Glossary
Welcome to the Kudotrade Glossary, here you will find clear and concise definitions of key terms and concepts, which are essential for navigating the world of financial markets and trading.
A
Accrued interest
Interest collected on a bond or other fixed-income security since the last interest payment.
Acquisition
The process of acquiring an asset, which may affect employees, consumers, and shareholders.
After hours
Trading that happens after the normal market hours.
Annualised return
Annual return on investment, taking into account the investment's duration and any changes in value over time.
Ask price
The lowest price for which a seller will accept a security. It is also referred to as the "offer price" and is always higher than the bid price.
Asset
An intangible, liquid economic resource that may be traded between individuals and institutions.
Asset class
A collection of assets that have a similar financial structure.
Automated trading systems (ATS)
A computer programme that executes transactions according to specified rules and algorithms.
Average holding time
The average time a trader holds a position open for.
B
Balance
Total remaining funds in the account.
Bank Rate
The interest rate at which a central bank lends money to commercial banks and financial institutions within its jurisdiction. It is a key tool used by central banks to control monetary policy, influence economic activity, and manage inflation.
Bear market
A prolonged period of dropping prices is also known as "bearish".
Bid price
The highest price at which a buyer is willing to purchase a security, such as a currency pair or a stock. It represents the price level at which traders or investors can sell an asset if they are initiating a sell (short) trade or closing a long trade.
Bonds
Bonds are investment instruments issued by businesses or governments to finance projects or operations.
Bull market
An extended upward trend in the market, starting from the previous lows.
Buy limit order
An order which will be entered at a specific price or lower.
Buy stop order
An order to enter a security at a specific price or higher.
C
Candlestick chart
A chart that displays the historical and real-time prices of a product or market, allowing you to discover patterns and trends.
Capital
Funds in the account which can be used to trade.
Capital return
The potential return in investment from the original price.
Central bank
A financial entity responsible for managing a country's monetary policy and regulating its financial system.
Closed position
An order that has been sold or closed.
Copy trading
Mirroring someone else’s real time trades.
Current assets
Assets that a company expects to convert into cash, sell, or consume within one year or within its operating cycle, whichever is longer. They are essential for a company's short-term liquidity and are used to fund day-to-day operations.
Current liabilities
The obligations or debts that a company is expected to settle within a short period, typically within one year or the normal operating cycle of the business, whichever is longer. These liabilities represent financial obligations that require the use of current assets or the creation of new liabilities to meet them.
D
Daily chart
A chart showing the price changes of an investment or asset over a single day.
Day order
An order that is only valid on the trading day in which it was placed.
Day trader
A daily trader that aims to profit from short-term price changes.
Debt-to-Equity ratio
A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.
Deflation
A decrease in the general price level of goods and services, often associated with a reduction in the supply of money and credit in the economy.
Diversification
Spreading your capital across different instruments, to help lower the impact of one asset's performance on your portfolio.
Dividend
A payment made by a corporation to its shareholders, usually as a distribution of profits. Dividends are typically paid out in cash, but they can also be issued as additional shares of stock or other property.
Drawdown
The value of an investment or trading account declines from peak to trough.
E
Earnings report
Financial statements released displaying the earnings over a certain period.
Economic calendar
A tool for reporting a country's economic highlights and data releases, such as GDP, employment figures, and central bank meeting results.
Equity
The value of the shares issued by a company.
Exchange
A regulated platform where financial instruments can be traded in a fair and orderly manner.
Exchange rate
The rate at which one currency is exchanged for a different one, primarily utilised in the foreign exchange market.
Execution
Completing / placing a trade or order in the market.
Execution only
A type of service where they will only place trades for clients, with no advice given.
F
Face value
The stated value of a security or instrument.
Fair value
The estimated value of an asset is determined by its market price, financial statements, and other pertinent criteria.
Fibonacci
Fibonacci retracement and extension levels are technical analysis tools to identify potential support and resistance levels in the market. These levels are derived from the Fibonacci sequence.
Financial market
Any place where assets or security can be traded, including forex, cryptocurrencies, commodities, indices and many more.
Financial risk
The risk of loss resulting from changes in market circumstances, interest rates, credit ratings, or other financial factors.
Fiscal year
A year period that a corporation or organisation employs for financial and accounting purposes, which may or may not correspond to the calendar year.
Fixed income
Investments that will pay a set level or percentage return.
Foreign exchange
The global marketplace where currencies are traded. It involves the exchange of one currency for another, and this trading is crucial for international trade and investment.
FTSE 100
The stock market index that measures the performance of the 100 largest publicly traded companies listed on the London Stock Exchange (LSE) based on market capitalization. The term "FTSE" stands for Financial Times Stock Exchange.
