Take a look at our list of the financial terms associated with trading and the markets. From beginners starting their trading journey to experts with decades of experience, all traders need to clearly understand a huge number of terms.
High frequency trading (HFT) is an automated form of algorithmic trading which uses computer programs to execute large numbers of orders at incredibly high speeds. This allows traders to capitalize on small price discrepancies in the market by exploiting arbitrage opportunities that exist due to different pricing among different exchanges. HFT is widely used today as a way for investors to make quick and efficient trades with a lower cost of entry.
How does high-frequency trading work?
High-frequency trading is an automated system of buying and selling stocks within fractions of a second. By using complex algorithms, traders can analyze and make decisions about the markets at a much faster rate than traditional methods. As a result, high-frequency trading enables firms to take advantage of short-term price fluctuations and generate significant profits.
Automated trading is also referred to as Algo Trading (Algorithmic is abbreviated to Algo) – is the use of algorithms for executing orders utilizing automated and pre-programmed trading instructions via advanced mathematical tools. Trading variables such as price, timing and volume are factors in Algo trading.
How does algo trading work?
Algo trading works by capitalizing on fast decision-making processes as human intervention is minimized. As such, Algo Trading enables automated trading systems to take advantage of opportunities arising in the market even before human traders can even spot them. It uses processes- and rules-based algorithms to employ strategies for executing trades. Algo trading is mostly used by large institutional investors and traders
Margin trading refers to the practice of borrowing money from a broker to purchase securities. It allows traders to buy more securities than they could afford to buy with cash alone, by leveraging the securities they already own as collateral. This increases the potential returns but also increases the potential risks, as the trader is responsible for paying interest on the borrowed money and must also cover any losses. Margin trading is considered to be a high-risk strategy and is only suitable for experienced traders with a good understanding of the risks involved.
How much money do you need for margin?
The amount of money required for margin trading depends on the minimum deposit requirement set by the broker. For markets.com this is 100 of your local currency, with the exception of South Africa where it is 1000 rand.
What level of margin is safe?
The level of margin that is considered safe depends on the trader's risk tolerance and investment goals. A lower margin level is generally considered to be safer, as it reduces the potential for large losses
Index Trading is a type of trading that involves trading a specific financial index such as the S&P 500. It is considered to be a passive investment strategy, where the investor seeks to match their performance with the broader market, instead of attempting to beat it.
What is an index?
An index is a measure of a portion of the stock market that reflects changes in the value of a basket of stocks within it. This can provide an overall snapshot of how a specific market is performing. For example, the US Tech 100 gives a broad overview of the US tech market performance at any given time.
What are indexes used for in finance?
Indexes are used in finance to measure the performance of portfolios and to benchmark the performance of investments against a predetermined set of criteria. They also help investors assess and analyze market trends, risks, and opportunities.
What are different types of index in stock market?
There are different types of indices in the stock market. Some indices used in Index trading are often used as benchmarks to evaluate performance in financial markets. Some of the most important indices in the U.S. markets are the Dow Jones Industrial Average and the S&P 500.
Arbitrage is trading that makes use of small differences in price between identical assets in two or more markets. An asset will most likely be sold in different markets, forms or via a different financial products.
Arbitrage is one alternative trading strategy that can prove exceptionally profitable when leveraged by sophisticated traders. It also carries risks which need to be considered prior and during an arbitrage.
Arbitrage as a trading strategy is when an asset is simultaneously bought and sold in different markets, thus taking advantage of a price difference, and generating a potential profit. Arbitrage is commonly leveraged by hedge funds and other sophisticated investors.
What is an example of arbitrage?
Without going into actual trading advice, here are several examples of Arbitrage in Trading:
• Exchange rates
• Offshore operations
• Cryptocurrency
And perhaps the most obvious and common form of arbitrage which is acting as a go between or affiliate, earning commission on price differences between the seller and the buyer.
Types of arbitrage traders use:
• Pure arbitrage - Traders simultaneously buying and selling assets in different markets to take advantage of a price differences.
• Merger arbitrage – When two publicly traded companies merge. If the target is a publicly traded company, the acquiring company must purchase its outstanding shares Convertible arbitrage.
• Convertible Arbitrage. It is related to convertible bonds, also called convertible notes or convertible debt.
