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.
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.
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.
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.
Alpha is the measurement of an investment portfolio’s performance against a certain benchmark – usually a stock market index. In other words, it’s the degree to which a trader has managed to ‘beat’ the market over a period of time. The alpha can be positive or negative, depending on its proximity to the market.
An annual general meeting (AGM) is a yearly gathering between the shareholders of a company and its board of directors. Generally, this is the only time that the directors and shareholders will meet throughout the year, so it is a chance for the directors to present the company’s annual report.
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.
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.
An asset is an economic resource which can be owned or controlled to return a profit, or a future benefit. In financial trading, the term asset relates to what is being exchanged on markets, such as stocks, bonds, currencies or commodities.
At the money (ATM) is a term used to describe an options contract with a strike price that is identical to the underlying market price. At the money options see a lot of trading activity, because they are so close to becoming profitable.
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.
Automated trading – also known as algorithmic trading – is the use of algorithms for making trade orders.
When a trader purchases an asset, the asset’s price drops, and if the trader purchases more, it is referred to as averaging down.
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.
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.
A basis point is a unit of measurement used to quantify the change between two percentages – it can also be referred to as ‘bp’, which is pronounced ‘bip’ or ‘beep’. A basis point is equal to one hundredth of one percent, or 0.01%.
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.
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.
A financial instrument’s beta is a measure of its risk or volatility when compared to the wider market.
In trading and investing, the bid is the amount a party is willing to pay in order to buy a financial instrument.
Binaries are a type of financial derivative, also referred to as binary options or binary bets.
Binary trading is a type of trading that involves utilising binary options.
Blue-chip stocks are the shares of companies that are reputable, financially stable and long-established within their sector. Over time, the companies that are considered blue chip tend to change, so the exact definition of what is required for blue-chip status can be vague. However, a company that is considered blue chip will tend to be at or near the very top of its sector, feature on a recognised index, and have a well-known brand.
Bollinger bands are a popular form of technical price indicator. They were developed by a pioneering technical trader called John Bollinger in the 1980s.
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.
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.
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.
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..
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.
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.
When a market, instrument or sector is on an upward trend, it is generally referred to as a bull market.
Buying a financial instrument means taking ownership of it from someone else, whether it is a commodity, stock or another asset.
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.
A call option is a contract the gives the buyer the right but not the obligation to buy a specific an asset at a specific price, on a specific date of expiry. The value of a call option appreciates if the asset's market price increases.
CFD trading is the speculation on financial markets via contracts for difference (CFDs), a form of financial derivative.
Crystallisation means selling an asset in order to realise capital gains or losses. When an investor buys an asset, any increase or decrease in the market price will not automatically translate to profit or loss – this is only realised after the position has been closed.
A currency future is a contract that details the price at which a currency could be bought or sold, and sets a specific date for the exchange.
A currency option is a type of options contract that gives the holder the right, but not the obligation, to buy or sell a currency pair at a given price before a set time of expiry. To get this right, the holder of the option pays a premium to the seller (known as the option’s writer).
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.
In spread betting, DFB stands for daily funded bet.
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.
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.
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.
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.
A forex broker is a firm that buys and sells currencies on behalf of retail traders, usually via a forex trading platform. Like stockbrokers, they charge a fee – though usually in the form of a spread instead of commission – in order to execute orders placed by their clients.
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.
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.
Shares trading is the buying and selling of company stock – or derivative products based on company stock – in the hope of making a profit.
A sprint is a type of simplified binary option, differing from standard binaries in their expiry and pricing. They are also known as sprint markets, and are only available with IG.
Tom-next is short for ‘tomorrow-next day’, which is a short-term forex transaction that enables traders to simultaneously buy and sell a currency over two separate business days: tomorrow, and the next day.