Account balance/account valueThe net amount held at any given time in an account, after factoring in all debits and credits.
AIM (Alternative Investment Market)A sub-market of the London Stock Exchange (LSE), allowing smaller companies to raise capital with a more flexible regulatory system than is required for the main market of the LSE. CFDs in AIM-listed shares are not available.
ArbitrageThe process of buying an asset (such as shares) and then immediately selling it so as to profit from the difference. Arbitrageurs can exploit tiny differences in the quoted price of an identical instrument across different markets using very large-sized trades.
AskThe lowest price at which a seller is willing to sell an investment or asset at a given moment. Also known as the offer price.
BackwardationA theory which says that as a futures contract nears expiry, it will trade at a higher price compared to when it was further from the expiry date. Also see ‘Contango’.
Bar chartA style of chart used in technical analysis, where the top of the vertical line represents the highest price traded in a particular instrument, and the bottom part displays the lowest price. The closing price is shown on the right side of the bar, and the opening price is shown on the left side of the bar. A single bar normally represents one day of trading.
Base currencyThe first currency quoted in a currency pair (for example in the GBP/USD currency pair, GBP is the base currency while USD is the quote currency).
Base rateThe lending rate determined by the central bank of a given country.
Basis pointTypically one hundredth of 1%, for example an interest rate cut of 50 basis pips is equal to 0.5%.
Bear marketA market distinguished by falling prices and negative sentiment.
BidThe highest price a buyer is willing to pay for a product is referred to as the ‘bid’. Also see Ask and Offer.
Bid priceThe price at which the buyer is willing to purchase at.
Bid-offer spreadThe difference between the buying price (offer/ask) and selling price (bid) of a product.
Blue chipBlue-chip companies are usually well-established, financially sound and better able to weather downturns. As a result, blue-chip stocks are regarded as less volatile. Companies listed in a country’s top tier stock index, such as the UK’s FTSE 100, are considered blue-chips.
Bollinger Bands®A chart indicator used in technical analysis to measure market volatility, consisting of a single moving average and two standard deviation bands.
Breakout tradingTrading strategies that recommend entering CFD trades once the price breaks through a defined resistance or support level. New ‘buy’ positions are entered into when the price breaks through a resistance level, while new ‘sell’ positions are entered into when the price breaks through a support level. These strategies are based on the view that once the price breaks through a support or resistance level, a new trend is likely to begin.
CableA term referring to the sterling/US dollar exchange rate: the rate was originally transmitted between the London and New York exchanges via the transatlantic telegraph cable beginning in the mid-1800s, hence the name.
CAC 40A market capitalisation weighted index of the largest 40 companies listed on the Paris stock exchange. The CAC index is published by the Societe des Bourse Francaises.
Candlestick chartAs with a bar chart, this graph shows the high, low, opening and closing prices, and the shape of the candle reflects the relationship between these prices. The candles are either green or red, depending on whether the closing price is higher than the opening price (green) or below it (red). The main body, or ‘wax’, represents the range between the opening and closing price and the ‘wicks’ show the highs and lows. It shows a visual representation of the prevailing trend and current market sentiment.
CapitalThe wealth, either monetary or in assets, owned by an individual or company.
Carry costThe cost incurred as a result of holding a position (e.g. The carry cost incorporated into the price of a commodity future consists of insurance costs, storage costs, interest charges and other related costs).
Carry tradeA strategy in which a trader sells a certain currency with a low interest rate and uses the funds to purchase a different currency yielding a higher interest rate, attempting to capture the difference between the rates. Common low yielding currencies include the USD and JYP and common high yielding currencies include the AUD and NZD.
Cash marketThe actual, underlying market on which derivatives contracts are based.
Cash priceThe price of an asset for immediate delivery. In other words, the actual price of an instrument right now. This term is often used for stock indices, whereas the synonymous term of spot is more often applied to forex and commodity prices. Also see Spot rate.
Central bankA government or quasi-governmental organisation that manages a country’s monetary policy. For example, the UK’s central bank is the Bank of England, and the US central bank is the Federal Reserve.
