Glossary of trading terms

The process of asset valuation which involves analysing the underlying macroeconomic fundamentals and financial factors of an asset. It is often used in combination with technical analysis. For more information, check out this blog article.

Also known as the DAX (Deutscher Aktienindex), the Germany 40 index tracks the performance of the 40 largest and most actively traded companies listed on the Frankfurt Stock Exchange.

Greenwich Mean Time (GMT) is the average solar time zone at the Royal Observatory in Greenwich, London. The GMT time zone is often used as a reference time for the entire world and is sometimes called Universal Time Coordinated (UTC) or Coordinated Universal Time (CUT). Deriv uses GMT all year round.

Refers to a trader's profit before factoring in any costs. This is the profit that you earn from a trade before considering costs such as fees and commissions.

A Good Till Cancelled (GTC) order is a trade order used in financial markets. When you place a GTC order, you are instructing your broker to keep your trade active until it is executed or until you manually cancel it.

A trading strategy used to reduce the risk of adverse price movements by taking an offsetting position in a related asset. Hedging can help protect against potential losses, but it may also limit potential gains.

A mathematical calculation tool used to analyse the price movements of an asset and provide traders with insights into the asset's potential future price direction.

Indices, or stock indices, are a collection of stocks that represent a particular market or sector. View the stock indices available on Deriv.

A continuous rise in the overall prices of goods and services within an economy over a period of time. Inflation is measured by the Consumer Price Index (CPI).

A specific financial asset or security that can be bought or sold in trading.

The value of an option determined by the difference between the current market price of the underlying asset and the option's strike.

Also known as the Nikkei 225 index, this stock index tracks the performance of 225 large, publicly-owned companies listed on the Tokyo Stock Exchange.

A process to verify the identity of clients and assess their risk levels to mitigate risk and adhere to compliance regulations. In Deriv, the KYC documents requested may include proof of identity, proof of address, and proof of wealth.

A measure of the total value of a company's outstanding shares of stock with a market capitalisation of 10 billion USD or more. It is also referred to as "big cap".

Leverage lets you hold larger market positions than what your initial capital would allow. This way, you would amplify both your potential profits and losses.

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For example, a leverage ratio of 1:1000 means that Deriv provides USD 1,000 in trading capital for every USD 1 you deposit. This gives you greater market exposure but at the same time increases your risk if trades don't go as expected.

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The higher the leverage ratio, the more capital you can command with your own equity deposit. While higher leverage has the potential to magnify profits, it also comes with the risk of bigger losses if trades don't go your way. You should consider if the risk tolerance and capital that come with the leverage levels suit your trading style and goals.

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For more information, check out this blog article.

A type of order to buy or sell a security at a specific price or better. When you place the order, it will only be executed if the asset price reaches the limit price specified.

Liquidity in trading refers to the degree to which an asset can be bought or sold in the market without causing a significant impact on its price. Higher liquidity indicates a more active market, and narrower spreads between bid and ask prices, allowing traders to enter or exit positions smoothly and at stable prices.

A trading institution that participates in financial markets by providing liquidity or the ability to buy or sell a particular asset, security, or currency pair.

The possibility that an asset such as a stock, bond, or other financial instrument cannot be quickly sold or converted into cash without causing a significant loss in value due to market liquidity.

A trading position where you buy instruments in the expectation that their value will increase.

A situation where the value of a trade decreases, leading to a financial loss. This occurs when the price of the asset being traded moves in a direction that is unfavourable to the trade's position. It is often referred to as trade loss or loss trading.

The amount of units or contracts of an asset that are being bought or sold in a single trade. It is used to determine the trade volume.

A margin is the amount of funds (expressed in the trader's account currency) required for opening and keeping a leveraged position open.

A trading tool to calculate the margin required to increase your market exposure.

A request from a broker for a trader to deposit more funds into their trading account to maintain the lowest level of margin required. When you receive a margin call, you should take immediate action to address it.

The amount of funds you'd need to put in to open a leveraged trading position or to maintain the required margin for all your trading positions.

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The margin deposit amount for each trade is calculated based on the size of the position, leverage, and any other margin requirements. Financial instruments may have different margin requirements depending on their volatility and liquidity.

The percentage of funds that you must have in your trading account in order to open or hold a position. Margin requirement is calculated as below:

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Required margin = (volume × contract size × asset price) ÷ leverage

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For more information, check out this blog article.

The platform where various financial instruments such as stocks, currencies, commodities, and derivatives are bought and sold. It is also also known as a trading market or trade market.

