Trading Glossary

Glossary of Trading Terms – Refer to our alphabetical guide below for market, financial and trading terms.


Active Management

An approach to asset management, which relies on a fund manager’s ability to select and actively traded stocks so that, over time, they will outperform a particular market index or benchmark.


A statistical measure of investment manager skill.

Alternative Investments

Investments, which do not fit into the mainstream areas of equities, bonds, cash, currency and property. Examples include venture capital, hedge funds, and commodities.


A person with expertise in companies, markets and economies.


To take a cumulative return over a certain period and restate it on an annual basis.


To increase in value over a period of time.


The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.

Ask Rate

Ask Rate – The rate at which a financial instrument is offered for sale (as in bid/ask spread).


Any item which has a monetary value.


Base Currency

It is the first currency quoted in a currency pair. Also, it is the currency in which an investor or issuer maintains its book of accounts. In the FX markets, 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.

Basis Point

One basis point represents one-hundredth of a percentage point or 0.01%.

Bear Market

A market distinguished by declining prices.

Bid Rate

The rate at which a trader is willing to buy a currency.

Bid/Ask Spread

The difference between the bid and offer price.


French term for Exchange.


An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee.

Bull Market

A market distinguished by rising prices.


Call Option

An option which gives the holder the right, but not the obligation, to purchase an asset at a specified price on or before a given date.


A measurement used to show how pure gold is.

Cash Market

See Spot Market.


Chicago Board of Trade

Central Bank

A government or quasi-governmental organization that manages a country’s monetary policy.

Certificate of Deposit (CD)

A certificate from a bank stating that the named party has a specified sum on deposit, usually for a given period of time at a fixed rate of interest.


Excessive trading of a client’s portfolio. Sometimes used to unethically generate extra commissions.


The process of settling a trade.


Day Trading

Refers to positions which are opened and closed on the same trading day.


Failure to make a payment on schedule.


An FX trade where both sides make and take actual delivery of the currencies traded.


To decrease in value.


The deliberate downward adjustment of a currency’s price, normally by official announcement.


Spreading investments across a range of assets in order to reduce risk.


Dubai Mercantile Exchange


Economic Indicator

Statistic, which gives an indication of the cyclical position of an economy.


Person who analyzes trends in economic indicators and attempts to forecast economic growth.

Emerging Market

Financial market in a developing or newly industrializing country. Characterized by high returns due to rapid growth and high risk due to low liquidity and political instability.


A single currency adopted on January 1, 1999, by 12 of the 15 EU nations, who switched to a single set of euro bills and coins on January 1, 2002.

European Central Bank (ECB)

Independent central bank responsible for setting monetary and exchange rate policy for the members of the European Monetary Union (EMU).

Exchange Rate Risk

The risk caused by varying exchange rates between two currencies.

Economic Indicator

Statistic, which gives an indication of the cyclical position of an economy.


Person who analyzes trends in economic indicators and attempts to forecast economic growth.

Emerging Market

Financial market in a developing or newly industrializing country. Characterized by high returns due to rapid growth and high risk due to low liquidity and political instability.


Federal Reserve

The central bank of the United States.

Financial Regulator

The regulator of all financial services firms in a country.

Fixed Exchange Rate

Official rate set by monetary authorities for one or more currencies.

Floating Rate

Refer to the value of a currency as decided by supply and demand.

Foreign Exchange Rate

The value of two currencies with respect to each other.


Foreign Exchange Market, a market in which brokers located in various parts of the world trade currencies of nations.

Forward Contract

A forward contract fixes the exchange rate for future delivery at a date to be agreed by both participants.

Forward Exchange Rate

The exchange rate set today for a foreign currency transaction with payment or delivery at some future date.

Forward Premium

Is when a currency trade forward price is higher than its spot price.

Forward Rate (or Swaps)

Refers to a cash price of 2 currencies interest difference for a fixed term.

Front Office

Administration, research and marketing activity of a financial brokerage company.

FTSE 100 Index

Share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization.

Fundamental Analysis

Focuses on the economic forces of supply and demand that causes price movement.

Futures Contract

An obligation to exchange a good or instrument at a set price on a future date.



Generally Accepted Accounting Principles – A common set of accounting principles.


Is United Kingdom Pound Sterling.

GTC Order (Good Till Cancelled)

An order to buy or sell at a specified price. This order remains open until filled or until the client cancels.



A hedging transaction is a purchase or sale of a financial product, having as its purpose the elimination of loss arising from price fluctuations.

Hurdle Rate

The minimum acceptable rate of return on a project/investment



Is an increase in the general price level of goods and services; alternatively, a decrease in the purchasing power of the dollar or other currency


An economic condition whereby prices for consumer goods rise, eroding purchasing power.

