Glossary
Glossary
Discover key terms commonly used in CFD trading with OP Trade.
Account
Record of all transactions.
Account Balance
Amount of money in an account.
Appreciation
A currency is said to appreciate when price rises in response to market demand; it stands for an increase in the value of an asset.
Arbitrage
Taking advantage of countervailing prices in different markets by making a purchase or sale of an instrument, and simultaneously taking an equal and opposite position in a related market to profit from the small price differentials.
Ask/Offer
The price, or rate, that a willing seller is prepared to sell at.
Aussie
The Australian Dollar.
Back Office
The departments and processes related to the settlement of financial transactions (i.e., written confirmation and settlement of trades, record keeping).
Balance of Payments
A record of all economic transactions between the residents of a country with the rest of the world in a particular period of time. It tracks international transactions, which include merchandise, services, and capital flows.
Balance of Trade
The value of a country’s exports minus its imports.
Bar Chart
A technical analysis tool that represents four significant points: the high and the low prices of a financial instrument, forming the vertical bar, the opening price marked with a horizontal line to the left of the bar, and the closing price marked with a horizontal line to the right of the bar.
Base Currency
The currency in which an investor or issuer maintains its book of accounts; the currency that other currencies are quoted against. In the Forex market, the U.S. 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 hundredth of a percent.
Bear
An investor who believes that prices and/or the market will decline.
Bear Market
A market characterized by a prolonged period of declining prices accompanied by widespread pessimism.
Bid
The price that a buyer is prepared to purchase at; the price offered for a currency.
Bonds
Tradable instruments (debt securities) issued by a borrower to raise capital. They pay either fixed or floating interest, known as the coupon. As interest rates fall, bond prices rise, and vice versa.
Broker
An individual or firm that acts as an intermediary, putting together buyers and sellers, usually for a fee or commission. In contrast, a ‘dealer’ commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.
Buba
The Deutsche Bundesbank, the central bank of the Federal Republic of Germany.
Bull
An investor who believes that prices and/or the market will rise.
Bull Market
A market characterized by a prolonged period of rising prices (opposite of bear market).
Candlestick Chart
A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.
Central Bank
A government or quasi-governmental organization that manages a country’s monetary policy and prints the nation’s currency. For example, the U.S. central bank is the Federal Reserve; others include the ECB, BOE, and BOJ.
Chartist
An individual who analyzes charts, graphs, and historical data to identify trends and predict future movements. Also referred to as a Technical Trader.
Clearing
The process of settling a trade.
Closed Position
Exposures in foreign currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. In other words, it will ‘square’ the position.
Commission
A transaction fee charged by a broker.
Confirmation
A document exchanged by counterparts to a transaction that confirms the terms of said transaction.
Contract
The standard unit of trading.
Counterparty
The participant, either a bank or customer, with whom the financial transaction is made.
Cross Rate
An exchange rate between two currencies that does not involve the U.S. Dollar. For example, GBP/CHF would be considered a cross rate.
Currency
Any form of money issued by a government or central bank.
Currency Pair
The two currencies that make up a foreign exchange rate. For example: EUR/USD, GBP/JPY.
Currency Risk
The risk of incurring losses due to adverse changes in exchange
Day Trading
Opening and closing the same position or positions within the same trading session.
Dealer
An individual or firm that acts as a principal or counterparty to a transaction, taking one side of a position and aiming to profit by closing it later at a favorable price. In contrast, a broker acts as an intermediary between buyers and sellers.
Deficit
A negative balance of trade or payments.
Delivery
A transaction where both sides transfer possession of the currencies traded.
Deposit
The borrowing and lending of cash. The rate that money is borrowed or lent at is known as the deposit rate.
Depreciation
A decline in the value of a currency due to market forces.
Derivative
A financial contract whose value is based on the price movements of an underlying asset, such as an option or future.
Devaluation
A deliberate downward adjustment of a currency's value, typically by a government.
ECB (European Central Bank)
The central bank for the European Monetary Union (EMU), responsible for monetary policy within the Eurozone.
End of Day (Mark-to-Market)
A method of revaluing a trader\s positions at the end of each working day using the closing market rates.
Euro
The official currency of the European Monetary Union (EMU)
Execution Date
The date on which a trade occurs.
Fed (Federal Reserve)
The central bank of the United States.
Fixed Exchange Rate
An official exchange rate set by monetary authorities for one or more currencies. It often fluctuates within upper and lower bounds.
Flat (Square)
A position where no assets are held, or all positions cancel each other out.
FOMC (Federal Open Market Committee)
The Federal Reserve's monetary policy committee.
Forex (Foreign Exchange)
The simultaneous buying of one currency and selling of another in an over-the-counter market.
Forward
A pre-specified exchange rate for a foreign exchange contract settling at a future date, based on interest rate differentials between the currencies.
Forward Points
The pips added to or subtracted from the current exchange rate to calculate a forward price.
Futures Contract
A contract obligating the buyer to purchase, or the seller to sell, a good or instrument at a set price on a future date.
GDP (Gross Domestic Product)
The total value of goods and services produced within a country during a specific period.