Stock trading is the practice of buying and selling stocks, or shares of ownership in a publicly-traded company, with the goal of making a profit through price appreciation or by receiving income in the form of dividends. Stock traders buy and sell shares in the stock market using a brokerage account, and they use a variety of strategies and techniques to determine when to enter and exit trades. Stock trading is a popular form of investment, but it also comes with risks and profits are in no way guaranteed. You should acquire a good understanding of the market and individual stocks before making trading decisions.
How are Stocks Different from Other Securities?
Stocks, also known as equities, represent ownership in a corporation, while other securities represent claims on an underlying asset. Other types of securities include bonds (debt securities), options, and derivatives.
How Do I Start Trading Stocks?
You can trade stocks using a stock exchange. Platforms like markets.com offer CFDs on stocks and other securities so you can start assembling and get trading outcomes of your own!
Day trading is the practice of buying and selling financial securities, such as stocks or futures, with the aim of making short-term profits within a single day's trading session. It requires a good understanding of markets and an ability to take advantage of opportunities in the right timing. Professional day traders are typically very experienced and have a deep understanding of the markets, products, strategies, and the risks.
How does day trading work?
Day Trading works in the same way any other trading process, yet at times the intervals between positions are short to very short. Day traders buy and sell batches of various assets within the same day, or even within very short periods within that day. It can be said that the process is based on exploiting the inevitable up-and-down price movements which occur during a trading session.
How do I start day trading?
To start day trading, you need to have an account with a broker like markets.com, basic knowledge of the stock market and financial markets, and the ability to access the markets online or via an app. You should also educate yourself on risk management strategies, study different investment styles, and use technical analysis when deciding what stocks to buy and sell. Finally, make sure to set realistic goals and keep records of your trades.
A CFD is a derivative financial instrument based on the price movements of an underlying asset. CFDs enable traders to trade shares, Forex, indices, bonds, or commodities without actually owning the assets being traded.
A CFD (Contract for Difference) is made between two parties, typically described as "buyer" and "seller", stating that the buyer will pay the seller the difference between the current value of an asset and its value when the contract was initially made. If the closing trade price is higher than the opening price, then the seller (the broker) will pay the buyer (the trader) the difference, and that will be the buyer’s profit. The opposite is also true. That is, if the current asset price is lower at the exit price than the value at the contract’s opening, then the seller, rather than the buyer, will benefit from the difference.
What is the difference between CFD trading and share trading?
While both “regular stock trading” and CFD Share trading are executed via trading platforms and applications, there are key differences between them. As indicated above, the main difference between stock share and CFD trading is that when you trade a CFD you are speculating on an asset’s price without actually owning the underlying asset. While regular stock trading requires the parties to have ownership of the underlying stocks.
Equity is the value of a trader's account, representing the total assets minus any margin used to open trades. It reflects their financial position and potential financial outcomes from any trading activities as they currently stand. Traders can use equity to decide when to enter or exit positions and what size positions to take.
What is difference equity and stock?
For traders, stock and equity are synonymous terms as stocks represent equity ownership in a company. Assets, liabilities, and shareholders' equity are items found on the balance sheet.
What is difference between equity and account balance?
Equity is the total account balance including profits/losses from open positions, whereas the account balance is simply the total money deposited in an account before any trades have been made.
iShares MSCI Taiwan (EWT) ETF tracks the investment results of an index composed of Taiwanese equities. The ETF provides exposure to large and mid-sized Taiwanese companies and can be used to access to the Taiwanese stock market. EWT includes 90 of the top companies on the Taiwanese Stock Exchange. It is heavily weighted toward the information technology and finance sectors, which account for 55.5% and 18.5% of the portfolio respectively.
The top ten holdings include Taiwan Semiconductor Manufacturing, Hon Hai Precision Industry Ltd, Formosa Plastics Corp and Chunghwa Telecom Ltd.
Multilateral Trading Facilities (MTFs, also known as Alternative Trading Systems or ATS in the United States) provide investment firms and eligible traders with alternatives to traditional stock exchanges. MTFs enable the trading of a wider variety of markets than other exchanges. MTFs users can trade on securities and instruments, including those that may not have an official market. They are electronic systems controlled by approved market operators as well as large investment banks.