ChannelAn upward or downward trend on a chart where the boundaries are marked by two straight lines. A break above or below the channel lines signals a potential change in trend.
ChartingA range of techniques that use past price charts, along with other indicators, to anticipate future price movements.
Close outSelling a buy position or buying back a sell position, which closes the position, so that you no longer have any exposure to changes in the market price.
Closed positionAn equal and opposite transaction (for instance buying 1000 BT shares then selling 1000 BT shares) which results in the position automatically being closed.
Closing priceThe closing price is the last price for a tradable instrument at the time the market closes.
CommissionA fee charged by a broker or agent for carrying out transactions/orders.
CommodityA physical good, such as food, metal or fuel, that is interchangeable with other commodities of the same type. The quality of a commodity may differ slightly, but it is basically uniform across all producers, as any commodities that are traded on an exchange must meet specific minimum standards. A commodity is any basic good that investors can ‘buy’ or ‘sell’. Some popular commodities include: crude oil, coffee, gold, natural gas, silver, corn, sugar, cotton and wheat.
Consumer Price Index (CPI)An index that measures changes in the price of goods and services purchased by consumers. The figure measures the average change over time in the price of a sample of various common goods and services purchased by typical urban households.
Contract (unit or lot)The standard trading unit on certain exchanges. For stock index, forex and commodity positions, it is the amount of base currency profit or loss per pip movement in the market.
Contract for difference (CFD)Contracts for difference (CFDs) are derivative products which enable you to trade on the price movement of underlying financial assets (such as indices, shares and commodities). A CFD is an agreement to exchange the difference in the value of an asset from the time the contract is opened until the time at which it is closed. With a CFD, you never actually own the asset or instrument you have chosen to trade, but you can still benefit if the market moves in your favour.
Controlled riskA position which has a strictly limited maximum loss by virtue of a guaranteed stop. Also see Limited risk.
Core inflationA measure of inflation that excludes items that are subject to volatile price movements. Vegetable prices are an example of items where prices fluctuate widely based on seasonal conditions. These products are excluded from the calculation as they can give a false measure of inflation because prices can diverge from the overall trend.
Corporate ActionAny event initiated by a corporation which impacts its shareholders. For some events, shareholders may or must respond to the corporate action or select from a list of possible actions. Examples of corporate actions include dividend payments, mergers, rights issues and stock splits. Also see Dividend and Rights issue.
Cross currencyA pair of currencies traded in forex that do not include the US dollar, for example EUR/JPY.
Cross rateAn exchange rate between two currencies, both of which are not the official currency of the country in which it is quoted. Also refers to currency quotes that don’t involve the US dollar.
Crossed priceA situation where the bid price exceeds the offer price. This is usually indicative of an issue on the venue or of the market being in an auction period.
Currency pairRefers to the price quotation of currencies traded in the foreign exchange market. To determine the value of a currency, it must be compared to the currency of another country (example GBP/USD). In currency pairs, the price amount shows how much of the second currency is required to buy one unit of the first currency.
Daily chartsCharts that encapsulate the daily price movement of an instrument, for example a currency pair, index or share.
Data releasesGlobal economic statistics that are normally released at regular intervals, often monthly. The data can have a varying impact on the financial market, depending on factors such as when it‘s released and the level of economic insight it provides.
DAX 30A market capitalisation weighted index of the top 30 companies listed on the Frankfurt Stock Exchange in Germany.This is referred to as the ’Germany 30’ on our website and trading platform.
Day orderAn order to buy or sell an instrument that will expire automatically at the end of the day if it’s not executed on the day the order has been placed
Day tradingThe process of entering and closing out trades within the same day or trading session.
Dealing spreadThe difference between the buying and selling price of a contract.
DepositThe funds required to initiate and maintain an open spread betting or CFD trading position. Since spread bets and CFDs are traded on margin, the deposit is only a fraction of the full value of the trade and is not the total amount that can be lost on a trade.
DepreciationA fall in the value of an asset.
