Glossary

A list with all the relevant terms that you might need for your trading. We advise that you get well acquainted with them, as they can help you read and understand market analysis. If you really want to get into the world of binary trading this is a necessity.

A

B

Back Office

The record keeping related to the completion of financial transactions

Balance of Payments

A record of a nation’s transactions with other nations for a given time period; this includes merchandise, services and capital flows.

Balance of Trade

The result after deducting a country`s imports from its exports.

Bar Chart

A chart type consisting of 4 points of importance:
-the vertical bar consisting of the high and low prices
-the opening price, signified as a small horizontal line to the left of the bar
-the closing price, which is signified same as the opening one but is to the right of the bar

Base Currency

The currency in which an investor keeps his account books; the currency which other currencies are quoted against. The USD is usually considered the “base” in the Forex market, which means that quotes are expressed in their value in USD.

Basis Point

A unit equal to 1/100th of a percentage point.

Bear

An investor who thinks that the prices or the market will drop.

Bear Market

A market defined by a prolonged period of dropping prices and general negative outlook on the market.

Big Figure

A term which refers to the first few digits in an exchange rate. These digits don`t change very often in normal market fluctuations, and are thus sometimes not mentioned in dealer quotes. For example the USD/JPY rate might be 107.10/107.15, but it will be verbally quoted simply as 10/15.

Bonds

Bonds are financial instruments issued by a borrower in order to raise capital. They pay either fixed or floating interest, known as the coupon.

Broker

An intermediary (usually an individual or a company) between buyers and sellers. The broker usually takes a certain fee or a commission.

Buba

The Central German Bank

Bull

An investor who believes that there will be a rise in the prices/market

C

Cable

A jargon used to express the British sterling to US dollar exchange rate.

“Call” (Above) Option

Making a prediction that a given asset will have a higher priced after a predetermined period of time.

Candlestick Chart

A chart which indicates the trading range for the day, along with the opening and closing prices. If the opening price was higher than the closing price, the rectangle between the two prices is shaded. If the closing price was higher than the opening price, then that area of the chart is not shaded.

Capital Markets

These are markets for medium to long-term investments, most times over one year.

Central Bank

Usually a government organization that manages the monetary policy of a country and takes care of printing its currency (the US Federal Reserve for example).

Chartist

Someone who uses charts and graphs to interpret historical data and find trends that help predict future movements.

Close Now

A function that gives traders to option to cancel a digital option before its time of expiration.

Commission

A fee charged by broker for a transaction.

Confirmation

A document that confirms a transaction and certifies the terms.

Counter Party

Someone (person, company, organization) with whom a financial transaction is made.

Cross Rate

The exchange rate between two currencies.

Currency

Any form of money issued by a government or central bank and used as legal tender and a basis for trade.

Currency Pair

The two currencies that make the foreign exchange rate. EUR and USD for example.

Currency Risk

The risk of incurring losses because of sudden change in the exchange rates.

Current Price

The price of an asset according to real time data.

D

Dealer

An individual or firm that takes a side of a position with the intention to earn profit by closing out the position in a following trade with someone else.

Deficit

When there is a negative balance of trade or payments.

Deposit

This is the borrowing and lending of cash. The rate at which money is borrowed or lent at is known as the deposit rate.

Depreciation

A decrease in the value of a currency because of certain market forces.

Derivative

A contract which changes its value according to the price movements of a related or underlying security or some other physical instrument. An Option is the most common derivative instrument.

Devaluation

The intentional downward adjustment of the price of a currency, usually made with an official announcement.

Digital Options

This is a synonym for binary options.

E

Economic Indicator

An indicator showing certain aspects of economic development, such as GDP, Employment Rates, Deficits and so on.

Euro

The currency officially used by the European Monetary Union.

Expiry Price

The price of the given asset at the time of expiration. It`s used to decide whether the option expired in-the-money or out-of-the-money.

Expiry Time

The precise time at which a binary option is going to expire and reveal the result of the trade.

F

Fed - Federal Reserve

The Central Bank of the United States.

Fixed Amount

This refers to the fixed amount of potential gain that the trader can receive. Since the amount of investment is fixed, so is the payout.

Fixed Exchange Rate

The official exchange rate set by a monetary institution for a given currency. Even fixed rates can fluctuate to some extent.

Forecast of Movement

The prediction which a trader makes for the movement of the given financial instrument. He can purchase a call action or a put action depending on his prediction.

Forex - Foreign Exchange

The simultaneous buy of a currency and sale of another in an over-the-counter market. Most times it`s quoted against the USD.

