Trading Glossary Explained

Trading is a complex process, which includes many actions that a person unfamiliar with the financial world will find puzzling. Once you launch your trading career, you will be swamped with trading terms whose meaning you will not know. You will not immediately grasp how the market value of a business differs from its book value. Nor will you understand what CPI stands for and how it is different from IPO, unless we supply you with a glossary of all confusing terms that you meet in a trading business.

To help you avoid confusion, we have compiled a comprehensive glossary of financial terms used in the markets. All trading glossary is presented in our glossary in alphabetical order and is explained with linguistic precision. Any financial term that sounds baffling at you now will become crystal clear once you read its definition in our glossary below.

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There are currently 10 names in this directory beginning with the letter F.

Federal Reserve

This term refers to the Federal Reserve Banks or Feds. It is the central bank which is in charge of financial stability in the US.

Fiat Currency

This is a national currency that is not pegged to the price of gold or silver. The value of fiat currency is based on the people’s faith in the country’s government or central bank that issue this currency.

Financial Instrument

It is a monetary contract between two parties – the buyer and the seller, which can be traded and settled. The contract represents an asset to the buyer and a financial liability to the seller.

Financial Market

It is a medium through which assets are traded, with their value determined by supply and demand.

Floating Exchange Rate

This term refers to a currency whose price is determined by supply and demand factors relative to other currencies. A Floating Exchange Rate is different from a Fixed Exchange Rate, determined by the government of the given currency.

Force Open

This is a function on the trading platform that allows traders to enter a new bet in the opposite direction to an existing bet on the same market.

Forex

This is the foreign exchange market where participants convert one currency to another.

Forward Contract

This is a contract which has a defined date of expiry. This contract may vary between different instances. This makes it a non-standardized entity which can be customized according to a traded asset, expiry date, and a particular trading account.

Funding Charges

These fees are also called Interest Charges. They are levied on leveraged positions held open overnight.

Futures Contract

This is an agreement between two parties to trade an asset at a predefined price on a specified date in the future.