The last trading dayIt is the last day you can invest in a particular market. This may or may not coincide with the settlement date for this market.
DiversificationAn investment strategy that aims to manage risk through variety within an investor’s trading portfolio. Different components are chosen from a range of different industry sectors, so it’s unlikely that all of the investments will fluctuate in the same direction. The idea is that the portfolio as a whole will display more consistent, stable results than any of the individual components in the portfolio.
DividendThat part of a company’s profit after tax that is distributed to its shareholders. Dividends are usually distributed in cash, but can also take the form of stocks. Also known as payouts.
DividendsA dividend is a distribution of a portion of a company’s earnings, decided by the board of directors, to a class of its shareholders. Dividends can be issued as cash payments, as shares of stock, or other property.
DoveThe opposite of hawk, a dove refers to an economic policy advisor supporting monetary policies with lower interest rates as a means of encouraging economic growth.
Dow Jones Industrial Average (DOW)The Dow is the second oldest stock market index in the US and the most widely used indicator of the overall condition of the US stock market. It measures the performance of a selection of 30 blue-chip, publicly owned companies in the US.
DowntrendA price trend characterised by a series of lower highs and lower lows.
Economic driverChange in the economy that leads to changes in the market price of investments, such as shares, commodities or property.
Economic indicatorA government-issued statistic that indicates current economic growth and stability. Common indicators include employment rates, gross domestic product (GDP), inflation and retail sales.
Electronic Currency Network (ECN)A virtual exchange for FX transactions.
Elliot wave theoryDeveloped by RN Elliott, the Elliott Wave theory is a method of technical analysis based on the assumption of predictability, by identifying a certain flow and structure to the price movement of financial instruments.
EquityA stock or share representing an ownership interest.
EuroThe monetary unit of the eurozone, currently used by 19 European Union countries (Germany, France, Italy, Spain, Portugal, Belgium, The Netherlands, Luxembourg, Austria, Ireland, Finland, Greece, Cyprus, Malta, Slovakia, Slovenia, Estonia, Latvia and Lithuania).
Ex-dividend dateThe first trading day on which the buyer of a share is no longer entitled to payment of the current dividend.
ExchangeA marketplace in which securities, commodities, derivatives and other financial instruments are traded. The core function of an exchange – such as a stock exchange – is to ensure fair and orderly trading, as well as efficient dissemination of price information for any securities trading on that exchange. Exchanges give companies, governments and other groups a platform to sell securities to the investing public. An exchange may be a physical location where traders meet to conduct business or an electronic platform.
Execute and eliminate orderA limit order to execute at the current market price or worse. If the order is not filled in its entirety down to the specified order level then any remaining balance will be cancelled.
Execution-only stockbrokerStockbroker who offers clients an inexpensive trading facility without advice, research or recommendations pertaining to investment style or policy.
Expiration dateThe last date that a particular contract can be traded.
Expiration/ ExpirySome spread betting or CFD markets have a fixed duration. For example futures contracts will expire at a pre-specified date and time in the future. At this point a futures contract is said to have expired and is awaiting settlement. Settlement is when the expired contract is closed at a level normally relating to the market at the time of expiry.
ExposureThe level of an investment which is at risk. The higher the exposure, the bigger the potential loss or gain.
Fair valueThe premium (or discount) of a futures contract against its underlying spot/cash instrument that normally consists of an interest and dividend component. The fair value represents the rational pricing of a futures contract such that no arbitrage opportunity exists between the futures and cash.
FibonacciTechnical analysis ratios used in trading to identify future price movements – named after mathematician Leonardo Fibonacci. The most popular Fibonacci tools are retracements and extensions.
FillThe execution of an order.
Fill or kill orderA limit order that will only be executed if it can be filled entirely to your specified order level. Otherwise it will be cancelled.
Financial Conduct Authority (FCA)The authority responsible for supervising financial services firms in the UK. One of the FCA’s roles is to regulate the conduct of brokers and dealers in securities, options, shares, spread bets and CFDs so clients get a fair deal.
