CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.

Glossary of trading terms

A - B - C - D - E - F - H - I - L - M - N - O - P - R - S - T - U - V - W

Take a look at our list of the financial terms associated with trading and the markets.

From beginners getting acquainted with the world of investing to experts with decades of experience, all traders need to learn – or review – the meanings behind a huge number of terms on an almost daily basis.

We’ve put our 40 years of experience in trading to good use, defining and explaining a comprehensive list of trading vocabulary. 

Acquisition definition

When one company decides to take over another one, it is referred to as an acquisition. The acquiring company will do this by purchasing either the majority or entirety of the ownership stake of the company being taken over.

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Alerts definition

IG alerts – also known as trading alerts – allow you to set specific criteria and be notified immediately once that criteria has been met. There are three main types: economic announcements, price alerts and indicator alerts.

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Ask definition

The ask refers to the price at which you can buy an asset or security from a seller. It can be variously referred to as ask, the ask, or asking price.

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Assets definition

Assets can be defined in two ways in trading, dependent on whether they are in connection with a company or a financial instrument.

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Auction definition

In trading, an auction (or auction market) refers to the process by which the prices of shares are determined before the open, after the close, or during intraday volatility auctions to build or stabilise the order book. They allow traders to place market or limit orders directly on an exchange.

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Automated trading definition

Automated trading – also known as algorithmic trading – is the use of algorithms for making trade orders.

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Base currency definition

In trading the term base currency has two main definitions: the first currency quoted in a forex pair, or the accounting currency used by banks and other businesses.

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Bear definition

Bears are traders who believe that a market, asset or financial instrument is heading in a downward trajectory. In that regard, they hold an opposite view to bulls, who believe that a market is going upwards.

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Bear market definition

When the market is on a sustained downward trajectory, with little optimism from traders to bring about a rally, it is referred to as a bear market.

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Bid definition

In trading and investing, the bid is the amount a party is willing to pay in order to buy a financial instrument.

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BoE definition

The BoE is a popular shortening of the Bank of England, the central bank of the United Kingdom.

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Bonds definition

Bonds are a form of financial investment that involve lending money to an institution for a fixed period of time. They usually come in two varieties: corporate bonds and government bonds, depending on the type of institution you are lending to.

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Brent crude definition

Brent crude – also referred to as Brent blend – is one of three major oil benchmarks used by those trading oil contracts, futures and derivatives. The other two major benchmarks are West Texas Intermediate (WTI) and Dubai/Oman, though there are many smaller oil varieties traded as well..

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Bull definition

Bulls are speculators who believe that a market, instrument, or sector is going on an upward trajectory. This belief puts them at odds with bears, who take a pessimistic view on a market’s direction.

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Bull market definition

When a market, instrument or sector is on an upward trend, it is generally referred to as a bull market.

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Buy definition

Buying a financial instrument means taking ownership of it from someone else, whether it is a commodity, stock or another asset.

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Call definition

Calls are option contracts that allow traders to profit when an asset’s price increases beyond a certain point within a specified time. They are the opposite of puts, which return a profit when an asset’s price decreases beyond a certain point within a defined period of time.

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CFD trading definition

CFD trading is the speculation on financial markets via contracts for difference (CFDs), a form of financial derivative.

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CFDs definition

Contracts for difference, or CFDs, are a type of financial derivative used in CFD trading.

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Closing price definition

An asset’s closing price is the last level at which it was traded on any given day. This price is often determined by an auction.

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Commission definition

Commission is the charge levied by an investment broker for making trades on a trader’s behalf.

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Commodity definition

A commodity is a basic physical asset, often used as a raw material in the production of goods or services.

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Cost of carry definition

The cost of maintaining an investment position is often referred to as the cost of carry or carrying charge. It can come in many forms, including interest on margins or the loans used to make the trade, or the cost of storage and insurance associated with holding a commodity.

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Currency peg definition

A currency peg is a governmental policy of fixing the exchange rate of its currency to that of another currency, or occasionally to the gold price. It can sometimes also be referred to as a fixed exchange rate, or pegging.

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Dark pools definition

Dark pools are networks – usually private exchanges or forums – that allow institutional investors to buy or sell large amounts of stock without the details of the trade being released to the wider market.

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Deposit margin definition

Deposit margin is the amount a trader needs to put up in order to open a leveraged trading position. It can also be known as the initial margin, or just as the deposit.

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Derivative definition

A derivative is a financial product that enables traders to speculate on the price movement of assets without purchasing the assets themselves. Because there is nothing physical being traded when derivative positions are opened, they usually exist as a contract between two parties.

