Trading glossary
The words you'll see most often, explained simply.
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- Ask
- The lowest price a seller is currently willing to accept.
- Bid
- The highest price a buyer is currently willing to pay.
- Drawdown
- The fall from an account's or investment's peak value to a later low.
- ETF
- An exchange-traded fund: a fund whose units trade on an exchange like shares.
- Futures
- A standardised contract to buy or sell something at a set price on a future date.
- Leverage
- Using borrowed money or a derivative to control a position larger than your own capital. It magnifies both gains and losses.
- Limit order
- An order to trade only at a set price or better. It may not fill.
- Liquidity
- How easily something can be traded without moving its price much.
- Long
- A position that benefits if the price rises.
- Margin
- Money set aside with a broker to open or hold a leveraged position.
- Market order
- An order to trade immediately at the best available price.
- Option
- A contract giving the buyer the right, but not the obligation, to buy or sell an asset at a set price by or on a set date.
- Position size
- How many shares, units or contracts you hold in a trade.
- Resistance
- A price area where rising prices have previously tended to stall.
- Short
- A position that benefits if the price falls.
- Slippage
- The difference between the price you expected and the price you actually got.
- Spread
- The gap between the bid and the ask.
- Stop order
- An order that becomes active once the price reaches a level you set, often used to limit a loss.
- Support
- A price area where falling prices have previously tended to stall.
- Volatility
- How much and how quickly a price tends to move.