What are OTFs?
OTFs (Organized Trading Facilities) are a type of trading venue that is authorized by European Union (EU) legislation to operate in the EU. They are similar to Multilateral Trading Facilities (MTFs) and provide a platform for the trading of financial instruments, such as bonds, derivatives, and equities. Unlike MTFs, OTFs have more flexibility in terms of the types of instruments and trading methods that they can offer.
Is a multilateral trading facility a regulated market?
Yes it is. MTFs are authorized by EU regulators, which provides a platform for the trading of financial instruments, such as bonds, derivatives, and equities.
In trading, rollover refers to the process of extending the settlement date of a trade by rolling it forward to the next available delivery date. This is typically done for futures contracts and currency trades. Rollover allows traders to maintain an open position beyond the initial settlement date without having to close and re-open the trade.
What are rollover and swap?
When rolling over a trade, a trader may also be required to pay or receive the difference in the interest rate between the two currencies involved in the trade. This is known as "swap" or "overnight financing". Rollover is typically done when traders expect market conditions to remain favorable for their position, allowing them to capture more potential profit.
In trading, “Volume of Trade” (Volume) refers to the total quantity of shares or contracts traded for a specific security, share or even to the market as a whole. Volume of trade can be measured through any type of asset traded during a specific duration, usually a trading day.
How is trade volume calculated?
Trade volume is calculated by adding together the number of shares or contracts traded during a specified time period.
What is a good volume to trade?
A good trade volume for a security varies and can depend on factors such as the type of security, market conditions, and overall liquidity. Generally, higher trade volume indicates greater liquidity, which can make it easier to buy and sell the security.
What does it mean when trade volume is high?
High trade volume means there is a high number of shares or contracts being bought and sold in a security or market, indicating high levels of interest and liquidity.
Yield in trading refers to the return on an investment, expressed as a percentage of the investment's cost. It represents the income generated by an investment, such as interest or dividends, divided by the cost of the investment. The yield can be used to compare the returns of different investments and is an important metric for investors evaluating the performance of their portfolios.
How do I calculate yield?
Yield is calculated as (income generated by investment / cost of investment) * 100. The cost of the investment is usually the purchase price, and the income generated can come from various sources such as dividends, interest, or rent.
Is yield same as return?
No, yield and return are not the same. Yield is the income generated by an investment as a percentage of the cost, while return is the total gain or loss on the investment including both income and capital appreciation or depreciation.
An Order in trading is a request sent by a trader to a broker or trading platform to make a trade on a financial instrument such as shares, Crypto, CFDs, currency pairs and assets. This can be done on a trading venue such as a stock market, bond market, commodity market, financial derivative market, or cryptocurrency exchange
What are the most common types of orders?
Common types of orders are:
• Market Orders. A market order is given by traders and investors as an order to immediately buy or sell an asset, security, or share. Such an order guarantees that the order will be executed, yet the actual execution price is not guaranteed.
• Limit Orders. A limit order is an order to buy or sell an asset such as a security at a specific price or better than that price. Traders wishing to define a maximum price for either buying or selling an asset can use limit orders.
• Stop Orders. Stop orders instruct brokers to execute a trade when the asset’s price reaches a certain level.
In trading, resistance level is a price point at which the price of a security or financial instrument tends to encounter selling pressure, making it difficult for the price to rise above that level. The resistance level is seen as a ceiling, as the price has a hard time going above it. Traders use resistance levels to identify areas where they expect the price to stall or reverse direction. This can be determined by observing the historical price movement of a security or financial instrument, looking for areas where the price has consistently failed to break above. Resistance levels are also used in combination with support levels to identify potential price ranges and trade entry or exit points.
What happens when a stock hits resistance?
If a stock hits a resistance level it can cause the stock to stall, move sideways, or even reverse direction. At resistance level traders that have taken a long position might decide to take profits, while traders that have not yet taken a position might decide to wait for a break above the resistance before buying.
When a stock hits resistance, traders will typically observe the stock's behavior at that level to determine if the resistance level is likely to hold or if the stock is likely to break through it. If the stock breaks through resistance, it can be considered a bullish sign, indicating that the stock is likely to continue to rise. On the other hand, if the stock fails to break through resistance, it can be considered a bearish sign, indicating that the stock is likely to stall or reverse direction.