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Dividend definition

A dividend is the portion of profit that a company chooses to return to its shareholders, usually expressed as a percentage.

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DMA definition

When trading, DMA stands for direct market access. It’s a way of placing trades that offers more flexibility and transparency than traditional dealing (which is usually referred to as OTC, or over-the-counter). It’s suitable for advanced traders.

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ECB definition

When traders talk about the ECB, they are referring to the European Central Bank, the central bank for the eurozone.

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Equity definition

In trading, equity can mean several different things. However it usually comes down to the ownership of an asset without any debt involved.

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Equity options definition

Equity options are a form of derivative used exclusively to trade shares as the underlying asset.

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ETF definition

ETF stands for exchange traded fund, a type of investment security that is bought and sold on exchanges.

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ETP definition

Exchange traded products, or ETPs, are a variety of financial instruments that are traded throughout the day on national exchanges.

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Exchange definition

An exchange is a marketplace where financial instruments – such as commodities, stocks, or derivatives – are traded. They can be either physical, like the New York Stock Exchange, or purely digital like a bitcoin exchange.

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FCA definition

The FCA, or Financial Conduct Authority, is the United Kingdom’s financial regulatory body. It is the successor to the FSA, or Financial Services Authority.

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Federal Reserve definition

The Federal Reserve bank, or the ‘Fed’ for short, is the central bank in charge of monetary and financial stability in the United States. It is part of a wider system – known as the Federal Reserve system – with 12 regional central banks located in major cities across the US.

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Force open definition

The ‘force open’ function on the trading platform allows you to enter a new bet in the opposite direction to an existing bet on the same market.

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Forex definition

Forex is how market participants convert one currency to another. It can variously be referred to as foreign exchange, FX, or currencies.

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Forex trading definition

Forex trading is the act of taking part in the forex market in order to speculate and attempt to make a profit. It can also be known as FX trading, foreign exchange or currencies trading.

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Forward contract definition

A forward contract is a contract that has a defined date of expiry. The contract can vary between different instances, making it a non-standardised entity that can be customised according to the asset being traded, expiry date and amount being traded.

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Futures contract definition

Futures contracts represent an agreement between two parties to trade an asset at a defined price on a specified date in the future. They are also often referred to simply as ‘futures’.

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Hedge definition

A hedge is an investment or trade designed to reduce your existing exposure to risk. The process of reducing risk via investments is called 'hedging'.

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Index definition

In trading, an index is a grouping of financial assets that are used to give a performance indicator of a particular sector. The plural term is indices.

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Indices trading definition

Indices trading is the means by which traders attempt to make a profit from the price movements of indices.

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Interest rates definition

The amount that a lender charges to a borrower for the loan of an asset, usually expressed as a percentage of the amount borrowed. That percentage usually refers to the amount being paid each year (known as annual percentage rate, or APR) but can be used to express payments on a more or less regular basis.

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IPO definition

When a company embarks on an IPO (which stands for initial public offering) it goes public on a stock exchange. This can also be known as floating, flotation, or just ‘going public’.

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Leverage definition

Leverage is a concept that can enable you to multiply your exposure to a financial market without committing extra investment capital.

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Leveraged products definition

Leveraged products are financial instruments that enable traders to gain greater exposure to the market without increasing their capital investment. They do so by using leverage.

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Limit order definition

A limit order is an instruction to your broker to execute a trade at a particular level that is more favourable than the current market price.

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Long definition

When used in trading, long refers to a position that makes profit if an asset’s market price increases. Usually used in context as ‘taking a long position’, or ‘going long’.

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Margin call definition

A margin call is the term for when a broker requests an increase maintenance margin from a trader, in order to keep a leveraged trade open.

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Margin definition

In trading, margin is the funds required to open and maintain a leveraged position.

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Market maker definition

A market maker is an individual or institution that buys and sells large amounts of a particular asset in order to facilitate liquidity.

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Market order definition

A market order is an instruction from a trader to a broker to execute a trade immediately at the best available price.

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Non-farm payrolls definition

Non-farm payrolls are a monthly statistic representing how many people are employed in the US, in manufacturing, construction and goods companies. They can also be known as non-farms, or NFP.

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Offer definition

Offer is the term used when one trader expresses an intention to buy an asset or financial instrument from another trader or institution.

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Open positions definition

Your open positions are the trades you have made that are still able to incur a profit or a loss. When a position is closed, all profits and losses are realised and the trade is no longer active.

