Glossary of trading terms
A trading strategy involving buying and selling of the same financial instrument at the same time whereby due to price differences, one can obtain a risk free profit.
The lowest price that a seller is willing to sell for a security.
An instruction given to a dealer to buy or sell at the best rate that is currently available in the market.
At the Price Stop-loss Order
A stop-loss order that must be executed since market price has hit the trigger price.
Slang for the Australian dollar.
Balance is the amount of your capital left with the broker. Even when there is a trade going on, this balance amount will not fluctuate along with the floating profit or loss. If you have opened a position and liquidated it, the amount will be changed in accordance to your profit or loss amount.
The rate at which a central bank is prepared to lend money to its domestic banking system.
Bar charts are a type of chart that display a vertical line for each data point to describe the highest and lowest price for each period of time it represents. Furthermore, horizontal lines are used in conjunction to show the closing and opening price.
The currency in which the operating results of the bank or institution are reported.
The difference between the cash price and futures price.
One per cent of one per cent (0.0001). It is commonly used as a measure of unit for interest rates and other percentages in finance.
It is a trading strategy where a trader takes opposite positions in the cash and futures market with the intention of profiting from favorable movements in the basis.
A market view believes that prices will decline.
A market in which prices decline against a background of widespread pessimism (opposite of Bull Market).
The maximum price that a buyer is willing to pay for a security.
Break Even Point
The point at which gains equal to losses in trade positions.
A market view believes that prices will rise.
Bullions are gold or silver that is in the form of bars and ingots of which have to be at least 99.5% pure.
A market characterized by rising prices.
Candlestick Chart is a type of chart that contains a "candlestick" for each period of time it represents. The bottom and top of the box represent the opening and closing while the vertical lines coming out of the boxes represent the lowest and highest price. If the candlestick is showing a rising trend, then the opening price is at the bottom of the box and the closing price is at the top of the box. For a decreasing price trend, the location of the opening and closing price are inverted.
A tool to view the underlying securities’ movements according to different time frames. When a period is selected, the corresponding changes will appear in the active chart. The client terminal has nine chart periods (M1 - indicates one-minute chart; M5 - indicates five-minutes chart; M30 - indicates thirty-minutes chart; H1 - indicates one-hour chart; H4 - indicates four-hours chart; D1 - indicates one-day chart; W1 - indicates one-week chart; MN - indicates one-month chart).
The fee that a broker may charge clients for a trade or transaction.
An agreement to buy or sell a specified amount of a particular product.
Contract for Differences (CFDs)
Contract for Differences (CFDs) are contracts between two parties whereby it is agreed that the seller will give the buyer the difference between its current value and the value at the end of the contract of an asset agreed upon. These are financial derivatives whose value depend solely on the change of price of an underlying asset meaning no physical asset is purchased.
The month in which a futures contract expires.
Contract Size is the deliverable quantity of a product. The size and the units of measure for each product differs from one another.
Contract Value is the value of an order that moves with the market price. It is largely dependent on three things, the volume the client is purchasing, the contract size and the current market price of the product. It is found by the formula:
Contract Value = (market price X volume X contract size)
It is a selected group of currencies in which the weighted average is used as a measure of the value or the amount of an obligation, it functions as a benchmark for regional currency movements.
The final date by which the underlying commodity for a futures contract must be delivered in order for the terms of the contract to be fulfilled.
It is a security which itself is a contract between two or more parties where its price is dependent upon or derived from one or more underlying assets.
Where the domestic currency is a variable amount and the foreign currency is fixed at one unit.
Equity is the sum of balance and gains and losses.
The Euro is the currency used by the Eurozone.
An execution is the completion of a buy or sell order for a security. There are three basic order execution modes:
- Instant Execution
In this mode, the order is executed at the price offered to the broker. At sending the order to be executed, terminal sets the current prices in the order. If broker accepts the prices, the order will be executed. If not, "Requote" will occur.
- Execution on Request
In this mode, prices for a certain market order are requested from the broker before the order is sent. After the prices have been received, order at the given price can be either confirmed or rejected.
