Trading Glossary

Crack the jargon and become the master of your trades!
Chopping your way through the undergrowth of technical terms in trading isn’t always a straight line but we have got your back with our trading glossary.

ADP National Employment Report

A monthly report on the non-farm private employment in the USA. This report is created by Automatic Data Processing (ADP) Inc., which processes approximately 20% of payrolls in the USA.

Advanced Trader

Award-winning trading platform by Swissquote. The platform includes a personlised, customisable trading interface and tools suitable for all levels of trading, from institutional traders who prefer their own API to private investors. For example, analysis and charts with built-in indicators, overlays and charting tools. Trading inspiration is provided by real-time news feeds and automatic pattern detection. Trades can be completed using any of a number of order types, using any common computer or mobile OS (Windows, Mac, Linux, iOS, Android).

Air drop

The practice of distributing cryptocurrency coins or tokens to a cryptocurrency wallet addresses at no cost. Airdrops are used by cryptocurrency projects to promote themselves and increase brand awareness. Recipients are often required to complete certain tasks, e.g. post on cosial media to raise awareness of the project, in order to receive the airdrop. It is best practice to use a secondary email address for airdrops and beware of airdrops that request personal information. Never share your private key.

All Country World Index (ACWI)

The All Country World Index (ACWI) developed by Morgan Stanley Capital International (MSCI) provides a benchmark for global performance because it is based on more than 2,700 small- medium- and large cap stocks in 23 developed countries and 24 emerging markets. The index also enables investors to gauge their diversification.

Alpha

A trading strategy's ability to outperform the market, named after the first letter of the Greek alphabet. Alpha can be calculated in several ways, taking various factors into consideration when benchmarking an investment's performance against the performance of a similar investment. Alpha is often used as one of several risk ratios to determine the risk-return profile of a potential investment.

Alternative Cryptocurrency Coins (altcoins)

A currency that rests on its own blockchain (i.e. distributed ledger) that registers transactions using the coin.

American style option

An option where the owner can exercise their option at any time before expiry (as opposed to European-style options, which can only be exercised on the expiration date). Stock options are American style; exchange-traded optoins are often American style; and many index options are European style. Both American and European style options are called "vanilla options", in contrast to "exotic options" for which the payoff is calculated differently.

Annual Report

An annual report presents information about a company's fiscal year. It generally includes an introduction, income statement, balance sheet and statement of cash flows. In short, it presents the company’s financial situation.

Arbitrage

Exploiting market inefficiencies to make a profit from a price difference. For example, if the same (or similar) asset is traded at different prices in two markets, the trader can buy the cheaper one and instantly profit by selling it again in the higher-priced market. Arbitrage evens out market inefficiencies and ensures fair value pricing over time.

Ask price

The selling price of your broker, i.e. the price at which you can buy something. The opposite is the broker's bid price.

Asset Management

A financial service. Asset managers invest on behalf of their clients, working to grow the assets while mitigating risk. This service is often available to high net-worth individuals, corporations etc. who wish to outsource the research that underlies strong investments.

Assets

Everything a company or person owns, including money, securities, equipment and real estate. Assets include everything that is owed to the company or person. Assets are listed on a company's balance sheet or an individual's net worth statement.

At the market

Also called a Market order: buying or selling at the market price, i.e. at whatever price is obtainable when the order reaches the trading floor.

At the Money

When an option's exercise price is the same as the current trading price of the underlying commodity. If a contract expires exactly at the money, it is worthless.

Atomic swap

A peer-to-peer (P2P) exchange of cryptocurrency coins to exchange one currency for another without sharing private keys or involving third parties (e.g. an exchange). This is useful because not all cryptocurrencies are available on all exchanges.

Average Hourly Earnings

The average basic hourly rate for major industries.

Back Months

The futures contract delivery months with expiration or delivery dates furthest into the future; also used about futures contract delivery months other than the spot or nearby delivery month.

Backtest

Testing a trading strategy on historic data to see how it would have performed and to optimise the strategy. It is important to test strategies on several sets of data to ensure the strategy is not "overfitted" to one particular data set, i.e. performs well on specific data but will not perform well on other data, incl. future data.

Backwardation

The condition in a futures market in which futures contracts trade at successively lower prices over a given time period, indicating low supply. Also called an inverted market.

Bank of England (BOE)

The central bank of the United Kingdom.

Bank of Japan (BOJ)

The central bank of Japan.

Bank rate

The interest rate charged by a central bank when lending or advancing money to comercial banks.

Barrel of Oil Equivalent (BOE)

A measure used to compare energy sources. A Barrel of Oil Equivalent is the energy of one barrel of crude oil; by calculating the BOE of various energy sources, investors are able to compare their prices. Also known as the Crude oil Equivalent (COE).

Base Currency

The first currency in a currency pair, and the one you are trading. The other currency is the quote currency. For example, in EURUSD, the Euro is the base currency, and you can buy 1 EUR by paying 0,9 USD.

Basis

The difference between the spot price of a commodity and the price of the nearest futures contract for the same commodity.

Bearish

Down-trending market, a bearish market.

Beta coefficient

A measurement of the rate of return of a stock or portfolio in relation to the overall market. If the value of a stock moves 2 points every time the market as a whole moves 1 point, the beta coefficient of the stock is 2.

Bid price

The price your broker is willing to pay, or offer, to buy something that you are selling. If you are trading in lots, remember to multiply the price by the number of units in the lot.

Bid to cover ratio

An indicator of the demand for US Treasury securities, the Bid-to-cover ratio is the dollar amount of bids received in a Treasury auction divided by the amount of securities sold.

Black-Scholes Model

An option pricing formula developed by F. Black and M. Scholes for securities options. It has since been refined and expanded to futures.

Blockchain

A blockchain is a distributed ledger made up of blocks of data. Each block records many transactions, and the chain of blocks grows continuously as transactions are recorded. Learn more about the blockchain

Board Certified in Estate Planning (BCE)

A certification, now called the Certified Estate and Trust Specialist (CES).

BOE

The central bank of the United Kingdom.

BOJ

The central bank of Japan.

Bollinger Bands

A technical analysis tool developed by John Bollinger. The standard Bollinger Bands are two lines plotted, respectively, two standard deviations above and below a Simple Moving Average (SMA) of the security's price.

