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.

All | # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

There are currently 6 names in this directory beginning with the letter P.

P/E Ratio

This is an abbreviation for Price-to-Earnings Ratio. It is a method of measuring a company’s value and is calculated by dividing the company’s market value per share by the earnings per share.

Pip

It is a measurement in forex trading, defined as the smallest move that a currency can make.

Position

This term refers to a trade that can currently incur a loss or make a profit, known as an open position, or to a trade that has recently been cancelled, known as a closed position. Profit or loss on a position is realized only after it has been closed.

Profit and Loss Statement (P&L)

It is a financial report providing a summary of a company’s revenue, expenses, and profit. It shows to investors how the company is operating and how much profit it is generating.

Pullback

It is a temporary pause or dip in an asset’s overall trend. It should not be confused with a reversal, a more permanent move against the asset’s prevailing trend.

Put Option

It is a contract that gives the buyer the right to sell an asset at a specified price and at a specific date of expiry. The buy is not obliged to sell, however. The value of a put option increases if the asset’s market price decreases.