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Trading terms glossary A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z - J

Trading terms glossary A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z - I Iceberg order An Iceberg order divides large orders into smaller segments. They are often used by traders for the purpose of hiding the full order quantity in order to minimise market disruption. Ichimoku Cloud The Ichimoku Cloud is a technical analysis indicator that shows support and resistance levels, as well as momentum and trend direction.

Roughly translated from Japanese, 'Ichimoku Kinko Hyo' means ‘one look equilibrium chart,' meaning traders can receive an array of information with just one look. In the money In the money (ITM) is defined by an option’s state of ‘moneyness’. More specifically, it refers to when an option goes beyond its strike price, giving it an intrinsic value of more than $0.

Index An index is a measure of something. In trading, an index is a grouping of financial assets that are used to give a performance indicator of a particular sector. Indices trading Indices trading refers to traders' endeavors to make money on the price movements of indices.

Inflation Inflation is the increase in the cost of goods and services in an economy, or the decline in the purchasing power of money (devaluing of currency). Learn more about Inflation. Interest Interest is the charge levied against a party for borrowing money, which can be either a cost or a means of making profit for a trader.

In trading, it can also refer to the amount of ownership a stockholder has in a company. Interest rates The amount that a lender charges to a borrower for the loan of an asset. The rate is expressed as a percentage of the loan.

Intrinsic value Intrinsic value is a measure of the perceived value of an asset. This is not always the same as the current market price because assets can be over- or undervalued. Interbank/Interdealer Market A market only open to large financial institutions, to trade between them.

This market is not restricted to a physical location and it does not have a centralised exchange. Investment capital A trader’s investment capital is the financial resources they currently have available for trading. It could be in the form of money or other assets.

It can also refer to funds invested in a firm or company for the purpose of furthering its business objectives. Investor An investor is a person who devotes capital to an investment, with the hope of seeing a return. The main goal of any investor is to minimise risk and maximise return.

IPO IPO stands for initial public offering. This is the first sale of a stock by a company, when it goes public on a stock exchange. This can also be known as floating, flotation, or just ‘going public’.

Trading terms glossary A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z - H Handle In trading, the term ‘handle’ has two meanings, depending on which market you are referring to. In most markets, handle is the the part of a price quote that exists to the left of the decimal point in the full quote. In forex, it refers to the part of the quote that you see in both the buy and sell price.

Hawks and doves The terms used by analysts and traders to classify the members of the Central Bank committee ahead of their votes and monetary policy is known as Hawks and doves. Learn more about Hawks and Doves Hedge/Hedging A hedge is an investment or trade designed to reduce your existing exposure to risk. The process of reducing risk via investments is termed as 'hedging'.

Heikin Ashi Heikin Ashi is a type of chart pattern used in technical analysis. Heikin Ashi charts are similar to 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. High frequency trading A form of advanced trading platform that processes a high numbers of trades very quickly using powerful computing technology is termed as High Frequency Trading (HFT).

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.

Trading terms glossary A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z - F Face Value Face value represents the amount that must be paid out at a bond or stock's maturity. It may also mean the dollar value of a security, set by the issuer. Fair value Fair value is the present value of a stock, once the stock's intrinsic value is considered.

This may cause debate, as fair value is based on a subjective understanding. Federal Reserve Referred to as the ‘Fed’ for short, the Federal Reserve is the central banking system in the United States. Fiat currency Money that is given legal tender status by a government and is not linked to the value of physical commodities like gold or silver.

Fibonacci retracement A Fibonacci retracement is a technical analysis tool that can help traders identify when to open and close a position, or when to apply stops and limits to their trades. It involves drawing trend lines on price charts between two points, usually the price highs and lows, in order to find possible areas of support and resistance. Fill Fill is the term used to refer to the completion of an order to trade a financial asset.

There is no guarantee that every trade will become filled. Financial instrument A financial instrument is a contract between two parties, which act as financial assets. These can be traded and settled.