Fund manager
A professional who is responsible for overseeing and making decisions regarding the investments of a mutual fund, pension fund, hedge fund, or other types of investment portfolios. The primary goal of a fund manager is to achieve the investment objectives of the fund.
Fundamental analysis
A technique to assess the price of an asset or market that concentrates on the underlying economic and organisational variables.
G
Gap risk
The risk of a big price fluctuation when the market reopens following a weekend or holiday.
GBP
The currency code for the pound.
Going long
Buying an instrument with the idea that it will rise over a longer period of time.
Going short
Selling a security or asset that the trader does not own, with the expectation that its price will fall, allowing the trader to buy it back at a lower price for a profit.
Government bond
A debt security issued by a government to support government spending and obligations. These bonds are considered low-risk investments due to the government's ability to tax and print money.
Gross profit margin
The gross profit margin is the amount of money a company earns after deducting the direct costs of manufacturing or delivery. This allows firms to measure their efficiency, which reflects their ability to create revenues from their activities.
Growth rate
The percentage increase or decrease in a quantity over a specific period of time. It is commonly used to measure the change in various economic, financial, and statistical indicators.
H
Hammer candlestick
This is a technical analysis pattern commonly used in financial markets, especially in chart analysis for stocks, currencies, commodities, and other assets. It is considered a bullish reversal pattern and is named for its resemblance to a hammer, with a small body and a long lower wick or shadow.
Hanging man candlestick
This is a technical analysis pattern that appears on price charts, particularly in financial markets like stocks, forex, commodities, and cryptocurrencies. It is considered a bearish reversal pattern and is named for its resemblance to a hanging man, with a small real body near the top of the trading range and a long lower shadow or wick.
Harmonic price patterns
Traders use this to identify potential reversals or continuation signals in financial markets. These patterns are based on geometric price relationships and ratios derived from Fibonacci levels.
Historical pricing
A record of a product's buying and selling prices that analysts and investors can use to assess its probable performance.
I
Income return
The portion of an investment's total return that is derived from periodic income payments, such as interest or dividends, rather than from capital gains. This is an important measure for investors who are primarily interested in generating regular income from their investments rather than seeking capital appreciation.
Indices
Indices, also known as stock indices or market indices, are statistical measures that track the performance of a group of stocks or other financial instruments. These indices represent the overall market or a specific sector of the market and are used by investors, analysts, and economists to gauge market trends, compare the performance of investments, and understand the health of an economy or industry.
Inflation
This is the rate at which the general level of prices for goods and services rises, leading to a decrease in the purchasing power of a currency. It is typically measured on an annual basis and is expressed as a percentage.
Interbank market
The global network of banks and financial institutions that trade currencies, loans, and other financial instruments among themselves. It is a key component of the financial system, providing liquidity, facilitating transactions, and influencing exchange rates and interest rates.
Investment fund
A pooled investment vehicle that gathers funds from multiple investors to invest in a diversified portfolio of securities, such as stocks, bonds, money market instruments, and other assets. The fund is managed by professional money managers or investment advisors according to specified investment objectives and strategies.
J
January effect
This is where stock prices often rise in January. This effect is said to be generated by an increase in buying after a price decrease, which normally occurs in December when investors engage in tax-loss harvesting to offset realised capital gains, prompting a sell-off.
Japanese candlestick
A type of price chart used in technical analysis, displaying open, high, low, and close prices in a candlestick format to analyse market trends and patterns.
JPY
The currency code for Japanese Yen.
Judgmental forecasting
A method of predicting future events or trends based primarily on subjective opinions, intuition, and experience rather than on quantitative data and statistical models. This type of forecasting relies on the expertise, insights, and judgement of individuals or groups, often incorporating their knowledge of specific contexts, market conditions, and unique factors that may not be captured by formal models.
K
Key currency
A major currency that is commonly used as a reserve currency and for international trade.
Key interest rate
This is the interest rate set by a central bank that guides monetary policy and influences the overall economic activity within a country or economic region. This rate is a critical tool used by central banks to manage inflation, control economic growth, and stabilise the financial system.
Key reversal
A technical analysis pattern where the price reverses direction sharply after reaching a new high or low, indicating a potential change in trend.
Knock-in option
This is a type of barrier option in financial derivatives trading, which becomes active (or "knocks in") and transforms into a standard option only if the underlying asset's price reaches a predetermined barrier level during the option's life. If the barrier is not reached, the option remains inactive and expires worthless.