GNP (Gross National Product)
A country's GDP plus income earned from abroad.
GTC (Good-Till-Cancelled)
An order to buy or sell at a specific price that remains in effect until executed or cancelled.
Hedge
A position or combination of positions used to reduce risk.
High/Low
The highest and lowest traded prices of an asset during a specific period.
Inflation
A rise in the general level of prices for goods and services, reducing purchasing power.
Initial Margin
The initial deposit required to enter into a leveraged position.
Interbank Rates
Foreign exchange rates quoted between large international banks.
Intervention
Action by a central bank to influence the value of its currency in the foreign exchange market.
IRS (Interest Rate Swaps)
A transaction where two parties exchange interest payments, typically swapping fixed for floating rates.
Kiwi
Slang for the New Zealand Dollar (NZD).
Leverage
The use of borrowed funds to increase potential returns; also known as margin.
LIBOR (London Inter-Bank Offered Rate)
The interest rate large international banks charge each other for short-term loans.
Liquidation
The process of closing a position by executing an offsetting trade.
Liquidity
The ability to quickly buy or sell an asset without causing a significant impact on its price.
Long
A position where an asset is bought with the expectation that its value will rise.
Long Position
A position that benefits from a rise in market prices. When the base currency in a forex pair is bought, the position is said to be long.
Loonie
Slang for the Canadian Dollar (CAD).
Lot
A unit to measure the amount of a deal. The value of the deal always corresponds to an integer number of lots.
Margin
The required equity that an investor must deposit to collateralize a position.
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 Order
An order to buy or sell at the best available price when the order reaches the market.
OCO (One Cancels the Other)
A contingent order where the execution of one part of the order automatically cancels the other part.
Open Order
An order that will be executed when a market moves to its designated price. Normally associated with Good-Till-Cancelled (GTC) orders.
Open Position
An active trade with corresponding unrealized profit or loss, which has not yet been offset by an opposite transaction.
Options
A financial derivative that gives the holder the right, but not the obligation, to buy (call) or sell (put) an asset at a specified price within a certain time.
Order
An instruction from a client to a broker to trade. Orders can be placed at a specific price or at the market price and can be good until filled or until the end of the trading session.
Overnight Position
A trade that remains open until the next trading day.
Points, Pips
The smallest price movement in forex, typically 0.0001 in major currency pairs like EUR/USD and GBP/USD, and 0.01 for USD/JPY.
Position
A trading view expressed by buying or selling. It can refer to the amount of a currency or asset held by an investor.
Premium
The amount added to or subtracted from the spot price to calculate a forward or futures price.
Profit/Loss (P&L)
The actual realized gain or loss from closed positions plus the theoretical unrealized gain or loss on open positions marked to market.
Quote
An indicative market price showing the highest bid and/or lowest ask price available on an asset at any given time.
Rally
A recovery in the price of an asset after a period of decline.
Range
The difference between the highest and lowest prices recorded during a specific trading session.
Rate
The price of one currency in terms of another.
Repo (Repurchase Agreement)
A type of trade involving the sale and later repurchase of an asset, usually in the short-term money market.
Resistance
A price level in technical analysis where an asset encounters persistent selling pressure, preventing it from rising further.
Risk Management
Strategies employed by traders to minimize financial risk, including the use of hedging techniques and stop-loss orders.
Roll-Over
The process of moving the settlement of a deal to another value date, often involving the exchange of interest rate differentials.
Settlement
The process by which a trade is entered into the records of the transaction counterparts, which may or may not involve the physical exchange of one currency for another.
Short
To sell an asset or currency that the trader does not own, with the expectation that its price will decline.
Short Position
A position that benefits from a decline in market prices. When the base currency in a forex pair is sold, the position is said to be short.
Spot
A transaction for immediate delivery, typically settled within two business days.
Spot Price
The current market price of an asset. Settlement for spot transactions usually occurs within two business days.
Spread
The difference between the bid and ask prices of an asset, often used to measure market liquidity. Narrower spreads typically indicate higher liquidity.
Stop-Loss Order
An order to buy or sell an asset when it reaches a specific price to limit potential losses.
Support Levels
A technique used in technical analysis that indicates a specific price level where an asset tends to find buying interest and is less likely to fall further.
Swap
A financial transaction involving the simultaneous sale and purchase of the same amount of an asset or currency at a forward exchange rate.
Technical Analysis
The practice of forecasting asset prices by analyzing market data, including historical price movements, volume, and trends.
Tick
The minimum price change of an asset, either up or down.
Tomorrow Next (Tom/Next)
A forex transaction where currencies are simultaneously bought and sold for delivery the next day.
Two-Way Price
A quote that includes both the bid and ask prices for a forex transaction.
US Prime Rate
The interest rate at which U.S. banks lend to their most creditworthy corporate customers.
Value Date
The agreed settlement date for a financial transaction, typically two business days forward for forex deals.
Volatility
A statistical measure of the magnitude of price fluctuations in a market, calculated using standard deviation. High volatility is often associated with greater risk.
Volume
The number or value of assets traded during a specific period.