Financial market A marketplace where the trading of securities occurs. The financial market provides an avenue for the purchase and sale of financial assets. Fixed costs Fixed costs are the expenses incurred by a company that are not impacted by the scale of production.

Fixed costs remain constant for a given period. Floating exchange rate A floating exchange rate is where the price of a currency is determined by supply and demand factors, relative to other currencies. Currencies with floating exchange rates can be traded without any restrictions, unlike fixed exchange rates.

FOMC The FOMC stands for the Federal Open Market Committee, which is a committee of the Federal Reserve System. The FOMC is in charge of decisions around interest rates and the US money supply. Forex Forex is a global marketplace for trading international currencies.

It is sometimes referred to as foreign exchange or FX. Forward contract A contract that has a defined date of expiry, which obliges the holder to buy or sell an asset by a specific date. The contract can vary and be customised between different instances.

Fundamental analysis 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. Learn more about exit systems for a fundamental approach Futures contract A futures contract is an agreement between to buy or sell an asset at a defined price on a specified date in the future.

They are also sometimes referred to simply as ‘futures.'

Trading terms glossary A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z - E Earnings per share Earnings per share (EPS) is the net profit of a company, divided by the number of outstanding shares. A tool commonly used to measure a company's profitability. EBITDA EBITDA (earnings before interest, taxes, depreciation, and amortization) is a way of evaluating a company’s performance.

An alternative measure to net income. ECB ECB stands for the European Central Bank, which is the central bank for the eurozone. Equity Equity can have several different meanings in the context of trading, however it usually refers to the ownership of an asset without any debt.

Equity options Equity options are contracts affording the owner the right, not the obligation, to trade to buy or sell shares of the underlying security at a specified price before the expiration date. ETF ETF stands for Exchange Traded Fund, which is a type of fund that is traded on a stock exchange. Learn more about ETF's ETP ETP stands for Exchange Traded Products, which are types of financial products that are publicly traded on a stock exchange.

Eurobond A eurobond is a debt instrument denominated in a currency other than the home currency (the market or country where it was issued). Sometimes referred to as external bonds. Eurodollar Bonds A type of eurobond, eurodollar bonds are denominated by the US dollar, but are sold outside of the US.

Can be sold worldwide. Exotics Exotics refer to c urrencies that are less actively traded. Exchange An open marketplace where financial instruments are traded.

An exchange can also be described as ‘the market.’ Execution The completion of a buy or sell order from a trader, actioned by a broker. Expiry date The day when a trading position automatically closes. Expiry (of a futures contract) The expiry date of a futures contract is the last day you can trade that contract.

Exposure Exposure can mean a variety of things in trading. It can either be the amount of money invested in a certain asset, or the total market value of an investor's open trades. Or it can refer to the total amount of possible risk at any given time.

Trading terms glossary A - B - C - D - E - F - G - H - I - J - K - L - M - N - O - P - Q - R - S - T - U - V - W - X - Y - Z - D Dark pools Dark pools is a privately organized financial forum or exchange for trading securities. They allow institutional investors to trade without exposure until after the trade has been executed and reported Day order A day order is provision placed on an order to a broker to execute a trade at a specific price that expires at the end of the trading day. Day trading Day trading involves buying and selling stocks before the market closure, with the aim of earning short-term profits.

Debt ratio 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. Delta Also termed as hedge ratio, Delta is a measure used in options trading to assess how the price of an options contract changes as the price of the underlying asset moves.

Depreciation Decline in an asset's value is defined as Depreciation. It can happen either due to market conditions or other factors like wear and tear. It is the opposite of appreciation.

Derivative 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. Direct market access (DMA) Direct market access (DMA) is a way of placing trades directly onto the order books of exchanges.

As a result, DMA offers traders flexibility and transparency when trading. But due to the risks and complexities involved, it is usually recommended for advanced traders only. Dividend A portion of profit that an organization chooses to return to its shareholders in terms of percentage is known as dividend.

Dividends are commonly paid quarterly, but in some cases are paid annually, or even monthly, depending on the companies policy.