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Arbitrage
The simultaneous purchase and sale of an instrument in two different markets to profit from a temporary price disparity.
Backwardation
When the bid price exceeds the offer price for a stock. This is a market distortion when usually stock is suspended.
Bear
The opposite of Bull. A “bear market” is a term used to describe a falling market, or one that is expected to fall.
Blue chip stock
A company that is regarded as traditional and not technical. Large, profitable and conservatively managed organizations. Well established company.
Bull
The opposite of “bear”. Refers to a market trend, market has risen or is expected to rise.
Cable
A market term used for the British Pound Sterling.
Call Rate
The overnight Interbank interest rate.
Capital Gains Tax
Spread betting exempts clients from paying any capital gains tax under current laws.
Commodity
A raw material or metal traded on the commodities market.
Contract for difference (CFD)
The financial product that investors purchase in order to spread trade. An over the counter derivative similar to a future, in that CFDs are liquid derivative instruments that mirror the underlying assets in all aspects, and can therefore be traded by closing out and re-opening at any time before the expiry date, at the prevailing market rate. CFDs reduce traders capital investment amount required, while increasing profit potential.
CFD Trade Position Opening
A position is opened by buying or selling a CFD. When a customer buys the Index, he buys the CFD. To make a profit, the index should rise. When a customer sells the Index, he sells the CFD. To make a profit, the index should fall.
CFD Position Closing
A position is closed by buying / selling the same amount of CFD(s) that was bought / sold earlier, in the same instrument. Closing a CFD position will result in a profit or loss being realized on customer's account.
Direct Dealing
An approach whereby dealers contact each other to transact without a broker.
Equity
An alternative name for stocks and sharesExpiry dateThe date at which a contract can no longer be
traded.
Equity Balances
The equity (or balance) on customer's account will fluctuate according to the money he has deposited in his account, according to the trading conducted on his account and positions held. Therefore customer's equity balance is constantly calculated in-line with market movements.
FTSE
Financial Times Stock Exchange. These firms are jointly responsible for the compilation and maintenance of the main stock indices reflecting the performance of the UK’s top
shares.
FTSE 100
The Index that highlights the performance of the UK’s top
companies.
Gearing
Also known as leverage. The ratio of a company's long-term funds with fixed interest to its total capital. A high gearing is generally considered very
speculative.
Guaranteed Stop loss
An order that protects one’s stop order in the scenario the markets gap below your stop
order.
Hedging
The practice of undertaking one investment activity in order to protect against loss in another, e.g. selling short to nullify a previous purchase, or buying long to offset a previous short sale. While hedges reduce potential losses, they also tend to reduce potential profits.
Initial Margin
The margin paid initially to trade currency futures. A trader’s loss may not exceed this margin per contract/lot. Libor London Interbank Offered Rate. This is the rate at which banks will lend to each other, set at 11:00 a.m. London time.
Limit orders
Instructions do deal that stipulate the minimum or maximum price at which you want to buy or sell your
shares.
Liquidity
Refers to how easy it is to trade in a stock. Liquid markets are those where there are a large number of people holding equities and a high volume of shares in the public
domain.
Margin
Margin is a cash deposit provided by clients as collateral to cover losses (if any) that may result from their trades. Margin comes in a number of different forms. With CFD trading it applies to all the CFD products offered, and is calculated as Initial Margin and Variation
Margin.
Margin Call
A demand for additional funds. A requirement by a clearing house that a clearing member (or by a brokerage firm that a client) brings margin deposits up to a required minimum level to cover an adverse movement in price in the market. This is the first trigger level for margin
trade.
Minimum Trade Size
Minimum trade size is the value of one Index point. For example £1 per point in the UK or $1 per point in the
USA.
Offer Price
Also referred to as the ask price, the price at which an investor can buy from the marketOptionsFinancial derivative instrument that allow investors to speculate on the future movements of the underlying stocks.
Partial Closing of Positions
A closing of an open position might be partial - by executing an opposite trade of a lesser amount than the previously open
trade.
Rollover
A transaction designed for spot deals whereby the delivery is extended and "exchanged" from the old spot delivery date to the current spot delivery date. Swap points are either subtracted or added reflecting either a positive cost of carry of negative.
S&P 500
Broader Index showing the performance of the US top 500 shares.
Sell/Short
Placing a trade if a trader thinks the market price will fallSharesShares are also known as equities, stocks, holdings or securities. Indicates ownership of part of a
company.
Software
Lightning fast deal execution CFD trading software. Click here to download a free trial.
Spread
The difference between the buy and the sell price.
Variation Margin
Variation Margin is the difference in margin required if the initial margin in customer's account has fallen below the 2% requirement for Index trading to hold his position. It provides for trading profits and losses. Once a CFD trade is opened, variation margin requirement must always be maintained for the open position(s). It is customer's responsibility to ensure that his account is sufficiently margined at all times, especially during volatile trading
periods.
Shortage in Equity
A shortage in equity occurs when the Equity balance falls below the required Initial margin. Accounts with shortage in equity will only be allowed to reduce open positions, until the equity balance is in excess of the required
deposit.
Stop Out Level
A Stop loss order for customer's open positions is placed at a level where the total Equity balance falls to 10% of the required Initial margin. This level is referred to as the Stop Out level, which is the second trigger level for Margin. Below this level all of customer's open positions will be automatically closed out. Once the stop-out level has been triggered, the customer will not be allowed to trade on his account until the equity balance is restored to the required Initial margin
level.
Trading Profits / Losses
Profits made on customer's trading activities increase and losses decrease the Equity Balance on his account, and therefore the available margin trading or holding
positions.
Minimum Trade Size
Minimum trade size is the value of one Index point. For example £1 per point in the UK or $1 per point in the USA. Stamp duty Stamp duty (UK) is a tax imposed on the buying of shares and property. Currently, stamp duty on share purchases applies at the rate of 0.5%. It only applies to purchases and not to sales. There is no stamp duty in the USA.
Volatility
A statistical measure of a market or a security's price movements over time and is calculated by using standard deviation. Associated with high volatility is a high degree of risk.
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