- Execution by Market
In this mode, the broker execute the order by the price that they received from the market. Sending the order in such a mode means advance consent to its execution at this price.
Expert Advisor (EA)
An expert advisor is a software program that analyses data and provides trader with buy and sell recommendations that fit within the trader’s strategy.
The final day that a futures contract may trade or be closed out before rollover to next trading period.
First Notice Day
The day after which a trader who has purchased a futures contract may be required to take physical delivery of the contract’s underlying commodity. First Notice Day varies by contract; it also depends on exchange rules.
A fixed spread is where the difference between bid and ask of a security stays the same, even while the prices themselves are changing.
Floating Exchange Rate
When the value of a currency is decided by the market forces dictating the demand and supply of that particular currency.
A floating spread is where the difference between bid and ask of a security constantly changes according to market supply and demand.
Forex is the market in which currencies are traded.
Free margin is the difference of your account equity and the open positions’ margin.
A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors.
A futures contract is a contractual agreement that generally trade on a futures’ exchange to purchase or sell a product at a pre-determined price in the future.
Good till Cancelled (GTC)
Good till cancelled is an order left with a broker. The order remains in place until it is cancelled by the client or filled.
Good till Today (GTT)
Good till today or day order is an order that if not executed on the specific day (in this case the pending order day) is automatically cancelled.
To provide prompt transfer of moderate amounts of information among experts, as well as organize conflict-free simultaneous working of several experts.
Hedging is a technique to reduce the risk of adverse price movements in an asset. Normally, a hedging consists of taking an offsetting position in the opposite direction for the same product.
Indicators are statistics used to measure past and current conditions as well as to forecast financial or economic trends.
- Economic Indicators
They are statistical metrics used to measure the growth or contraction of the economy as a whole or sectors within the economy.
- Technical Indicators
They are used extensively in technical analysis to predict changes in securities’ price patterns.
Where the foreign currency is a variable amount and the domestic currency is fixed at one unit.
The smallest amount of money that an investor/trader must initially deposit into a new account.
The deposit required by the broker before a client can trade/transact a deal to have some protection for the broker in the event of default by the client.
Slang for the New Zealand dollar.
Last Notice Day
The final day that a futures contract may trade or be closed out before delivery of the underlying asset or cash settlement must occur. By the end of the last trading day, the contract holder must be prepared to accept delivery of the commodity, or settle in cash if the position is not closed.
The ratio of the transaction size to the actual investment used for margin. Leverage allows a client to trade without putting up the full amount. Instead a margin amount is required. For example, 200:1 leverage, also known as 0.5% margin requirement, means $500 of equity can purchase a contract worth $100,000.
Line Chart is simple chart that mark data as a series of points connected to each other by a straight line.
It is the buying of a security such as a commodity or currency with the expectation that the asset will rise in value.
Slang for the Canada dollar.
Collateral that the holder of a position in securities, options, Forex or futures contracts, has to deposit to cover the credit risk of his counterparty. Other definitions to margin used in other areas are:
- Margin Level
Margin level is the ratio of equity to margin.
- Margin Call
A margin call is a broker's demand on an investor to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. Margin calls occur when your account value falls below a value calculated by the broker's particular formula.
Open, High, Low, Close Line (OHLC Line)
OHLC is a function in AETOS’s MT4 to show the current price’s Open, High, Low, Close respectively, it normally appears on the left top corner in the chart window.
One Click Trading
Traders on AETOS’s MT4 terminal can buy or sell with a single click without having to fill out clumsy order tickets. Stop loss and take profit orders can be entered at the same time as the market order and pre-defined order templates can be set allowing the scaling in and out of positions at pre-defined targets.
An order is an instruction to buy or sell on a trading venue such as a stock market, bond market, commodity market, or financial derivative market. There are two main types of orders:
- Market Order
A market order is an order that an investor makes through a broker or brokerage service to buy or sell an investment immediately. A market order is the default option and is likely to be executed because it does not contain restrictions on the buy/sell price or the time frame in which the order can be executed.
