The terms exchange and market are often used interchangeably, as they both describe an environment in which listed products can be traded.
In trading, execution is the completion of a buy or sell order from a trader. It is carried out by a broker.
Expiry date definition
The point when a trading position automatically closes is known as the expiry date (or expiration date).
In trading, exposure is a general term that can mean three things: the total market value of your trades at open, the total amount of possible risk at any given point, or the portion of a fund invested in a particular market or asset
Fair value definition
Fair value has two meanings to investors. Generally, it is used to mean the value attributed to a stock by an individual investor or broker but in futures trading, it can refer to the predicted price of a market which is reflected in the cost to open a position.
Federal Reserve definition
The Federal Reserve bank, or the ‘Fed’ for short, is the central bank in charge of monetary and financial stability in the United States. It is part of a wider system – known as the Federal Reserve system – with 12 regional central banks located in major cities across the US.
Fiat currency definition
A fiat currency is a national currency that is not pegged to the price of a commodity such as gold or silver. The value of fiat money is largely based on the public’s faith in the currency’s issuer, which is normally that country’s government or central bank.
Fibonacci retracement definition
A Fibonacci retracement is a key technical analysis tool that uses percentages and horizontal lines, drawn onto price charts, to identify possible areas of support and resistance. Identifying these areas is useful to traders since it can help them decide when to open and close a position, or when to apply stops and limits to their trades.
Fill is the term used to refer to the satisfying of an order to trade a financial asset. It is the basic act of any market transaction – when an order has been completed, it is often referred to as ‘filled’ or as the order having been executed. However, it is worth noting that there is no guarantee that every trade will become filled.
Financial instrument definition
A financial instrument is a monetary contract between two parties, which can be traded and settled. The contract represents an asset to one party (the buyer) and a financial liability to the other party (the seller).
Fixed costs definition
Fixed costs are the costs incurred by a company that do not vary with the scale of production. They are one of two main types of cost associated with companies’ balance sheets: the others are variable costs.
Floating exchange rate definition
A floating exchange rate refers to a currency where the price is determined by supply and demand factors relative to other currencies. A floating exchange rate is different to a fixed – or pegged – exchange rate, which is entirely determined by the government of the currency in question.
The FOMC, or Federal Open Market Committee, is the branch of the Federal Reserve bank that is in charge of short and long-term monetary policy decisions.
Force open definition
The ‘force open’ function on the trading platform allows you to enter a new bet in the opposite direction to an existing bet on the same market.
Forex is how market participants convert one currency to another. It can variously be referred to as foreign exchange, FX, or currencies.
Forward contract definition
A forward contract is a contract that has a defined date of expiry. The contract can vary between different instances, making it a non-standardised entity that can be customised according to the asset being traded, expiry date and amount being traded.
Fundamental analysis definition
Fundamental analysis is a method of evaluating the intrinsic value of an asset and analysing the factors that could influence its price in the future. This form of analysis is based on external events and influences, as well as financial statements and industry trends.
Futures contract definition
Futures contracts represent an agreement between two parties to trade an asset at a defined price on a specified date in the future. They are also often referred to simply as ‘futures’.
Gamma is a derivative of delta: the relationship between a derivative’s price and the price of its underlying asset. Specifically, gamma is the movement of delta in regard to the price of the underlying asset.
GDP stands for gross domestic product, or the total value of the goods and services produced in a country over a specified period. It is used as an indicator of the size and health of a country’s economy.
Gearing ratio definition
A gearing ratio is a measure used by investors to establish a company’s financial leverage. In this context, leverage is the amount of funds acquired through creditor loans – or debt – compared to the funds acquired through equity capital.
Grey market definition
By taking a position on a grey market, you’re taking a position on a company’s potential market cap ahead of its initial public offering (IPO). The price of a grey market is a prediction of what the company’s total market capitalisation will be at the end of its first trading day.
Gross margin definition
Gross margin is a way of measuring the amount of profit a company can make from its revenue.
In trading, the handle has two meanings. In most markets, it means the whole numbers involved in a price quote, without the decimals included. In forex, the handle refers to that part of the quote that appears in both numbers of the spread.
Hawks and doves definition
Hawks and doves are terms used by analysts and traders to categorise members of Central Bank committee ahead of their votes on monetary policy.
