Trading glossary
Trading glossary is something every trader will need to understand. SimpleFX will take you through some of the main terms used in trading and explain what they mean.
A
Altcoin
All cryptocurrencies other than Bitcoin are referred to as altcoins, short for alternative coins. Each altcoin typically offers unique features, technologies, or use cases that differentiate it from Bitcoin. Major examples include Ethereum (smart contracts), Solana (high-speed transactions), and Litecoin (faster block times). Thousands of altcoins exist, and many are available for CFD trading on SimpleFX.
Arbitrage
Arbitrage is a trading technique that exploits price differences for the same asset across different markets or exchanges. A trader buys the asset at a lower price in one market and simultaneously sells it at a higher price in another. These opportunities are typically short-lived, as market forces quickly eliminate price discrepancies.
Ask Price
Asset
Any resource that can be owned, traded, or exchanged on financial markets that has economic worth is considered an asset. Common tradable asset classes include currencies (forex), equities (stocks), commodities (oil, gold), cryptocurrencies (Bitcoin, Ethereum), and indices. Each asset class carries different risk characteristics and trading conditions on platforms like SimpleFX.
Automated trading
Traders can teach computer programs to make trade orders for them. The practice is called algorithmic trading. The orders can be executed by simple rules, ie. decision tree, or by deep learning algorithms.
B
Base Rate
The base rate is the benchmark interest rate set by a central bank, such as the Federal Reserve, Bank of England, or European Central Bank. It affects inflation, savings returns, and borrowing costs throughout the economy. Higher base rates tend to strengthen a currency, making base rate decisions key events for forex traders.
Bear and bull market
Bear and bull are symbols of uptrend and downtrend. Bears are skeptical, they expect the prices of an asset to go down, or even collapse. On the other hand, bulls are optimistic about the future price.
Bid Price
Bitcoin
Bitcoin is a cryptocurrency created in 2009, based mainly on a self-published paper by Satoshi Nakamoto. Bitcoin enables immediate payments (and micropayments) at a very low cost, while avoiding the need for central authorities and issuers.
Blockchain
Blockchain is a decentralized digital ledger that records transactions across multiple computers. This technology underpins cryptocurrencies like Bitcoin, ensuring security and transparency by preventing alteration of transaction data once recorded.
Brent Crude
Brent Crude, derived from oil fields in the North Sea, is a major global benchmark for the oil prices. Around two-thirds of the world’s internationally traded crude oil is priced relative to Brent. Brent prices reflect global supply and demand dynamics in the energy sector and are closely correlated with WTI Crude.
C
Commodities
Commodities are primary goods or raw materials that are traded on international markets and can be substituted for other items of the same kind. Major categories include energy (crude oil and natural gas), precious metals (gold and silver), and agricultural products (cocoa and coffee). Commodity prices are driven by supply and demand dynamics, making them popular instruments for diversifying a trading portfolio on SimpleFX.
Consumer Price Index (CPI)
The Consumer Price Index (CPI) is a key economic indicator that measures changes in the price of a basket of consumer goods and services over time. Published monthly, CPI is one of the most widely followed measures of inflation. Forex traders closely monitor CPI reports because rising inflation often leads central banks to raise interest rates, which can strengthen a currency.
Coordinated Universal Time (UTC)
The main global time standard used to synchronize clocks and schedules worldwide is Coordinated Universal Time (UTC). In trading, UTC is essential because markets operate across multiple time zones - forex sessions, economic calendar events, and trade execution timestamps all reference UTC. SimpleFX displays trading times in UTC to ensure consistency for traders regardless of their location.
Cryptocurrencies
Cryptocurrencies are digital currencies secured by cryptography that operate on decentralized blockchain networks without central banks. Bitcoin, launched in 2009, was the first. Other major cryptocurrencies include Ethereum, Solana, and many altcoins. Crypto markets trade 24/7, and SimpleFX offers CFD trading on selected ones.
Currency Peg
A currency peg is a fixed exchange rate policy in which a country ties its currency to another currency, typically the U.S. dollar, at a set ratio. Pegs lower trading uncertainty and offer exchange rate stability. In crypto, stablecoins like Tether (USDT) and USD Coin (USDC) are pegged to the dollar to maintain a consistent value for traders.