A financial metric that measures the total market value of a publicly traded company's outstanding shares of stock, also known as market cap. The market capitalisation formula is calculated by multiplying the company's current stock price by the total number of outstanding shares.

The real-time information about market activity, such as pricing, trading volume, bid and ask, quotes, and other relevant trading statistics. You can use market data to monitor trends, assess conditions, and make informed trading decisions.

Market execution in MT5 means executing a trade at the best available market price. You may get a different price than the one you intended if the market moves quickly.

The degree to which market fluctuations can affect you. It can be measured by considering various things, such as your investment size, how much the asset's price moves, and how long you intend to hold the trade.

A financial institution or individual that offers both a buy and a sell price for a security and facilitates trading by providing liquidity to the market. Market makers play a crucial role in maintaining an orderly and liquid market.

The price at which a financial instrument can be bought or sold on the open market at a particular time. It represents the current asset value based on the interaction of buyers and sellers in the market.

The maximum amount of a financial instrument that you can trade in a single order.

The highest price target a trader can set on an option contract.

The highest number of shares, contracts, or units of an asset traded within a single trading day, reflecting the level of trading activities. It provides insight into the liquidity and activity of a particular asset, helping you assess market conditions and potential price movements.

The maximum allowed time for holding an options contract, measured in ticks.

Options trading is unavailable to clients residing within the EU.

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The highest amount of borrowed funds or leverage when executing trades. Knowing the maximum leverage allows you to assess your risk exposure and help control potential losses.

The maximum number of trading contracts that you're allowed to have open at any given time.

The maximum potential profit that you can earn on the trade.

The maximum amount of stake that you can invest to open an options contract.

Options trading is unavailable to clients residing within the EU.

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The maximum number of strikes available for you to choose.

Metals refer to precious metals, such as gold, silver, platinum, and palladium, as well as industrial metals, such as copper, aluminum, zinc, and nickel. View metals offered on Deriv.

A measure of the total value of a company's outstanding shares of the stock price with a market capitalisation between 2 to 10 billion USD.

The minimum amount of an instrument that you can trade in a single order.

The minimum distance from spot price available to choose as the strike.

The smallest position size or contract size that can be entered when making a trade. By knowing the minimum size, you can assess if you have sufficient capital to meet the requirements of a specific trade.

The smallest possible difference between the bid price and ask price of a financial instrument.

The minimum amount of stake you must invest to open an options contract.

Options trading is unavailable to clients residing within the EU.

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Forex minor pairs, or cross currency pairs, are currency pairs that do not include the US dollar as one of its components. Instead, it is made up of two other major currencies, such as the euro, Japanese yen, or British pound. These pairs are less frequently traded than major currency pairs, and typically have wider bid-ask spreads and lower market liquidity.

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View the forex minor pairs available on Deriv.

A technical analysis tool that calculates the average price of trading assets over a particular period. It is used to identify market trends and potential support or resistance levels.

A technical analysis indicator that identifies a financial asset's potential price trends and reversals. It shows the relationship between two exponential moving averages (EMAs) of an asset's price.

The multiplier rate that you choose to amplify your potential profit. The multiplier rate varies for every asset.

Multipliers is our leveraged derivative trading product with limited risk. Your potential profit is amplified when the market moves in your favour. You won't lose more than your stake when the market moves against your prediction.

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Learn more about multipliers on Deriv.

The highest multiplier rate that you can choose to amplify your potential profit.

The lowest multiplier rate that you can choose to amplify your potential profit.

The range of multiplier rates that you can choose to amplify your potential profit.

The multipliers profit and loss calculator, or multipliers PnL calculator, is a trading tool to estimate the level and amount of the stop loss and take profit for multipliers contracts.

A multipliers contract type where you predict whether the price of an underlying asset will be higher or lower than the entry spot at the end of the contract period.

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If you select 'Up', you'll earn a profit when the exit spot is higher than the entry spot.

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If you select 'Down', you'll earn a profit when the exit spot is lower than the entry spot.

A risk management tool offered by some brokers to protect traders from losing more than their account balance.

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On Deriv, if your MT5 Derived account balance becomes negative due to stop out, your account balance will be automatically brought back to 0.00 in your account currency.

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Negative balance protection is designed to cover trading losses and does not provide protection against other charges or fees, including overnight financing costs or trading commissions. The applicability of this tool may vary based on your country of residence, as it is subject to local regulations.