A hedge is an investment or trade designed to reduce your existing exposure to risk. The process of reducing risk via investments is called ‘hedging’.
Heikin Ashi definition
Heikin Ashi is a type of chart pattern used in technical analysis. Heikin Ashi charts are similar to a candlestick charts, but the main difference is that a Heikin Ashi chart uses the daily price averages to show the median price movement of an asset.
Helicopter money definition
Helicopter money is the term used for a large sum of new money that is printed and distributed among the public, to stimulate the economy during a recession or when interest rates fall to zero. It is also referred to as a helicopter drop, in reference to a helicopter scattering supplies from the sky.
High frequency trading definition
High frequency trading (or HFT) is a form of advanced trading platform that processes a high numbers of trades very quickly using powerful computing technology. It can be used to either find the best price for a single large order, or to find opportunities for profit in the market in real time.
Ichimoku Cloud definition
The Ichimoku Cloud is a technical analysis indicator that defines support and resistance levels, gauges momentum and provides trading signals. In Japanese, it is called the ‘Ichimoku Kinko Hyo’ which roughly means ‘one look equilibrium chart’ – because with just one look, traders can receive a range of information.
In the money definition
In the money (ITM) is defined by an option’s state of ‘moneyness’ – the underlying asset’s status when compared to the price at which it can be bought or sold (its strike price). Specifically, in the money means that an option* on an underlying asset has gone beyond its strike price, giving it an intrinsic value of more than £0.
In trading, an index is a grouping of financial assets that are used to give a performance indicator of a particular sector. The plural term is indices.
Indices trading definition
Indices trading is the means by which traders attempt to make a profit from the price movements of indices.
Inflation is the increase in the cost of goods and services in an economy. As that in turn means that each unit of the currency’s economy is worth less of any good or service, inflation can also be viewed as a devaluing of currency.
In finance, interest can have more than one definition. Firstly it refers to the charge levied against a party for borrowing money, which can be either a cost or a means of making profit for a trader. Secondly, it can mean the portion of a company’s stocks held by a particular shareholder.
Interest rates definition
The amount that a lender charges to a borrower for the loan of an asset, usually expressed as a percentage of the amount borrowed. That percentage usually refers to the amount being paid each year (known as annual percentage rate, or APR) but can be used to express payments on a more or less regular basis.
Intrinsic value definition
Intrinsic value is a way of describing the perceived or true value of an asset. This is not always identical to the current market price because assets can be over- or undervalued. Intrinsic value is a common part of fundamental analysis, which investors use to assess stocks, as well being used in options pricing.
Investment capital definition
A trader’s investment capital is the portion of financial resources they have available for trading. It could be in the form of money or other assets.
An investor is any person who devotes capital to an investment in the hope that they will see a return from it. However, in the investment community, investors tend to have a different attitude to investing than traders.
When a company embarks on an IPO (which stands for initial public offering) it goes public on a stock exchange. This can also be known as floating, flotation, or just ‘going public’.
Leverage is a concept that can enable you to multiply your exposure to a financial market without committing extra investment capital.
Leveraged products definition
Leveraged products are financial instruments that enable traders to gain greater exposure to the market without increasing their capital investment. They do so by using leverage.
A company’s liabilities are the debts and obligations represented on its balance sheet. They are the opposite of assets.
Limit order definition
A limit order is an instruction to your broker to execute a trade at a particular level that is more favourable than the current market price.
Limit up / limit down definition
Limit up and limit down are the maximum amounts a commodity future may increase (limit up) or decrease (limit down) in any single trading day.
Liquidity is used in finance to describe how easily an asset can be bought or sold in the market without affecting its price – it can also be known as market liquidity. When there is a high demand for an asset, there is high liquidity, as it will be easier to find a buyer (or seller) for that asset.
When used in trading, long refers to a position that makes profit if an asset’s market price increases. Usually used in context as ‘taking a long position’, or ‘going long’.
A lot is a standardised group of assets that is traded instead of a single asset.
M2 is a measure of money supply, referring to a certain portion of the money contained in an economy.
Maintenance margin definition
Maintenance margin is the amount that must be available in funds in order to keep a margin trade open. It is also known as the variation margin.
Margin call definition
A margin call is the term for when a broker requests an increase maintenance margin from a trader, in order to keep a leveraged trade open.
In trading, margin is the funds required to open and maintain a leveraged position.