D
Decentralized applications (dApps)
Software that operates on a distributed blockchain network as opposed to a centralized server is known as a decentralized application (dApp). Most dApps are built on Ethereum and power services like decentralized exchanges, lending platforms, and blockchain games. Users interact with dApps through crypto wallets, making them a core component of the DeFi and Web3 ecosystem.
Decentralized finance (DeFi)
Decentralized Finance, or DeFi, refers to a financial system built on blockchain technology that operates without central financial intermediaries. It utilizes smart contracts and cryptocurrencies to provide more open and transparent financial operations compared to traditional banking.
Derivative
A derivative is a financial security whose value is dependent upon or derived from an underlying asset or group of assets. Common underlying instruments include equities, bonds, commodities, currencies, interest rates, and market indices.
Dividend
A dividend is a portion of a company’s earnings distributed to shareholders, typically in cash or additional shares. Companies like Tesla and MicroStrategy may offer dividends as a way to return value to shareholders, affecting stock price and investor interest.
E
Economic Indicator
An economic indicator is a statistic about an economic activity, helping analysts assess overall economic health. Key indicators include the NFP (Non-Farm Payrolls), which signals employment trends; the FOMC (Federal Open Market Committee) announcements, influencing monetary policy; and the CPI (Consumer Price Index), measuring inflation.
Equities
Ethereum
Ethereum is a decentralized platform known for its ability to execute smart contracts and develop decentralized applications (dApps). Unlike Bitcoin, which is primarily a digital currency, Ethereum allows for complex agreements coded directly into the blockchain.
F
First In, First Out (FIFO)
A trading rule known as First In, First Out (FIFO) mandates that positions be terminated in the order that they were opened. If a trader holds multiple positions in the same instrument, the oldest position must be exited first. FIFO is mandated by some regulators, particularly in U.S. forex markets, and affects hedging and position management strategies.
Forex Broker
A financial intermediary that gives retail traders access to the foreign exchange market is known as a forex broker. Brokers provide leverage, real-time price feeds, and trading platforms. They earn revenue through spreads or commissions. When choosing a forex broker like SimpleFX, traders should consider regulation, available instruments, fees, and platform quality.
Fundamental analysis
Fundamental analysis is a method of evaluating an asset’s intrinsic value by examining economic, financial, and qualitative factors. For stocks, it includes metrics such as earnings, revenue, and growth potential. In forex, it focuses on economic indicators like GDP, interest rates, and employment data. Traders often combine fundamental and technical analysis to make informed trading decisions.
Future Contract
A futures contract is a standardized agreement to buy or sell an asset at a predetermined price on a specified future date. Commodities, currencies, and indices are all traded on exchanges through futures contracts. They can be more volatile than spot markets - for example, oil futures briefly went negative in 2020.
G
Game Finance (GameFi)
GameFi is a sector that combines decentralized finance (DeFi) with blockchain-based gaming. It allows users to earn cryptocurrencies or NFTs by playing games. GameFi applications typically run as decentralized apps (dApps) and use play-to-earn models. This sector has contributed to the growth of crypto tokens that traders can speculate on.
Greenwich Mean Time (GMT)
Greenwich Mean Time (GMT) is a time standard based on the average solar time at the Royal Observatory in Greenwich, London. In financial markets, GMT is commonly used to define trading sessions - for example, the London session typically runs from 08:00 to 16:00 GMT.
Gross Domestic Product (GDP)
Gross Domestic Product is the sum of the value of the goods and services produced in a country (or region). Usually economists measure annual GDP to check if the economy is growing or shrinking, and to compare the economic power of a territory.
H
Halving
Halving is a significant event in the Bitcoin network where the reward for mining new blocks is cut in half. This process occurs approximately every four years and is designed to control inflation by reducing the rate at which new bitcoins are generated.
Hash
A hash is a fixed-length code generated from data of any size, using a mathematical function. It is crucial in blockchain technology for ensuring data integrity and security. Hash functions are also foundational in various DeFi.
Hedging
A risk management strategy where a trader opens an offsetting position to reduce potential losses on an existing trade. For example, a trader holding a long position on EUR/USD may open a short position on a correlated or the same asset to limit exposure to unfavorable price movements.
