Trade Smart with our Guide to CFD Trading Terms
| Term | Definition |
|---|---|
| Algorithmic Trading | Automated trading using algorithms (pre-set instructions) to execute trades, often used in CFD trading for high-frequency strategies. |
| Analysis (Technical/ Fundamental) | Technical analysis involves studying charts and patterns to forecast future price movements, while fundamental analysis looks at economic indicators. |
| Appreciation | An increase in the value of an asset. This is important in CFD trading as it affects the profit and loss of open positions. |
| Arbitrage | The practice of taking advantage of a price difference between two or more markets, striking a combination of matching deals that capitalize upon the imbalance. |
| Ask Price | The price at which a CFD can be bought- it is the lowest price a seller is willing to accept. |
| Ask Spread | The difference between the ask (buy) and bid (sell) prices of a CFD, reflecting the cost of executing a trade. |
| Asset | Anything of value or a resource of value that can be traded. In CFDs, this includes stocks, commodities, indices, and currencies. |
| ATR (Average True Range) | A technical tool in CFD trading that measures market volatility by averaging the range of price movements over a set period. It helps assess potential price fluctuation but doesn't indicate direction. Higher ATR values denote greater volatility. |
| Aussie | An informal term for the Australian dollar (AUD), referencing the country's name. |
| Automated Trading | Trading systems that automatically generate and execute buy and sell orders based on pre-set rules. |
| Available | In the context of CFD trading, 'available' refers to the funds in a trader's account that can be used to open new positions. It is the balance after accounting for margin requirements on open trades and any unrealized profits or losses. |
| Average Down | This refers to increasing a position as the market moves against it, to reduce the average cost per unit. |
| Term | Definition |
|---|---|
| Backtesting | The process of testing a trading strategy on historical data to see how it would have performed in the past. |
| Balance | The total amount of money in a trading account, including all profits and losses from open positions. |
| Bandwidth | In trading, this can refer to the capacity of a trading system or network to handle trading activity, important in high-frequency CFD trading. |
| Base Currency | The first currency listed in a forex pair. For example, in the EUR/USD pair, the Euro is the base currency. |
| Bear Market | A market condition where prices are falling or expected to fall, often leading to a more cautious trading approach. |
| Bearish Sentiment | This term describes the prevailing mood among traders that a market or specific asset is expected to decline in value. In CFD trading, bearish sentiment can influence trading strategies, leading to an increase in selling or shorting activities. |
| Bid Price | The price at which a trader can sell an asset. It's the highest price a buyer is willing to pay. |
| Bid-Ask Spread | The difference between the bid (sell) and ask (buy) prices of a CFD, representing the transaction cost. |
| Blue Chip Stock | Refers to shares of large, well-established, and financially stable companies with a history of reliable performance. In CFD trading, blue chip stocks are often seen as lower-risk investments for long-term positions. |
| Bollinger Bands | A technical analysis tool used in CFD trading, consisting of a moving average line and two standard deviation lines. These bands widen during increased market volatility and narrow during less volatile periods, helping traders gauge market trends and potential price breakouts. |
| Breakout | A term used in technical analysis that indicates a situation where the price moves above a resistance level or below a support level, signaling a potential new trend. |
| Broker | An individual or firm that acts as an intermediary, facilitating the buying and selling of CFDs. |
| Buck | Another term for the U.S. dollar, often used informally. |
| Bull Market | A market condition where prices are rising or expected to rise, often encouraging more aggressive trading strategies. |
| Bullish Market | Refers to a market environment where prices are consistently rising, indicating strong investor confidence and optimism. In CFD trading, a bullish market suggests the potential for profitable long positions. |
| Buy and Hold | A long-term investment strategy where a trader buys an asset and holds it for an extended period, regardless of short-term market fluctuations. In CFD trading, this strategy is less common due to the short-term nature of most CFD contracts. |
| Buy Order | An instruction in CFD trading to purchase a specific quantity of an asset at a specified price. It's executed when the market price meets or falls below the buy order price. |
| Buy Position (Long Position) | A buy position is where a trader purchases a CFD with the expectation that the underlying asset's market price will rise. |
| Term | Definition |
|---|---|
| Cable | A term used in Forex trading, especially in CFDs, to refer to the GBP/USD currency pair. The term originates from the transatlantic cable used to transmit the exchange rate between the British pound and the US dollar. |
| CAC 40 | A benchmark French stock market index representing the 40 largest equities listed on the Euronext Paris exchange. In CFD trading, the CAC 40 index is used to speculate on the overall performance of the French stock market. |
| Call Option | In finance, a call option is a contract giving the buyer the right, but not the obligation, to buy a specified amount of an underlying asset at a set price within a specified time. With CFDs, options like calls are not directly traded, but CFDs on assets with options can be influenced by the options market. |
