All trading involves risk. Losses can exceed deposits.

Glossary of trading terms

All trading involves risk. Losses can exceed deposits.

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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 clearly understand a huge number of terms.

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

Trading terms

Accumulated distribution definition

Accumulated distribution is a term related to exchange traded funds (ETFs) trading, meaning that the ETF in question reinvests any income and dividend payments back into the fund.

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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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Active investment definition

Active investment is a form of investment strategy that involves actively buying and selling assets in the hope of making profits and outperforming a benchmark or index.

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ADR definition

An American Depositary Receipt (or ADR, for short) is a way in which US investors can trade shares of non-US companies without using their local exchanges.

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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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Arbitrage definition

Arbitrage refers to the practice of buying an asset then selling it immediately to take advantage of a difference in price.

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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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Asset classes definition

The various types of financial instruments are called asset classes, and they come under four broad categories. Asset classes are defined by the similar characteristics of the instruments within them, such as behaviour on the market, laws and regulations. 

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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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At the money definition

At the money is a term used in options trading, used to define the proximity of an underlying asset’s price to the figure at which it can be bought or sold (known as its strike price). This is also referred to as its ‘moneyness’.

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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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Authorised participant definition

An authorised participant (AP) is a recognised body that has a relationship with an ETF provider to create or redeem exchange traded funds (ETFs). Most APs are market makers or large investment houses.

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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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Averaging down definition

When a trader purchases an asset, the asset’s price drops, and if the trader purchases more, it is referred to as averaging down.

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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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Base rate definition

The base rate, or base interest rate, is the interest rate that a central bank – like the Bank of England or Federal Reserve – will charge to lend money to commercial banks.

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Basis point definition

A basis point (also referred to as bp – pronounced bip or beep) is a unit used in trading to describe movements in interest rates or other percentages. It is equal to one hundredth of one percent, or 0.01%.

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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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Beta definition

A financial instrument’s beta is a measure of its risk or volatility when compared to the wider 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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Blue chip stocks definition

Blue chip stocks are the shares of companies that are reputable, financially stable and long-established within their sector.

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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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Bollinger bands definition

Bollinger bands are a popular form of technical price indicator. They were developed by a pioneering technical trader called John Bollinger in the 1980s.

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Bond trading definition

Bond trading is one way of making profit from fluctuations in the value of corporate or government bonds. Many view it as an essential part of a diversified trading portfolio, alongside stocks and cash.

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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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Bottom line definition

A company’s bottom line is an important factor in share trading. Variously, it can be used to refer to the net earnings or earnings per share (EPS) of a business.

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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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Broker definition

A broker is an individual or company that places trades on behalf of a trader. They can do so in a number of different asset classes, with the most well-known being stockbroking.

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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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Cable definition

Cable is one of a few slang terms for different currency pairs; in this case referring to British pound sterling against the US dollar. This may also be shown as GBP/USD or GBPUSD. Occasionally, people also refer to the price of the British pound as cable.

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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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Capital expenditure definition

Capital expenditure, or CAPEX, is the term used for the money spent by businesses on physical assets. It’s an important part of understanding a company’s accounts.

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Capital gains definition

Capital gains are the profits made from the buying and selling of assets. They are made when traders sell assets – like shares or commodities – for more than they originally paid for them. The opposite of a capital gain is a capital loss.

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Capital gains tax definition

Capital gains tax (or CGT), is the tax levied by the government on the profits made from financial asset sales. CGT regulations and levels vary from country to country.

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Capital loss definition

When a trader sells an asset at a lower price than they initially paid for it, they have incurred a capital loss. As such, capital loss is the opposite of capital gain: the profit made when an asset is sold for more than originally paid.

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Cash drag definition

Cash drag is a term associated with exchange trade funds (ETFs), referring to the delay between when an ETF receives a dividend and when it uses the proceeds.

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Cash flow definition

Cash flow is the amount of money coming into and going out of a company’s accounts, as reported in earnings announcements. It can refer to a single project or the entire business.