Knock-out option
This is a type of barrier option in financial derivatives trading that ceases to exist (or "knocks out") if the price of the underlying asset reaches a predetermined barrier level during the option's life. Once the barrier is breached, the option is terminated, and the holder loses the right to exercise it further.
Know your customer (KYC)
Verification of clients on a financial platform.
L
Leading indicator
An economic indicator that offers information about future economic activity.
Leverage
Leverage refers to the use of borrowed capital or debt to increase the potential return on an investment. It allows an investor or a company to control a larger position or asset with a smaller amount of their own capital.
LIBOR
London Interbank Offered Rate, which is a point of reference interest rate within the financial markets.
Liquidity
The ease with which an asset can be quickly converted into cash without significantly affecting its market price. It is a crucial concept in finance, reflecting the ability to buy or sell assets in the market efficiently.
Liquidity provider
Plays an important role in the financial markets by offering to buy or sell assets, securities, or financial instruments to other market participants. They contribute to market liquidity by providing continuous quotes and ensuring that there are buyers and sellers available for trading activities.
London session
The period in which the London financial markets are open for trading.
Lot
A measurement used to determine the size of a particular deal. Typically, investors begin trading with one lot.
Lot based commission
A fee charged by brokers or financial institutions for executing trades in financial markets, such as stocks, options, futures, or currencies (Forex). The commission is typically based on the volume or size of the trade, usually measured in standard lots or units of currency.
M
Margin
This is the minimum fund you need in your account to make trades and helps brokers to guarantee the ability for you to open new positions and maintain them.
Margin call
A request made by the broker for the trader to add more funds to the account in order to meet the minimum margin requirements.
Market risk
The potential for financial losses due to movements in market prices. This type of risk affects the entire market and cannot be eliminated through diversification. It is inherent in all types of investments and can be influenced by a variety of factors, including economic changes, political events, and natural disasters.
Market sentiment
The overall perception of market players towards an asset or the market as a whole, which has a direct impact on price movements.
Micro lot
A standardised trading size that represents 1,000 units of the base currency in a currency pair and is also one of the smallest possible trade sizes in the forex market.
Mini lot
This represents 10,000 units of the base currency.
Monthly return
The difference between a user's net worth at the start and end of a month, including any withdrawals or deposits made during that period.
N
Nano lot
This is one tenth of the size of a micro lot and one hundredth of a mini lot, meaning it is worth 100 units of the base currency.
Net income growth
This refers to the increase in a company's net income over a specific period, typically measured on an annual basis. Net income, also known as net profit or net earnings, is the amount of profit that remains after all expenses, taxes, and costs have been deducted from total revenue.
Net position
The worth of a trader's position after deducting the initial cost of setting it up.
Net profit margin
This is a financial metric that measures the percentage of net income derived from total revenue. It indicates how efficiently a company is converting revenue into actual profit after accounting for all expenses, including operating costs, interest, taxes, and other expenses.
Net working capital
Net working capital (NWC) is a financial metric that represents the difference between a company's current assets and current liabilities. It is an indicator of a company's short-term liquidity and its ability to cover its short-term obligations with its short-term assets.
New York session
The period in which the New York financial markets are open for trading.
New York stock exchange
The New York Stock Exchange (NYSE) is one of the largest and most prestigious stock exchanges in the world; playing a significant role in the global financial markets.
O
Offer
The price at which the seller is selling a product.
Open position
An order which has been placed and being held.
Operating income
It is a measure of a company's profitability that indicates how much profit a company generates from its core business operations, excluding any income or expenses not directly tied to the core business activities.
Order
A request to purchase or sell an item at a given price or within a certain range.
Order type
This is based on the execution instructions; instant execution, buy limit or sell limit.
Overbought
A product has been bought too many times so the price has reached its peak and may be due a correction or decline.
Overnight position
A trade or position in financial markets that is held open beyond the daily trading session and into the next trading day.
Overnight rate
The interest rate at which financial institutions, particularly banks, borrow or lend funds among themselves on an overnight basis; this rate is a key benchmark in the interbank market.
Oversold
An undervalued asset is one whose price has fallen below its current value as a result of substantial selling over a period of time.
P
Pending order
An instruction given from the trader to buy or sell a financial instrument at a specific price or under certain conditions in the future.
Pip
The smallest unit of measurement for a currency pair's price change.
Position
The direction of the trade; long means a price increase and short means a price decrease.
Pre-market trading
The hours prior to the markets opening, allowing traders to analyse and observe the markets.
Price to earnings ratio
This is a financial metric used to evaluate the valuation of a company's stock by comparing its current share price to its per-share earnings. It is a widely used tool for investors to assess whether a stock is overvalued, undervalued, or fairly valued relative to its earnings.