| Candlestick Chart | A type of financial chart used to describe price movements of a security, derivative, or currency. Each "candlestick" typically represents one day of trading and is valuable for technical analysis. |
| Capital | Refers to the amount of money a trader has available to trade. It includes funds used to hold positions as well as any unused balance. |
| Carry Trade | A strategy where a trader borrows money at a low-interest rate to invest in an asset that provides a higher rate of return. In CFD trading, this can relate to holding positions overnight, leading to swap or rollover fees. |
| Central Bank | A national institution that manages a country's currency, money supply, and interest rates. Decisions and policies of central banks can significantly impact market movements and currency values, influencing trading strategies, particularly in Forex CFDs. |
| CFD (Contract for Difference) | A financial derivative that allows traders to speculate on asset price movements without owning the underlying asset. |
| Chart Patterns | Patterns formed by the price movements on a chart. Used as part of technical analysis to predict future market movements. |
| Closed Trade | This term indicates that a previously open trading position has been terminated. It involves executing a trade opposite to the initial one to exit the market. For instance, if the initial trade was a buy (long), the trade is closed by selling, and vice versa. |
| Close Position | The action of exiting a trade, which can result in a profit or loss depending on the change in price since the position was opened. |
| Commodity CFDs | CFDs that allow traders to speculate on the price of commodities, like gold, oil, or agricultural products, without owning the physical commodity. |
| Commission | A fee charged by a broker for executing a trade. Some CFD brokers offer commission-free trading, making their money from the spread instead. |
| Confirmation | A tool in technical analysis where two or more indicators or analysis techniques confirm the same market movement prediction. |
| Contract Size | The deliverable quantity of commodities or financial instruments underlying a contract, determining the value of one CFD contract. |
| Correction | In financial markets, a correction is a short-term decline in asset prices, typically around 10%, following a significant upward market trend. In CFD trading, corrections are seen as temporary reversals that adjust overvalued asset prices, offering potential trading opportunities. |
| Correlation | A statistical measure of how two securities move in relation to each other, which in CFD trading can be used to manage portfolio risk. |
| Counterparty Risk | The risk that the other party in a CFD (usually the broker) will not fulfill their contractual obligations. |
| CPI (Consumer Price Index) | A statistical measure that examines the weighted average of prices of a basket of consumer goods and services. In CFD trading, CPI is a crucial economic indicator, as changes in consumer prices can signal inflation trends, influencing central bank policies and market sentiment, especially in Forex CFDs. |
| Cross Currency Pair | This term refers to a currency pair that doesn't include the U.S. dollar (USD). For example, EUR/JPY or GBP/CHF. These pairs are traded directly without being converted into USD first. |
| Cross Rates | Cross rates are exchange rates between two currencies in a currency pair that does not include the domestic currency. For example, if you're trading GBP/JPY and you're a trader based in the United States, you would need to calculate the cross rate between GBP and JPY without involving USD. It's essentially the exchange rate between two non-USD currencies. |
| Currency Pair | In forex CFD trading, this refers to the quotation of two different currencies, with the value of one currency being quoted against the other. |
| Current Price | The most recent price at which a CFD is traded, constantly changing during market hours. |
| Term | Definition |
|---|---|
| DAX 30 | The DAX 30 (Deutscher Aktienindex) is a major stock market index consisting of the 30 major German blue chip companies trading on the Frankfurt Stock Exchange. In CFD trading, the DAX 30 is widely used for speculating on the overall economic performance of Germany's largest companies. |
| Day Trading | A trading strategy where positions are opened and closed within the same trading day, commonly used in CFD trading. |
| Dealer | An individual or firm that acts as a principal in a trading transaction, often the counterparty in a CFD trade. |
| Dealing Desk | A term used to describe brokers who create a market for their clients and often take the other side of a trade. |
| Dealing Spread | The difference between the buying and selling price offered by a broker. |
| Derivative | A financial security whose value is derived from an underlying asset or group of assets. CFDs are a type of derivative. |
| Diversification | A risk management strategy that mixes a wide variety of investments within a portfolio, applicable in CFD trading by trading different asset classes. |
| Dividend | A distribution of a portion of a company's earnings to its shareholders. In CFD trading, traders can receive dividend adjustments if they hold a position in a dividend-paying stock CFD. |
| Dow Jones Industrial Average (DOW) | A stock market index that measures the stock performance of 30 large, publicly-owned companies trading on the New York Stock Exchange (NYSE) and the NASDAQ. In CFD trading, the DOW is a popular index for speculating on the broader U.S. market's performance. |