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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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Chartist definition

A chartist is a trader who relies predominantly on charts to help them understand a financial instrument’s historical price movements, in order to better predict and to speculate on its future performance. They are also commonly known as technical analysts, or technical traders.

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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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Concentration ratio definition

An industry’s concentration ratio is the size of a certain number of firms in an industry compared to its total size. It is used to calculate one or more firms’ dominance of their sector.

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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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Covered call definition

A covered call is when a trader sells (or writes) call options in an asset that they currently have a long position on. They are also known as buy-writes.

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CPI definition

CPI stands for consumer price index, an average of several consumer goods and services that are used to give an indication of inflation.

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Creation units definition

Creation units are the blocks of securities that comprise ETF. They are also known as creation baskets.

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Crystallisation definition

Crystallisation is the term used when a trader or business closes a position and then reopens an identical position immediately.

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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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Day order definition

A day order is a type of order, or instruction from a trader to their broker, to buy or sell a certain asset.

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Day trading definition

Day trading is a strategy of short-term investment that involves closing out all trades before the market closes.

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Debt ratio definition

Debt ratio is an indication of how much debt a company is holding, when compared to the value of its assets. It can also be applied to individuals: in which case it is the cost accrued by their debt compared to total income each year.

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Delta definition

A derivative’s delta is defined as its price movement in relation to the change in price of its underlying asset. It can also sometimes be referred to as a hedge ratio, and is most often used when dealing in options.

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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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Depreciation definition

Depreciation is the term given to the decline in an asset’s value, either due to market conditions or other factors like wear and tear. It is the opposite of appreciation.

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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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DFB definition

In spread betting, DFB stands for daily funded bet.

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Digital 100 definition

Digital 100s are a type of financial derivative, also referred to as digital 100 options or digital 100 bets.

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Digital 100s trading definition

Digital 100 trading is a type of trading that involves utilising digital 100 options.

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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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Earnings per share definition

Earnings per share, or EPS, is an important metric in a company’s earnings figures. It is derived from the total amount of profit generated in a period, divided by the number of shares in the company listed on the stock market.

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EBITDA definition

EBITDA stands for ‘earnings before interest, taxes, depreciation and amortisation’. It is calculated by taking away the above figures from a company’s total revenue, to give an idea of the profit made before tax and other financial factors are taken into account.

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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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EDSP definition

EDSP stands for exchange delivery settlement price. It refers to the price at which derivative contracts on exchanges are settled.

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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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ETC definition

ETC stands for exchange traded commodity. It is a type of exchange traded product (ETP), like exchange traded funds (ETFs) or exchange traded notes (ETNs).

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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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ETF provider definition

An ETF provider is a company that makes exchange traded funds (ETFs). Some of the major ETF providers include iShares by BlackRock and Vanguard.

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ETN definition

ETN stands for exchange traded note. It is a type of exchange traded product (ETP), meaning it is traded on exchanges like exchange traded funds (ETFs) and exchange traded commodities (ETCs).

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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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Execution definition

In trading, execution is the completion of a buy or sell order from a trader. It is carried out by a broker.

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Expiry date definition

The point when a trading position automatically closes is known as the expiry date (or expiration date).

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Exposure definition

In trading, exposure is a general term that can mean three things: the total market value of your trades at open, the total amount of possible risk at any given point, or the portion of a fund invested in a particular market or asset

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Fair value definition

Fair value has two meanings to investors. Generally, it is used to mean the value attributed to a stock by an individual investor or broker but in futures trading, it can refer to the predicted price of a market which is reflected in the cost to open a position.

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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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Fibonacci retracement definition

A Fibonacci retracement is a key technical analysis tool, used to gain insight into when to place and close trades, or place stops and limits.

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Fill definition

Fill is a trading term that refers to the completion of an order to trade a financial asset. When an order has been completed, it is often referred to as ‘filled’.