Automated trading is also referred to as Algo Trading (Algorithmic is abbreviated to Algo) – is the use of algorithms for executing orders utilizing automated and pre-programmed trading instructions via advanced mathematical tools. Trading variables such as price, timing and volume are factors in Algo trading.
How does algo trading work?
Algo trading works by capitalizing on fast decision-making processes as human intervention is minimized. As such, Algo Trading enables automated trading systems to take advantage of opportunities arising in the market even before human traders can even spot them. It uses processes- and rules-based algorithms to employ strategies for executing trades. Algo trading is mostly used by large institutional investors and traders
Arbitrage is trading that makes use of small differences in price between identical assets in two or more markets. An asset will most likely be sold in different markets, forms or via a different financial products.
Arbitrage is one alternative trading strategy that can prove exceptionally profitable when leveraged by sophisticated traders. It also carries risks which need to be considered prior and during an arbitrage.
Arbitrage as a trading strategy is when an asset is simultaneously bought and sold in different markets, thus taking advantage of a price difference, and generating a potential profit. Arbitrage is commonly leveraged by hedge funds and other sophisticated investors.
What is an example of arbitrage?
Without going into actual trading advice, here are several examples of Arbitrage in Trading:
• Exchange rates
• Offshore operations
• Cryptocurrency
And perhaps the most obvious and common form of arbitrage which is acting as a go between or affiliate, earning commission on price differences between the seller and the buyer.
Types of arbitrage traders use:
• Pure arbitrage - Traders simultaneously buying and selling assets in different markets to take advantage of a price differences.
• Merger arbitrage – When two publicly traded companies merge. If the target is a publicly traded company, the acquiring company must purchase its outstanding shares Convertible arbitrage.
• Convertible Arbitrage. It is related to convertible bonds, also called convertible notes or convertible debt.
Day trading is the practice of buying and selling financial securities, such as stocks or futures, with the aim of making short-term profits within a single day's trading session. It requires a good understanding of markets and an ability to take advantage of opportunities in the right timing. Professional day traders are typically very experienced and have a deep understanding of the markets, products, strategies, and the risks.
How does day trading work?
Day Trading works in the same way any other trading process, yet at times the intervals between positions are short to very short. Day traders buy and sell batches of various assets within the same day, or even within very short periods within that day. It can be said that the process is based on exploiting the inevitable up-and-down price movements which occur during a trading session.
How do I start day trading?
To start day trading, you need to have an account with a broker like markets.com, basic knowledge of the stock market and financial markets, and the ability to access the markets online or via an app. You should also educate yourself on risk management strategies, study different investment styles, and use technical analysis when deciding what stocks to buy and sell. Finally, make sure to set realistic goals and keep records of your trades.
A CFD is a derivative financial instrument based on the price movements of an underlying asset. CFDs enable traders to trade shares, Forex, indices, bonds, or commodities without actually owning the assets being traded.
A CFD (Contract for Difference) is made between two parties, typically described as "buyer" and "seller", stating that the buyer will pay the seller the difference between the current value of an asset and its value when the contract was initially made. If the closing trade price is higher than the opening price, then the seller (the broker) will pay the buyer (the trader) the difference, and that will be the buyer’s profit. The opposite is also true. That is, if the current asset price is lower at the exit price than the value at the contract’s opening, then the seller, rather than the buyer, will benefit from the difference.
What is the difference between CFD trading and share trading?
While both “regular stock trading” and CFD Share trading are executed via trading platforms and applications, there are key differences between them. As indicated above, the main difference between stock share and CFD trading is that when you trade a CFD you are speculating on an asset’s price without actually owning the underlying asset. While regular stock trading requires the parties to have ownership of the underlying stocks.
High frequency trading (HFT) is an automated form of algorithmic trading which uses computer programs to execute large numbers of orders at incredibly high speeds. This allows traders to capitalize on small price discrepancies in the market by exploiting arbitrage opportunities that exist due to different pricing among different exchanges. HFT is widely used today as a way for investors to make quick and efficient trades with a lower cost of entry.
How does high-frequency trading work?