Financing costsCFD and spread betting share positions carried overnight will incur financing costs for the full consideration of the position. If you open a position with a 5% margin, overnight finance will be based on 100% of the balance. Clients who hold a long position will pay interest; clients who are short may receive interest.
Fiscal policyFiscal policy refers to governments’ spending policies, which have a significant impact on the overall economy. The policy affects government revenue and spending. When a government runs a deficit (spends more than it earns), it is putting more into the economy than it is taking out, adding to gross domestic product (GDP).
Flexible spreadThe difference between the bid and offer price that a broker can adjust according to market conditions. Also known as dynamic spread, floating spread or variable spread.
Floating profit/ lossCurrent profit/loss on open positions calculated at current prices.
Foreign exchangeThe forex market is made up of banks, commercial companies, central banks, investment management firms, hedge funds, retail forex brokers and investors. It’s a financial market for trading international currencies. Investors speculate on the relative strength of one currency against another by buying the currency of one country and selling it against another.
ForwardA forward trade (or contract) is the price of an asset for delivery at a defined future date, which is also the date of expiry. Most forward trades can be closed prior to the expiry date, to limit any loss or take a profit, for example.
Free marginFunds on the trading account which may be used to open a position. It’s calculated as account value less necessary margin.
FTSE 100A market capitalisation weighted index of the top 100 companies listed on the London Stock Exchange. This is often used as an indicator to assess the broader UK market.
Fundamental analysisThis involves analysing and valuing financial assets based on factors such as news, financial statements and earnings forecasts, company strategy and risk assessments, demand and supply forecasts, projections of future economic growth, industry developments and government policy. In fundamental analysis, an investor uses real data to evaluate a stock’s value rather than using charts and technical analysis to make trading decisions.
FuturesA future rate is notionally an agreement to conduct a transaction at some specified time in the future, with the price agreed now. A futures CFD will automatically expire at a specified time in the future, whereas a spot or cash CFD has no such expiry time. Often the price of a future contract will differ from the cash price. Also see Fair value, Expiration/expiry.
GappingThe phenomenon of a market trading at a price away from the previous traded price without trades occurring at intervening prices; it more usually, but not necessarily, relates to when a market resumes trading after a period of closure. Also see Slippage.
GearingGearing is a measure of leverage used, usually expressed as a percentage. A highly leveraged trade would require a small initial outlay in comparison to the notional value of the trade, and can be seen as high risk. Small price movements create amplified gains or losses, and therefore losses can exceed deposits made. Also see Leverage.
Good-for-day (day order)An order type that will expire if not filled by the end of the day. See also Order to open, Good-till-cancelled, Fill.
Good-till-cancelled (GTC)Unlike good-for-day orders, GTC orders remain active on the account waiting for a fill unless cancelled before being filled. See also Order to open, Good-for-day, Fill.
GreenbackA slang term for the US dollar.
Gross domestic product (GDP)GDP is the value of goods and services produced in a country including exports, minus imports made. It’s a measurement of a country’s overall economic activity, and can also be a gauge for its standard of living.
Guaranteed stop-loss order (GSLO)A stop-loss order is an order to buy or sell when the market reaches the ‘stop’ price, which allows you to limit your losses. Unlike a standard stop-loss order, a guaranteed stop-loss order (GSLO) is unaffected by slippage or gapping and guarantees the price your trade will be closed out at. There is a premium to pay when placing the GSLO with us; however we will refund this in full if the trade is closed out without the GSLO being executed.
Hawk, hawkishAn economic policy advisor who favours relatively higher interest rates to keep inflation under control or curb rapid economic growth. See also Dove.
HedgeA way of reducing the risk of losses that may occur if interest rates, share prices or foreign exchange rates move in the wrong direction. This usually involves the use of CFD or futures contracts.
Holding costsPositions that are held open past 17:00 New York time will incur holding costs. These holding costs will be calculated based on the total size of the position. Also see Financing costs.
Illiquid marketA market with relatively less aggregate volume in the order book. In an illiquid market, a small amount of business often moves prices by a disproportionate amount, and bid and offer prices can be far apart.
