Glossary Of Trading

Cable

Forex slang for the British Pound – US Dollar pair, named after the first trans-Atlantic telegraph cable laid along the ocean’s bed, and whose primary task at the time was the transmission of currency values.

Call option

An option to buy an underlying asset at a predetermined (“strike”) price upon expiration. An option is paid for up front by the option buyer at a rate defined as a “premium”, which is received by the option seller. The premium should not be confused with the asset’s current market price and future strike price.

Candlestick Chart

A chart in which candle-like shapes display the opening and closing prices of an asset over a time period represented by the candle’s body. Wicks above and below the body indicate maximum and minimum prices during that time period. A rising or falling candle is differentiated by its colour.

Central Bank Rate

The rate at which a state’s central bank loans money to other financial institutions.

Chart

A visual representation of (usually) numerical data. Financial charts can be either line charts, bar charts or candlestick charts.

Commodity

A tangible good that can be and which has been “commoditized”, i.e. standardized by quality and quantity to enable interchangeability.

Consumer Price Index (CPI)

The change in value of a fixed consumer basket of goods & services, aids in measuring consumer inflation.

Contract for Difference (CFD)

An agreement between 2 parties to exchange the change in value of an asset at the expiration of the contract.

Counter currency

The second currency quoted in a forex pair and to which the value of the pair is equal. The pair’s value is equal to the amount of counter currency (the second currency quoted) required to buy/sell one unit of the Base currency (the pair). If 1 EURUSD – a currency pair in which the Euro is the Base currency and the US Dollar is the Counter currency – equals 1.1.000, 1 Euro equals 1.1000 US Dollars.

Currency

A financial medium for the exchange of value. In economics, it is the monetary system employed by a nation, the name of its coinage.

Currency pair

A pair of currencies that are being exchanged for one another. The pair is defined by its base currency (the base unit) and valued by its counter currency. Forex traders invest in the comparative value of the two currencies.