| Drawdown | The decline in the value of a trading account from its peak to its low, often expressed as a percentage. |
| Duration | Refers to the length of time a position is held in trading. In CFD trading, this can range from very short-term (minutes or hours) to longer-term (days or weeks). |
| Dynamic Leverage | A system where the leverage offered by a broker changes based on the size of the open position. |
| Term | Definition |
|---|---|
| Earnings Report | A document issued by companies detailing their earnings, expenses, and net profit over a specific period. |
| ECB (European Central Bank) | The central bank for the euro and administers monetary policy within the Eurozone. In CFD trading, ECB's decisions on interest rates, monetary policy, and economic outlook significantly influence the value of the euro and market sentiment, especially in Forex CFDs involving the euro. |
| Economic Calendar | A schedule of major economic events that could impact financial markets, essential to traders for planning and strategies. |
| Economic Indicator | Statistical data and reports that indicate the current state of the economy or a financial market, used by traders for fundamental analysis. |
| ECN Broker (Electronic Communication Network) | A type of broker that provides a platform where traders can trade directly with other market participants, offering lower spreads but may charge a commission. |
| Equity | Refers to the value of a trading account if all positions were closed, including all profits and losses. |
| ETF (Exchange-Traded Fund) | A versatile CFD trading option that bundles various assets (e.g., stocks, bonds) for easy trading on stock exchanges, offering diversification and potential gains. |
| Execution | The completion of a buy or sell order in CFD trading. |
| Exotic Pair | In forex CFD trading, a less commonly traded currency pair that typically includes a major currency and the currency of a smaller or emerging economy. |
| Expiry Date | The date on which a CFD contract becomes invalid and is settled. Some CFDs, particularly those based on futures contracts, have expiry dates. |
| Exposure | The amount of money at risk in a trading position or across a portfolio of positions. |
| Extended Hours Trading | Trading that takes place either before or after the regular trading hours of a stock exchange. |
| Term | Definition |
|---|---|
| Fed (Federal Reserve) | The U.S. central bank, influential in CFD trading for its decisions on interest rates and monetary policy, significantly impacting USD and U.S. market-based CFDs. |
| Fiber | Slang for the EUR/USD currency pair. |
| Fibonacci Retracement | A technical analysis tool. It involves a set of horizontal lines that indicate where support and resistance are likely to occur, based on Fibonacci numbers. |
| Fill or Kill (FOK) | A type of order in CFD trading where the trader instructs the broker to execute a transaction immediately and in its entirety, or not at all. |
| Financial Instrument | Any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. In CFD trading, the CFD itself is a financial instrument. |
| Financing Costs | Fees charged for holding a position overnight, reflecting the cost of the capital provided to maintain the position. These costs are also known as swap or rollover rates. |
| Fixed Spread | A spread that remains constant, not varying with market conditions. |
| Flat/Flat Position | Refers to a trading position that has been fully closed out, meaning the trader holds no risk in the market. |
| Floating Profit/Loss | The current profit or loss on an open position, which changes with market movements until the position is closed. |
| Forex | Short for 'foreign exchange,' is the market in which currencies are traded. In CFD trading, Forex CFDs allow traders to speculate on the changing values of currency pairs without owning the actual currencies. |
| Forward Contract | A non-standardized contract between two parties to buy or sell an asset at a specified future time at a price agreed upon today. In CFD trading, this concept is used in 'futures CFDs'. |
| FTSE | An abbreviation for the Financial Times Stock Exchange Group, which includes a series of indices representing the performance of UK stocks. The most notable is the FTSE 100, tracking the 100 largest companies on the London Stock Exchange. |
| Fundamental Analysis | A method of measuring a financial instrument's intrinsic value by examining related economic and financial factors. In CFD trading, it involves studying economic indicators, earnings reports, and other factors. |
| Futures Contract | A standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future. |
| Futures CFDs | These are CFDs that derive their value from the future price of an underlying asset, such as commodities, indices, or treasury notes. |
| Term | Definition |
|---|---|
| Gann Fan | A technical tool in CFD trading used to predict future price movements by identifying key support and resistance levels through angled lines on a price chart. |
| Gap | A term in CFD trading referring to a situation where a financial instrument's price changes significantly from one level to another without any trading in between. Gaps often occur due to market news or events happening after the close of a market or over the weekend. |
| Gearing | Another term for leverage in trading. It refers to trading a position larger than the amount of capital in the trader's account. |
| Going Long | A term used in trading when a trader buys a CFD with the expectation that the underlying asset's price will rise. |
