Glossary of terms
Become even more fluent in the language of trading with our expanding glossary of key financial terminology.
Whether you are a new, intermediate or advanced trader, you can always check the specific trading vocabulary, right here, on our Glossary page.
Having the correct definition of industry’s terms can save you loads of time and having to struggle when it comes to understanding trading or the financial markets.
If you feel you need a more comprehensive understanding of specific words, please make use of all our resources under the Learning Hub section.
Alternatively, please get in touch with us here if you think any terms are missing that we should add.
Glossary of terms
Aggregate demand refers to the total demand for goods and services in a given economy, sector, or market. It consists of all consumer goods, government spending, capital goods like factories and equipment, exports, and imports. Aggregate demand clarifies the link between current price levels and a country’s GDP (see ‘gross domestic product’).
A measurement that shows how an investment portfolio is performing against a defined benchmark like a stock market index. An alpha of greater than zero means a trade outperformed the benchmark. Alpha is also a measure of risk and makes clear the extent to which a trader has beaten or fallen behind the market over a period of time.
Arbitrage is the practice of buying and selling an asset simultaneously to take advantage of a short-term difference in price. In forex, it is the strategy of exploiting price disparities in currency markets.
The rate at which you can buy the base currency, in our case, the British Pound, and sell the quoted currency, i.e. the Japanese Yen.
This refers to an entire category of financial instrument. An asset class can be physical or financial. They are grouped based on whether they are governed by the same regulations and/or have similar characteristics. Major asset classes include commodities, futures, financial derivatives like CFDs, stocks, bonds, and increasingly— cryptocurrencies.
The Bank of England (BoE) is the United Kingdom’s central bank. Its mission is to ‘promote the good of the UK by maintaining monetary and financial stability.’
In currency trading, the base currency or transaction currency is the first to be listed in a currency pair quotation. The second part is the quote currency or counter currency. For example, in the EUR/USD currency pair, the euro is the base currency, and the dollar is the quote currency.
A basis point (commonly referred to as BPs or bips) is the unit of measurement used to capture the percentage change in the value of financial instruments or the rate change in an index. A basis point equals one-hundredth of one per cent (0.01%).
In financial markets, bearish means you believe that an asset, instrument, or market is set to go down in price, value, or volume. It’s the opposite of being ‘bullish’ when traders believe a market is on an upward trajectory.
A bid is an amount someone is willing to pay in order to buy a financial instrument.
Developed by famed technical trader John Bollinger, Bollinger bands are a price indicator used in technical analysis. They consist of an upper and lower band, appearing adjacent to the sides of a simple moving average (SMA). The bands are plotted two standard deviations away from the market SMA, and as such, they can point to areas of resistance and support.
Brent crude is one of three major oil benchmarks, along with West Texas Intermediate (WTI) and Dubai/Oman. Crude oil benchmarks provide pricing reference for other types of oil and oil-backed securities. They make it easier for traders to establish correct pricing for the many varieties and blends of crude oil.
A broker is a business (like Hantec Markets) that executes financial transactions on behalf of another party. Brokers can act in several different asset classes: currency trading (like Hantec Markets), insurance, or equities (stocks). Brokers often charge a commission on the orders they execute.
In financial markets, bulls are traders who believe that a sector, market, or instrument is heading upward. Bulls are the opposite of bears, who take the negative (bearish) view of a market’s likely direction.
Bullish traders believe that a market will experience upward movement on price and act accordingly – typically buying an underlying market now in order to profit by selling back to the market later when the price has risen.
In currency trading, cable refers to the GBP/USD currency pair. It’s a slang term representing the British pound against the US dollar – one of the most popular currency pairs in forex markets. In trading, the term is used frequently and interchangeably with GBP/USD.
Traders who depend on charts to help them understand a financial instrument’s historical price movements are referred to as chartists. They use the past history of an instrument to try and predict its future performance. Chartists are also known as ‘technical traders’.
A commodity is a physical asset, often sold in mass quantities for use as a raw material in manufacturing. It is interchangeable with other goods of the same type – for example, oil, gas, metals, grains, and other agricultural goods.
Contracts for Difference (CFDs) are a type of financial derivative. They comprise an arrangement where the difference between the open and closing trade prices of an asset are settled without the delivery of physical goods or securities. CFDs can be used to trade in financial markets like forex, commodities, and indices.