Forex, Stocks & Financial Glossary

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Our Forex Introduction  Stock Trading and Options Trading pages will give you more insight into the money markets and online trading.

Trades, professions and interest groups have a sub-language, slang or jargon evolves over time. Terminology, definitions, abbreviations, acronyms, technical words and expressions are usually made up or taken from similarly related disciplines.

NASDAQ – The National Association of Securities Dealers Automated Quotation. NASDAQ is an acronym for the largest electronic screen-based equity securities market in the United States. An Index of over 5,000 company listings, it trades on average more shares per day than any other US stock market. The UK stock market index equivalent is the FTSE.

In the latter part of 2007, the NASDAQ began trading options.  Learn how to invest in ETFs - a way of buying selected stocks of one of many popular indexes like the NASDAQ, S&P500 or FTSE.

Watch a video about NASDAQ trading in today's markets – from INO TV.

OCO (One Cancels the Other) Order
A combination of a linked limit order and a stop loss orders at predetermined market levels, where if one is executed the other order is automatically cancelled. It is used to encapsulate foreign exchange risk within known parameters i.e. to try to achieve a favourable rate whilst also giving protection against adverse market moves. It is lodged with a Bank or Broker and offers 24 hour protection and will float until either cancelled or hit. It is free of charge to use and provides an excellent vehicle for companies to transact their currencies at the best point in a range, whilst protecting themselves from negative movements.

Offer Price is the rate quoted by the broker for selling the first of a particular pair of currencies.

Open Order
An order that will be executed when a market moves to its designated price. Normally associated with Good Till Cancelled Orders.

Open Position - A deal not yet reversed or settled with a physical payment.

Options Trading
An option is defined as the right, but not an obligation, to buy or sell an asset (such as stock or currency) at a fixed price before a predetermined date. However, CFDs (Contracts for Difference) are much more flexible and easier to learn than Options or Binary Options. Learn more here.

Over-leverage & Over-trading
This is risking too much of your money on a single trade, out of greed or possibly fear. Risk management is the key. Never trade without knowing how many lots you need to buy, what your risk reward is, or without knowing the exact amount of your trade. A tool that lets you trade correctly without emotion is the Forex Position Allotment Calculator. It takes all the guesswork and much of the risk out of every trade you enter.

Over The Counter (OTC) is used to describe transactions not conducted over an exchange.

Overnight
A trade that remains open until the next business day. Overnight Trading is the purchase or sale of currencies between the hours of 21:00 and 08:00 EST (New York time) which can be done through using Stop Loss or Limit Orders.

Penny Stock
Although this is not a Forex term, most traders are aware of this type of stock which is traded at a relatively low price and market capitalization, usually on smaller exchanges. Considered to be more highly speculative and risky due to lack of liquidity and wide spreads, nevertheless they are extremely popular with those who have learned how to trade this potentially lucrative market. Learn more about penny stock trading. 

Pip or PIP
The dictionary definition of 'pip' is the smallest countable part of something. A forex pip is  the fifth and final digit of a currency. For valuation purposes it applies only to the base currency. All currency pairs are quoted and valued against each other using 5 digits, but the position of the decimal point can vary. For example, the Japanese yen may be 107.00 to 1.0000 US dollar. The GBP/USD rate might be 1.9500 (i.e. £1.0000 is worth $1.9500). As a pip is 0.0001 of a dollar, if the rate moved up by 5 pips, it would become 1.9505.

Where did the term 'pip' or 'PIP' originate? Most accept it as an abbreviation or acronym for Price In Points, Percentage In Points or Price Interest Point. Stock and currency trading were around long before acronyms became popular and pips are not exclusive to currency markets either. Pip is a simple English word for the seed or smallest part of fruit (apple, orange pips). Apart from the audible BBC pips, US soul singer Gladys Knight had her Pips too!