Also known as the Dutch Stock Market Index, this index tracks the performance of the 25 most actively traded companies listed on the Euronext Amsterdam Stock Exchange.

The trading gains or total profit you earn on a trade after deducting all costs, such as fees and commissions.

A mathematical calculation tool used to analyse and predict the future price movements of an asset.

An active trade that still has not been closed.

A request to buy or sell a financial instrument at a specific price.

A type of technical indicator used to identify potential market turning points by signaling when a financial instrument is losing momentum.

A situation where you hold a position in a specific financial asset that exceeds your risk appetite, trading capital, or diversification strategy.

The buying and selling of financial instruments that are not traded on a centralised exchange but directly between two parties, such as banks, corporations, or individual investors.

A way to make deposits into or withdrawals from your trading account. Learn more about Deriv's deposit and withdrawal payment methods.

An order to buy or sell a security at a specific price, but it isn't placed in the market immediately. The order is held by the broker and is executed when the market reaches the specified price.

Pip, or percentage in point, is a standard unit used to measure how much the asset value changes. When an asset has a quote with five or three decimal places, we use a smaller unit called a 'pipette'. A pipette is one-tenth the size of a pip. Pipettes help measure smaller price movements more accurately.

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For more information, check out this blog article.

A trading tool to determine the pip value of a trade.

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Knowing the value of each pip in a trade is important because it can help you understand the possible risks and rewards involved. By using this information, you can set appropriate stop loss and take profit levels, and adjust your position sizes accordingly.

Refers to how much 1 pip is worth, which is the smallest value change in a currency's exchange rate. For more information, check out this blog article.

The profit and loss margin calculator, or PnL margin calculator, is a trading tool to estimate the stop loss and/or take profit levels as well as the pip value.

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This calculator can help you determine the potential profit or loss on the trade. However, it's worth noting that results from the calculator are estimates and may not account for unforeseen market fluctuations or slippage.

A collection of trading assets that are held by a trader.

The specific trade that you hold in a particular financial instrument, such as stocks, commodities, currencies, or derivatives. It shows how much you are affected by the price movements of that instrument when there's any open trading position.

A trading strategy in which positions are held for weeks to months or even years for long term investment.

The period of trading that occurs after the regular market has closed for the day. It is also known as after-hours trading.

An estimate of the profit or loss based on the current market price of the underlying asset and the current value of the options contract. It is not realised until you choose to exercise or sell the trade contract before expiry time.

Options trading is unavailable to clients residing within the EU.

The period of trading that occurs before the regular market opens for the day.

The amount you earn after deducting any associated costs from your trades. It is the difference between an asset's buy and sell price or a trade's opening and closing price.

A financial metric that compares the total profits generated by successful trades to the total cost incurred by losing trades.

A type of document used to confirm a person's current country of residence. A proof of address can include a variety of documents, such as a utility bill or bank statement.

A type of document used for identity verification. A proof of identity can include a variety of documents, such as a government-issued ID card, passport, or driver's licence.

A type of document used to confirm a person's ownership of the payment method used in a transaction. A proof of ownership can include a variety of documents that consist of the person's full name and account details.

A type of document used to confirm a person's financial position. A proof of wealth can include variety of documents such as a payslip, tax return, or savings plan.

A temporary trading reversal or retracement that occurs within a larger price trend.

An economic policy in which a central bank buys large quantities of financial assets to increase the money supply and lower the interest rate to encourage lending and invesment.

The second currency or counter currency listed in a currency pair. It is the currency that is being used to quote the value of the base currency.

The current market price of a financial instrument. It represents the latest bid and ask prices available in the market. This price is continuously changing in response to market demand and supply.

A period of sustained upward movement or increase in prices of a particular financial instrument over a short to medium term period. It is driven by positive factors and a bullish sentiment.

The spread or difference between the highest and lowest asset prices within a certain period of time. It is also known as trading range.

A trading account that allows traders to trade with real money. It is also known as a live account or a funded account.

A technical analysis indicator used in trading to measure the magnitude and speed of price movements in a financial asset. This momentum indicator is primarily used to identify overbought or oversold conditions in an asset.

A term used in technical analysis to refer to a price level where the upward movement of an asset is expected to stop or reverse due to selling pressure.

An economic indicator that measures inflation in the UK economy by tracking the rate at which prices of goods and services are rising.

The profit or loss usually expressed as a percentage of the initial investment or stake.

A change in the direction of a price trend.

The various factors or events that could lead to a loss of capital.