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ARBITRAGE

This defines a situation where transactions are made to take advantage of market imperfections, making a risk-less profit.

ASK / OFFER

The price at which a trader enters a long position or closes a short position.

AUSSIE (OZZIE)

This is the commonly used name for the AUD/USD pair.

BACK TESTING

This is when a client tests a trading strategy using the historical data of the charts.

BALANCE

The amount of money a trader has in his account.

BASE CURRENCY

The base currency is the first currency of a pair being quoted. For Example, when trading EUR/USD the base currency is the EUR.

BEAR MARKET

Defines a market where the price is falling.

BID

The price at which a trader enters a short position or closes a long position.

BROKER

Serves as a middleman in the market, bringing sellers and buyers together, earning a commission in the process.

BULL MARKET

Defines a market that is rising.

BUY LIMIT

A type of order used to enter a long position at a price below the current market price. A buy limit is triggered if the market moves down and the ask price hits the set price of the order.

BUY STOP

A type of order used to enter a long position at a price above the current market price. The buy stop is triggered if the market moves up and the ask price hits the set price of the order.

CABLE

This is the commonly used name for the GBP/USD pair.

CFD

A CFD (contract for difference) is based on an underlying financial instrument and allows an investor to experience all the benefits and risks of owning the underlying security without owning it.

COMMISSION

This is a fee from the broker for carrying out a trade and is charged in addition to the spread.

DIVIDEND

A company may at times distribute a portion of its earnings by issuing dividend.

ECN

Electronic Communication Network (ECN) trading is a market network of liquidity providers, including banks, ECN brokers, corporations and traders.

ECONOMIC CALENDAR

This is a calendar that displays economic news / events. It will display which institution the release has come from, which currency it is likely to affect, and usually is graded in tiers as to how much of an impact it may have on the market (1 – low impact, 2 – medium impact, 3 – high impact).

EQUITY

The amount of money in an account adjusted for any unrealised profits/losses (open positions).

EXOTICS

Non heavily traded currencies. A pair that does not contain one of the major currencies (CAD, USD, EUR, GBP, CHF, JPY, AUD, NZD).

EXPERT ADVISORS

EAs are computer programs that are used for automation of analytical and trading processes, otherwise known as algorithmic trading. Finlake ltd does not offer its own EAs, however, we are happy to allow the use of third party EAs on our MT4 accounts.

FIBRE

This is the commonly used name for the EUR/USD pair.

FLAT

This is when the trader has no open positions.

FLOATING PROFIT / LOSS

This is the profit/loss of your currently open positions.

FREE MARGIN

This is the amount of money available for trading net of margin already in use and any unrealised gains/losses. It is calculated by subtracting used margin from the available equity.

GOPHER

This is the commonly used name for the USD/JPY pair.

HEDGE

This is when a trader holds opposing positions of the same instrument. For example, if a trader has a buy position and a sell position of EURUSD, they would have a hedged position. Fully hedged means that you have the same volume of Buy and Sell open of the same instrument. For example, 1 lot Buy EURUSD and 1 lot Sell EURUSD would be a fully hedged trade.

INDEX

Indices are a measurement of the price performance of a group of shares from an exchange. For example, the FTSE 100 (Financial Times Stock Exchange 100) is an index of the biggest 100 companies on the London Stock Exchange.

INSTANT ORDER / EXECUTION

Used when entering the market at the current bid/ask price depending on whether you wish to sell/buy a specific instrument. If the requested price is not available at the time of execution you would receive a requote, where the trader would have to confirm that they wish to enter the trade at the new price.

KIWI

This is the commonly used name for the NZD/USD pair.

LATENCY

This is the time taken between an order being placed, and it being executed. Traders prefer lower latency, as it reduces the chances of the market moving between the order being placed and executed.

LEVERAGE

Utilising leverage allows traders to trade with a lower margin requirement than would be required without leverage. It is a form of borrowing from the broker. For example, if a trader, without leverage, wanting to purchase 1 lot of EUR/USD would be required to have a margin of 100,000.00 euro in his account. However, with the use of leverage, the margin requirement is greatly reduced; the same trader, this time utilising a leverage of 100:1, would only be required to have 1000 euro in margin for the same 1 lot of EUR/USD. Leverage is regarded as a double-edged sword because just as it increases trading profits and can equally increase trading losses.

LIQUIDITY

Depends on the amount of volume available in the market and describes the ease at which a financial instrument can be bought or sold without distressing the market price. If the market is liquid, this means that there are large volumes supporting current prices and therefore it is easy to trade the instrument at current price levels. Conversely, an illiquid market defines market condition where there is little volume, making it hard to fill orders at the market price.

LONG

If the trader is a net buyer of a specific instrument, he is long the instrument.

LOONIE

This is the commonly used name for the CAD/USD pair.

LOT

This is the standardised unit representation of a specific financial instrument. For example, holding 1 lot long of EUR/USD is synonymous with buying 100,000.00 euro worth of US dollars (the standard contract size of the pair).

MAJORS

These currency pairs are considered by traders to drive the global forex market and are the most heavily traded. There are 7 major currency pairs, and they must include USD + any of the other 7 major currencies (CAD, EUR, GBP, CHF, JPY, AUD, NZD).

MARGIN

The amount of money required to open a position. Margin is depended on the type of contract to be traded, the volume to be traded and the leverage used by the client.

MARGIN CALL

A trader would receive a margin call warning, from his broker if one or more of the trades he/she is involved in decreases in value below the required margin. The trader should either deposit more money in the account or close some positions or potentially face a stop out.

MARGIN LEVEL

This is a percentage representation of how much equity outweighs the margin requirements of all open positions. It is calculated by dividing equity over used margin.