| Going Short | This means selling a CFD with the expectation that the underlying asset's price will fall. It's a strategy used to profit from declining market prices. |
| Gold CFDs | CFDs that allow traders to speculate on the price movements of gold without owning physical gold. It's a popular choice for traders looking to hedge against inflation or economic uncertainty. |
| Good 'Til Cancelled (GTC) | A type of order in CFD trading that remains active until it is filled or the trader cancels it. |
| Greenback | A slang term for the U.S. dollar, often referring to the color of U.S. banknotes. |
| Gross Profit/Loss | This refers to the total profit or loss from all open and closed positions, before accounting for any fees or commissions. |
| Guaranteed Stop Loss Order | A risk management tool. It guarantees to close your trade at a specified price, regardless of market gaps or slippage, often for an additional fee. |
| Term | Definition |
|---|---|
| Head and Shoulders | A bearish reversal pattern in technical analysis. It typically consists of three peaks, with the middle peak (the head) being higher than the other two (the shoulders). In CFD trading, traders watch for this pattern as it may signal a potential trend reversal from bullish to bearish. |
| Hedge/Hedging | A strategy used in trading to reduce or eliminate the risk of adverse price movements in an asset. Traders might open a position in a CFD that is inversely correlated to an existing position in their portfolio. |
| High (High Price) | This term refers to the highest price at which a CFD or underlying asset has traded during a particular time frame, such as a trading day. |
| Historical Data | Past market data including prices, volume, and other trading statistics. |
| Holding Cost | Also known as a 'swap' or 'rollover fee', this is the cost or profit of holding a position overnight, based on the interest rate differential between the two currencies in a Forex pair, or the asset's underlying market. |
| HODL | A misspelling of "hold" that has become a slang term in the crypto community. It refers to the act of holding onto cryptocurrencies rather than selling them, even during price fluctuations. |
| Horizontal Resistance/Support | In technical analysis for CFD trading, these are price levels at which an upward or downward trend is expected to pause due to a concentration of supply (resistance) or demand (support). |
| Hybrid Model | In the context of CFD brokers, a hybrid model refers to a brokerage that combines different types of trade execution models, such as market maker and ECN (Electronic Communication Network). |
| Term | Definition |
|---|---|
| Index CFDs | Contracts for Difference based on market indices, such as the S&P 500 or FTSE 100. Traders can speculate on the overall movement of the stock market or specific sectors without owning the underlying stocks. |
| Initial Margin | The initial deposit required to open a position. It's a percentage of the total trade value and represents a form of security or collateral. |
| Instrument | In CFD trading, an instrument is the underlying asset on which the CFD is based, such as a stock, commodity, currency pair, or index. |
| Interest Rate Differential | A key factor in the holding costs of a Forex CFD. It's the difference in interest rates between the two currencies in the currency pair being traded. |
| In-the-Money | A term borrowed from options trading, used when a CFD trade is profitable. For a long position, it means the market price is above the entry price; for a short position, the market price is below the entry price. |
| Investment Strategy | A plan for allocating assets and conducting trades. In CFD trading, this might involve choosing which markets to trade, how much capital to allocate to each trade, and the types of risk management techniques to use. |
| Inverted Yield Curve | A rare occurrence in the bond market where short-term interest rates become higher than long-term rates. While not a direct part of CFD trading, it's an important economic indicator that can affect market sentiment and asset prices. |
| Islamic Account | A type of trading account that complies with Sharia law, important for Muslim traders. Islamic CFD accounts do not involve interest payments, in line with Islamic finance principles. |
| Term | Definition |
|---|---|
| Joint Account | A trading account operated by two or more individuals. |
| JPY | An abbreviation for the Japanese Yen, a major currency often involved in Forex trading. The JPY is known for its liquidity and is a key component in popular currency pairs like USD/JPY. |
| Jump | A sudden and significant price movement in a financial market. In trading, jumps can occur due to economic news, events, or market announcements, impacting the value of open positions. |
| Term | Definition |
|---|---|
| Keltner Channel | A technical analysis tool used in CFD trading. It consists of three lines: a central moving average line and two channel lines above and below it. The channel lines are typically set at a distance based on the Average True Range (ATR), and the tool is used to identify potential breakout points in the market. |
| Key Level | In technical analysis, a key level is a specific price level considered significant based on past price action. These levels often act as support or resistance, where the price might bounce back or breakthrough. |
| Kiwi | A slang term for the New Zealand Dollar (NZD). |
| Knock-Out Option | Although more common in options trading, the concept can be relevant in CFD contexts as well. It refers to an option with a built-in mechanism to expire if a specified price level is reached, effectively 'knocking out' the option. In CFD trading, similar risk management strategies can be employed to limit losses. |