High Frequency Trading (HFT)
High-Frequency Trading (HFT) is a type of algorithmic trading where large numbers of orders are executed at extremely high speeds, often in milliseconds, using advanced computer systems. HFT strategies aim to profit from small price differences across markets.
I
Indices
Indices are market benchmarks that track the performance of a group of stocks representing a specific market or sector. They help traders assess market trends and compare asset performance. Key indices include the S&P 500 (500 large U.S. companies), the NASDAQ (tech-heavy), the Nikkei 225 (top Japanese companies), and the Euro Stoxx 50. CFD trading on major global indices is available through SimpleFX.
Initial Public Offering (IPO)
An initial public offering (IPO) is the process by which a private company offers its shares to the public for the first time on a stock exchange. IPOs often generate significant price volatility on their debut day. Notable examples include NVIDIA’s 1999 IPO and Tesla’s 2010 listing, both of which are now major equities available for CFD trading.
Interest
Interest is the cost of borrowing money or the return earned on a deposit, often expressed as an annual percentage rate (APR). In trading, central bank interest rates significantly influence currency values, bond yields, and equity markets. Traders closely monitor interest rate decisions, as they can create significant volatility in forex pairs.
Intrinsic Value
Intrinsic value is the estimated true value of an asset based on fundamental analysis, independent of its current market price. If the market price is below the intrinsic value, the asset may be considered undervalued; if above, overvalued. Traders and investors use intrinsic value to identify potential buying or selling opportunities across financial markets.
J
K
Kiwi
Know Your Customer (KYC)
KYC, or Know Your Customer, is a process used by businesses, especially in the financial sector, to verify the identity of their clients. This regulatory requirement helps prevent identity theft, financial fraud, or money laundering.
L
Leverage
Leverage allows traders to control a larger market position by using margin, which is only a fraction of the total trade value. For example, with 1:100 leverage, $1,000 in margin can control a $100,000 position. While leverage increases market exposure, it also amplifies both potential gains and potential losses, making risk management essential when trading with leverage on platforms like SimpleFX.
Limit order
A limit order is an order to buy or sell an asset at a specified price or better. A buy limit order is placed below the current market price, while a sell limit order is placed above it. The order is executed only if the market reaches the set price, giving traders precise control over their entry and exit levels.
Liquidation price
The liquidation price is simply the estimated market price at which a position will be automatically closed when account equity is no longer sufficient to maintain it. This typically occurs when the margin level reaches the broker’s stop-out threshold. Understanding the liquidation price helps traders manage risk and adjust position size or stop loss accordingly.
Liquidity
The speed and ease with which an asset can be purchased or sold without materially altering its price is referred to as liquidity. Highly liquid markets, such as major forex pairs like EURUSD or popular assets like Bitcoin and NVIDIA, feature tight spreads and fast execution. Low liquidity in exotic pairs or small-cap stocks can lead to wider spreads and slippage.
Long Position
A long position is a trade where a trader buys an asset with the expectation that its price will rise. When the asset's value rises above the entry price, the trader profits. For example, opening a long position on EURUSD means you are buying euros and expecting the pair to appreciate.
M
Margin
Margin is the minimum capital required to open and maintain a leveraged trading position. It is expressed as a percentage of the total trade value and acts as collateral against potential losses. For example, a 1% margin requirement means you need $1,000 to control a $100,000 position. If equity falls below required levels, a margin call may occur.
Margin Call
Margin Call is an alert to the trader when the account equity falls below 80% Margin Level. It means that the account is left with only the supplied margin and should be funded with more money in order to prevent it from facing a Stop Out or a forced closure.
Metals
Metals form a major commodity class traded on global financial markets, including both precious and industrial ones. Gold (XAU/USD) and silver (XAG/USD) are the most popular precious metals, valued as safe-haven assets and inflation hedges. SimpleFX offers CFD trading on major metals with competitive spreads and leverage.
Mining
Mining is the process of using computational power to solve cryptographic puzzles that validate transactions and add them to a blockchain. In Proof-of-Work systems like Bitcoin, miners receive rewards for securing the network and producing new blocks.
N
Net Position
Node
A node is a computer connected to a blockchain network that verifies and transmits transactions. Many nodes maintain a full copy of the blockchain ledger to help ensure security and decentralization. Networks like Bitcoin and Ethereum rely on thousands of distributed nodes to prevent any single point of failure or control.