Bonds

Promissory notes issued by a corporation or government to its lenders, usually with a specified amount of interest for a specified length of time Learn more about bonds

Book

The record of all active buy and sell orders for a particular financial instrument, e.g. stock.

Booked Orders

Orders that are not filled immediately. Also called outstanding orders.

Broker

The company that holds your trading account. Learn more about broker

Bullish

Up-trending market, a bullish market.

Buy

When you buy a currency, you are buying the base currency of the currency pair at the ask price of your broker.

Cable

The nickname for the GBPUSD because the price used to arrive via the Atlantic cable connection.

Call Option

A call option is a contract that gives the holder the right (but no obligation) to buy a specified number of securities at a stated price within a fixed time period Learn more about call options

Candlestick

A chart graphic that shows the opening, closing, high and low price in a way that many find easier to read than a bar chart.

Case-Shiller Home Price Index

Consisting of four indices published monthly or quarterly, the index compares the prices houses are sold at over time in the USA. The index does not include new construction. The national index is published quarterly, the regional indices monthly.

Cash Settlement

Settling certain futures or options contracts in cash, i.e. by paying money instead of delivering the commodity.

Certified Estate and Trust Specialist (CES)

A certification aimed at financial advisors and brokers whose clients are interested in estate planning. The certification is offered by the Global Academy of Finance and Management (GAFM) and requires continued education to uphold the certification.

CFD

Contract for Difference (CFD). A derivative that allows traders to trade on the movement of an underlying financial instrument (e.g. a stock, index, or commodity) instead of buying the underlying asset itself. If the underlying asset pays/receives dividend, the CFD trader will as well. Learn more about cfds

Charting

Using graphs and charts to plot trends of price movements, trading volume and open interest in order to inspire and time trades. See Technical Analysis.

Churning

Excessive trading of an account by a broker or administrator of a trading account for the purpose of generating commissions, often while disregarding the interests of the customer.

Clearing Fee

The fee for a transaction (trade) charged by the clearing house of an exchange.

Clearing house

The entity (usually an exchange) that acts as counterparty to every transaction. The clearing house “clears” every transaction by becoming the buyer to the seller and the seller to the buyer. The purpose is to is to prevent defaults.

Close

The time at which a stock exchange closes to trading (and after-hours trading is conducted).

Close position

When you have bought (or sold) something, you have an open position. When you make the opposite trade, that is, sell (or buy), you are said to close the position. The profit/loss of a trade is calculated based on the difference between the opening and the closing trade prices.

Coin burning

Taking crypto coins out of circulaiton by sending them to an ‘eater address’. The "transaction" recorded on the blockchain. Coin burning is used to increase and stabilise the value of a crypto coin and any tokens based on that coin.

Commodities

A basic good (e.g. agricultural products and natural resources such as soy beans and oil) used for commerce that are traded on an authorized commodities exchange. Commodities are the underlying asset of exchange-traded options and futures contracts.

Commodity Channel Index (CCI)

A technical analysis tool developed by Donald Lambert. The CCI is a timing indicator based on momentum that measures the difference between the current price and the historical average price. It is used to assess price trend direction and strength, and thus to time trades. The index is from -100 to +100.

Commodity Futures Contracts

Purchase and sales agreements for commodities for delivery in the future, under standardized terms (e.g. quantities, grades, delivery time, price basis, and delivery methods).

Complete Fill

When an order trades all of its specified volume. The opposite is called a partial fill.

Compound Annual Groth Rate (CAGR)

A calculation used to compare the average growth rates of different investments. The CAGR smooths out growth rates for a given amount of time and shows the rate that an investment would have grown if 1) it had grown at the same rate every year and 2) the profits were reinvested at the end of each year. This smoothing enables comparisons between securites, or e.g. between a security and an index.

Compound interest

Interest calculated on the initial principal and previously paid interest.

Conditional order

A conditional order specifies conditions that must be fulfilled before the order is placed for execution. The simplest conditional orders are Limit and Stop orders. The specified variables incorporate e.g. price, time, volume, margin cushion, percentage change etc.

Consumer Price Index (CPI)

The average change in prices (over time) that consumers pay for a predefined "basket" of goods and services. The change in price over time is used to identify inflation and deflation, and to assess the cost of living. The CPI includes housing, food, transportation, medical care, and often other elements depending on the country and calculation method.

Contango

The condition in a futures market in which futures contracts trade at successively higher prices over a given time period, indicating low demand. Learn more about contango

Contract for Difference (CFD)

A derivative that allows traders to trade on the movement of an underlying financial instrument (e.g. a stock, index, or commodity) instead of buying the underlying asset itself. If the underlying asset pays/receives dividend, the CFD trader will as well. CFD trades are closed by making a reverse trade. Often in contrast to their underlying asset, CFDs can be traded using leverage, can be short-sold, day-traded and traded without fees (because the cost is built into the spread).

Contract Month

The month in which delivery is to be made in accordance with the terms of a futures contract. Also called Delivery Month.

Contract Size

The number of the underlying asset that the contract is for. Remember to multiply the price with the number of underlying units; e.g. if an options contract is quoted at EUR 2 and the contract size is 100, then one contract costs EUR 200 (100 x EUR 2.

Convertible bond

A corporate bond that may be converted into shares of another security (often the issuing company's common stock) under specific, stated terms.

Counterparty

A counterparty is the other party to a financial transaction. I.e. the buyer and the seller are the two parties necessary for the transaction.

Crypto exchange

A marketplace that trades only cryptocurrencies. Some accept only cryptocurrencies, others will exchange fiat currency into your chosen cryptocurrency. Bitcoin is offered on most crypto exchanges, and can be the used to buy other cryptocurrencies. Crypto exchanges can be peer to peer, fiat exchange, trading, and decentralised. Some have been known to close abruptly, so exercise due diligence.

Cryptocurrency

Cryptocurrencies are digital or virtual currencies that are encrypted to secure and verify transactions. Learn more about cryptocurrency

Currency pair

In Forex, you are always trading one currency for another. The combination of currencies that you are trading is called a currency pair. For example, EURUSD, where buying Euro and selling US dollars is called "Buying EURUSD".

