Education reference
Trading glossary
Plain-English definitions for common terms used across futures, equities, FX, CFDs, commodities, rates and options concepts.
Core market terms
Bid
The price buyers are currently willing to pay.
Ask
The price sellers are currently willing to accept.
Spread
The difference between the bid and ask price.
Liquidity
How easily a market can be traded without large price impact.
Volatility
The size and speed of price movement.
Margin
Collateral required to open or maintain a leveraged position.
Leverage
Market exposure larger than the initial amount committed.
Expiry
The date when a contract reaches the end of its life.
Tick value
The money value of the smallest quoted movement in a contract.
Yield
A return measure used heavily in bond and rates markets.
Basis point
One hundredth of one percentage point.
Premium
The price of an option, or an amount above a reference value depending on context.
Strike price
The agreed price used to determine an option’s exercise value.
Settlement
The process for finalising obligations under a market transaction.
Positions and directions
Long
A position that profits if the price rises. Opened by buying.
Short
A position that profits if the price falls. Opened by selling first with the intention of buying back later.
Position
An open trade in a market, either long or short, that carries exposure until it is closed.
Pip
The smallest standard price move in an FX pair, commonly the fourth decimal place.
Contango
When a futures contract trades above the expected spot price, so later-dated contracts cost more.
Backwardation
When a futures contract trades below the expected spot price, so later-dated contracts cost less.
Order types
Market order
An instruction to buy or sell immediately at the best available price.
Limit order
An instruction to trade only at a specified price or better, which may not fill if the market does not reach it.
Stop order
An order that activates once the market reaches a set level, often used to limit a loss or protect a gain.
Stop-limit order
A stop order that, once triggered, becomes a limit order rather than a market order.
Day order
An order that stays active only for the current trading session and expires if not filled.
Slippage
The difference between the expected price of a trade and the price at which it actually executes.
Guide pages
Related guides
General education only
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