IlliquidityThe difficulty of changing your assets in cash because of a lack of demand for the asset you’re trying to sell. As a market maker, we provide liquidity by constantly quoting a bid and offer spread. Also see Liquidity.
IndexAn index, such as the FTSE 100 or S&P 500, gauges the prosperity or value of a section of the stock market. It is calculated from the prices of selected stocks, usually using a weighted average. It is not possible to invest directly in an index; instead investors trade in funds or other products that track the movement of an index.
Industrial productionA monthly economic indicator that measures changes in output for the UK’s industrial sector, including manufacturing, mining and utilities.
InflationIncrease in the general price of goods and services.
Inflation rateA measure of inflation that occurs in a given period (a year or calendar quarter for example). The inflation rate shows us how quickly the general price of goods and services is rising.
Initial Public Offering (IPO)The process by which a company is floated on the stock market for the first time. Offering shares to the investment public is a way of raising capital for further expansion. Also known as New issue.
Instant executionAn order that is executed at the price displayed on the screen. If the price isn’t available a requote can be offered as a new two-way price, at which you can resubmit the order or choose to cancel it.
Interbank ratesFX rates quoted to each other by international banks.
InterestCash adjustments made to reflect the economic effect of owing or receiving the notional amount of equity controlled by a spread bet or CFD position.
Intraday tradingTrading where positions are opened and then closed out within the same trading day.
Japanese candlestick chartsJapanese candlestick charts are similar to bar charts in that each ‘candle’ shows the opening price, closing price, high price and low price for the period. The candles are either green or red, depending on whether the closing price is higher than the opening price (green) or below it (red). The main body, or ‘wax’, represents the range between the opening and closing price and the ‘wicks’ show the highs and lows.
KiwiA slang term often used to reference the New Zealand dollar (or NZD), which is New Zealand’s base unit of currency.
Last dealing dayThe last day on which you may trade in a particular market. This may or may not coincide with the settlement date for that market.
LeverageLeverage allows traders to gain a large exposure with a relatively small outlay. This has the effect of amplifying profit or loss. A leverage of 1:100 means that in order to open and maintain a position the necessary margin is one hundred times less than the transaction size.
Libor (London InterBank Offered Rate)The interest rate charged between banks in London for short-term loans and a key benchmark that influences many other interest rate charges/products. Individual currency denominations have an associated Libor. It is produced for ten currencies with 15 maturities quoted for each, ranging from overnight to 12 months, producing 150 rates each business day.
Limit orderA limit order is an order to buy or sell a product at a specific price. A limit order to buy at a target price with OWM is executed at the target price or lower, when the buy price is equal to or lower than the target price. A limit order to sell at a target price with OWM is executed at the target price or higher, when the sell price is equal to or higher than the target price.
Limited riskA trade which has a strictly limited maximum loss. Also see Controlled risk.
Line chartsLine charts are created by connecting a series of data points, usually past price closes, with a line. They are the most basic type of charts used in financial markets.
Liquid marketA liquid market has sufficient volume of two-way business for a large transaction to occur with little or no impact on price. Such a market will normally exhibit tight bid-offer spreads.
LiquidityThe level of continual buy and sell activity making up market demand and indicating the ease with which investors can undertake transactions.
Liquidity providersA liquidity provider is an individual or institution which acts as a market maker in a given asset class. In the world of Forex the majority of global liquidity is provided by a number of big name investment banks (referred to as Tier 1 liquidity providers).
Log fileAn ongoing journal of your trading activity.
Long positionA position taken in anticipation of a rising market. To go long means to open a ‘buy’ position.
Long-term tradingIn the context of CFDs or spread betting, longer-term trading refers to strategies where the average duration of open positions would be between a week and several months.
LoonieA slang term for the Canadian dollar.
Lot sizeIt is the standardised quantity of a financial instrument, such as base currency, underlying asset or shares, per contract.
Major currency pairsThe most heavily traded currency pairs in the FX market, including: EUR/USD, USD/JPY, GBP/USD and USD/CHF.