High-frequency trading is an automated system of buying and selling stocks within fractions of a second. By using complex algorithms, traders can analyze and make decisions about the markets at a much faster rate than traditional methods. As a result, high-frequency trading enables firms to take advantage of short-term price fluctuations and generate significant profits.
Equity is the value of a trader's account, representing the total assets minus any margin used to open trades. It reflects their financial position and potential financial outcomes from any trading activities as they currently stand. Traders can use equity to decide when to enter or exit positions and what size positions to take.
What is difference equity and stock?
For traders, stock and equity are synonymous terms as stocks represent equity ownership in a company. Assets, liabilities, and shareholders' equity are items found on the balance sheet.
What is difference between equity and account balance?
Equity is the total account balance including profits/losses from open positions, whereas the account balance is simply the total money deposited in an account before any trades have been made.
Index Trading is a type of trading that involves trading a specific financial index such as the S&P 500. It is considered to be a passive investment strategy, where the investor seeks to match their performance with the broader market, instead of attempting to beat it.
What is an index?
An index is a measure of a portion of the stock market that reflects changes in the value of a basket of stocks within it. This can provide an overall snapshot of how a specific market is performing. For example, the US Tech 100 gives a broad overview of the US tech market performance at any given time.
What are indexes used for in finance?
Indexes are used in finance to measure the performance of portfolios and to benchmark the performance of investments against a predetermined set of criteria. They also help investors assess and analyze market trends, risks, and opportunities.
What are different types of index in stock market?
There are different types of indices in the stock market. Some indices used in Index trading are often used as benchmarks to evaluate performance in financial markets. Some of the most important indices in the U.S. markets are the Dow Jones Industrial Average and the S&P 500.
iShares MSCI Taiwan (EWT) ETF tracks the investment results of an index composed of Taiwanese equities. The ETF provides exposure to large and mid-sized Taiwanese companies and can be used to access to the Taiwanese stock market. EWT includes 90 of the top companies on the Taiwanese Stock Exchange. It is heavily weighted toward the information technology and finance sectors, which account for 55.5% and 18.5% of the portfolio respectively.
The top ten holdings include Taiwan Semiconductor Manufacturing, Hon Hai Precision Industry Ltd, Formosa Plastics Corp and Chunghwa Telecom Ltd.
Margin trading refers to the practice of borrowing money from a broker to purchase securities. It allows traders to buy more securities than they could afford to buy with cash alone, by leveraging the securities they already own as collateral. This increases the potential returns but also increases the potential risks, as the trader is responsible for paying interest on the borrowed money and must also cover any losses. Margin trading is considered to be a high-risk strategy and is only suitable for experienced traders with a good understanding of the risks involved.
How much money do you need for margin?
The amount of money required for margin trading depends on the minimum deposit requirement set by the broker. For markets.com this is 100 of your local currency, with the exception of South Africa where it is 1000 rand.
What level of margin is safe?
The level of margin that is considered safe depends on the trader's risk tolerance and investment goals. A lower margin level is generally considered to be safer, as it reduces the potential for large losses
Multilateral Trading Facilities (MTFs, also known as Alternative Trading Systems or ATS in the United States) provide investment firms and eligible traders with alternatives to traditional stock exchanges. MTFs enable the trading of a wider variety of markets than other exchanges. MTFs users can trade on securities and instruments, including those that may not have an official market. They are electronic systems controlled by approved market operators as well as large investment banks.
What are OTFs?
OTFs (Organized Trading Facilities) are a type of trading venue that is authorized by European Union (EU) legislation to operate in the EU. They are similar to Multilateral Trading Facilities (MTFs) and provide a platform for the trading of financial instruments, such as bonds, derivatives, and equities. Unlike MTFs, OTFs have more flexibility in terms of the types of instruments and trading methods that they can offer.
Is a multilateral trading facility a regulated market?
Yes it is. MTFs are authorized by EU regulators, which provides a platform for the trading of financial instruments, such as bonds, derivatives, and equities.
An Order in trading is a request sent by a trader to a broker or trading platform to make a trade on a financial instrument such as shares, Crypto, CFDs, currency pairs and assets. This can be done on a trading venue such as a stock market, bond market, commodity market, financial derivative market, or cryptocurrency exchange
What are the most common types of orders?