MARKET MAKER

A company or individual who quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.

MARKET ORDER / EXECUTION

Used when entering the market at the current bid/ask price depending on whether you wish to sell/buy a specific instrument. If the requested price is not available at the time of execution, then the system will automatically enter the trade at the next best available price. It is possible to receive the requested price, a worse price (negative slippage) or a better price (positive slippage/price improvement).

MARKET PRICE

The current price (bid/ask) at which a financial instrument can be traded.

MICRO LOT

This is 1/100th of a standard lot. Denoted as 0.01 lots on the platform. This is the smallest trade size available for our FX pairs.

MINI LOT

This is 1/10th of a standard lot. Denoted as 0.1 lots on the platform.

MT4

MetaTrader 4 is an electronic trading platform widely used by online forex brokers.

NDD (NO DEALING DESK) INTERVENTION

This means that trades will be executed automatically, without any intervention from a dealing desk.

PENDING ORDER

An order to be executed at a future time at a price that you specify. The following types of pending orders are available: Buy Limit, Buy Stop, Sell Limit, and Sell Stop. You may attach a stop loss and/or take profit to any pending order.

PIP

A pip is the smallest commonly quoted change of an exchange rate of a currency pair. The major currencies, except the JPY, are priced to four or more decimal places, for these currencies a pip is one unit of the fourth decimal point. For the JPY, a pip refers to one unit in the second decimal point. Please note that a lot of Forex brokers quote exchange rates with an additional digit that is called a point.

PIP VALUE

This is the value of a 1-pip movement of a trade. For example, a 1 Lot EURUSD trade will have a pip value of 10 usd. Therefore, each time the market price moves by 1 pip (0.0001) the client will profit, or lose depending on the direction of the trade, by 10 usd.

POINT

A point is 1/10th of a pip (0.1 pips). So would be the 5th digit after the decimal point on the majority of forex pairs, or the third digit after the decimal point on JPY pairs.

RESISTANCE LEVEL

This is a term used in technical analysis. It is used to describe an area at which there is strong selling pressure preventing the market price from breaking above a certain level.

ROLLOVER / SWAP

If a trade is kept open overnight, then there is a swap/rollover cost/income calculated on that position based on the difference in interbank lending rates of the specific countries comprising the pair. This will be applied at 23:59 Server time each night, and triple on Wednesdays to compensate for the weekend.

SCALPING

Trading technique that is characterised by short term, high-frequency trading.

SELL LIMIT

A type of order used to enter a short position at a price above the current market price. A sell limit is triggered if the market moves up and the bid price hits the set price of the order.

SELL STOP

A type of order used to enter a short position at a price below the current market price. The sell stop is triggered if the market moves down and the bid price hits the set price of the order.

SHORT

If a trader is a net seller of a specific instrument, he is short the instrument.

SLIPPAGE

This is when there is a difference in price between the trader’s request, and the execution of the request. It is possible to receive both negative and positive slippage. For example, if a trader has requested to open a Buy position at 1.10000 and it was executed at 1.10001, then then client has received negative slippage of 1 point, as the opening price is worse than the requested price. Similarly, if a client requested to close a sell position at 1.10000 and it was executed at 1.09999 then the client has received positive slippage of 1 point, as the closing price is better than the requested price.

SPIKE

A large market movement within a short period of time.

SPREAD

This is the difference between the bid and ask price of an instrument.

STOP LOSS

Stop Loss is a trading tool that helps a trader to limit their losses on a specific trade. The trader can set a price that the trade will be triggered to close if it were to be reached. For a Buy trade, the Stop Loss would have to be below the current market price and would be triggered when the Bid price reaches the Stop Loss level. Conversely, for a Sell trade the Stop Loss would have to be above the current market price and would be triggered when the Ask price reaches the Stop Loss level. Stop Losses are executed using Market Execution; therefore, it is possible to receive negative or positive slippage on the execution of a Stop Loss.

STOP OUT

Stop Out is a tool that helps a trader to avoid losing their entire balance if the market were to move against them. The system will automatically close trades, starting with the least profitable, until the traders margin level percentage is back above the required level. Stop Out will occur when your Margin Level Percentage falls equal to, or below, 40%. Which means if your Equity falls below 40% of your used Margin Stop Out will occur.

SUPPORT LEVEL

This is a term used in Technical analysis. It is used to describe an area at which there is strong buying demand preventing the market price from breaking below a certain level.

SWISSY

This is the commonly used name for the CHF/USD pair.

TAKE PROFIT

Take Profit is a trading tool that helps a trader to automatically close a profitable trade when it reaches a predefine price level. For a Buy trade the Take Profit would have to be above the current market price and would be triggered by the Bid price reaching the Take Profit price. For a Sell trade the Take Profit would have to be below the current market price and would be triggered based on the Ask price. Take Profit orders are executed using Limit Execution, which means you will receive either your requested price or better.

TERM / QUOTED CURRENCY

The term Currency is the second currency quoted in your currency trading pair. For Example, when trading the EURUSD the term currency is the USD.

TICK

This is the smallest price movement for a non-FX instrument. For example, if XAUUSD were to move from 100.00 to 100.01 then it has increased by 1 tick.

TRAILING STOP

This is a function where you can place a stop loss on an open trade, that will move with the market whilst it is moving in the same direction as your trade, then will execute the stop loss when the market moves in the opposite direction of the trade. Bear in mind that trailing stops are saved to the trading platform, rather than the server, therefore will not operate if the platform is not running.

VOLATILITY

Represents the amount of dispersion around an average for a given pair within a specific period.

Traders Terminology

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