Non-Farm Payroll (NFP)
Non-Farm Payrolls (NFP) is a key U.S. economic report released monthly that measures the number of jobs added or lost, excluding farm workers, private household employees, and nonprofit staff. It is one of the most market-moving events - strong job growth often supports the U.S. dollar, while weak data can trigger volatility across forex pairs and indices.
Non-Fungible Token (NFT)
A Non-Fungible Token (NFT) is a unique digital asset stored on a blockchain that represents ownership of a specific item, such as artwork, music, or video. Unlike cryptocurrencies, NFTs are not interchangeable on a one-to-one basis.
O
Offer Price
The offer price, also called the ask price, is the lowest price at which a seller is willing to sell a financial instrument. On SimpleFX, you enter at the offer price when you start a buy trade. The difference between the bid and offer price is the spread, which represents your initial transaction cost.
Open Position
Open-Source
Open-source refers to software whose source code is freely available for anyone to view, modify, and distribute. This strategy encourages transparency and community-driven growth. Open-source code is essential to the cryptocurrency and blockchain industries; Bitcoin, Ethereum, and most DeFi protocols release their source code so users can independently verify the system's security and fairness.
P
Peer-to-Peer (P2P)
Peer-to-peer (P2P) is a decentralized network model where participants interact and transact directly with each other without a central authority or intermediary. P2P networks in cryptocurrency allow users to transmit and receive digital assets, such as Bitcoin, directly between wallets. P2P architecture is the foundation of blockchain technology, ensuring censorship resistance and eliminating single points of failure.
Profit
Profit is the financial gain realized when the revenue generated from business activities exceeds the expenses, costs, and taxes needed to sustain the operations. It is a crucial measure of potential success for any enterprise.
Proof of Stake (PoS)
Proof of Stake (PoS) is a blockchain consensus mechanism where validators are selected to create new blocks and verify transactions based on the amount of cryptocurrency they stake as collateral. Proof of Stake uses significantly less energy than Proof of Work. Ethereum transitioned to PoS in 2022, reducing its environmental impact while maintaining its network security.
Proof of Work (PoW)
Proof of Work (PoW) is a blockchain consensus mechanism in which miners use computational power to solve cryptographic puzzles to validate transactions and add new blocks to the chain. The first miner to solve the puzzle receives a block reward, typically in Bitcoin. While PoW secures the network, it requires significant computational power and energy.
Q
Quantitative Easing (QE)
Quantitative easing (QE) is a monetary policy tool used by central banks to support economic growth by purchasing government bonds and other financial assets, increasing liquidity in the economy. QE often lowers borrowing costs and encourages investment. It can influence financial markets, typically supporting equities and weakening the currency, while also increasing market volatility.
Quote Currency
The quote currency is the second currency in a forex pair and shows how many units of the base currency are needed to buy 1 unit of the quote currency. In EUR/USD, USD is the quote currency - if the pair trades at 1.0850, one euro costs 1.0850 U.S. dollars. Profit and loss are typically calculated in the quote currency.
R
Rate Of Return (RoR)
Rate of return (RoR), expressed as a percentage, is a loss or gain of the cost of the investment. Every investment has a rate of return - if it’s above zero it means that the trader made a profit.
Risk Management
Risk management involves identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. In trading crypto, indices, and commodities, effective risk management is crucial for protecting investments.
Rollover
Rollover is the process of extending a trading position beyond its initial settlement or expiration date. In futures-based CFDs, such as BUND or TNOTE on SimpleFX, rollover moves the position to the next available contract, which may involve price adjustments. In forex, rollover refers to holding a position overnight and involves paying or receiving a swap fee based on the interest rate differential between the two currencies.
S
Short Position
Traders who want to sell an asset - for example a currency pair - open a short position. If an investor sells EURUSD, it means that a short position is opened.
Size
Trade size, also known as position size, refers to the size of a trading position expressed in lots, units, or contracts. It determines a trader’s exposure to market movements and directly affects potential profit or loss. On SimpleFX, trade size varies by instrument - for example, one standard lot in forex equals 100,000 units of the base currency.
Slippage
Slippage occurs when a trade is executed at a different price than expected, typically during fast-moving markets or when available liquidity at the requested price is insufficient. For example, if you place a buy order at 50.00 but liquidity is limited, your order may fill at 50.1. Slippage can be positive or negative and is common during major news events.