Primary market
A segment of the financial market where newly issued securities, such as stocks, bonds, and other financial instruments, are offered and sold directly by issuers to investors.
Profit and loss
Refers to the financial results of a company's operations over a specific period, typically reflected in a financial statement known as the profit and loss statement or income statement. This statement summarises the revenues, costs, and expenses incurred during a period.
Pullback
This is a short-term decline in asset prices following a period of rising prices.
Q
Quantity
The amount of a product being bought or sold (known as lot).
Quarterly report
A financial document that publicly traded companies and some private companies produce every three months to provide an overview of their financial performance.
Quick ratio
Also known as the acid-test ratio, is a financial metric used to evaluate a company's short-term liquidity and ability to meet its immediate financial obligations without relying on the sale of inventory.
Quote
The price in which the price of an asset was last traded at.
R
Resistance
This refers to a significant price level or zone on a chart where an asset's upward price movement is expected to encounter selling pressure or barriers, potentially causing the price to stall, reverse, or consolidate.
Return
The overall earnings from an investment/trade.
Risk assessment
Identifying and assessing potential hazards to an investment or financial portfolio in order to evaluate the amount of risk and the best risk management measures.
Risk management
The process of identifying, assessing, and mitigating potential risks associated with trading activities in financial markets. It involves implementing strategies and techniques to protect capital, minimise losses, and optimise returns.
Risk mitigation
Strategies and actions taken to reduce the impact of potential risks associated with trading activities in financial markets. It involves identifying potential risks, implementing measures to minimise their occurrence or impact, and developing contingency plans to handle adverse situations effectively.
Risk monitoring
The ongoing process of observing, assessing, and analysing potential risks associated with trading activities in financial markets. It involves continuously monitoring market conditions, portfolio performance, risk metrics, and other relevant factors to identify changes, trends, or emerging risks that may impact trading outcomes.
Rollover
Extending the expiration or settlement date of a financial contract or position to a future date. It is commonly associated with derivative contracts such as futures contracts, options contracts, and forward contracts.
S
S&P500
A stock market index that serves as a benchmark for the performance of the U.S. stock market and a key indicator of the overall health of the economy. It includes a diverse selection of 500 large-cap companies in the United States.
Scalp trading
A short-term trading strategy that involves making quick and frequent trades in financial markets to capitalise on small price movements. Traders who employ scalp trading, known as scalpers, aim to profit from small price fluctuations within a short time frame, often holding positions for seconds to minutes.
Sell limit order
An order to sell an asset at a price lower than the current market price. It is executed when the market price reaches or falls below the specified price.
Short selling
A trading strategy used by investors and traders to profit from the decline in the price of an asset.
Slippage
The difference between the expected price of a trade and the actual price at which the trade is executed. It can occur in both buy and sell orders and is a common phenomenon, especially in fast-moving or volatile markets.
Speculation
The practice of making financial decisions in the hope of profiting from short-term price movements in assets, without necessarily having a fundamental interest or long-term investment objective in the asset.
Spread
The difference between the bid price and the ask price of a currency pair. The spread represents the cost of executing a trade and is typically measured in pips (percentage in points), which is the smallest price movement of a currency pair.
Spread betting
Investors speculate on the price movements of various financial instruments without owning the underlying assets.
Stop loss
The position will automatically close once it hits the predetermined price.
Support and resistance
A key concept in technical analysis used by traders to identify potential price levels where a financial asset may experience buying (support) or selling (resistance) pressure. These levels are based on historical price data and are significant because they represent areas where the supply and demand for an asset are likely to interact, potentially leading to price reversals or continuation patterns.
Swap rates
These are interest rates that traders pay or earn for holding positions overnight in the foreign exchange (forex) market or other financial markets. Swap rates are applied to positions that are carried over (rolled over) from one trading day to the next.
Swing trading
A trading strategy used by traders and investors to capture short to medium-term price swings or "swings" in financial markets. Unlike day trading, which involves opening and closing positions within the same trading day, swing trading typically involves holding positions for several days to weeks to capitalise on larger price movements or trends.
T
Take profit
The trade will close automatically once it meets the predetermined price.
Technical analysis
A method used by traders and investors to evaluate and forecast future price movements of financial assets, such as stocks, currencies, commodities, and indices, based on historical price data and trading volume. It focuses on studying price charts, patterns, trends, and technical indicators to make trading decisions, identify potential entry and exit points, and assess market sentiment.
Timeframe
Each candle or bar on a price chart represents a certain time period.