Currency swap

A kind of interest rate derivative that exchanges the interest (and sometimes principal) in one currency for the interest (and sometime principal) in another currency. Interest payments are exchanged at fixed dates for the duration of the contract. Note: this is different from a Foreign Exchange swap.

Daily Chart

A chart where the time frame is set to 1 day. In other words, each entry in the chart is 1 trading day apart.

DAX

A stock index of the 30 largest and most traded German companies on the Frankfurt Exchange in Germany. The 30 companies comprise approximately 75% of the market capitalisation traded on the Frankfurt Exchange.

Day order

A day order is good only for that trading day. If it is not filled during the standard trading session, the order is canceled. (Some platforms support a variation of day orders that are valid until the end of the extended trading session.)

Day Trade

Opening and closing trades within a trading session, without "rolling over" the position to the next day.

Demo Account

A practice account with your broker where you can practice and become familiar with the trading platform while "trading" with imaginary money.

Denomination

See Face value.

Depth of Market

How much of a currency you can trade at a given price. More volume may be available for trade, but at a different price.

Derivative

A financial instrument with a value that is based on (derived from) an underlying asset. The price changes of the derivative are based on the price changes of the underlying asset. The most common underlying assets are stocks, bonds, commodities, currencies, interest rates and market indexes. Derivatives can be exchange-traded or over-the-counter (OTC). The contract specifies conditions (especially the dates and values of the underlying commodities) under which payments are to be made between the two parties (buyer and seller) of the contract.

Digit

I mean, 1/10 of PIP

Digit

You can use the "digit" value in MetaTrader's MQL4 script to e.g. enhance your Expert Advisor. The digits to the right of the pip (i.e. 1/10th of a pip) shows the direction of price movement. For example, for a EURUSD price of 1.09876, where the "7" is a "pip", the "6" is a "digit" in MetaTrader lingo. For two-digit currency pairs such as the USDJPY, the third digit is the "digit". This digit is often shown as a superscript in the price window.

Digital currency

See Cryptocurrency

Discount rate

See Present value

Discretionary Account

An investment or trading account for which the owner has given written authorisation to someone else, usually a broker or trading advisor, to make transactions for the account without prior approval of the account owner. Also called Managed Account.

Distributed ledger

A ledger shared by many computers to replicate and validate all transactions using a given cryptocurrency. The record is "distributed" in that there is no central administrator.

Diversification

Limiting investment risk by buying various types of securities from different companies, and/or representing different sectors of the economy.

Dividend

The portion of a company’s profits that is paid to people who own that company’s stock. Dividends are paid quarterly or annually. Note that not all companies pay dividends.

Dow 30

Formally the Dow jones industrial Average, this index comprises 30 stocks that represent the market performance of the USA.

Durable Goods Orders

An indicator of the manufacturing industry of the USA. Durable goods are items expected to last at least three years, purchased by businesses or consumers. There are in fact two reports - one shows new orders placed in the USA for durable goods, and the other shows the manufacturers' inventories, orders and shipments.

Earnings

A company's after-tax net income, or profit. Earnings can be used to assess a company's profitability over time, or to compare with other companies. Note that earnings can be defined and calculated in several ways, e.g. before and after tax (EBT and EBIT), interest, depreciation and amortisation (EBITDA). When comparing, ensure that the same calculation is used for each company.

Earnings per share (EPS)

A short-hand way of comparing the profitability of companies, calculated by dividing a company's profit by the outstanding shares of common stock. The higher the result, the more profitable the company is considered. To compare fairly, ensure that the time period of the stocks are the same when making the calculations. EPS is also used to calculate price-to-earnings ratios (P/E) to compare stock prices.

Electronic Communication Network (ECN)

A computer system that connects buyers and sellers in a market.

Enter trade

When you have bought (or sold) something, you have "entered a trade" and have an open position. When you make the opposite trade, that is, sell (or buy), you are said to close the position. The profit/loss of a trade is calculated based on the difference between the opening and the closing trade prices.

Equities

Common and preferred stocks represent partial ownership of a company.

Equity

Shares, stocks and equity are three names for a security that represents partial ownership of a corporation. These securities are offered by corporations to raise money, and buyers are entitled to a proportion of the corporation's earnings and assets that corresponds to the buyer's investment. Note that there exist several classes of ownership, which affects what the buyer is entitled to.

European Central Bank (ECB)

The European Central Bank (ECB) is the central bank of the 19 European Union countries which have adopted the euro and administers monetary policy within the Eurozone.

European style option

An option where the owner can only exercise their option on the expiration date (as opposed to American-style options, which can be exercised at any time before the expiration date). Stock options are American style; exchange-traded optoins are often American style; and many index options are European style. Both American and European style options are called "vanilla options", in contrast to "exotic options" for which the payoff is calculated differently.

Ex-Dividend Date

The first day a stock trades without the right to receive the dividend of the stock. Four dates are involved to explain ex-dividend: the Declaration Date when the company states that it will issue a dividend; the Record Date on which you must be registred as the owner of the stock to receive dividend; the Ex-dividend Date, which is the day after you should have bought the stock in order to be registered as owner on the Record Date (remember, it takes 1-3 days to settle the trade and change the ownership record); and finally, the Payable Date on which the dividend is paid to owners registered on the Record Date. On the ex-dividend date, the price of the stock usually falls by the amount of the announced dividend because the new owner will not receive the announced dividend.

Exchange

A place in which securities, commodities, derivatives and other financial instruments are traded. The core function of an exchange is to ensure fair and orderly trading and the efficient dissemination of price information. They provide companies and governments a platform from which to sell securities to the investing public. In recent times, an exchange can be either a physical location where traders meet to conduct business or an electronic platform.

Exchange Rate

The value of one currency measured by another currency.

Execution

When an order to buy or sell has been completed, the trade has been executed, and the trader has executed the transaction.

Exercise price

See Strike price

Exit trade

When you have bought (or sold) something, you have "entered a trade" and have an open position. When you make the opposite trade, that is, sell (or buy), you are said to "exit", or close, the position. The profit/loss of a trade is calculated based on the difference between the opening and the closing trade prices.

Exotic options

Exotic options are non-standard options traded in an over-the-counter (OTC) market. They differ from standard (vanilla) options in e.g. their underlying securities, expiration dates, payments or strike prices. They can be used to hedge specific risks and to diversify risk.