Fundamental Analysis

An analysis used for evaluating macroeconomic factors` effect on the price of a given binary option.

Futures Contract

An agreement and obligation to exchange a good or instrument at a set price at a certain date in the future.

G

G5

The five leading industrial countries; the United States, Germany, Japan, France, United Kingdom.

G7

The seven leading industrial countries; the United States, Germany, Japan, France, United Kingdom, Canada, Italy.

GDP - Gross Domestic Product

The total value of a country's output, income or expenditure produced within the borders of the country.

GNP - Gross National Product

The above mentioned GDP plus the income earned from citizens of the country abroad.

GTC - Good-Till-Cancelled

An order made with a dealer to buy or sell at a fixed price. It will remain valid until executed or cancelled.

H

Hedge

A position or combination of a few positions which minimizes the risk of the primary position.

High/Low

The highest or lowest trading price for the underlying instrument for a given day.

I

IMF - International Monetary Fund

An international organization consisting of 184 member countries. It was established to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment, as well as to provide temporary financial assistance to countries in order to help ease the balance of payments adjustment.

Inflation

A period noted by an increase in the price of consumer goods, and a consequential decrease purchasing power.

Intervention

An action by a central bank aimed at affecting the value of its currency by entering the market.

In-the-money

This means that the trader has picked the right choice and has turned a profit. For a Call options, this means that the price ended above the starting point at the time of purchase and for a Put option, it means that it ended below the starting point.

IRS - Interest Rate Swaps

The exchange of two debt obligations which have different payment streams.

K

Kiwi

The currency of New Zealand.

L

Leading Indicators

Economic indicators that are said to predict future economic developments and trends.

Leverage

The ratio of the amount used in a transaction to the required security deposit (also referred to as margin).

London InterBank Offered Rate (LIBOR)

The London Inter-Bank Offered Rate. Some international banks use LIBOR when borrowing from another bank.

Liquidity

A market`s ability to take large transactions with minimal or no impact on price stability.

Long

A position to buy more of an instrument than is actually sold. This might lead to an increase in value if the market prices increase.

Loonie

A Canadian $1 coin.

M

Margin

The amount of equity that an investor should deposit in order to collateralize a position.

Market Maker

A dealer who is willing to create a 2 sided market for almost any financial instrument and quotes the bid and ask prices.

Money Markets

Short term investments in which the participants are usually banks and other institutions. (Deposits, Commercial Paper, etc.) This kind of investments are usually safer and more liquid.

O

Out-of-the-money

This means that the trader didn`t predict the price correctly and incurred a loss of his money.

P

Points/ Pips

A term or a unit, used for measuring the smallest move possible move that an exchange rate makes.

Position

This is the trading view in terms of buying or selling. It can be used to express how much currency an investor is owed or owns.

Premium

This is the number of points put on top of the spot price that determines a forward of futures price.

Profit/ Loss

The gain or loss incurred from trading.

“Put” (Below) Option

An option where the trader predicts that the asset will end at a lower price than the one at the time of purchase.

Q

Quote

It is a price indicator showing the highest bid and lowest ask price on a security.

R

Rally

A stabilization of the price after an interval of general decline.

Range

The interval between the highest and lowest price for a given trading session.

Range Option

In this option the trader can select an interval, within which he thinks that the price of the asset will stay.

Rate

A currency`s price as expressed in terms of another currency.

Resistance

Certain price level which a given currency won`t be able to exceed.

Return on Investment (ROI)

The amount of money that the investor makes out of his initial investment.

Risk Management

Utilizing various techniques and trading strategies in order to minimize risk. To hedge one's risk one will employ financial analysis and trading techniques.

S

Settlement

The exchange of consideration for financial instruments after the execution of a transaction.

Short

Selling an instrument without owning it with the expectation of a decline in price and future purchase of the same instrument at more favorable conditions.

Spread

The spread is used for determining the liquidity of the market and consists of the difference between the bid and offer prices.

Strike Price

The determining price level that an asset must reach/touch in order to be in or out of the money.

Support Levels

The opposite of resistance. A floor or a price ceiling at which the exchange rate is going to correct itself automatically.

T

Technical Analysis

The utilization of various techniques in order to predict price movements and market behavior.

Tick

A minimal upward or downward change in the price.

Touch Option

This option allows the trader to make a prediction of whether the given asset will touch a certain strike price in a predetermined amount of time.

Two Way Price

The bid and ask rate given for a Forex transaction.

U

US Prime Rate

The interest rate given by US banks to their main customers.

V

Volatility

A statistical measure for expressing the price movements of a market over a period of time.

Volume

The amount of securities traded for a certain period of time.
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