Margin deposit definition
Deposit margin is the amount a trader needs to put up in order to open a leveraged trading position. It can also be known as the initial margin, or just as the deposit.
Margin trading definition
Margin trading is a way of speculating on financial markets that involves amplifying your exposure using leverage. Leverage is a facility that enables you to open a position on a market without needing to put up the total value of your position.
Market capitalisation definition
Market capitalisation is the total market value of a company’s shares on the market. It is often abbreviated to market cap. Market capitalisation is an easy way for investors to determine a company’s size, which can help to assess the risk of investing in its shares.
Market data definition
Market data refers to the live streaming of trade-related data. It encompasses a range of information such as price, bid/ask quotes and market volume. Trading venues provide reports on various assets and financial instruments, which are then distributed to traders and firms. Market data is available across thousands of global markets, including stocks, indices, forex and commodities.
Market can have several meanings within investments. Generally it is defined as a medium through which assets are traded, with their value determined by supply and demand.
Market maker definition
A market maker is an individual or institution that buys and sells large amounts of a particular asset in order to facilitate liquidity.
Market order definition
A market order is an instruction from a trader to a broker to execute a trade immediately at the best available price.
Market value definition
While the market value reflects what a business is worth according to market participants, book value reflects what a business is worth according to its financials (its books). The calculation for the book value of a company is its total tangible assets minus its liabilities.
When two or more companies decide to combine and become one entity, it is called a merger.
MetaTrader is an electronic trading platform which is popular among traders around the world.
Moving average convergence/divergence (MACD) definition
The moving average convergence/divergence (MACD) is a technical analysis indicator that aims to identify changes in a share price’s momentum. The MACD collects data from different moving averages to help traders identify possible opportunities around support and resistance levels.
Moving average definition
A moving average (often shortened to MA) is a common indicator in technical analysis, used to examine price movements of assets while lessening the impact of random price spikes.
Multilateral trading facilities definition
Multilateral trading facilities (MTFs) offer traders and investment firms an alternative to traditional exchanges. They allow trading of a wider variety of markets than most exchanges, including assets that may not have an official market.
Multiplier effect definition
The multiplier effect is the term used to describe the impact that changes in monetary supply can have on economic activity. When an individual, government or company spends money it has a trickle-down effect to businesses and individuals. The resulting impact can be much wider than the initial action.
Net change definition
Net change is the difference between the closing price of the current trading session, compared to the closing price of the previous trading session. Net change can be positive or negative, as it represents whether the markets are up or down on the previous day.
Net income definition
Net income is the total amount of profit (often known as earnings) made by a company, listed in its earnings report.
Non-current assets definition
Non-current assets represent a company’s long-term investments, for which the full value won’t be realised during the accounting year. This can also include items that don’t have an inherent value – intangible assets, for example – or assets with no fixed expiry such as property or land.
Non-farm payrolls definition
Non-farm payrolls are a monthly statistic representing how many people are employed in the US, in manufacturing, construction and goods companies. They can also be known as non-farms, or NFP.
Off book definition
An ‘off-book’ trade refers to the process of trading shares away from an exchange or regulated body. They are usually executed via the over-the-counter (OTC) market. Off-book transactions are made directly between two parties, outside or ‘off’ of the order books.
Offer is the term used when one trader expresses an intention to buy an asset or financial instrument from another trader or institution.
On exchange definition
On exchange is a term used to mean that a trade is taking place directly on an order book. It differs from at quote, which is a trade made at the price quoted by a market maker.
On-balance volume definition
On-balance volume (OBV) is a form of technical analysis which enables traders to make predictions about future price movements based on the asset’s previous trading volume. OBV is mostly used in shares trading, because the volume has an especially large influence on the way share prices move.
OPEC is the Organisation of the Petroleum Exporting Countries. It was founded in 1960 by Saudi Arabia, Venezuela, Iraq, Iran and Kuwait. The other countries that have joined OPEC since are Libya, the United Arab Emirates, Algeria, Nigeria, Ecuador, Gabon, Angola, Equatorial Guinea and the Republic of the Congo – bringing OPEC’s membership to 14, as of January 2020.
Open has several definitions within investing. It can refer to the daily opening of an exchange, and an order or position that has not yet been filled or closed.