Expert advisor

An automated trading system (trading robot) that you instruct (program) yourself.

Expiration Date

The date at which an option contract expires, i.e. after which the option cannot be exercised.

Face value

The nominal value of a security. The same as Par value and denomination.

Factor Certificate

Also known as Constant Leverage Certificate, they allow investors to participate disproportionately (with leverage) in the positive (long) or negative (short) development of the underlying. Investors bear the risk of the Factor Certificates expiring worthless if the price of the Underlying does at any time reach the selected strike price (also called Knock Out Level).

FED

The Federal Reserve System, also called the Federal Reserve, is the central banking system of the USA. It consists of 12 regional Federal Reserve Banks and a Board of Governors in Washington D.C. Its three main objectives are maximising employment, stabilising prices and moderating long-term interest rates for the USA.

Fiat currency

Currencies issued by a government; "normal" money backed by central banks. Learn more about fiat currency

Fiber EURUSD

The nickname for the EURUSD because the price arrives via the Atlantic fiberoptic cable connection.

Financial instrument

An asset that can be traded, for example currency, bonds, stocks or contracts for futures or options.

Foreign Exchange swap (FX swap)

Simultaneously buying and selling identical amounts of a currency pair; such swaps can be used to pay a trade in a foreign currency at a future date without taking on foreign exchange risk. One leg of the trade is always a Forward; the other leg can be a Spot trade or another Forward. Note: this is different from a currency swap.

Forex Chart

A chart based on trading prices. For example, the hourly bid price.

Forex market

Forex is traded 24 hours a day from Monday morning in the Pacific to Friday evening in New York. This market is one of the largest and most liquid in the world. Learn more about the forex market

Forex Scalping

Very short-term trades.

Forex Spot Rate

The current market value of a given currency.

Forex trading robots

See "Expert advisor"

Forex, FX Foreign Exchange

Also called FX, Forex is short for "Foreign Exchange", which is the exchange of two currencies. Learn more about forex

Forex/FX options

A contract that gives the buyer the right, but not the obligation, to either buy or sell a given currency at a specified exchange rate (the strike price) on or before a specified date (the expiration date). Forex options are used by financial institutions, corporations and individuals to hedge against adverse movements in exchange rates. As with other options, both simple (vanilla) and complex (exotic) options are available.

Fork

A situation where a blockchain splits into two separate chains. Forks generally happen in the crypto-world when new ‘governance rules’ are built into the blockchain’s code. Sometimes this is planned (hard fork or soft fork), sometimes not (hard fork with new chain).

Forward Curve

Graph showing the future price of a futures contract. Forward curves may show backwardation, contango or both.

FTSE

Pronounced "footsie", "FTSE" is often short for the FTSE 100, a weighted stock index of the 100 companies on the London Stock Exchange that have the highest market capitalisation. There exist several FTSE indices, for example the FTSE 250, the FTSE 350 and the FTSE SmallCap. These indices are all maintained by the Financial Times Stock Exchange group, which is owned by the London Stock Exchange.

FTSE MIB

An index of the 40 most traded stocks on the Milan exchange, accounting for approximately 80% of Italian domestic market capitalisation. The acronym stands for "Financial Times Stock Exchange Milano Indice di Borsa" and is maintained by the Financial Times Stock Exchange group, which is owned by the London Stock Exchange.

Fundamental analysis

Analysis of anything that can affect the value of a financial instrument, for example economic, financial and industry conditions. Learn more about fundamental analysis

Futures

General term for "Futures contracts", which are an agreement to make a trade in the future on standardised terms decided now. The buyer is obligated to buy the underlying asset upon expiry, and the seller is obligated to provide the underlying asset at that time. Futures contracts are used to guarantee prices, hedge and speculative trading. Futures are a derivative, and the underlying assets can be e.g. stocks, indices, or commodities. Most futures traders close out their positions before the contract expires since few retail traders and hedge funds need, for example, containers of soy beans.

Futures Delivery

The transfer of commodity ownership from the the seller to the the buyer during the delivery period. Ownership is transferred by the handover of warehouse receipts or as specified in the contract.

Futures expiration date

The last trading day of a futures contract.

Good till canceled order (GTC)

This order type is valid until you cancel it. In other words, you do not specify the order duration when you create your order. Note that some brokers automatically cancel GTC orders if they are not filled in e.g. 30 or 60 days.

Gross Domestic Product (GDP)

A measure of the increase in market value of a country's aggregate production of both final goods and services over a period of time. GDP is measured in currency, e.g. dollars.

Hedge

To neutralise a position by taking a new position. For example, if you have a long position but expect the price to temporarily fall, you can take a separate, short position for the duration of the price dip.

Hedge fund

Limited partnerships for private investment that require a large minimum initial investment. Trading strategies vary widely, as do the investment vehicles. Fees usually include both a manaement fee and a percentage of any gains. Usually, investments are locked for the first year, and withdrawal periods may be limited. The name "hedge" fund is historical, based on early hedge funds that focused on stock investments with careful hedging.

High-yield bonds

High-yield bonds offer high yields to attract investors despite being at greater risk of default than than corporate bonds with higher credit ratings. The credit rating scale varies between rating agencies, but in general, bonds rated from AAA to BBB are "investment grade" bonds of low to medium credit risk; high-yield bonds carry greater credit risk and are thus below investment grade. Some high-yield bonds are offered by companies that used to be of investment grade, but for which the risk of default has increased; other high-yield bonds are offered by start-up companies or companies with high debt ratios. Some traders prefer high-yield bond indices to individual bonds.

In the Money (ITM)

An options contract is in the money when the underlying asset is trading at a price that is favourable to the contract holder. (I.e. a call option is in the money if the strike price is lower than the price of the underlying asset; and a put option is in the money if the strike price is higher than the price of the underlying asset.) I.e. in the money options are contracts that can be exercised at a profit.

Index

A benchmark, or reference, for traders and portfolio managers. A 5 percent return may sound good, but if the index rose 8 percent, then you could have just invested in an index fund and saved yourself the effort

Industrial Production

The real production output of the manufacturing, mining (incl. oil and gas), gas and electric industries.