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Option definition

An option is a financial instrument that offers you the right – but not the obligation – to buy or sell an asset when its price moves beyond a certain price with a set time period.

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Option spread definition

An option spread is a strategy used in options trading. It involves buying and selling multiple options on the same underlying asset that are almost identical to each other but with a different strike price or expiry.

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Order definition

In trading, an order is a request sent to a broker or trading platform to make a trade on a financial instrument.

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OTC definition

OTC stands for over-the-counter, and refers to a trade that is not made on a formal exchange. It is often also referred to as off-exchange trading.

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Pip definition

A pip is a measurement of movement in forex trading, defined as the smallest move that a currency can make.

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Pip value definition

Pip value is the value attributed to a one-pip move in a forex trade.

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Position definition

A position is the financial term for a trade that is either currently able to incur a profit or a loss (an open position) or has recently been cancelled (a closed position). Positions are the way in which a trader will hope to make a profit.

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Power of attorney definition

Power of attorney gives another person the ability to act on your behalf. In trading, this means they can take over your trading accounts.

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Profit and loss definition

Profit and loss are two terms that are central to trading: the financial returns (or outgoings without returns) from any business enterprise or trade.

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Put definition

Puts are a variety of option that give the purchaser the right, but not the obligation, to sell an asset at a certain price before the option expires.

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Range definition

Range is the difference between a market’s highest and lowest price in a given period. It is mostly used as an indicator of volatility: if a market has a wide range, it's a sign that it was volatile over the period analysed.

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Rights issue definition

A rights issue is the term for when a company offers more of its shares to current shareholders, usually to raise extra capital. It differs from other additional shares offerings, where shares are available for any investor willing to buy.

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Scalp definition

A scalp in trading is the act of opening and then closing a position very quickly, in the hope of profiting from small price movements.

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Shares definition

Shares are the units of the ownership of a company, usually traded on the stock market. They are also known as stocks, or equities.

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Shares trading definition

Shares trading is the buying and selling of company stock – or derivative products based on company stock – in the hope of making a profit.

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Short definition

In trading, short describes a trade that will incur a profit if the asset being traded falls in price. It is also often referred to as going short, shorting or sometimes selling.

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Short selling definition

Short selling is the act of selling an asset that you do not currently own, in the hope that it will decrease in value and you can close the trade for a profit. It is also known as shorting.

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Slippage definition

When the price at which an order is executed does not match the price at which it was made, it is referred to as slippage.

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Spot definition

In trading, spot refers to the price of an asset for immediate delivery, or the value of an asset at any exact given time. It differs from an asset’s futures price, which is the price for delivery at some date in the future, or its expected price.

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Spread definition

In finance, the spread is the difference in price between the buy (bid) and sell (offer) prices quoted for an asset.

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Stock exchange definition

A stock exchange is a medium by which shares are bought and sold.

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Stock index definition

A stock index is a group of shares that are used to give an indication of a sector, exchange or economy. Usually, a stock index is made up of a set number of the top shares from a given exchange.

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Stockbroking definition

Stockbroking is a service which gives retail and institutional investors the opportunity to trade shares.

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Stop order definition

Stop orders are types of order that instruct your broker to execute a trade when it reaches a particular level: one which is less favourable than the current market price. They can also be known as stop-loss orders.

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Strike definition

In options trading, the strike is the price at which a contract can be exercised, and the price at which the underlying asset will be bought or sold. It is also known as the strike price.

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Technical analysis definition

Technical analysis is a means of examining and predicting price movements in the financial markets, based on an asset’s chart history. It is one of the two major schools of market analysis, with the other being fundamental analysis.

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Tom-next definition

Tom-next is short for tomorrow-next day, the means by which forex speculators avoid taking physical delivery of currency and are able to keep forex positions open overnight.

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Trailing stops definition

A trailing stop is a type of stop-loss that automatically follows positive market movements of an asset you are trading. If your position moves favourably but then reverses, a trailing stop can lock in your profits and close the position.

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Unborrowable stock

Unborrowable stock is the stock that no one is willing to lend out to short sellers. When shares in a company become unborrowable, the traditional means of short selling them is impossible.

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VIX definition

VIX is short for the Chicago Board Options Exchange Volatility Index. It is a measure used to track volatility on the S&P 500 index, and is the most well-known volatility index on the markets.

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Working order definition

A working order is a general term for either a stop or limit order to open. It is used to advise your broker to execute a trade when an asset reaches a specific price.

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CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.