Open positions definition
An open position is a trade which is still able to generate a profit or incur a loss. When a position is closed, all profits and losses are realised, and the trade is no longer active. Open positions can be either long or short – enabling you to profit from markets rising as well as falling.
An option is a financial instrument that offers you the right – but not the obligation – to buy or sell an asset when its price moves beyond a certain price with a set time period.
Order book definition
In trading, an order is a request sent to a broker or trading platform to make a trade on a financial instrument.
In trading, an order is a request sent to a broker or trading platform to make a trade on a financial instrument.
OTC stands for over-the-counter, and refers to a trade that is not made on a formal exchange. It is often also referred to as off-exchange trading.
Out of the money definition
Out of the money is one of three terms used in options trading, referring to an underlying asset’s price in relation to the price at which it can be bought or sold (its strike price).
Overexposure in trading is the term used to describe the mistake of taking on too much risk. Typically, it’s when a trader makes the technical blunder of investing too much capital in a single position or market.
P/E ratio definition
The price-to-earnings ratio, or P/E ratio for short, is a method of measuring a company’s value. The P/E ratio is calculated by dividing the company’s market value per share by the earnings per share (EPS).
Parent company definition
A parent company is one which has a controlling or majority interest in another company, which gives it the right to control the subsidiary’s operations. Parent companies can be directly involved in the management of their subsidiaries, or they can have a more hands-off approach.
The term parity can be used in a few ways when trading, but always as an expression of equality.
A pip is a measurement of movement in forex trading, defined as the smallest move that a currency can make.
Pip value definition
Pip value is the value attributed to a one-pip move in a forex trade.
A portfolio refers to group of assets that are held by a trader or trading company. Assets in a portfolio can come in many forms, including stocks, bonds, commodities or derivatives.
A position is the expression of a market commitment, or exposure, held by a trader. It is the financial term for a trade that is either currently able to incur a profit or a loss – known as an open position – or a trade that has recently been cancelled, known as a closed position. Profit or loss on a position can only be realised once it has been closed.
Power of attorney definition
Power of attorney gives another person the ability to act on your behalf. In trading, this means they can take over your trading accounts.
Profit and loss definition
A profit and loss (P&L) statement is a financial report that provides a summary of a company’s revenue, expenses and profit. It gives investors and other interested parties an insight into how a company is operating and whether it has the ability to generate a profit.
A pullback is a temporary pause or dip in an asset’s overall trend. The term is sometimes used interchangeably with ‘retracement’ or ‘consolidation’. However, a pullback should not be confused with a reversal, which is a more permanent move against the prevailing trend.
Purchasing managers index definition
A purchasing managers index (PMI) is an economic indicator comprised of monthly reports and surveys from private sector manufacturing firms. The index surveys product managers, who are the individuals that buy the materials needed for a company to manufacture its products.
A put option is a contract that gives the buyer the right but not the obligation to sell an asset at a specific price, at a specific date of expiry. The value of a put option increases if the asset’s market price depreciates.
Quantitative easing definition
Quantitative easing (or QE, for short) is an economic monetary policy intended to lower interest rates and increase money supply. It saw an increase in profile and use after the 2008 financial crash and subsequent recession.
Quote currency definition
The quote currency is the second currency listed in a forex pair. It is also known as the counter currency.
In trading, the quote is the price at which an asset was last traded, or the price at which it can currently be bought or sold.
A rally is a period in which the price of an asset, market or index sees sustained upward momentum. Typically, a rally will arrive after a period in which prices have been flat or in a decline.
Random walk theory definition
Random walk theory is a financial model which assumes that the stock market moves in a completely unpredictable way. The hypothesis suggests that the future price of each stock is independent of its own historical movement and the price of other securities.
Range is the difference between a market’s highest and lowest price in a given period. It is mostly used as an indicator of volatility: if a market has a wide range, it’s a sign that it was volatile over the period analysed.
Rate of return definition
Rate of return (ROR) is the loss or gain of an investment over a certain period, expressed as a percentage of the initial cost of the investment. A positive ROR means the position has made a profit, while a negative ROR means a loss. You will have a rate of return on any investment you make.
Ratio spread definition
A ratio spread is a strategy used in options trading, in which a trader will hold an unequal number of buy and sell options positions on a single underlying asset at once.
Reserves are the liquid assets set aside for future use by an individual, central bank or business. Usually they are in the form of currency or a commodity, such as gold. For traders, reserves will usually be kept as cash that can be accessed quickly.