Initial Coin Offering (ICO)

An initial coin offering (ICO) is the first sale or offering of a new cryptocurrency, or blockchain. Learn more about ICO

Initial Public Offering (IPO)

The first sale or offering of a stock by a company to the public. Learn more about IPO

Initial Token Offering (ITO)

The initial offering of tokens to fund a project. Tokens are a means of measuring value based on an existing cryptocurrency. Note that many people use Initial Coin Offering (ICO) and Initial Token Offering (ITO) interchangeably. See also: Tokens.

Insider trading

Trading a publicly traded stock on the basis of non-public material information that would affect other investors' desire to trade the stock. In order to maintain a fair marketplace, insider trading is illegal in many jurisdictions.

Interbank market

The market between banks where financial institutions lend and borrow money among themselves.

Intrinsic Value

The difference between the current market value of the underlying interest and the strike price of an option. When the intrinsic value is positive, the option is "in the money".

Investment

The purchase or ownership of something in order to earn income, capital or both. In addition to financial instruments, investments may also include artwork, antiques and real estate.

ISM Non-Manufactoring Index

An abbreviation of "non-manufacturing business activity index", which is published by the Institute for Supply Management (ISM). The index covers the US service economy; a score of 50 means "unchanged", and a score over 50 means there has been an increase in business activity. ISM publishes several monthly indices.

Japanese candlesticks

See Candlesticks

Jumbo bonds

A colloquial term for a high-value bond issue, generally more than € 500 million. (The size of the issue depends on the market: in developed markets, a jumbo bond issue can be in the billions of dollars, while it is often less in emerging markets.) These large issues of straight bonds improve the liquidity of the bond and make the issue more cost-effective.

Junk bonds

See High-yield bonds

Knock-out warrant

A warrant that expires immediately if the underlying security is traded at the predefined knock-out price before the expiry date. The point is to limit the potential liability of the seller (and thus the potential upside for the buyer).

Lagging indicator

A technical indicator that lags - i.e. appears after - changes in a price trend.

Last Trading Day

The last day on which a futures or option contract can be traded.

Leading indicator

A technical indicator that leads - i.e. appears before - changes in a price trend.

Leverage

Borrowing money in order to command a larger position. Holding larger positions means that profits/losses are amplified. Learn more about leverage

Leveraged Buy-out (LBO)

Purchasing a company without using much capital, by using the assets of the target company as collateral for the loan used to buy the target company. The ratio of equity to debt can be as much as 10% to 90%.

Liabilities

The debts and obligations of a company. Current liabilities are debts due and payable within one year. Long-term liabilities are those payable after one year. Liabilities are stated in a company's balance sheet.

Limit order

An order type used to guarantee a price. A limit order allows precise order entry, and is appropriate if getting a specific price is more important than getting filled. A buy limit order (a limit order to buy) is executed at the specified limit price or lower (i.e., better). Conversely, a sell limit order (a limit order to sell) is executed at the specified limit price or higher (i.e., better). Limit order prevent negative slippage, but do not guarantee a fill.

Liquidity

How easy it is to buy or sell something when desired. In general, greater liquidity is mirrored by narrower spreads.

Lombard loan

A Lombard loan is a fixed loan or overdraft agreement secured by marketable deposits such as securities, life insurance policies or cash. You still own your portfolio and benefit from any gains while creating opportunity for further investments.

Long

To trade long or open a long position means to buy something in the expectation that the price will rise. I.e. when one is bullish, one trades long (buys).

Long Position

A position that was opened by buying. The position is closed by selling the same amount of the currency or security.

Lots

A unit of trade. For currencies, 1 lot is normally 100,000 of the base currency. For example, trading 1 lot of EURUSD means buying or selling 100,000 Euro. For stock options, 1 lot is normally 100 shares. Futures and commodities are traded in lots, as well.

Maintenance margin

Maintenance margin is the minimum amount of equity that must be available in a margin account in order to maintain your open positions.

Managed Account

A trading account managed by somebody different from the owner of the invested funds. The investor can be an institutional or retail investor; the manager is hired to manage the account and is given authority to trade within given guidelines, e.g. regarding goals and risk appetite.

Management fee

The fee paid to asset, fund or investment managers for their services. The fee can be defined in various ways, but are often a percentage of profits.

Margin

A loan from a broker that is used to purchase a financial instrument, e.g. Forex or CFDs. The difference between the amount of the loan and the price of the asset is called the margin. Trading on margin has the possibility for both great upsides and downsides. If the market moves, you may be required to add funds to your account in order to hold your positions (see Maintenance margin).

Margin Call

A notification that you need to deposit more money into your account to ensure sufficient margin to maintain your open positions. If you do not deposit money or close positions, your broker might close positions for you.

Marked to Market

A process whereby long and short positions are revalued to reflect their settlement price.

Market Cap

Also called "market capitalisation", this number is the total market value of a publicly traded company's outstanding shares, calculated by multiplying the number of outstanding shares by the current market price of one share. Market capitalisation is used to determine a company's size.

Market Capitalisation

Also called "market cap", this number is the total market value of a publicly traded company's outstanding shares, calculated by multiplying the number of outstanding shares by the current market price of one share. Market capitalisation is used to determine a company's size.

Market Maker

A market maker makes firm bids or offers up to a specified minimum guaranteed fill. Learn more about market makers

Market order

An order to buy or sell at the best available current price. As long as there is adequate liquidity, this type of order is executed immediately. Market orders are used when it is more important to fill the order than to trade at a certain price. Note that for financial instruments traded on a spread, a market order to buy is filled at the ask price, and a market order to sell is filled at the bid price.

Markup

The difference between the cost of a security and the price the dealer is willing to sell the security for. A dealer might widen - i.e. mark up - the "spread" in order to make a profit. An alternative method to fees.

Metaquotes

Established in 2000, MetaQuotes Software Corp. is considered as one of the leading developers of software applications for brokerages, banks, and exchanges. The MetaTrader platform features advanced tools for the development, testing, and optimization of trading robots and is used by traders worldwide on both desktop and mobile devices.

Metatrader

MetaTrader is an electronic trading platform used by many individual traders. It has a highly customisable user interface, and supports many institutional offers such as automated trading and trading robots. The platform is offered and maintained by Metaquotes Software Corporation.

Metatrader 4

The most popular trading platform on the market, developed by MetaQuotes Software Corp., seamlessly integrated with Swissquote's deep liquidity and fast trade execution.