Spot Market
A spot market is a financial marketplace where instruments such as currencies, commodities, or cryptocurrencies are bought and sold for immediate delivery at the current market price. Unlike futures markets, where contracts settle at a future date, spot market transactions settle on the spot, typically within two business days for forex pairs.
Spread
The difference between a financial instrument's bid and ask prices is known as the spread. It shows how much it costs to execute a trade and is expressed in points for other markets or pips for FX. Tighter spreads indicate higher liquidity and lower trading costs, making them a key factor when comparing brokers like SimpleFX.
Stop Loss
A stop loss is a risk management order that automatically closes an open position when the market price reaches a predetermined unfavorable level. To limit their maximum possible loss on a trade, traders set stop losses. For example, if you buy EUR/USD at 1.1000, placing a stop loss at 1.0950 limits your loss to 50 pips.
Stop Order
An order to buy or sell an asset once the market reaches a specified price level, known as the stop price. Traders place buy stop orders above the current price and sell stop orders below it. Stop orders are commonly used to enter breakout trades or to limit losses on existing positions.
T
Take Profit
Take profit is an order to close a previously opened position at a price more profitable for the client than the price at the time of placing the order. When the take profit is reached, the order will be closed.
Technical Analysis
Trailing Stop
Trailing stop is a type of stop loss order. It is set at a percentage level either below the market price (for long positions), or above the market price (for short positions).
U
V
Value
Value refers to the perceived or estimated worth of a financial asset, influenced by its fundamentals, market demand, and economic conditions. Traders assess value to determine whether an asset is overvalued or undervalued. In forex, the value of pairs like EUR/USD is influenced by interest rate differentials, economic data, and geopolitical events.
Volatility
Volatility measures the degree of variation in the price of an asset over time. High volatility indicates significant price swings, common in markets like crypto, particularly with assets like emerging altcoins.
Volume
The total number of shares, contracts, or units traded for a specific asset over a given time period is referred to as volume. Strong market interest is indicated by high trade volume, which usually coincides with notable price changes. Traders use volume as a confirmation tool in technical analysis - a price breakout supported by high volume is considered more reliable than one on low volume.
W
Wallet
A crypto wallet is a digital tool that allows users to store, send, and receive cryptocurrencies by managing their private and public keys. Wallets can be hardware devices for enhanced security or software-based applications on desktop or mobile. They are essential for interacting with decentralized finance (DeFi) platforms and decentralized applications (dApps) on blockchains like Ethereum.
Web3
Web3 is a concept for a decentralized internet built on blockchain technology, focusing on transparency, user ownership, and peer-to-peer interactions. Unlike Web2, where platforms control user data, Web3 enables users to interact through cryptocurrencies, smart contracts, and decentralized applications (dApps). Key components include DeFi protocols, NFTs, and decentralized autonomous organizations (DAOs) operating on networks like Ethereum.
Whitepaper
A whitepaper is a detailed technical document that outlines the concept, architecture, tokenomics, and goals of a blockchain or cryptocurrency project. It serves as a key resource for investors to evaluate a project's feasibility and potential. Notable examples include Satoshi Nakamoto’s 2008 Bitcoin whitepaper and Vitalik Buterin’s 2013 Ethereum whitepaper, which laid the foundations for their respective networks.
WTI Crude
WTI Crude (West Texas Intermediate) is the primary U.S. benchmark for crude oil prices. It is a light, sweet crude oil priced at Cushing, Oklahoma, and serves alongside Brent Crude as one of the two main global oil price benchmarks used by traders and energy markets.
Y
Yield
Yield is the return on an investment, usually expressed as an annual percentage. In bond markets, it often refers to yield to maturity (YTM), and bond prices move inversely to yields as interest rates change. Forex traders closely monitor government bond yields, as yield differentials between countries influence currency movements.
Z
Zero-knowledge proof cryptocurrency ZCash
Zcash is a privacy-focused cryptocurrency that enables private transactions via zero-knowledge proofs (zk-SNARKs). Unlike Bitcoin, where transactions are publicly visible, Zcash allows users to shield the sender, receiver, and transaction amount. Launched in 2016, Zcash remains one of the leading privacy-focused cryptocurrencies.