However, while the origin of the forex pip is hardly important, the number of Pips In Profit you make is! The change in forex rates seen in the short term, such as a day, is often very small. It might be only 0.0001 percent. However, profit is still achievable; a trader who buys standard 'lot' of 100,000 units of a base currency e.g. the GBP, with a unit price of $1.5159, would be sure to make more than $100 profit if the value rose by just 0.001 percent during the day. If he held this level of trade for a month, it would be some $3,000 or $36,000 per year from capital of $100,000 dollars, a 36% annual return, unlikely elsewhere in today's markets. While each investment option has its downsides, the growth potential of gold-backed IRA is not under the threat of an inflationary economy. Despite the dynamics and the pressure in the market, the price of gold remains stead. Gold IRA's provide an alternative investment option for people who want to gain protection while benefiting from the capital appreciation.

So the forex PIP: Percentage In Point is the percentage of a single percentage point (1%) that a currency changes within a day.

Pip Spread
The pip difference between the Bid and Ask price. Typically 3 or more pips, varying also by currency pairs. Some brokers offer fixed spreads; others will change the spread (variable spread) depending on market activity.

Pip Value
If the USD is the base currency, one pip is worth $10 for a standard lot ($100,000) trade and $1 for a mini lot of $10,000. Some brokers offer even smaller lots and a pip will of course be worth less. For other base currencies such as for the GBP/USD or EUR/JPY pairs, a pip will have a different base currency value if converted back to dollars. See Lot Size.

Point
A 'point' represents 100 pips. If the GBP/USD rate moves up by 100 pips from 1.9500 to 1.9600, it has moved by one point. See Forward Points - 'points on', 'points off'.

Premium - In the currency markets, describes the amount by which the forward or futures price exceed the spot price.

Prime Rate - The interest rate at which banks lend money to their prime corporate customers.

Profit Feeder is a private subscription service for stock swing traders – a daily email detailing stocks likely to move significantly within the next few days.

Resistance
A term used in technical analysis, this is a forecast price level where the rate of exchange should encounter selling pressure, which should stop the price/rate from rising any further. Main market participants including investment funds and banks, look for resistance and support levels to place orders and thus they become, to a large degree, self-fulfilling prophecies. See also Support.

Revaluation is the opposite of Devaluation - an increase in the exchange rate for a currency as a result of central bank intervention.

Risk
Anything that lacks absolute certainty (like death and taxes!) involves a degree of risk. This can range between low, medium, high or even critical. In forex, it's possible to limit risk of loss in various ways, including placing predefined stops on trades. This should be part of a safer trading strategy. You cannot avoid risk, but you can reduce it or lessen its effects. See Spread, Scalping.

Risk Management - the employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.

S&P - Standard & Poor's Index
Named after the 1941 merger of the Standard Statistics Bureau and Henry Varnum Poor's publication History of Railroads and Canals in the United States, forerunners of present-day stock reporting and analysis. Named the Standard & Poor's Corporation, it was acquired in 1966 by McGraw-Hill Companies. Investing in the Spider ETF gives you shares in the S&P500.

Scalping
The word used to mean cutting the hair and skin (scalp) off an adversary's head as a trophy. Native Americans used to practice it. Nowadays scalping refers to making quick profits from sudden small swings in the market. This is how brokers make their money, but they call it spread. Some will close trader's account for scalping habitually.

Settlement
The process by which a trade is entered into the books and records the details of a transaction. Settlement of currency trades usually does not involve the actual physical exchange of one currency for another.

Short Position - An investment position that benefits from a decline in market price.

Slippage
The difference in pips between the order price approved by the client and the price at which the order is actually executed. Slippage can occur when a trade is not immediately available at the requested price, or when prices are changing rapidly. Unless a range is stipulated, the broker needs to confirm a different price for approval by the client (trader) who can accept or refuse the new entry price.

Spot Price, Spot Rate
By definition a spot forex transaction is a currency trade with a settlement date (liquidation) within a maximum of 2 working days following the placement. The spot rate is the current rate – the one used for an immediate order to buy or sell currency.

Spread
The price difference, quoted as a number of pips, between bid and offer rates (buy and sell) for currency pairs. In forex trading, spread is the main source of broker income. Instead of charging commission, banks and brokers earn from the spread of every trade entered and exited, winning or losing.

STArS Daily Signal Report is a daily stock trading subscription service (sometimes available on a 30 day trial basis which shows open stock positions, all of them potentially profitable, together with exit signals. You also get bonus ebooks worth $300 whether you continue to subscribe or not. Worth trying.

Sterling is slang for the British Pound (GBP). See Currencies.