| KYC (Know Your Customer) | Regulatory requirements for brokers to verify the identity, suitability, and risks involved with maintaining a business relationship. |
| Term | Definition |
|---|---|
| Leverage | A tool that allows traders to control a large position with a relatively small amount of capital. Leverage amplifies both potential profits and losses. |
| Limit Order | An order to buy or sell a CFD at a specific price or better. A buy limit order will only be executed at the limit price or lower, while a sell limit order will be executed at the limit price or higher. |
| Liquidity | Refers to how quickly and easily an asset can be bought or sold in the market without affecting its price. High liquidity indicates a high volume of trading. |
| Long Position | Taking a long position means buying a CFD with the expectation that the underlying asset's price will rise. |
| Long-term Trading | A CFD trading strategy focused on holding positions over an extended period, often months or years, to capitalize on long-term market trends and potential profits. |
| Loonie | A slang term for the Canadian Dollar (CAD). |
| Lot | A standardized number of units of the underlying asset that are being traded in a CFD contract. In Forex CFD trading, a standard lot typically represents 100,000 units of the base currency. |
| LSE | An abbreviation for the London Stock Exchange, one of the world's oldest and largest stock exchanges. |
| Leveraged ETFs | Exchange-Traded Funds that use financial derivatives and leverage to amplify the returns of an underlying index. While not a CFD themselves, traders can trade CFDs that track the performance of these ETFs. |
| Term | Definition |
|---|---|
| MACD (Moving Average Convergence Divergence) | A trend-following momentum indicator used in technical analysis, showing the relationship between two moving averages of an asset's price. |
| Margin | The amount of capital required to open and maintain a position. It's essentially a deposit as a part of the total trade value. |
| Margin Call | A demand from a broker for a trader to deposit additional money into their account to maintain the minimum margin requirement for their open positions. |
| Market Maker | A broker or firm that provides both buy and sell prices, facilitating trades by taking the opposite position to traders. |
| Market Order | An order to buy or sell a CFD immediately at the best available current price. |
| MT4/MT5 (MetaTrader 4/5) | Popular online trading platforms used for trading, offering a range of tools for technical analysis. |
| Micro Lot | In Forex CFD trading, a micro lot represents 1,000 units of the base currency, smaller than a standard lot, allowing for lower-risk trades. |
| Moving Average | A widely used indicator in technical analysis that smooths out price data to create a single flowing line, making it easier to identify the direction of the trend. |
| Multiplier | Similar to leverage, a multiplier in CFD trading increases the trader's exposure to an asset. A higher multiplier magnifies both potential profits and losses. |
| Term | Definition |
|---|---|
| NASDAQ | A global electronic marketplace for buying and selling securities, and a benchmark index for U.S. technology stocks. Traders often trade on the price movements of NASDAQ-listed stocks or the index itself. |
| Negative Balance Protection | A policy offered by some CFD brokers that ensures traders cannot lose more money than they have deposited in their trading account. |
| Net Position | The amount of a particular asset a trader is holding after taking into account all open buy (long) and sell (short) positions. |
| New York Stock Exchange (NYSE) | The world's largest stock exchange by market capitalization, located in New York City. |
| No Dealing Desk (NDD) | Refers to brokers who provide direct access to the interbank market without passing orders through a dealing desk. |
| Noise | In the context of CFD trading, 'noise' refers to random or irrelevant data or events that can cause confusion in the interpretation of market movements. |
| Non-Farm Payroll (NFP) | A key economic indicator for the United States, representing the number of jobs added or lost in the economy over the last month, excluding farm workers. |
| Notional Value | The total value of a leveraged position's assets. In CFD trading, this can be much higher than the actual amount invested due to leverage. |
| Term | Definition |
|---|---|
| Offer Price | Also known as the 'ask price', it's the price at which you can buy a CFD. It's the lowest price a seller is willing to accept. |
| Open Position | A trade that has been initiated but not yet closed. In CFD trading, an open position represents an ongoing investment that is subject to market fluctuations. |
| Order | Instructions to a broker to buy or sell a CFD. Orders can be market orders (executed immediately at the best available price) or limit orders (executed at a specified price). |
| Order Book | A list of buy and sell orders for a particular CFD or asset, organized by price level. It’s used to gauge market depth and sentiment. |
| Oscillator | A technical analysis tool that varies over time within a band (above and below a centerline, or between set levels). Examples include the Relative Strength Index (RSI) and Stochastic Oscillator. |
| Over-the-Counter (OTC) | A decentralized market where trading occurs directly between two parties, without the supervision of an exchange. CFDs are typically traded OTC. |
| Overnight Position | A position that is held open past the close of the trading day. Holding a position overnight can incur swap or rollover charges, especially in Forex CFD trading. |