Margin callA broker’s request to an investor using margin to deposit additional funds. Margin calls occur when an account’s funds fall to a specific value calculated by the broker, or if one or more of the products bought, effectively with borrowed money, decreased in value past a certain pip.
Mark-to-marketThe daily adjustment of an account to reflect accrued profits and losses often required to calculate variations in margins.
Market capitalisation (MCAP)Market capitalisation refers to the value of a company’s shares. The figure is reached by multiplying the number of shares that have been issued by the current share price. Investors find the MCAP figure useful for determining the size of a company.
Market executionAn order that is executed at the best price available in the market, with no requotes.
Market orderAn order that you use to specify the direction and size of a trade, but not the price. This ensures your order will be filled as quickly as possible.
Market-makingThe process of quoting a bid and offer based on speculation, expectation, supply and demand.
Medium-term tradingIn the context of CFDs, this refers to strategies where the trader is prepared to hold positions open for longer than one day but where the average duration of open positions would be no more than a few weeks.
Mid-priceThe bid plus the offer, divided by two.
Monetary policyThe action of central banks to set interest rates and control the amount of money in an economy, with the aim of keeping inflation and unemployment at acceptable levels.
Moving averageThe graphical representation of a smoothed-out price action over a set period of time. Moving averages can help identify a trend, pips of entry and potential target levels for stops.
Moving Average Convergence Divergence (MACD)A chart indicator used in technical analysis to indicate a potential bullish or bearish trend reversal.
NASDAQThe NASDAQ is the second largest stock exchange in the US and traditionally lists many technology companies, such as Microsoft. The movements of the NASDAQ can have a significant effect on UK markets, particularly the techMARK index of technology, media and telephony companies.
New issueA company that is floated on the stock market for the first time. Offering shares to the investing public is a way of raising capital for further expansion. Also known as Initial Public Offering (IPO).
New York Stock Exchange (NYSE) (NYSE)The largest and oldest stock exchange in the US.
Nikkei 225A price-weighted index of the top 225 shares listed on the Tokyo stock exchange.
Non-dealing desk (NDD)An execution model that allows you to trade directly with numerous market liquidity providers in order to get the most competitive bid and ask prices.
Non-farm payrollsA notable economic indicator normally released on the first Friday of every month by the US Department of Labor. It presents the number of people on the payrolls of all businesses, with the exception of agricultural, local government, private household and non-for-profit. The monthly figure can change significantly, and often leads to a high level of volatility in FX pairs such as EUR/USD, around the time of the release. Generally, a high reading is seen as positive (or bullish) for the US dollar, while a low reading is seen as negative (or bearish).
OCO (one cancels the other)Lets you place a sell limit and sell stop order on the same stock at the same time. When either order is executed the other will automatically be cancelled. Also applies to a buy limit and buy stop order.
OfferA current market price is made up of a level at which you can sell and a level at which you can buy. The level at which you can buy is always the higher of the two prices and is called the offer.
Offer priceThe price at which the seller is willing to sell at.
The act of buying or selling financial instruments via the internet using a broker like OWM’ online trading platform.
Open positionA long or short position which has not been closed out by an equal and opposite position.
OptionThe right, but not the obligation, to buy (‘call option’) or sell (‘put option’) a specific amount of a given stock, commodity, currency, or index at a specified price (the ‘strike price’) during a specified period of time. For the holder, the potential loss is limited to the price paid to acquire the option. When an option is not exercised, it expires.
Order / order to openAn instruction by a customer to a broker/trader to buy or sell should a specified price be reached. The order remains valid until executed or cancelled by the customer.
Order bookWhen bid and offer prices match, new incoming orders are automatically logged against orders on the book. FTSE 100 stocks have been traded on an electronic order book since 20 October 1997
OscillatorA leading indicator in chart analysis which shows a potential trend reversal before it occurs.
Out-of-hours – or extended hours – trading usually refers to trading on an index outside of its main opening hours. At OWM, you can trade on the UK 100, Germany 30, France 40 and Euro 50, 24-hours-a-day from Sunday evening to Friday evening.