Don’t you just love that title?! Continuing on the topic of trading, I thought I would explain some of the terminology that goes with it.
Spreadex does a comprehensive glossary and the link to their site is:
I am going to list only a few:
Bid - Spread betting quotes are made up of two prices – one at which you can sell and one at which you can buy. The level at which you can sell is always the lower of the two prices and is called the bid.
Buy - You ‘buy’ a market if you think it will go up in price. You can also ‘buy’ to close out an existing ‘sell’ bet. When you buy, you buy at the ‘ask’ price, which is the higher price of the spread quoted.
Sell - You ‘sell’ or short a market if you think it will fall (if you are opening a new bet). You also ‘sell’ to close out an existing ‘buy’ bet.
Close - The process of ending (or trading out of) an existing bet. Closing a bet results in a profit or loss being realised. A financial bet can be closed automatically when it hits a limit order or stop loss limit, or closed manually by entering an opposing bet in the market to the open position, or on the expiration of the contract such as a future.
Bid Size - Governs how much you make or lose on a spread bet for every point of movement in the price of the market. This is also known as stake size.
P&L - Abbreviation of profit and loss: how much you have made or lost.
Currency Pair - The two currencies that comprise a foreign exchange (or forex, FX) rate. A foreign exchange rate is the amount that the first currency in the pair is worth expressed in terms of the second currency. When trading a currency pair, if you expect the first named currency to appreciate in price versus the second currency you would buy the currency pair.
Dealing Spread - Difference between the two ends of quoted price. You make an Up Bet (‘buy’) at the higher end of the spread and make a Down Bet (‘sell’) at the lower end of the spread.
Deposit - The funds required as an initial outlay for a bet. It is not the total amount that can be lost on the bet.
Spot – The price for a currency, index, commodity or share for immediate settlement or delivery.
Rollover - The procedure whereby a bet approaching expiry is closed and a bet of the same size and direction is opened for the next period, thereby prolonging the exposure to a particular market.
Quarterly Bet - A type of future with periodic expiries spaced three months apart. Prices are normally quoted for the next two or three quarter months.
Guaranteed stop - A Stop-loss order that puts an absolute limit on your liability, eliminating the chance of slippage and guaranteeing an exit price for your trade.
Slippage - The difference between the level of a Stop order and the actual price at which it was executed. Can occur during periods of higher volatility when market prices move rapidly or gap. Slippage can be prevented by placing a Guaranteed Stop.
Limit Order - An instruction to deal if the price moves to a level at which you would like to place a trade – for example, you could place a limit order to buy the UK100 if it drops to 4500 or sell it if it goes to 5000. The order can be placed as ‘Good Till Cancelled’ meaning it will stay live in the market until you cancel it or ‘Good For Day’ meaning it will stay live until that day’s expiry time.
Stop Order (or Stop Loss Order) - An instruction to deal if the price of the instrument in which you have an open position starts to move against you; normally placed to prevent a loss of more than a certain amount of money or to get out of a trade at a predetermined technical level.
Working Order - The process of having an order that has not yet been executed.
Margin or NTR – Notional Trading Requirement - the funds required as initial outlay for a trade. It is not the total amount that can be lost on the trade but the minimum amount you need to set aside to place a specific trade. NTR’s vary from product to product.
Point - The increment in price movement; A ‘Percentage In Point’ is generally, though not always, the fourth decimal place, i.e. 0.0001. Traditionally, a pip was the smallest point by which a forex rate could move; although with modern advances in precision this is no longer the case.
Position - A current bet that you have running. You say you have an ‘open position’ in the FTSE if you have placed a spread bet on the FTSE index via our UK 100 Index market.
Support - A term used in technical analysis to indicate a price level at which you would expect the market to stabilise and ‘bounce’ off – can be useful for deciding to place a long trade if a market is finding a support level at a certain price. Opposite of this is resistance.
Resistance - A term used in technical analysis indicating a price level at which analysis suggests a predominance of selling – and hence a greater likelihood that the price will fail to break through the level.
Long Position - A position taken in anticipation of a rising market. To go long means to buy.
Short Position - A position taken in anticipation of a falling market. To go short means to sell and you go short by selling at the ‘bid’ price.
Downtrend - A price trend characterised by a series of lower highs and lower lows.
Up trend – A price trend characterised by a series of higher highs and higher lows.
Well, that is apparently a few. It can be quite a lot to take in at first and can seem quite daunting, but once you see it in practise, the puzzle pieces fall into place. Hopefully over the next few days I will be able to give a few examples.
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Tessa aka Splashpuddle
Life and Life More Abundantly
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