GLOSSARY

Balance

Your balance is the amount of money you have available in your trading account

Aussie

The Aussie is a nickname that traders use when referring to the Australian dollar.

Ask Price

When trading, you will be presented with two prices for any asset that you’re interested in, the bid price and the ask price. The ask price (also known as the offer price) is the lowest price at which sellers are willing to sell the asset in question. In short, if you are buying you will receive the ask price.

Arbitrage

Arbitrage is when traders take advantage of price inefficiencies between markets. If, for instance, you become aware that a certain asset is selling for a higher price on Market A than you are able to purchase it for on Market B, then buying it at the cheaper price and selling it on the more expensive market would be an example of arbitrage. In practise, arbitrage becomes harder to take advantage of the more interconnected markets become.

Algorithmic Trading

An algorithm is a set of instructions to be followed in a step-by-step manner by a computer. Algorithmic trading is the use of algorithms to automatically open and close trades according to predefined parameters. For instance, an algorithm can be programmed to observe the overbought and oversold conditions of a given market and to automatically open and close positions when certain criteria are met.

Base Currency

Currencies are quoted in pairs. The base currency is the first currency in any currency pair. For example, in the EURUSD pair the base currency is the Euro. The exchange rate tells you how much of the second currency in the pair you need in order to buy a single unit of the first currency.

Bear Market

A bear market is a market that has consistently fallen in value. Sentiment in a bear market is negative, traders choose to sell the assets that they are holding, reasoning that further drops in price are imminent.

Bid/Ask Spread

The bid/ask spread is the difference between the lowest price that sellers are willing to take in order to part with a certain security and the highest price that buyers are willing to pay for that same security. An easy way to remember this bid/ask dynamic is that if you are selling you will get the bid price, whereas if you are buying you will get the ask price.

Bid Price

As a trader you will be quoted two prices for any security that you are trading. The bid price is the highest price that buyers are willing to pay. The ask price is the lowest price that sellers are willing to receive in order to part with that same security. When selling you will receive the bid price.

Bond

Bonds are fixed-income securities that allow an issuer to borrow money in return for interest payments throughout the life cycle of the bond. The amount borrowed is payable by the issuer when the bond in question matures. Bonds are issued by a variety of entities, including governments, corporations and local authorities. The desirability of a bond will fluctuate throughout its life as interest rates change. If a bond is paying out more than the prevailing interest rate, investors will flock to the bond in question, driving up its price until its effective rate is on a par with the prevailing interest rate. If, on the other hand, interests rates rise higher than the bond is paying out, bond holders will sell the bond, thus driving down its price until again its interest payouts are on a par with the prevailing interest rate.