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Fixed costs definition

Fixed costs are the costs incurred by a company that do not vary with the scale of production. They are one of two main types of cost associated with companies’ balance sheets: the others are variable costs.

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FOMC definition

The FOMC, or Federal Open Market Committee, is the branch of the Federal Reserve bank that is in charge of short and long-term monetary policy decisions.

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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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French PEA definition

A plan epargne d’action, or PEA, is a tax-efficient investment wrapper for residents of France.

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Full replication definition

In investments, full replication refers to a type of physically replicated ETF that holds equities in all of the constituents of the benchmark it is designed to track.

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Fundamental analysis definition

Fundamental analysis is a method of evaluating assets on the basis of external events and influences, as well as financial statements on the asset itself. It is used by traders to make decisions on different assets by measuring the economic, financial and market conditions that can affect its price.

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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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Gamma definition

Gamma is a derivative of delta: the relationship between a derivative’s price and the price of its underlying asset. Specifically, gamma is the movement of delta in regard to the price of the underlying asset.

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GDP definition

GDP stands for gross domestic product, or the total value of the goods and services produced in a country over a specified period. It is used as an indicator of the size and health of a country’s economy.

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Gross margin definition

Gross margin is a way of measuring the amount of profit a company can make from its revenue.

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Handle definition

In trading, the handle has two meanings. In most markets, it means the whole numbers involved in a price quote, without the decimals included. In forex, the handle refers to that part of the quote that appears in both numbers of the spread.

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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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High frequency trading definition

High frequency trading (or HFT) is a form of advanced trading platform that processes a high numbers of trades very quickly using powerful computing technology. It can be used to either find the best price for a single large order, or to find opportunities for profit in the market in real time.

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In the money definition

In the money is a term that describes an option’s state of ‘moneyness’ – the underlying asset’s status when compared to the price at which it can be bought or sold (its strike price).

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Income distribution definition

Income distribution is a term used in exchange traded funds (ETFs) for when any income or dividend payments are redistributed to investors in the form of a payment.

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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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Inflation definition

Inflation is the increase in the cost of goods and services in an economy. As that in turn means that each unit of the currency’s economy is worth less of any good or service, inflation can also be viewed as a devaluing of currency.

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Interest definition

In finance, interest can have more than one definition. Firstly it refers to the charge levied against a party for borrowing money, which can be either a cost or a means of making profit for a trader. Secondly, it can mean the portion of a company’s stocks held by a particular shareholder.

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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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Intrinsic value definition

In investing, intrinsic value can have two different meanings. Firstly, in options it is the difference between the underlying asset’s price and the option’s strike price. Secondly, it can refer to the ‘true’ value of a company as perceived by an investor. 

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Investment capital definition

A trader’s investment capital is the portion of financial resources they have available for trading. It could be in the form of money or other assets.

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Investor definition

An investor is any person who devotes capital to an investment in the hope that they will see a return from it. However, in the investment community, investors tend to have a different attitude to investing than traders.

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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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ISA definition

ISA stands for individual savings account, a form of UK investment that is exempt from tax on its returns.

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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 ETFs definition

Leveraged ETFs are a form of exchange traded fund (ETF) that seek to deliver multiplied returns of the underlying benchmark they track. For instance, if the FTSE 100 increases 10% in a day, a 2x FTSE ETF will aim to increase 20%.

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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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Liabilities definition

A company’s liabilities are the debts and obligations represented on its balance sheet. They are the opposite of assets.

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LIBOR definition

LIBOR, or the London Interbank Offered Rate, is a benchmark that dictates daily interest rates on loans and financial instruments around the world.

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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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Limit up / limit down definition

Limit up and limit down are the maximum amounts a commodity future may increase (limit up) or decrease (limit down) in any single trading day.

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Liquidity definition

In investment, liquidity is the ease of buying or selling a particular asset in the market without affecting its price. It can also refer to the facility of converting an asset to cash quickly and easily.

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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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Lot definition

A lot is a standardised group of assets that is traded instead of a single asset.

