Capital Swiss Education

The price at which the market is prepared to buy a product. Prices are quoted two-way as Bid/Ask. In FX trading, the Bid represents the price at which a trader can sell the base currency, shown to the left in a currency pair. For example, in the quote USD/CHF 1.4527/32, the base currency is USD, and the Bid price is 1.4527, meaning you can sell one US Dollar for 1.4527 Swiss francs. In CFD trading, the Bid also represents the price at which a trader can sell the product. For example, in the quote for UK OIL 111.13/111.16, the Bid price is £111.13 for one unit of the underlying market.*

Taking a long position on a product.

A Contract for Difference (or CFD) is a type of derivative that gives exposure to the change in value of an underlying asset (such as an index or equity). It allows traders to leverage their capital (by trading notional amounts far higher than the money in their account) and provides all the benefits of trading securities, without actually owning the product. In practical terms, if you buy a CFD at $10 then sell it at $11, you will receive the $1 difference. Conversely, if you went short on the trade and sold at $10 before buying back at $11, you would pay the $1 difference.

The price at which a product was traded to close a position. It can also refer to the price of the last transaction in a day trading session.

A fee that is charged for buying or selling a product.

The value of an account if all positions were closed.

A position or combination of positions that reduces the risk of your primary position.

An economic condition whereby prices for consumer goods rise, eroding purchasing power.

A private company’s initial offer of stock to the public. Short for initial public offering.

Also known as margin, this is the percentage or fractional increase you can trade from the amount of capital you have available. It allows traders to trade notional values far higher than the capital they have. For example, leverage of 100:1 means you can trade a notional value 100 times greater than the capital in your trading account.*

A position that appreciates in value if market price increases. When the base currency in the pair is bought, the position is said to be long. This position is taken with the expectation that the market will rise.

A request from a broker or dealer for additional funds or other collateral on a position that has moved against the customer.

A request from a broker or dealer for additional funds or other collateral on a position that has moved against the customer.

An instruction to execute a trade.

The smallest unit of price for any foreign currency, pips refer to digits added to or subtracted from the fourth decimal place, i.e. 0.0001.

The difference between the cost price and the sale price, when the sale price is higher than the cost price.

An economic indicator which indicates the performance of manufacturing companies within a country.

The amount of money you have made or lost when a position has been closed.

Exposure to uncertain change, most often used with a negative connotation of adverse change.

The employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.

A rollover is the simultaneous closing of an open position for today’s value date and the opening of the same position for the next day’s value date at a price reflecting the interest rate differential between the two currencies.In the spot forex market, trades must be settled in two business days. For example, if a trader sells 100,000 Euros on Tuesday, then the trader must deliver 100,000 Euros on Thursday, unless the position is rolled over. As a service to customers, all open forex positions at the end of the day (5:00 PM New York time) are automatically rolled over to the next settlement date. The rollover adjustment is simply the accounting of the cost-of-carry on a day-to-day basis

An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.

The difference between the bid and offer prices.

The combined price of a group of stocks – expressed against a base number – to allow assessment of how the group of companies is performing relative to the past.

This is an order placed to sell below the current price (to close a long position), or to buy above the current price (to close a short position). Stop loss orders are an important risk management tool. By setting stop loss orders against open positions you can limit your potential downside should the market move against you. Remember that stop orders do not guarantee your execution price – a stop order is triggered once the stop level is reached, and will be executed at the next available price.

A price that acts as a floor for past or future price movements.

A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.

See definition of Limit Order.

The process by which charts of past price patterns are studied for clues as to the direction of future price movements.

A minimum change in price, up or down.

Measures the difference in value between imported and exported goods and services. Nations with trade surpluses (exports greater than imports), such as Japan, tend to see their currencies appreciate, while countries with trade deficits (imports greater than exports), such as the US, tend to see their currencies weaken.

A trailing stop allows a trade to continue to gain in value when the market price moves in a favorable direction, but automatically closes the trade if the market price suddenly moves in an unfavorable direction by a specified distance. Placing contingent orders may not necessarily limit your losses.

Price movement that produces a net change in value. An uptrend is identified by higher highs and higher lows. A downtrend is identified by lower highs and lower lows.

Measures the total workforce that is unemployed and actively seeking employment, measured as a percentage of the labor force.

Funds traders must hold in their accounts to have the required margin necessary to cope with market fluctuations.

Where a limit order has been requested but not yet filled.