Trading Glossary
Master the language of financial markets. A comprehensive reference guide to common trading terms used on SPM.
Ask Price
The lowest price at which a seller is willing to sell an asset. When you buy a currency pair or other instrument, you buy at the ask price. Also referred to as the "offer" price.
At-The-Market
An order type that executes at the best available current price, rather than at a specified price level.
Bid Price
The highest price at which a buyer is willing to purchase an asset. When you sell a currency pair or other instrument, you sell at the bid price.
Bear Market
A market condition in which prices are falling or are expected to fall, typically defined as a decline of 20% or more from recent highs.
Bull Market
A market condition characterised by rising prices and investor optimism. Typically defined as a rise of 20% or more from recent lows.
CFD (Contract for Difference)
A financial derivative that allows traders to speculate on price movements without owning the underlying asset. Profit or loss is determined by the difference between the opening and closing price.
Currency Pair
The quotation of two different currencies, where the value of one is quoted against the other. For example, EUR/USD represents Euros quoted against US Dollars.
Demo Account
A practice trading account funded with virtual money, allowing traders to practice strategies and familiarise themselves with the platform without risking real capital.
Drawdown
The peak-to-trough decline during a specific period for an investment or trading account. It is a measure of downside risk expressed as a percentage decline from the highest balance.
Equity
The current value of a trading account, calculated as the account balance plus or minus any unrealised profit or loss from open positions.
Exchange Rate
The price at which one currency can be exchanged for another. Exchange rates fluctuate constantly based on supply and demand.
Forex (Foreign Exchange)
The global marketplace for trading national currencies against one another. It is the largest and most liquid financial market in the world, with daily trading volumes exceeding $6 trillion.
Fundamental Analysis
A method of evaluating an asset by examining related economic, financial, and other qualitative and quantitative factors to determine its intrinsic value.
Going Long
Buying an asset with the expectation that its price will rise, allowing you to sell it later at a profit.
Going Short
Selling an asset you do not own, with the expectation that its price will fall, allowing you to buy it back at a lower price for a profit.
Hedging
A risk management strategy used to reduce potential losses by taking an offsetting position in a related instrument.
Indicator
A statistical calculation based on historical price and/or volume data used by technical analysts to forecast future price movements. Examples include Moving Averages, RSI, and MACD.
Leverage
A mechanism that allows traders to control a large position with a smaller amount of capital. Expressed as a ratio such as 1:100. Leverage amplifies both profits and losses.
Limit Order
An order to buy or sell an asset at a specified price or better.
Liquidity
The ease with which an asset can be bought or sold without significantly affecting its price. High liquidity means tighter spreads and faster execution.
Lot
The standardised unit of measurement for trade sizes in Forex. A standard lot equals 100,000 units of the base currency.
Margin
The amount of capital required to open and maintain a leveraged trading position. It is essentially a deposit or collateral, not a fee.
Margin Call
A notification that your account equity has fallen below the required margin level. You must either deposit more funds or close positions.
Market Order
An order to buy or sell an instrument at the best currently available price. Executed immediately at the current market rate.
Moving Average (MA)
A technical indicator that smooths price data by calculating the average price over a specified number of periods.
Pip
Short for "percentage in point." The smallest price move that a given exchange rate can make. For most currency pairs, one pip equals 0.0001.
Position
A trade that is currently open. A "long position" means you bought expecting the price to rise. A "short position" means you sold expecting it to fall.
Price Action
A trading methodology that relies solely on historical price movements to make trading decisions, without the use of indicators.
Resistance
A price level at which an upward trend is expected to pause or reverse, due to a concentration of sell orders.
Risk Management
The process of identifying, assessing, and controlling potential losses in trading. Includes setting stop losses, position sizing, and managing leverage.
RSI (Relative Strength Index)
A momentum oscillator that measures the speed and change of price movements on a scale of 0 to 100. Readings above 70 suggest overbought; below 30 suggest oversold.
Scalping
A high-frequency trading strategy that aims to profit from very small price changes, often holding trades for seconds to minutes.
Slippage
The difference between the expected price of a trade and the price at which it is actually executed.
Spread
The difference between the bid (sell) price and the ask (buy) price of an instrument. Essentially the transaction cost for most trades.
Stop Loss
An order that automatically closes a trade when the price reaches a specified level against your position, limiting potential loss.
Support
A price level at which a downward trend is expected to pause or reverse, due to a concentration of buy orders.
Swap / Rollover
The interest paid or earned for holding a position overnight. Swap rates reflect the difference in interest rates between the two currencies in a Forex pair.
Take Profit
An order to automatically close a trade when the price reaches a specified profit target.
Technical Analysis
A method of forecasting future price movements by analysing historical price data, charts, and technical indicators.
Trend
The general direction in which the price of an asset is moving. An uptrend consists of higher highs and higher lows; a downtrend consists of lower highs and lower lows.
Volatility
The degree of variation in the price of a financial instrument over time. High volatility means large price swings.
Volume
The total number of units traded in an instrument over a given period. High volume generally indicates strong market interest and liquidity.
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