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M2 definition

M2 is a measure of money supply, referring to a certain portion of the money contained in an economy.

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Maintenance margin definition

Maintenance margin is the amount that must be available in funds in order to keep a margin trade open. It is also known as the variation margin.

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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 capitalisation definition

A company’s market capitalisation is the total value of its outstanding shares on the market. It is also referred to as market cap.

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Market data definition

In investments, market data is the data reported on various assets and financial instruments by trading companies and exchanges. 

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Market definition

Market can have several meanings within investments. Generally it is defined as a medium through which assets are traded, with their value determined by supply and demand.

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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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Merger definition

When two or more companies decide to combine and become one entity, it is called a merger.

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MetaTrader definition

MetaTrader is an electronic trading platform which is popular among traders around the world.

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Moving average definition

A moving average (often shortened to MA) is a common indicator in technical analysis, used to examine price movements of assets while lessening the impact of random price spikes.

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Multilateral trading facilities definition

Multilateral trading facilities (MTFs) offer traders and investment firms an alternative to traditional exchanges. They allow trading of a wider variety of markets than most exchanges, including assets that may not have an official market.

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Multiplier effect definition

The multiplier effect is an economic term for when changes in money supply are amplified from the knock-on effects of economic activity.

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Net asset value definition

A fund’s net asset value (NAV), refers to the underlying value of its holdings if they were all to be immediately sold, usually divided by the number of shares in circulation.

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Net change definition

Net change is the difference in an asset’s closing price from one day to the next. It is a commonly used method of quoting the price movements of stocks and funds.

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Net income definition

Net income is the total amount of profit (often known as earnings) made by a company, listed in its earnings report.

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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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Off book definition

An ‘off-book’ trade refers to a stock trade that is executed away from the exchange, via the OTC market.

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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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On exchange definition

On exchange is a term used to mean that a trade is taking place directly on an order book. It differs from at quote, which is a trade made at the price quoted by a market maker.

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OPEC definition

OPEC stands for the Organisation of Petroleum Exporting Countries. It is a group comprising all of the world’s top oil-producing nations, founded to coordinate oil policy as well as sharing economic and technical aid.

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Open definition

Open has several definitions within investing. It can refer to the daily opening of an exchange, and an order or position that has not yet been filled or closed. 

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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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Open/closed-ended investment definition

In investments, the terms open-ended and closed-ended are used to designate whether a fund has an open or fixed number of shares in circulation.

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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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Out of the money definition

Out of the money is one of three terms used in options trading, referring to an underlying asset’s price in relation to the price at which it can be bought or sold (its strike price).

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Overexposure definition

The term for when a trader makes the technical mistake of investing too much in a particular opportunity.

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P/E ratio definition

P/E ratio is an important metric used to assess the relative value of a stock (or sometimes an index or industry). It is calculated as its share price divided by earnings per share (EPS).

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Parity definition

The term parity can be used in a few ways when trading, but always as an expression of equality.

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Passive investment definition

Passive investment is an investment strategy which seeks to track a benchmark or an index, rather than outperform it (the aim of active investment).

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Physical replication definition

Physical replication refers to the situation in which an exchange traded fund (ETF) tracks its benchmark by holding all or a portion of all the underlying securities that make up that benchmark. For example, the iShares FTSE 100 ETF holds underlying assets in the constituents of the FTSE 100.

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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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PMI definition

PMI stands for purchasing managers index, a useful indicator of health in a particular sector within an economy. In the UK, Markit produce a PMI for the manufacturing, services and construction industries.

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Portfolio definition

A portfolio refers to group of assets that are held by a trader or trading company. Assets in a portfolio can come in many forms, including stocks, bonds, commodities or derivatives.

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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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Quantitative easing definition

Quantitative easing (or QE, for short) is an economic monetary policy intended to lower interest rates and increase money supply. It saw an increase in profile and use after the 2008 financial crash and subsequent recession.