Resistance level definition
A resistance level is the point on a price chart at which an upward price trajectory is impeded by an overwhelming inclination to sell the asset. If a market price is nearing a resistance level, a trader may opt to close their position and take the profit, rather than risk the price falling back.
A reversal is a turnaround in the price movement of an asset: when an upward trend (or a rally) becomes a downward one (a correction), or vice versa. They can also often be referred to as trend reversals.
Rights issue definition
A rights issue is when a company offers its existing shareholders the chance to buy additional shares for a reduced price. Usually the discounted price will stand for a specified time frame, after which it is returned to normal.
Risk management definition
Risk management is the process of identifying potential risks in your investment portfolio, and taking steps to mitigate accordingly.
In trading, risks are the ways in which an investment can end up losing you money.
The Regulatory News Service, or RNS, is responsible for disseminating regulatory and non-regulatory information on behalf of UK businesses and publicly listed companies. Operating as part of the London Stock Exchange (LSE), the RNS provides businesses with information that can help them to comply with their disclosure obligations.
Return on capital employed, or ROCE, is a long-term profitability ratio that measures how effectively a company uses its capital. The metric tells you the profit generated by each dollar (or other unit of currency) employed.
In trading, a rollover is the process of keeping a position open beyond its expiry.
RSI stands for the relative strength index. It is a key tool used in technical analysis, assessing the momentum of assets to gauge whether they are in overbought or oversold territory.
A scalp in trading is the act of opening and then closing a position very quickly, in the hope of profiting from small price movements.
The SEC stands for the US Securities and Exchange Commission. It is a government agency set up to regulate markets and protect investors in the United States, as well as overseeing any mergers and acquisitions.
Sectors are divisions within an economy or market, useful for analysing performance or comparing companies with similar outputs and characteristics.
Share buyback definition
Share buyback, or share repurchase, is when a company buys back its own shares from investors. It can be seen as an alternative, tax-efficient way to return money to shareholders. Once shares are repurchased they are considered cancelled, but they can be kept for redistribution in the future.
Share price definition
A share price – or a stock price – is the amount it would cost to buy one share in a company. The price of a share is not fixed, but fluctuates according to market conditions. It will likely increase if the company is perceived to be doing well, or fall if the company isn’t meeting expectations.
Shares are the units of the ownership of a company, usually traded on the stock market. They are also known as stocks, or equities.
Shares trading definition
Share trading has a particular significance in relation to IG’s platform. Here, we define share trading in general investing and explain what it means to you when trading with IG.
In trading, short describes a trade that will incur a profit if the asset being traded falls in price. It is also often referred to as going short, shorting or sometimes selling.
Short selling is the act of selling an asset that you do not currently own, in the hope that it will decrease in value and you can close the trade for a profit. It is also known as shorting.
When the price at which an order is executed does not match the price at which it was made, it is referred to as slippage.
Smart order router definition
A smart order router (SOR) is an automated process used in online trading that follows a set of rules when looking for trading liquidity. The goal of an SOR is to find the best way of executing a trade.
SNB stands for Swiss National Bank, the central bank for Switzerland.
In trading, spot refers to the price of an asset for immediate delivery, or the value of an asset at any exact given time. It differs from an asset’s futures price, which is the price for delivery at some date in the future, or its expected price.
In finance, the spread is the difference in price between the buy (bid) and sell (offer) prices quoted for an asset.
A sprint is a type of simplified digital 100 option, differing from standard digital 100s in their expiry and pricing. They are also known as sprint markets, and are only available with IG.
Stock analysis definition
Stock analysis is the method used by a trader or investor to examine and evaluate the stock market. It is then used to make informed decisions about buying and selling shares. Stock analysis can also be referred to as market analysis, or equity analysis.
Stock exchange definition
A stock exchange is a centralised location where the shares of publicly traded companies are bought and sold. Stock exchanges differ from other exchanges because the tradable assets are limited to stocks, bonds and exchange traded products (ETPs).
Stock index definition
A stock index is a group of shares that are used to give an indication of a sector, exchange or economy. Usually, a stock index is made up of a set number of the top shares from a given exchange.
Stock symbol definition
A stock symbol is an abbreviation used to identify publicly traded companies. When a company decides to go public, it will select the exchange to list on and then choose a unique stock symbol to differentiate itself from other companies on the exchange.