Stop Loss Order
An order to buy or sell a currency pair (or stock) when a predetermined price is reached. It is lodged with a Bank or Broker and offers 24-hour protection and will float until either cancelled or hit. The 'secret' is knowing where to place your Stop Loss to protect your purchase or sale of a currency from negative movements in the market overnight or over a period of days/weeks. It is free of charge to use and provides an excellent vehicle for traders to protect themselves from negative movements while leaving the door open to benefit if the market continues to move in its favour.

Support Levels
Support is a forecasted price level where the rate of exchange should encounter buying pressure, which should stop the price/rate from falling any further. Main market participants look for support and resistance levels to place their orders and thus they become, to a larger degree, self-fulfilling prophecies. See also Resistance.

Swap - In currency trading, the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.

Swing Trading
A trade made usually in stocks (but also in forex) and held for between several days and up to a few weeks. A swing trade might be completed in less than a week, or if the stock consolidates it might take several weeks. While a swing trader will watch the market very closely, this trading style does not require constant monitoring. A swing trader will typically aim for a 10-15% average profit on trades.  While the stock market is much smaller than the forex, it is more 'physical'; predictions of price movement can be more reliable, depending on the source of information.

Technical Analysis
This is the study of market action, primarily through the use of charts, for the purposes of forecasting future prices and historical trends, support and resistance levels. It can be used to further identify trends and indicate trend reversals. Technical analysis is widely used by the main market players (traders, mainly banks, whose large trades can influence (but not control) price levels. Technical analysis has become arguably the most popular form of analysis in tracking and forecasting currency movements.

Tick
Shortest interval used in stock trading and forex charting. Equivalent to pips. A ticker or tick chart, table or graph, shows current and/or recent history of a currency's movement. Other charts show change over longer periods: 1, 5, 10, 15 minutes, hours, days weeks, months or years.

Top
A market 'top' is an area where the price in an upward trend encountered heavy resistance, was unable to progress any higher, and either reversed (went into a bear trend) or traded sideways.

Unsuccessful Trades
Losing trades are common among traders who haven't invested in knowledge first!

Volatility
The ability to change rapidly. Instability. 'Volatile' describes rapid changes in exchange rates. It is not easy to know where to enter a trade if a currency pair is too volatile.

Volcone Analyzer Pro
Popular software program from the Options University which tells you if an Option is 'cheap' or 'expensive', based on its actual historical volatility. See a free video of how the analyzer works.

Vis-à-vis
A French expression long adopted into English, usually without the grave accent, and pronounced 'veez-ar-vee'. It means 'face-to-face'; compared with, opposing, opposite to, in relation to. Used by forex commentators to compare currency pair rates e.g. the dollar/yen vis-a-vis the pound/yen. Virtually the same as Vs.

Vs. (vs  vs. v. v)
Spoken as 'versus', or you can say 'against', these are all abbreviations of the Latin word and English legal term versus (against) referring to the opposing sides in a lawsuit e.g. Kramer vs. Kramer. Vs is used to compare two items such as a pair of currencies: dollar vs yen, EUR vs USD; also a match or contest between sporting participants – football teams, tennis players, boxers etc.

Whipsaw slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.

XAG (silver) and XAU (gold) are ISO codes. These are quoted as one ounce (Oz.) against the US dollar and other currencies, and can be traded in pairs like XAU/USD, XAG/GBP etc. The origin is from the Latin words and chemical symbols for these precious metals; silver is argentum (Ag), gold aurum (Au); also platinum XPT and palladium XPD. See also Currency Codes. Open a vaulted bullion account and trade in precious metals.

XTrade is the international broker of choice for trading CFDs, forex, commodities, shares and indices.

Zero Losses
Absolutely no trader wins all the time! Reduce your risk of loss by education, taking advice from independent, reliable sources and keeping your confidence high and your leverage low!

Zero Sum Game
Forex, futures and options trading are known as "zero-sum games". Basically, for every winner or winning trade, there are losers with matching losing trades; the amount of money involved or wealth (excluding spread or broker costs) remains the same; it just changes hands. Stock trading is not a zero sum game; stock values change as prices go up or down, regardless of who actually owns it. Wealth can be created.

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