Metatrader 5

The latest generation of MetaTrader software, developed by MetaQuotes Software Corp., for experienced traders seeking more comprehensive technology.

Mini futures

Futures contracts a fraction of the size of a standard futures contract, which makes futures accessible to many more traders and investors. The greater audience often means better liquidity and thus narrower spreads. The first such contract was the S&P 500's e-mini contract in 1997, and small futures contracts now exist for many indices, commodities and currencies.

Mini Lot

A unit of trade. In forex, a full lot is normally 100,000 of the base currency. One minilot is 10,000. For example, trading 1 minilot of EURUSD means buying or selling 10,000 Euro. For options, a lot os normally 100 units of the underlying asset.

Minimum deposit

The amount of money necessary to open a trading account.

Moneyness

The relative position of the current price of an underlying asset and the strike price of a derivative. The term is often used about options contracts. The moneyness of an options contract is one of three states: in the money, at the money and out of the money. The price of a contract is governed by its state of moneyness.

Moving average (MA)

A technical indicator used by traders to smooth price movements when charting or adjusting technical indicators, e.g. the MACD indicator. The longer the period chosen for the average, the smoother the line - and the greater the lag compared to the real-time price.

Moving average convergence divergence (MACD)

A lagging momentum indicator used by technical traders. The MACD uses two moving averages set to different time periods to gauge a security's price trend direction and momentum. A basic MACD subtracts a 26-period exponential moving average (EMA) from a 12-period EMA, but the periods may be adjusted. The exponential moving average is used because it weights prices so that newer price information weighs more heavily.

MSCI index

See All Country World Index (ACWI)

Multi-Account Manager (MAM)

A tool on the MetaTrader4 electronic trading platform that enables traders to manage multiple trading accounts, for example to run several trading strategies or to trade on behalf of others.

NASDAQ

A US stock exchange, the world's first electronic stock market and now the world's second-largest stock exchange by market capitalisation (after the New York Stock Exchange).

NASDAQ 100

A stock index that includes the 103 largest (by market capitalisation) non-financial securities listed on the NASDAQ stock exchange i.e. not necessarily US based companies. These two factors differentiate the index from the DOW 30 and S&P 500.

Net Change

The difference between the previous day's closing price and the last traded price.

Net Worth

The difference between a company's total assets and its total liabilities.

Nikkei 225 (Nikkei Index)

An index of the 225 largest Japanese corporations publicly traded on the Tokyo Stock Exchange.

Node

A computer that holds a copy of a given blockchain and participates in maintenance of the distributed ledger.

Nonfarm Payroll (NFP)

Part of the US Bureau of Labor Statistics' monthly Employment Situation Report ("Jobs Report"), the nonfarm payroll reports the total number of jobs added or lost. The report reflects the economic health and counts payrolls except farm work, self-employment, non-for-profit organisations and a few other categories.

Offer price

See Ask price

One cancels other (OCO) order

Orders where the filling of one cancels the other. For example, when opening a trade, place the two parts of an OCO above and below the current trading price. That way, regardless of which way the market moves, you will either take profit or limit the loss.

Open

The time an exchange opens for trading. Pre-market trading hours begin earlier.

Open interest

The number of options or futures contracts that exist on the book of the clearing house (one count involves two parties to the contract, i.e., the buyer and the seller). The number of open positions involving a given contract is useful for determining liquidity, as high open interest usually indicates high liquidity.

Open Position

When you have bought (or sold) something, you have an open position. When you make the opposite trade, that is, sell (or buy), you are said to close the position. The profit/loss of a trade is calculated based on the difference between the opening and the closing trade prices.

Option

An option contract is the option - but not obligation - to either buy or sell an underlying asset. Specifically, the option writer must either buy or sell the underlying asset to the buyer on the specified date at the agreed-upon price IF the buyer chooses to exercise their option. If the option is about to expire, and the price of the underlying asset has not moved favourably to the buyer, the buyer can let the contract expire. The buyer will lose the amount they paid for the option, wihch is called the "premium". A "put" option gives the holder the right to sell the underlying asset, and a "call" option gives the holder the right to buy the underlying asset. The buy/sell price defined in the contract is called the "strike" price.

Option Class

Options of the same type (call or put) based on the same underlying asset.

Option Cycle

A set time pattern of months when a class of options expires.

Option Holder

The buyer of an option contract.

Option Type

A call or put option contract

Option Writer

The seller of an option contract who may be required to deliver (call option) or to buy (put option) the underlying asset.

Options chain

Any table in which a broker or trading platform lists information about an option contracts, i.e. symbol, price, contract size, expiration date etc.

Options Symbols

The "name" of a specific option contract, given by a string of characters where the first three characters usually define the underlying security. The fourth character indicates the expiration month of the contract and the fifth relates to the strike price.

Options Table

See Options chain

Order

The intent to trade a given amount of a financial instrument. There are many kinds of orders. For example, in Forex a Spot order is executed at the current market price. In contrast, many order types enable the trader to define the market price at which the order will be executed. Still other orders enable the trader to define more complex conditions before the order is active and executed. The most commonly used order types are Take profit and Stop orders (both close the trade at a predefined market price), where the Stop order is often a training stop that enables the trader to lock in profits.

Order duration

The time interval during which an order is active. Once this limit is reached, the order is deleted if it has not been activated and filled.

Out of the Money

An options contract is out of the money when the underlying asset is trading at a price that is not favourable to the contract holder. (I.e. a call option is out of the money if the strike price is higher than the price of the underlying asset; and a put option is out of the money if the strike price is lower than the price of the underlying asset.) If an options contract expires when out of the money, it is worthless.

Out Trade

A trade that cannot be cleared by a clearing house because the two participants in the trade have submitted differing information. Out trades must be resolved before the market opens again.

Out-of-the-Money Option

An option with no intrinsic value. I.e. a call option with a strike price higher than the current market value of the underlying asset (or a put option with a strike price lower than the current market value).

Over-The-Counter (OTC) Market

The market maintained by securities dealers for issues not listed on a stock exchange. Learn more about over the counter

Overnight Position

When you keep a position open overnight (rollover), the position is closed at the daily close rate, and opened again at the new day's opening rate. You also pay (short) or earn (long) the rollover (interest) rate.

Par Value

See Face value.

