BUY (Long)
Definition: Buying or going long refers to purchasing an asset with the expectation that its price will increase over time. This is one of the fundamental strategies in trading, where you profit from the rise in the asset’s value.
Example: If you buy a stock at $50 and later sell it at $60, your profit per share would be $10.
SELL (Short)
Definition: Short selling, or going short, involves selling an asset that you don’t currently own, betting that its price will decline. You then repurchase the asset at a lower price, keeping the difference as profit.
Example: If you short a stock at $50 and it falls to $40, you can buy it back at the lower price and gain $10 per share.
Bid
Definition: The bid is the highest price that a buyer is willing to pay for a particular asset at a given time.
Example: If a trader offers to buy a stock for $100, the bid price is set at $100.
Ask
Definition: The ask is the lowest price a seller is willing to accept for an asset.
Example: If a seller is offering their stock for $101, then the ask price is $101.
Volatility
Definition: Volatility measures how much the price of an asset changes over a specific time period. High volatility indicates larger price swings, while low volatility suggests stable price movements.
Example: Cryptocurrencies often display significant volatility, meaning their prices can experience sharp changes within a short span of time.
Liquidity
Definition: Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price.
Example: The US dollar is highly liquid because it can be exchanged quickly and easily with minimal impact on its value.
Bull Market
Definition: A bull market is a condition where asset prices are generally rising, often reflecting investor optimism and economic growth.
Example: If stock prices have been consistently increasing for several months, the market is said to be in a bullish phase.
Bear Market
Definition: A bear market is a condition in which prices are falling or are expected to fall, typically driven by widespread pessimism or economic downturns.
Example: If the stock market experiences prolonged declines, it enters a bear market.
Take Profit
Definition: A take profit order is an instruction to automatically sell an asset once it reaches a predetermined price, locking in the trader’s gains.
Example: If you set a take profit order at $60 for a stock you bought at $50, the system will sell it for you when the price hits $60.
Stop Loss
Definition: A stop-loss order automatically sells an asset when its price falls to a certain level, minimizing potential losses.
Example: If you buy a stock at $50 and set a stop-loss at $45, your position will be sold if the price drops to $45.
Market Order
Definition: A market order is a trade executed immediately at the current market price.
Example: If you place a market order to buy a stock listed at $100, the purchase is made at that price almost instantly.
Limit Order
Definition: A limit order is a directive to buy or sell an asset at a specific price or better.
Example: If you set a limit order to buy a stock at $95, it will only execute if the price reaches $95 or lower.
Leverage
Definition: Leverage allows traders to control larger positions than their actual capital would permit by borrowing funds, potentially magnifying both gains and losses.
Example: If you have $1,000 and use 10:1 leverage, you can trade with $10,000, increasing your potential return — but also your risk.
Spread
Definition: The spread is the difference between the bid and ask prices of an asset, representing the cost of trading.
Example: If the bid for a stock is $100 and the ask is $101, the spread is $1.
Diversification
Definition: Diversification is the practice of spreading investments across different assets or sectors to reduce overall risk.
Example: By holding a mix of stocks, bonds, and commodities, you can diversify your portfolio, limiting the impact of any one asset performing poorly.
Cross Margin
Definition: Cross margining allows excess margin from one account to be used to satisfy margin requirements for another account within the same firm, providing flexibility in managing trading positions.
Example: If one of your accounts has a surplus margin and another needs more margin, cross margining lets you use the surplus to cover the shortfall.
Isolated Margin
Definition: Isolated margin confines the amount of margin used for a specific position, capping the maximum loss to that amount.
Example: If you allocate $1,000 of isolated margin for a trade, your losses are limited to $1,000, regardless of what happens in other positions.
Margin
Definition: Margin refers to the borrowed funds used to trade assets, effectively allowing traders to control larger positions than their capital alone would allow.
Example: If you want to buy $10,000 worth of stock but only have $5,000, your broker may lend you the additional $5,000 as margin.
Margin Used
Definition: Margin used is the portion of your total capital that is currently allocated to active trades.
Example: If you have $10,000 in equity and $5,000 is tied up in open positions, your margin used is $5,000.
Margin Call
Definition: A margin call is a demand from your broker to deposit additional funds or close positions because your account’s equity has fallen below the required margin.
Example: If your account value drops due to market losses, your broker may issue a margin call, requiring you to add more funds or close trades.
Margin Close
Definition: Margin close occurs when the broker automatically closes your positions to meet margin requirements, typically after a margin call has not been fulfilled.
Example: If you don’t meet a margin call, your broker may close some of your trades to bring your margin back to the required level.
PnL (Profit and Loss)
Definition: PnL is a measure of the financial gain or loss on a specific position or portfolio.
Example: If you purchase a stock for $50 and sell it for $60, your PnL is a $10 profit per share.
AML (Anti-Money Laundering)
Definition: AML refers to laws and practices aimed at preventing illegal money from being disguised as legitimate financial transactions.
Example: Financial institutions must implement AML measures to detect and report suspicious activity, such as money laundering.
KYC (Know Your Customer)
Definition: KYC is a process by which businesses, particularly in finance, verify the identity of their clients to prevent fraud and ensure compliance with regulations.
Example: When opening a new trading account, you'll be required to provide documents to verify your identity as part of the KYC process.
APY (Annual Percentage Yield)
Definition: APY stands for Annual Percentage Yield, which represents the real return on an investment over a year, including the effects of compound interest.
Example: If you invest $1,000 in an account with a 5% APY, your balance will grow by $50 in one year, assuming no additional deposits or withdrawals.

Basics of Trading

Tokenized Assets

Trading Vocabulary

Risk Management

Technical Analysis

Trading with Fundamental Analysis

Trading Psychology Essentials

Basics of Trading