- Pending Order
A pending order is an order that has been entered into the trading platform, but will not be executed unless certain conditions are met.
Buy Limit Order
Buy Limit Order is a trade request to buy at the Ask price that is equal to or lower than the market price. The current price level is higher than the value in the order. Usually this order is placed in anticipation of a price drop followed by a rebound.
- Buy Stop Order
Buy Stop Order is a trade request to buy at the Ask price that is equal to or higher than the market price. The current price level is lower than the value in the order. Usually this order is placed in anticipation of a continuous price rise.
- Sell Limit Order
Sell Limit Order is a trade request to sell at the Bid price that is equal to or higher than the market price. The current price level is lower than the value in the order. Usually this order is placed in anticipation of a price rise followed by a fall back.
- Sell Stop Order
Sell Stop Order is a trade request to sell at the Bid price that is equal to or lower than the market price. The current price level is higher than value in the order. Usually this order is placed in anticipation of a continuous price fall.
- Buy Limit Order
Over the Counter (OTC)
A market conducted directly between traders and principals rather than a regulated exchange trading floor.
A pip generally means the smallest movement in forex trading. For example, AUD/USD a move of 0.7700 to 0.7701 would be one pip. There are some exceptions, some currencies, such as Yen, one pip move would be 110.00 to 110.01.
A financial term for a trade that is either still able to incur a profit or a loss (open position) or has been closed (closed position), it is a way for trader to hope making profits.
- Closed Position
Executing a security transaction that is the exact opposite of an open position, so that profit and losses are realized and the trade is no longer active.
- Open Position
It is any trade that has been executed, but has yet to be closed.
An indicative price.
In financial trading, risks are the situations that an investment could lose money. Other risks including:
- Unforeseen Circumstances
If there are some situation beyond dealer’s control, such as, during period of significant market disturbance, it may be impractical or impossible to trade in relevant financial markets.
- Market Volatility
Foreign exchange and commodity markets are subject to many influences which may results in rapid price fluctuations. Because of this market volatility, there is no margin FX or CFD transaction or stop loss order which is available in AETOS’s MT4 platform that can be considered “ risk free ”.
- Leverage Risk
Trading Margin FX and CFDs involves a high degree of leverage, trader can use a relatively small initial margin which secures a significantly larger exposure to an underlying security, and however, the potential gain and loss is equally magnified when use leverage.
It is the selling of a security such as a commodity or currency with the expectation that the asset will fall in value.
The price which reflects the product’s current value in the market.
Spot Contract is a contract of buying or selling a commodity, security or currency for settlement (payment and delivery) on the spot date, which is normally two business days after the trade date. The settlement price (or rate) is called spot price (or spot rate).
The difference between the bid and ask price of a product.
Slang for the British Pound.
Stop Loss Order
Stop Loss Order is an order placed to close an open position when it reaches a certain unfavorable price. It is designed to limit trader’s loss on a position.
Refers to the point at which margin has been reduced past its minimum level required by the broker which triggers the client’s largest losing position to be closed to release free margin. A margin call will occur before the stop out to demand on the client to bring his/her margin level up.
It is the interest that is earned or paid for holding a spot position overnight.
Slang for the Swiss Franc.
A symbol is an arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly.
Take Profit Order
This is a pending order given instruction to the trading platform to execute/close a trade when it reaches a particular favorable level against current position, in order to lock in/realize a set amount of profit.
Technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume.
A minimum change in price, up or down of any product, for example, in currency trading, one tick means 0.00001, with expectation of JPY which is 0.001.
All time frames shown on AETOS MT4 platform is in Greenwich Mean Time (GMT). Greenwich Mean Time is the same as Coordinate Universal Time (UTC).
Trailing Stop Order
A trailing stop order sets the stop price at a fixed distance from the market price with an attached "trailing" amount. As the market price movement is favourable, the stop price will follow by the trail amount, but if the market price movement is unfavourable, the stop loss price doesn't change, and a market order is submitted when the stop price is hit.
Slang for the Japanese Yen.