Partial Fill

When only part of the volume of an order is traded. The opposite is a complete fill.

People's Bank of China (PBOC)

The central bank of China.

Performance fee

The fee paid to asset, fund or investment managers for their services. The fee can be defined in many ways, e.g. fixed fee, as a percentage of (realised or unrealised) profits, compared to baselines or indices, with or without triggering "hurdles", etc. The various methods aim to align the interest of the asset manager with that of the investor whose funds are being invested.

Pip

The smallest increment that the price changes in. Usually the 4th decimal of the quote.

Premium

The amount by which the price of a financial instrument exceeds its principal.

Premium

The price of an option contract.

Present value

The current value of a future payment (or several payments), given a specified interest rate.

Price-to-Earnings ratio (P/E ratio)

A ratio calculated by dividing a company's market value per share with earnings per share. The aim is to enable comparison between companies, and thus to assess investment opportunities. This ratio is very commonly used, and variations exist that average performance over time and attempt to predict companies' future P/E ratios.

Principal, principal amount

The par value of a bond, payable at maturity (excluding accrued interest).

Private key

A private key is never shared. It is a unique identifier code that is used as a digital signature for identification during transactions. The other part of an encrypted exchange is the Public Key, which is openly shared.

Public key

A public key is shared with others to complete encrypted interactions. To make a cryptocurrency transaction, you share your public key to conduct the transaction. The public key identifies you although your actual name or personal information is not shared.

Purchasing Managers Index (PMI)

A leading indicator based on a survey of US supply chain professionals in 19 manufacturing and service industries. Conditions are assessed for inventory, new orders, production, supplier deliveries and employment, and expressed on a scale from 0-100, where scores above 50 reflect an expansion. The greater the distance from 50, the greater the change.

Put Option

A put option is a contract that gives the holder the right (but no obligation) to sell a specified number of securities at a stated price within a fixed time period. Learn more about put options

Quote Currency

The second currency in a currency pair, the one that pays for the trade of the first currency of the pair, called the base currency. For example, in EURUSD, the Euro is the base currency, and you can buy 1 EUR by paying 0,9 USD. In this example, USD is the quote currency.

Rating

An assessment of a stock or bond. For stocks, analysts recommend buy/sell/hold. For bonds, rating agencies assess the issuing company's risk of default and assign a credit rating that varies between agencies, but generally goes from AAA to BBB for (low to medium risk) investment grade bonds.

Relative Strength Index (RSI)

A momentum indicator used by technical traders. This indicator is used to time trades and expresses whether a given financial instrument is deemed overbought or oversold on a scale from 0-100, where movements below 30 (oversold) or above 70 (overbought) might indicate an upcoming trend reversal.

Repo rate (repurchase rate)

The price at which a central bank repurchases government securities from commercial banks. The rate is used to control the money supply: by raising the repo rate and repurchasing more securities, the money supply is reduced and economic activity is dampened (and vice versa if the repo rate is lowered).

Reserve Bank of Australia (RBA)

The central bank of Australia.

Reserve Bank of New Zealand (RBNZ)

The central bank of New Zealand.

Resistance

A price level that the price seems to stay below.

Retail Sales

Retail sales are a measure of the total number of (durable and non-durable, including food and retail) sales in a given time period. The number of sales is an indicator of the health of the economy, since consumer spending is generally two-thirds of GDP. The report is a lagging indicator that is usually published within a few weeks of data gathering.

Risk Management

Protecting your capital and ensuring that good trades run long and losing trades are closed.

Robo-advisory

Robo-Advisor is an electronic asset manager that creates a bespoke investment portfolio for you and monitors it around the clock, continually optimising it to maintain your desired risk level. We develop robots to make our work easier, deliver precise results, increase our performance and, of course, to save time. We have created the Robo-Advisor to help you realise all these goals in your personal asset management activities. Simply specify your risk appetite, select your favourite securities or sectors (optional) and let your robo-advisor do the rest. Its advanced algorithms analyse thousands of securities and generate suggestions for your ideal portfolio. You only pay for the transactions you choose to enter into. Its efficient structure means that management fees, which are calculated by tranches, and on a downward sliding scale, allow you to reap the full benefits of your strategy’s performance. Our Robo-Advisor requires a smaller initial investment than traditional asset management services and is much more cost-effective. It is also fully transparent and gives you complete control on your investments.

Rollover Rate

When keeping a position open overnight (rollover), you pay or earn interest.

Round Turn

A futures transaction involving either both a purchase and a liquidating sale, or a (short) sale followed by a covering purchase.

S&P 500

An abbreviation of "Standard and Poor's", the S&P 500 is a weighted stock index of the 500 largest US companies by market capitalisation. It reaches across all sectors and thus provides a broad indication of the health of the US stock market. There exist several S&P indices, for example the S&P smallCap 600 and the S&P Midcap 400.

Scalper

A trader who targets small, short-term profits during a trading session. Scalpers rarely hold a position overnight.

Sector

Also called "industry". Companies active in the same industry belong to the same sector and often share characteristics, and their stock prices often move in parallel.

Security

A transferable certificate of ownership of investment products such as bonds, stocks and futures and options contracts.

Sell

When you sell a currency, you are selling the base currency of the currency pair at the bid price of your broker.

Settlement

When the seller delivers a security to the buyer and the buyer pays the seller.

Settlement Date

The date when a securities buyer pays for a purchase and a seller must deliver the securities. Settlement must usually be made on or before the third business day after the transaction date.

Share

Shares, stocks and equity are three names for a security that represents partial ownership of a corporation. These securities are offered by corporations to raise money, and buyers are entitled to a proportion of the corporation's earnings and assets that corresponds to the buyer's investment. Note that there exist several classes of ownership, which affects what the buyer is entitled to.

Short

To trade short or open a short position means to sell something in the expectation that the price will fall. I.e. when one is bearish, one trades short (sells).

Short position

A position that was opened by selling. The position is closed by buying the same amount of the currency or security.

SIX Swiss Exchange

Principal stock exchange in Switzerland

Smart contract

Smart contracts are agreements or transactions with that are self-executing. They connect the blockchain database with users - they can be seen as an interface that, given a specific input, results in a specific outcome Learn more about smart contracts

Spot price

The current price in the marketplace at which a financial instrument can be bought or sold for immediate delivery.