Initial Margin

initial deposit of collateral required to enter into a position as a guarantee on future performance.


Having insufficient assets to meet debt obligations and /or liabilities.

Interbank Rates

The Foreign Exchange rates at which large international banks quote other large international banks.


Jobless Claims

People without a job considered as a group.


Leading Indicators

Statistics that are considered to predict future economic activity.


A financial obligation, debt, claim, etc due to be made.


The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.

Limit Order

An order with restrictions on the maximum price to be paid or the minimum price to be received.

Liquid Asset

Asset that can be readily and cheaply turned into cash.


The closing of an existing position through the execution of an offsetting transaction.


The ability of a market to accept large transaction with minimal to no impact on price stability.

Long Position

A position that appreciates in value if market prices increase. When one buys a currency, their position is long.



The required equity that an investor must deposit to collateralize a position.

Margin Call

A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the client. If the equity balance in your account falls below the margin requirement, a margin call will be generated. In the event that an account exceeds its maximum allowable leverage, ALL open positions are liquidated immediately, regardless of the size or the nature of positions held within the account.

Margin Deposit

The margin deposit is not a down payment on a purchase of equity, as many perceive margins to be in the stock markets. Rather, the margin is a performance bond, or good faith deposit, to ensure against trading losses. The margin requirement allows traders to hold a position much larger than the account value, which allow for this high leverage. In the event that funds in the account fall below margin requirements, brokerage firms will automatically close all open positions.

Marked to Market

When profits and losses are posted to accounts for all positions. This is done at the end of each day.

Market Maker

A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.

Market Risk

Exposure to changes in market prices.

Mark-to-Market (or MTM)

Process of re-evaluating all open positions with the current market prices, in order to determine margin requirements.


The date for settlement or expiry of a financial instrument.

Monetary Policy

Government policy concerning money supply and interest rates.

Moving Average

An analysis term used to indicate market trends. Obtained by averaging prices/indices over a specified period of time, for example, the last 30 days.


Natural Gas

Gas used for heating and lighting, obtained from under the earth or under the sea.


New York Mercantile Exchange


OCO (One cancels the other) Order

A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.


The rate at which a dealer is willing to sell a currency.

Offsetting Order

A trade that serves to cancel or offset some or all of the market risk of an open position.

Open Order

An order that will be executed when a market moves to its designated price.

Open Position

A deal not yet reversed or settled with a physical payment.

OTC (Over the Counter) Order

Used to describe any transaction that is not conducted over an exchange.


Trade that remains open until the next business day.



The netted total holdings of a given currency.


In the currency markets, describes the amount by which the forward or futures price exceed the spot price.



One quarter of a set of things or people, arranged in order of value, amount, wealth etc.



The price of one currency in terms of another.


Reuters supplies the global financial markets with the widest range of information including real time financial data.

Risk Tolerance

An investor’s ability to handle volatility and possible declines in the value of his/her portfolio.



A market position where the client has sold a currency with the expectation that the currency will fall, at which time the currency would be bought back in order to make a profit.

Spot Exchange Rate

Current exchange rate.

Spot Market

A market in which commodities such as grain, gold or crude oil, are bought and sold for cash and delivered immediately. It can also be referred to as a cash market.


Is when one currency is temporarily exchanged for another, then the currency is held and exchanged later after a fixed period of time.


Technical Analysis

Attempt to predict share price movements on the basis of past patterns.


Unit of measuring mass used as popular denomination for gold bullion bars in India, Pakistan, Singapore and the U.A.E.

Total Return

The return on an investment, including income from dividends and interest, as well as appreciation or depreciation in the price of positions, over a given time period.

Transaction Costs

Costs incurred when buying or selling currencies or commodities, such as commissions and the spread.

Troy Ounce

Units of measuring mass, customarily used for precious metals. One troy ounce (ozt) is equal to 31.1034768 grams.


Unemployment Rate

The percentage of people within the labor force who are considered to be without jobs.


Value Date

It is also called maturity date. It is the date upon which the different parties involved in a financial deal consent to make the final settlement.

Variation Margin

Additional amount of money needed by a broker to make up for losses when the balance drops below the required minimum level due to adverse price movements.


A measure of the rate of fluctuation of the price of a financial instrument over a period of time.


Wire Transfer

The electronic transfer of money from one financial institution to another.

World Bank Group

An organization that offers technical and financial support to different developing countries around the globe.



Is the currency of Japan. Its subdivisions are 100 sen and 1000 rin.

Yield Curve

A graph that illustrates the correlation between the interest rate and the time to maturity of the debt instrument for a particular borrower using a particular currency.



The currency symbol of the South African Rand.