| Overtrading | Excessive buying and selling of CFDs, often driven by emotional decision-making or an attempt to recover losses. Overtrading can lead to increased risks and fees. |
| Term | Definition |
|---|---|
| Parity | In CFD trading, "parity" refers to the condition where two currencies have the same value or exchange rate. It can also denote a specific exchange rate, often expressed as 1:1, where one unit of one currency equals one unit of another. |
| Pip | A pip (percentage in point) represents a very small measure of the change in a currency pair. It's typically the fourth decimal place (0.0001). |
| Pipette | A fraction of a pip, often used when referring to very small price movements. |
| Purchasing Managers Index (PMI) | A key trading indicator measuring the health of a sector's economy. Values above 50 signify growth, below 50 suggest contraction, impacting markets. |
| Position | A position is an investment in a CFD. A position can be either long (buying a CFD) or short (selling a CFD). |
| Position Sizing | The process of determining how much of a particular asset or CFD to buy or sell. It's a key part of risk management, balancing potential profit against risk. |
| Portfolio | A collection of investment assets. In CFD trading, a diversified portfolio can help spread risk. |
| Pound | Refers to the British pound, GBP. |
| Profit/Loss (P/L) | The total gain or loss on a position. It's realized when the position is closed and can be positive (profit) or negative (loss). |
| Price Band | A range within which a CFD's price is expected to fluctuate over a certain period. Price bands can be used for setting stop-loss and take-profit orders. |
| Price Feed | The real-time stream of prices for CFDs from a broker. Accurate price feeds are essential for effective trading. |
| Prime Brokerage | A service offered by banks to large clients, like hedge funds, that allows them to outsource some of their investment activities, such as trading. |
| Principal | In financial trading, including CFDs, the principal can refer to the original amount of money invested or the main party involved in a transaction. |
| Pyramiding | A strategy in CFD trading where a trader increases their position size as profits are earned, potentially amplifying gains. |
| Term | Definition |
|---|---|
| Quantitative Easing | A term referring to a central bank's monetary policy tool involving the purchase of financial assets, such as government bonds, to increase money supply and stimulate the economy. QE can influence markets by affecting interest rates and asset prices. |
| Quota | Sometimes used in the context of commodities, a quota can refer to a government-imposed trade restriction on the quantity of a commodity that can be imported or exported. While not a direct CFD term, it can affect commodity CFD prices. |
| Quotation | The process of stating a current bid and ask price for a CFD, from which traders can execute trades. |
| Quote Currency | This is the second currency in a currency pair. For example, in the EUR/USD pair, USD is the quote currency. It indicates how much of the quote currency is needed to buy one unit of the base currency. |
| Quoted Spread | The difference between the bid and ask price of a CFD as provided by a broker. The spread can be variable or fixed, depending on the broker and market conditions. |
| Quintile | A statistical value of a data set that represents 20% of a given population. In trading analysis, quintiles can be used to gauge performance or volatility metrics, categorizing them into segments for comparison. |
| Term | Definition |
|---|---|
| Rally | A period during which prices in the financial markets increase significantly. In CFD trading, a rally offers opportunities for profit, particularly for those with long positions. |
| Range | The difference between the high and low prices of a CFD or underlying asset over a specific time period. Traders often look for range-bound markets to implement specific trading strategies. |
| Rate of Return | The gain or loss on an investment over a specified period, expressed as a percentage. In CFD trading, it reflects the performance of open and closed positions. |
| Rebate | A cashback that some brokers provide to their clients based on their trading volume or other criteria. |
| Recession | A significant decline in economic activity across the economy, lasting more than a few months. Recessions can greatly affect market sentiment and trading strategies. |
| Regulation | Rules and guidelines set by authorities to govern the operation of financial markets. Regulation ensures transparency, fairness, and safety for traders. |
| Re- quote | When the broker offers a revised price after your initial order, often due to fast market changes. It affects trade execution. |
| Resistance Level | In technical analysis, a price level at which rising prices tend to stop or reverse. Knowing resistance levels helps traders make informed decisions about entering or exiting trades. |
| Risk Management | The process of identifying, analyzing, and accepting or mitigating uncertainty in investment decisions. This includes setting stop-loss orders and choosing appropriate position sizes. |
| Rollover | This refers to the process of extending the settlement date of an open position. A rollover may involve a swap charge or credit. |
| Round Trip | Refers to completing both a buy and a sell transaction for the same asset, resulting in a complete trading cycle. It represents the journey from opening and closing a position, potentially resulting in gains or losses. |
| RSI (Relative Strength Index) | A momentum indicator used in technical analysis that measures the speed and change of price movements. It helps traders identify overbought or oversold conditions. |