Spread

The difference between the broker's bid price and their ask price, that is, the difference between your price to sell and to buy something Learn more about spreads

Stochastic Momentum Index (SMI)

A momentum indicator used by technical traders. The stochastic momentum index (SMI) is considered a refinement of the stochastic oscillator and expresses whether a given financial instrument is deemed overbought or oversold on a scale from -100 to 100. The SMI can also be used as a bullish/bearish trend indicator.

Stochastic oscillator

A directional momentum indicator used by technical traders. The stochastic oscillator compares the closing price of a given financial instrument to the price over a period of time and expresses whether the security is deemed overbought or oversold on a range of 0-100.

Stock

Shares, stocks and equity are three names for a security that represents partial ownership of a corporation. These securities are offered by corporations to raise money, and buyers are entitled to a proportion of the corporation's earnings and assets that corresponds to the buyer's investment. Note that there exist several classes of ownership, which affects what the buyer is entitled to.

Stop-loss order

An order placed in case the market does not move in the expected direction, in order to limit trading losses. See also Trailing stop order.

Straight-Through Processing (STP)

Electronic payment and settlement for e.g. money transfers and online trading.

Strike Price

The price at which the owner of an option can buy or sell (call or put) the underlying security. Also called Exercise price.

Support

A price level that the price seems to stay above.

Swap

The exchange of one asset (or liability) for a similar, for example with a different maturity date or coupon rate.

Swiss DOTS

Swiss Derivatives Over-the-Counter trading system.

Swiss Market Index (SMI)

An index of the 20 largest Swiss corporations publicly traded on the SIX Swiss Exchange in Zurich.

Symbol

A stock symbol is a one- to four-character alphabetic root symbol that represents a publicly traded company on a stock exchange. Currencies are also indicated by symbols, i.e. EUR for Euro. See Option Symbols for a description of their construction.

Target Federal Funds Rate

US banks must maintain reserves at a Federal Reserve Bank. When banks have a surplus to requirements, they can lend funds to other banks who want to make up a shortfall. The US Federal Reserve sets a target rate for the interest rate applied by banks when they lend each other reserve balance funds, but the banks negotiate the actual rate for the loan between themselves.

Technical analysis

Using calculations and graphic indications on price charts to inspire or time trades. Learn more about technical analysis

Technical indicator

A calculated graphic indication on a price chart used to inspire or time trades.

Time Decay

The way the extrinsic value of a contract will diminish as the expiration date nears.

Time Value

The difference between the premium and intrinsic value of an option

Token

Tokens are "sub-currencies" that rest on top of a cryptocurrency blockchain. Tokens can represent anything of value. It is much easier for a project to create tokens (that represent coin value) than a new cryptocurrency (new blockchain and coins). Cryptocurrency blockchains normally offer templates (smart contracts) for creating tokens.

Trade execution

Implementing a trade, actually buying or selling (opening or closing a position).

Trading Session

The period during which an exchange is open for trading.

Trading system

A trading system is a set of rules that state when and how to trade, also called algorithmic trading. Now that many trading systems are automated, they have become more complex. Automated trading systems (ATSs) can communicate directly with the market and place orders based on rules related to e.g. technical indicators, fundamentals, news and the prices of securities.

Trailing stop order

A stop order that automatically follows the current price in order to lock in profits. For example, for a long trade with a trailing stop, the level of the trailing stop rises along with the price as it climbs. When creating the order, the trader defines the distance between the market price and the trailing stop level.

Tranche

A class of bonds in an offering that have the same characteristics.

Transaction Date

The date on which the purchase or sale of a financial instrument takes place. This is often different from the settlement date.

Underlying

The specific security, commodity, index or financial instrument that a derivative (CFD, option etc.) is based on. For example, Tesla is the underlying stock of a Tesla CFD.

Underlying asset

A derivative is a financial instrument with a price that is based on a different asset. The underlying asset is the financial instrument on which a derivative's price is based. Underlying assets give derivatives their value, and movements in the price of the underlying asset affects trade in the derivative.

Unemployment rate

The percentage of a country's workforce that is without a job. The percentage may differ depending on how "workforce" is defined, for example whether it is all people of a given age, or only people who have, for example, actively applied for a job recently. The unemployment rate is a lagging indicator of a country's economic health; a low unemployment rate generally indicates a healthy economy.

Unlisted

A financial instrument that is not listed on an exchange; such instrument are traded in the so-called over-the-counter market.

Unsecured bond

A bond that is not secured by collateral.

Uptick

When the a trade occurs at a higher price than the previous trade.

Vanilla options

An option is a security that gives the buyer the right (but not obligation) to buy or sell an underlying security, for example an equity, at a given price called the "exercise price" on or before a given "expiry date". There are many different kinds of options, and "vanilla" options are simpler than e.g. exotic types of options.

Volatility

The size and frequency of price changes.

Volume

The number of shares of stock, or currency units, or contracts traded during a particular time period, normally measured in average daily trading volume. Volume is another good indicator of liquidity - higher volume often indicates greater liquidity.

Warehouse Receipt

A document stating the existence and availability of a given quantity and quality of a commodity. This document is used to transfer of ownership of commodities in both cash and futures transactions.

Warrants

A warrant is a derivative similar to an option that gives the buyer the right (but not the obligation) to buy (or sell) an underlying security (often a stock) at a given price called the "exercise price" on or before a given "expiry date". Warrants are issued by the company that is issuing (or buying back) the underlying stock.

Whale

A trader who makes trades so large that they affect the pricing of the market. The expression is used often in cryptocurrency trading, where trading volume in some currencies is sometimes limited and thus exposed to large trades.

Working Orders

Limit Orders placed in the market but not yet executed.

Writer

The seller of an option. The writer has an obligation associated with the contract to either purchase or sell a specified number of shares at the strike price on or before expiry.

Yield

The annual rate of return earned on a financial instrument, as a percentage. I.e. for a stock, divide the annual dividend amount by the price paid for the stock or by the current market price. Calculating a bond yield involves annual interest payments and amortizing the difference between the current market price and par value over the life of the bond.

Zero-coupon bond

A bond with no periodic interest payments. The investor receives one payment at maturity (equal to the principal invested plus compounded interest earned to maturity).