Common types of orders are:
• Market Orders. A market order is given by traders and investors as an order to immediately buy or sell an asset, security, or share. Such an order guarantees that the order will be executed, yet the actual execution price is not guaranteed.
• Limit Orders. A limit order is an order to buy or sell an asset such as a security at a specific price or better than that price. Traders wishing to define a maximum price for either buying or selling an asset can use limit orders.
• Stop Orders. Stop orders instruct brokers to execute a trade when the asset’s price reaches a certain level.
Stock trading is the practice of buying and selling stocks, or shares of ownership in a publicly-traded company, with the goal of making a profit through price appreciation or by receiving income in the form of dividends. Stock traders buy and sell shares in the stock market using a brokerage account, and they use a variety of strategies and techniques to determine when to enter and exit trades. Stock trading is a popular form of investment, but it also comes with risks and profits are in no way guaranteed. You should acquire a good understanding of the market and individual stocks before making trading decisions.
How are Stocks Different from Other Securities?
Stocks, also known as equities, represent ownership in a corporation, while other securities represent claims on an underlying asset. Other types of securities include bonds (debt securities), options, and derivatives.
How Do I Start Trading Stocks?
You can trade stocks using a stock exchange. Platforms like markets.com offer CFDs on stocks and other securities so you can start assembling and get trading outcomes of your own!
In trading, rollover refers to the process of extending the settlement date of a trade by rolling it forward to the next available delivery date. This is typically done for futures contracts and currency trades. Rollover allows traders to maintain an open position beyond the initial settlement date without having to close and re-open the trade.
What are rollover and swap?
When rolling over a trade, a trader may also be required to pay or receive the difference in the interest rate between the two currencies involved in the trade. This is known as "swap" or "overnight financing". Rollover is typically done when traders expect market conditions to remain favorable for their position, allowing them to capture more potential profit.
In trading, resistance level is a price point at which the price of a security or financial instrument tends to encounter selling pressure, making it difficult for the price to rise above that level. The resistance level is seen as a ceiling, as the price has a hard time going above it. Traders use resistance levels to identify areas where they expect the price to stall or reverse direction. This can be determined by observing the historical price movement of a security or financial instrument, looking for areas where the price has consistently failed to break above. Resistance levels are also used in combination with support levels to identify potential price ranges and trade entry or exit points.
What happens when a stock hits resistance?
If a stock hits a resistance level it can cause the stock to stall, move sideways, or even reverse direction. At resistance level traders that have taken a long position might decide to take profits, while traders that have not yet taken a position might decide to wait for a break above the resistance before buying.
When a stock hits resistance, traders will typically observe the stock's behavior at that level to determine if the resistance level is likely to hold or if the stock is likely to break through it. If the stock breaks through resistance, it can be considered a bullish sign, indicating that the stock is likely to continue to rise. On the other hand, if the stock fails to break through resistance, it can be considered a bearish sign, indicating that the stock is likely to stall or reverse direction.
In trading, “Volume of Trade” (Volume) refers to the total quantity of shares or contracts traded for a specific security, share or even to the market as a whole. Volume of trade can be measured through any type of asset traded during a specific duration, usually a trading day.
How is trade volume calculated?
Trade volume is calculated by adding together the number of shares or contracts traded during a specified time period.
What is a good volume to trade?
A good trade volume for a security varies and can depend on factors such as the type of security, market conditions, and overall liquidity. Generally, higher trade volume indicates greater liquidity, which can make it easier to buy and sell the security.
What does it mean when trade volume is high?
High trade volume means there is a high number of shares or contracts being bought and sold in a security or market, indicating high levels of interest and liquidity.
Yield in trading refers to the return on an investment, expressed as a percentage of the investment's cost. It represents the income generated by an investment, such as interest or dividends, divided by the cost of the investment. The yield can be used to compare the returns of different investments and is an important metric for investors evaluating the performance of their portfolios.
How do I calculate yield?
Yield is calculated as (income generated by investment / cost of investment) * 100. The cost of the investment is usually the purchase price, and the income generated can come from various sources such as dividends, interest, or rent.
Is yield same as return?
No, yield and return are not the same. Yield is the income generated by an investment as a percentage of the cost, while return is the total gain or loss on the investment including both income and capital appreciation or depreciation.
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