Trading psychology
The mental and emotional factors that influence a trader's behaviour, decision-making process, and overall performance in financial markets. It encompasses a wide range of psychological aspects, including cognitive biases, emotions, risk tolerance, discipline, self-control, and mindset, all of which can significantly impact trading outcomes.
Trading time zones
The periods during which financial markets are open and active for trading activities in different regions around the world. These time zones are influenced by geographical locations, market hours of operation, and global financial centres where trading takes place.
Trading volume
Refers to the total number of shares, contracts, or units of a financial asset that are bought and sold within a specified period, typically during a trading session, trading day, or specific time frame.
Trend
The directional movements and patterns that prices of financial assets, such as stocks, currencies, commodities, and indices, exhibit over time.
U
Undercapitalization
A trader has insufficient capital or funds to support their trading activities or investment strategies adequately. It occurs when the amount of capital available to the trader is insufficient to cover potential losses, margin requirements, or risk exposure associated with their trading positions.
Underlying asset
A financial instrument or tangible asset that serves as the basis for a derivative contract or financial security. Derivatives derive their value from the performance or price movements of the underlying asset.
Universal currency
A single currency that is adopted and accepted worldwide as the standard medium of exchange for international transactions, trade, and financial activities.
Unregulated market
A financial market that isn’t under government regulation and can operate with a higher degree of freedom.
Upside
The potential for an asset's price or value to increase in the future. It represents the positive or favourable direction of price movement, where investors and traders anticipate gains or profitability from their positions; expecting bullish market movements.
Uptrend
An uptrend refers to a sustained and consistent upward movement in the price of an asset over time. It is characterised by a series of higher highs and higher lows on a price chart, indicating a positive trend direction where buyers dominate, demand exceeds supply, and prices generally rise.
USD
The currency code for the dollar.
V
Valuation
Establishing the value of an asset, product or company.
Variable cost
Business expenditure that changes in accordance with the company's sales volume. As production increases or decreases, variable costs also rise or fall accordingly.
Vertical spread
A trading strategy that involves simultaneously buying and selling options contracts of the same type on the same underlying asset, but with different strike prices and/or expiration dates.
Volatility
The degree of variation or fluctuation in the price of a financial asset, such as stocks, currencies, commodities, or indices, over a specific period. It measures the rate and magnitude of price changes, both upward and downward, and is a crucial concept in financial markets as it reflects the level of risk, uncertainty, and market dynamics.
Volume
The total number of shares, contracts, or units of a financial asset that are bought and sold during a specific period, such as a trading day, session, or time frame. It represents the level of activity and liquidity in the market for that asset.
Voluntary disclosure
The practice where companies or entities provide additional information or data beyond what is required by regulatory standards or financial reporting requirements.
W
Wall street
The centre of the United States’ financial district and is synonymous within the American Financial industry.
Weighted moving average
A type of moving average calculation used in technical analysis to smooth out price data and identify trends over a specified period. It assigns varying weights or importance to each data point.
Wide bid-ask spread
This refers to the significant difference between the highest price at which a buyer is willing to purchase a security (bid price) and the lowest price at which a seller is willing to sell the same security (ask price).
Working capital
This represents the funds available for the day-today operations and short term financial obligations.
X
Y
Year to date
The period starting from the first day of the calendar years up to the present or specified date before the years end. It allows companies and people to analyse a specified time frame to compare and contrast to previous years, to analyse performance.
Yield
The return or income generated from an investment over a specific period, typically expressed as a percentage of the investment's cost or current value. It is a fundamental measure of investment performance and reflects the earnings or cash flows received by an investor relative to the amount invested.
Yield curve
A graphical representation of interest rates for bonds of varying maturities. It shows the relationship between short-term and long-term interest rates.
Yield curve risk
The risk associated with changes in the shape or slope of the yield curve, impacting the prices of fixed-income securities and the profitability of interest rate-sensitive investments.
Z
Zero coupon bond
A type of bond that does not pay periodic interest or coupon payments to investors during its term. Instead, it is issued at a discount to its face value and matures at its full face value, generating a profit for the investor equal to the difference between the purchase price and the face value.
Zloty
Polish currency.
Zonal analysis
A technical analysis approach that involves dividing price charts into distinct zones or regions based on price levels, support and resistance levels, chart patterns, or other relevant criteria. Traders use zonal analysis to identify key price areas, understand market behaviour, and make trading decisions based on the price action within each zone.
Zone of resistance
A price level or range where an asset's upward movement is likely to encounter selling pressure or resistance from traders and investors, potentially causing the price to reverse or consolidate.
Zone of support
A price level or range where an asset's downward movement is likely to find buying interest or support from traders and investors, potentially leading to a price bounce or reversal.