Stockbroking is a service which gives retail and institutional investors the opportunity to trade shares.
Stop order definition
Stop orders are types of order that instruct your broker to execute a trade when it reaches a particular level: one which is less favourable than the current market price. They can also be known as stop-loss orders.
A straddle is a type of options trading strategy that allows traders to speculate on whether a market is about to become volatile or not, without having to predict a specific price movement. Straddles involve either buying or selling simultaneous call and put options with matching strike prices and expiration dates.
In options trading, the strike is the price at which a contract can be exercised, and the price at which the underlying asset will be bought or sold. It is also known as the strike price.
Sunday trading with IG definition
Sunday trading is a service that enables you to speculate on several markets over the weekend.
Support level definition
A support level is the price at which an asset may find difficulty falling below as traders look to buy around that level.
Tangible assets definition
Tangible assets are the assets on a company’s books and balance sheet that have a physical form. They comprise the machinery, office equipment and buildings used by a company (fixed assets) and of the materials that are used in producing products (current assets).
Technical analysis definition
Technical analysis is a means of examining and predicting price movements in the financial markets, by using historical price charts and market statistics. It is based on the idea that if a trader can identify previous market patterns, they can form a fairly accurate prediction of future price trajectories.
Tom-next is short for ‘tomorrow-next day’, which is a short-term forex transaction that enables traders to simultaneously buy and sell a currency over two separate business days: tomorrow, and the next day.
Trading floor definition
A trading floor is the area of a business or an exchange where assets are bought and sold, most commonly associated with stock exchanges and futures exchanges. It is also often referred to as a trading pit.
Trading plan definition
A trading plan is a strategy set by the individual trader in order to systemise evaluation of assets, risk management, types of trading, and objective setting. Most trading plans will comprise two parts: long-term trading objectives, and the route to achieving them.
Trailing step definition
A market’s volatility is its likelihood of making major, unforeseen short-term price movements at any given time.
Trailing stops definition
A trailing stop is a type of stop-loss that automatically follows positive market movements of an asset you are trading. If your position moves favourably but then reverses, a trailing stop can lock in your profits and close the position.
Treasury stock definition
Treasury stock is the portion of a company’s shares that it keeps in its own treasury. The shares do not count towards the total amount of outstanding shares listed, and neither pay dividends nor carry voting rights (because a company cannot pay itself, or own itself).
When a market is making a clear, sustained move upwards or downwards, it is called a trend. Identifying the beginning and end of trends is a key part of market analysis. Trends can apply to individual assets, sectors, or even interest rates and bond yields.
Trending shares definition
A trending share is the term for when a company’s stock is undergoing a significant move in comparison to its underlying index. The trend can be either upwards or downwards.
Unborrowable stock is the stock that no one is willing to lend out to short sellers. When shares in a company become unborrowable, the traditional means of short selling them is impossible.
Value at risk (VaR) definition
A market’s volatility is its likelihood of making major, unforeseen short-term price movements at any given time.
Variable costs definition
Variable costs are business expenses that change when production volumes change. They differ from fixed costs, which remain constant if production volume rises or falls.
VIX is short for the Chicago Board Options Exchange Volatility Index. It is a measure used to track volatility on the S&P 500 index, and is the most well-known volatility index on the markets.
A market’s volatility is its likelihood of making major, unforeseen short-term price movements at any given time.
In trading, volume is the amount of a particular asset that is being traded over a certain period of time. It is often presented alongside price information, as it offers an extra dimension when examining an asset’s price history.
VWAP is the abbreviation for volume-weighted average price, which is a technical analysis tool that shows the ratio of an asset’s price to its total trade volume. It provides traders and investors with a measure of the average price at which a stock is traded over a given period of time.
Working order definition
A working order is a general term for either a stop or limit order to open. It is used to advise your broker to execute a trade when an asset reaches a specific price.
WTI stands for West Texas Intermediate (occasionally called Texas Light Sweet), an oil benchmark that is central to commodities trading. It is one of the three major oil benchmarks used in trading, the others being Brent crude and Dubai/Oman.
Yield is the income earned from an investment, most often in the form of interest or dividend payments. Yield is one of the ways in which investments can earn a trader money, with the other being the eventual closing of a position for profit.
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