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Quote currency definition

The quote currency is the second currency listed in a forex pair. It is also known as the counter currency.

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Quote definition

In trading, the quote is the price at which an asset was last traded, or the price at which it can currently be bought or sold.

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Rally definition

A rally is a period in which the price of an asset, market or index sees sustained upward momentum. Typically, a rally will arrive after a period in which prices have been flat or in a decline.

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Ratio spread definition

A ratio spread is a strategy used in options trading, in which a trader will hold an unequal number of buy and sell options positions on a single underlying asset at once.

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Reserves definition

Reserves are the liquid assets set aside for future use by an individual, central bank or business. Usually they are in the form of currency or a commodity, such as gold. For traders, reserves will usually be kept as cash that can be accessed quickly.

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Resistance level definition

A resistance level is a key tool in technical analysis, indicating when an asset has reached a price level that market participants are unwilling to surpass.

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Reversal definition

A reversal is a turnaround in the price movement of an asset: when an upward trend (or a rally) becomes a downward one (a correction), or vice versa. They can also often be referred to as trend reversals.

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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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Risk management definition

Risk management is the process of identifying potential risks in your investment portfolio, and taking steps to mitigate accordingly.

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Risks definition

In trading, risks are the ways in which an investment can end up losing you money.

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RNS definition

RNS is short for the Regulatory News Service, a part of the London Stock Exchange. The RNS sends regulatory and non-regulatory information on behalf of businesses and other companies, helping them to comply with the disclosure obligations set out by regulators around the world.

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ROCE definition

ROCE stands for return on capital employed: a ratio which measures how effectively a company uses capital.

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Rollover definition

In trading, a rollover is the process of keeping a position open beyond its expiry.

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RSI definition

RSI stands for the relative strength index. It is a key tool used in technical analysis, assessing the momentum of assets to gauge whether they are in overbought or oversold territory.

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Sample replication definition

Sample replication, or optimised replication, refers to a type of exchange traded fund (ETF) that holds equities or bonds in some of the constituents of the benchmark it tracks. It differs from full replication, when an ETF holds all of the constituent securities of its benchmark.

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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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SEC definition

The SEC stands for the US Securities and Exchange Commission. It is a government agency set up to regulate markets and protect investors in the United States, as well as overseeing any mergers and acquisitions.

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Sectors definition

Sectors are divisions within an economy or market, useful for analysing performance or comparing companies with similar outputs and characteristics.

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SETS definition

SETS stands for the Stock Exchange Electronic Trading Service, the London Stock Exchange’s digital order book.

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Shares dealing definition

Share dealing is a form of investing that involves buying company stock, with profit attained either by selling the stock on for a higher price or via dividends.

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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 ETF definition

A short exchange traded fund (EFT), or inverse ETF, is a type of exchange traded fund which aims to rise in value if its benchmark falls in value.

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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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SIPP definition

SIPP stands for self-invested personal pension, a type of pension that grants you increased control over where your capital is invested.

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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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Smart beta definition

A smart beta is an investment strategy used by a certain type of exchange traded fund (ETF) that takes more factors into account when choosing assets for the benchmark than a traditional ETF.

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Smart order router definition

A smart order router (SOR) is an automated process used in online trading that follows a set of rules when looking for trading liquidity. The goal of an SOR is to find the best way of executing a trade.

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SNB definition

SNB stands for Swiss National Bank, the central bank for Switzerland.

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Socially responsible definition

Socially responsible investing, or ethical investing, is an investment strategy that seeks to return profit while taking the wider ethical implications of investments into account.

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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 betting definition

Spread betting is a leveraged financial derivative. When spread betting, you are making a bet on the direction in which a market will move. The accuracy of your bet determines the profit or loss when the position is closed.

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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 analysis definition

Stock analysis is the examination and evaluation of the stock market. It can take the form of analysis of an individual stock, sector or broader areas. Stock analysis is also referred to as market analysis, or equity analysis.