| Term | Definition |
|---|---|
| S&P 500 | The S&P 500, or Standard & Poor's 500, is a major stock market index that represents 500 of the largest publicly traded companies in the United States. It's widely used to gauge the overall performance of the U.S. stock market. |
| Scalping | A trading strategy involving making numerous trades over a very short time frame to profit from small price changes. |
| Sell Order | An instruction to your broker to sell a specific asset or CFD at the current market price. It allows traders to profit from falling asset prices by selling first and buying back at a lower price later. |
| Settlement | The process of finalizing a trade in which the seller transfers the asset to the buyer and receives payment in return. |
| Short Position | When a trader sells a CFD with the expectation that the underlying asset's price will fall. It allows traders to profit from declining market prices. |
| Slippage | The difference between the expected price of a trade and the price at which the trade is actually executed. Slippage often occurs in fast-moving markets. |
| Spread | The difference between the buy (ask) and sell (bid) prices quoted for a CFD. The spread represents the broker's fee for executing the trade. |
| Speculation | The act of trading financial instruments with the aim of profiting from fluctuations in their price, without intending to hold the asset for the long term. |
| Stochastic Oscillator | A momentum indicator used in technical analysis, comparing a particular closing price of an asset to a range of its prices over a certain period. |
| Stop-Loss Order | A risk management tool used to limit potential losses. It automatically closes a trade at a predetermined price level that is less favorable than the current market price. |
| Support Level | In technical analysis, a price level at which a declining asset's price tends to stop falling and may bounce back up. Identifying support levels can help traders make informed trading decisions. |
| Swap | A fee paid or received for holding a position overnight. It's based on the interest rate differential between the two assets in the pair. |
| Swing Trading | A trading strategy that aims to capture gains in a financial asset over a few days to several weeks. Swing traders utilize various methods to identify potentially profitable trading opportunities. |
| Systematic Risk | The risk inherent to the entire market or market segment, also known as market risk. It cannot be eliminated through diversification and affects most assets. |
| Swissy | A slang term for the Swiss Franc (CHF). Traders may refer to CHF as "Swissy" when trading currency pairs like USD/CHF. |
| Term | Definition |
|---|---|
| Take-Profit Order | An order to close a trade when it reaches a specific level of profit. In CFD trading, this is used to lock in profits before the market potentially moves in the opposite direction. |
| Technical Analysis | A method of evaluating CFDs by analyzing statistical trends gathered from trading activity, such as price movement and volume. It's used to predict future market movements. |
| Tick | A "tick" refers to the smallest price movement in an asset's price, often one increment of the asset's price. It is essential for tracking price changes and determining trading strategies. |
| Ticker Symbol | A unique series of letters assigned to a security for trading purposes. Each CFD based on a particular asset (like a stock or commodity) will have a ticker symbol. |
| Trading Platform | The software used to open, close, and manage market positions through a financial intermediary like the WebTrader Platform. |
| Trading Strategy | A set plan of action designed to achieve a long-term or short-term investment goal. It can include rules for trade entries, exits, and risk management. |
| Trailing Stop | A type of stop-loss order that moves with the market price and is designed to protect profits while allowing a trade to remain open and benefit from favorable market movements. |
| Transaction Cost | The costs associated with trading a CFD, which typically include the spread, and may also involve commissions or other fees. |
| Trend | The direction in which the market or a particular CFD's price is moving. Identifying trends is a key aspect of technical analysis. |
| Turnover | The total volume of trades in a given period. In CFD trading, high turnover can indicate high liquidity and active trading. |
| Two-Way Price | A price quotation that indicates the bid (buy) and ask (sell) price. This helps traders understand the current buying and selling prices for a particular CFD. |
| Term | Definition |
|---|---|
| Underlying Asset | The financial instrument upon which a CFD is based. It can be a stock, commodity, currency pair, index, or other assets. The performance of the CFD is directly related to the performance of this underlying asset. |
| Unrealized Profit/Loss | The profit or loss on an open position that has not yet been closed. This value fluctuates with the market price of the underlying asset. |
| Uptick | A term used to describe an increase in the price of an asset from its previous price. In CFD trading, an uptick might signal a potential upward trend or a reversal in a downward trend. |
| Uptrend | A term in technical analysis referring to a market price that is generally moving upward over time. Identifying an uptrend is crucial for traders looking to take long positions. |
| US30 | A popular index CFD based on the Dow Jones Industrial Average (DJIA), which is composed of 30 major U.S. companies. |
| USD (United States Dollar) | The currency of the United States and one of the most widely traded currencies in the Forex market. |