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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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Stock symbol definition

A stock symbol is a unique series of letters or numbers, used to identify a stock traded on a stock exchange. They are also sometimes referred to as stock tickers or ticker symbols.

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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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Straddle definition

A straddle is a type of options trading strategy that allows traders to speculate on whether a market is about to become volatile or not, without having to predict a specific price movement. Straddles involve either buying or selling simultaneous call and put options with matching strike prices and expiration dates.

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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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Sunday trading with IG definition

Sunday trading is a service that enables you to speculate on several markets over the weekend.

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Support level definition

A support level is the price at which an asset may find difficulty falling below as traders look to buy around that level.

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Synthetic replication definition

Synthetic replication refers to a type of exchange traded fund (ETF) that doesn’t hold any of the underlying securities featured on its benchmark.

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Tangible assets definition

Tangible assets are the assets on a company's books and balane sheet that have a physical form. They comprise the machinery, office equipment and buildings used by a company (fixed assets) and of the materials that are used in producing products (current assets).

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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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Total cost of ownership definition

Total cost of ownership (TCO) is a measure of the cost of investing in an exchange traded fund (ETF) over a period of time. It is viewed by some ETF providers as a more comprehensive indicator of an ETF’s cost than its total expense ratio (TER).

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Total expense ratio definition

In funds, total expense ratio (TER) is the amount you’ll have to pay to hold an investment (like an ETF) for one year. This figure will come out of the fund’s performance rather than being separately invoiced to you.

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Tracking difference definition

Tracking difference is a key metric in gauging the performance of exchange traded funds (ETFs), showing how a product has performed compared to its benchmark over a period of time.

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Tracking error definition

An exchange traded fund’s (ETF’s) tracking error refers to the consistency of its tracking difference over a period of time.

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Trading floor definition

A trading floor is the area of a business or an exchange where assets are bought and sold, most commonly associated with stock exchanges and futures exchanges. It is also often referred to as a trading pit.

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Trading plan definition

A trading plan is a strategy set by the individual trader in order to systemise evaluation of assets, risk management, types of trading, and objective setting. Most trading plans will comprise two parts: long-term trading objectives, and the route to achieving them.

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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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Treasury stock definition

Treasury stock is the portion of a company’s shares that it keeps in its own treasury. The shares do not count towards the total amount of outstanding shares listed, and neither pay dividends nor carry voting rights (because a company cannot pay itself, or own itself).

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Trend definition

When a market is making a clear, sustained move upwards or downwards, it is called a trend. Identifying the beginning and end of trends is a key part of market analysis. Trends can apply to individual assets, sectors, or even interest rates and bond yields. 

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Trending shares definition

A trending share is the term for when a company’s stock is undergoing a significant move in comparison to its underlying index. The trend can be either upwards or downwards.

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UCITS definition

UCITS stands for ‘undertakings for collective investment in transferable securities’, a European directive that provides a regulatory framework for which are managed and domiciled in the EU and intended for sale to retail clients.

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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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Variable costs definition

Variable costs are business expenses that change when production volumes change. They differ from fixed costs, which remain constant if production volume rises or falls.

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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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Volatility definition

A market’s volatility is its likelihood of making major, unforeseen short-term price movements at any given time.

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Volume definition

In trading, volume is the amount of a particular asset that is being traded over a certain period of time. It is often presented alongside price information, as it offers an extra dimension when examining an asset’s price history.

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VWAP definition

VWAP stands for volume weighted average price, a trading benchmark that is often used by passive investors. It reflects the ratio of an asset’s price to its total trade volume.

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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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WTI definition

WTI stands for West Texas Intermediate (occasionally called Texas Light Sweet), an oil benchmark that is central to commodities trading. It is one of the three major oil benchmarks used in trading, the others being Brent crude and Dubai/Oman.

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Yield definition

Yield is the income earned from an investment, most often in the form of interest or dividend payments. Yield is one of the ways in which investments can earn a trader money, with the other being the eventual closing of a position for profit.

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