| USDCNH | U.S. Dollar vs. Chinese Yuan Renminbi. |
| USDSGD | U.S. Dollar vs. Singapore Dollar. |
| User Interface (UI) | The part of the trading platform that the user interacts with. A well-designed UI can help traders better analyze the market, execute trades, and manage their accounts. |
| Term | Definition |
|---|---|
| Value Date | The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., the delivery of funds. |
| Variation Margin | Additional funds a broker may require from a trader to keep a margin account open, due to unfavorable price movements against their open positions. |
| Volatility | Refers to the frequency and severity of the price movements of a security or market. High volatility indicates large price swings, offering both higher risk and potential for profit. |
| Volume | The number of shares or contracts traded in a security or an entire market during a given period. Volume can be an indicator of market strength and liquidity. |
| VWAP (Volume Weighted Average Price) | A trading benchmark that is calculated by taking the average price a security has traded at throughout the day, based on both volume and price. It is often used in trading algorithms. |
| Term | Definition |
|---|---|
| Warrant | While more commonly associated with stock trading, a warrant is a derivative that gives the right, but not the obligation, to buy or sell a security, typically at a specific price before a set date. |
| Wash Sale | A strategy where an investor sells a security at a loss and then repurchases the same security shortly after, to create a tax write-off. This practice is generally discouraged and can be considered illegal in certain jurisdictions. |
| WebTrader | A broker-provided online platform accessible via web browsers. Enables trade management and market analysis without the need for software downloads. |
| Whipsaw | A term describing the condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal. Whipsaws can lead to increased risk and unexpected losses, especially in volatile markets. |
| Win/Loss Ratio | A metric in trading that compares the number of winning trades to the number of losing trades. In CFD trading, a positive win/loss ratio indicates more winning than losing trades, which is a key measure of a trader’s performance. |
| Working Order | A type of order that has been placed but not yet executed. These orders remain active until they are executed or canceled. |
| Writer | In the context of options trading, which can relate to CFD trading as well, a writer is the seller of an option who opens a position to collect a premium payment from the buyer. |
| WTI (West Texas Intermediate) | A specific grade of crude oil and one of the primary benchmarks in oil pricing. |
| Term | Definition |
|---|---|
| XAG/USD | The ticker symbol for a silver CFD traded against the US Dollar. In this pair, XAG represents one ounce of silver, and it's a popular commodity CFD. |
| XAU/USD | The ticker symbol for a gold CFD traded against the US Dollar. Similar to silver, XAU represents one ounce of gold. |
| XBR/USD | A symbol used for Brent Crude oil CFDs traded against the US Dollar. Brent Crude is a major trading classification of sweet light crude oil and a commonly traded commodity in the CFD market. |
| XPD/USD and XPT/USD | Ticker symbols for palladium (XPD) and platinum (XPT) CFDs, respectively, traded against the US Dollar. These are examples of more exotic commodity CFDs. |
| XTI/USD | The ticker symbol for West Texas Intermediate (WTI) crude oil CFDs traded against the US Dollar. WTI is a grade of crude oil used as a benchmark in oil pricing and is a frequently traded commodity in CFD markets. |
| Term | Definition |
|---|---|
| Yield | In finance, yield refers to the earnings generated and realized on an investment over a particular period, expressed as a percentage. In CFD trading, yield can refer to the dividends received from a stock CFD based on the underlying stock's dividend payments. |
| Yield Curve | A graph that shows the relationship between interest rates and the maturity dates of debt instruments like bonds. While not a direct aspect of CFD trading, the yield curve can impact the markets, especially when trading on bonds or interest rate-sensitive instruments. |
| YTD (Year-to-Date) | Refers to the period from the beginning of the current year to the present date. YTD figures are often used in finance and trading to assess performance or market trends over the current calendar year. |
| Yuan (CNY) | The official currency of the People's Republic of China. In Forex CFD trading, the Yuan may be part of currency pairs, allowing traders to speculate on changes in its value relative to other currencies. |
| Term | Definition |
|---|---|
| Zero Coupon Bond | A debt security that doesn't pay interest (a coupon) but is traded at a deep discount, offering a profit at maturity when the bond is redeemed for its full face value. Some platforms may offer CFDs based on the price movements of zero-coupon bonds. |
| Zig Zag Indicator | A technical analysis tool used in trading to identify clear upward or downward trends by filtering out minor price changes. It's especially useful for analyzing short-term price movements and identifying support and resistance levels. |
| Zone | In trading analysis, this term is often used to describe areas of support or resistance on a chart. Identifying these zones can help in making decisions about entering or exiting positions. |
| ZAR (South African Rand) | The currency of South Africa. Traders can speculate on the ZAR's price movements, especially in pairs with major currencies like the USD (USD/ZAR). |
| ZARJPY | South African Rand vs. Japanese Yen. |
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