Trading Basics

• Short SellingBeginner12 min read

  Short selling means selling something you have borrowed, hoping to buy it back later for less and keep the difference.

• Long PositionBeginner10 min read

  A long position means you own an asset — or a contract that behaves like owning it — because you expect its price to rise.

• Bull MarketBeginner5 min read

  A bull market is a sustained period of rising prices, often defined for stock indices as a rise of 20% or more from a recent low.

• Bear MarketBeginner5 min read

  A bear market is a sustained period of falling prices, commonly defined for stock indices as a decline of 20% or more from a recent high.

• Trading PlanBeginner5 min read

  A trading plan is a written set of rules that decides in advance what you trade, when you enter and exit, and how much you are willing to risk.

• Market HoursBeginner5 min read

  Market hours are the times when a market is open for trading; many stock exchanges trade only on weekdays, while crypto markets trade around the clock.

• Trading SessionBeginner4 min read

  A trading session is a block of the day when a particular market is most active, such as the Asian, London and New York sessions in currency markets.

• Profit and LossBeginner4 min read

  Profit and loss (P&L) is how much a trade or account has gained or lost, after costs, measured in money or as a percentage.

• BrokerBeginner4 min read

  A broker is a regulated firm that gives you access to markets and executes your orders, usually for a commission, a spread or other fees.

• ExchangeBeginner4 min read

  An exchange is an organised marketplace with set rules where buyers' and sellers' orders are matched, such as a stock exchange or a crypto exchange.

• PositionBeginner4 min read

  A position is the amount of an asset or contracts you currently hold or owe, together with its direction — long or short.

• Exchange-Traded FundBeginner4 min read

  An exchange-traded fund is a fund whose shares trade on an exchange like a stock. Most ETFs track an index, sector or commodity, giving broad exposure in a single trade.

• Break-EvenBeginner4 min read

  Break-even is the price at which a trade neither makes nor loses money once all costs are included; moving a stop to break-even means exiting there if the price returns.

• Spot TradingBeginner4 min read

  Spot trading is buying or selling the asset itself for immediate delivery at the current price, rather than trading a derivative contract on it.

• Trading PairBeginner4 min read

  A trading pair shows two assets quoted against each other, such as EUR/USD or BTC/USDT: the price tells you how much of the second asset buys one unit of the first.

• Realized and Unrealized P&LBeginner4 min read

  Unrealized P&L is the paper gain or loss on a position you still hold; it becomes realized P&L when you close the position and the result is locked in.

• Borrowing FeeIntermediate4 min read

  A borrowing fee is what a short seller pays to borrow shares, usually quoted as an annual rate and charged daily.

• PipBeginner3 min read

  A pip is the standard unit of price movement in a currency pair — 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen.

• TradingBeginner3 min read

  Trading is buying and selling financial assets with the aim of profiting from changes in their price, usually over shorter periods than long-term investing.

• AssetBeginner3 min read

  An asset is anything with economic value that can be owned or traded, such as a share, a currency, gold or a cryptocurrency.

• Base and Quote CurrencyBeginner3 min read

  In a pair such as EUR/USD, the base currency is the first one (EUR) and the quote currency is the second (USD); the price is the amount of quote currency per one unit of base currency.

• Buy and SellBeginner3 min read

  To buy is to acquire an asset or open a long position; to sell is to dispose of an asset you own or, in short selling, to sell one you have borrowed.

• Cash PositionBeginner3 min read

  A cash position is one paid for entirely with your own funds, without borrowing; it also refers to the part of a portfolio held in cash.

• Financial InstrumentBeginner3 min read

  A financial instrument is a tradable contract or product with monetary value, such as a share, a bond, a futures contract or an option.

• Institutional TraderBeginner3 min read

  An institutional trader trades on behalf of an organisation such as a bank, pension fund, hedge fund or insurance company, usually in large size.

• KYC and AMLBeginner4 min read

  Know Your Customer (KYC) rules require brokers and exchanges to verify who their customers are; anti-money laundering (AML) rules require them to watch for and report suspicious activity. They are why platforms ask for ID and proof of address.

• Market ParticipantBeginner3 min read

  A market participant is anyone who trades or provides services in a market, from an individual trader to banks, funds, brokers and market makers.

• Market PriceBeginner3 min read

  The market price is the price at which an asset can be bought or sold right now — in practice, the best available bid or ask.

• MarketBeginner3 min read

  A market is any place or system where buyers and sellers meet to exchange an asset at a price they both accept.

• Net Asset ValueIntermediate3 min read

  Net asset value is the value of a fund’s holdings minus its liabilities, usually expressed per share. An ETF can trade slightly above (a premium) or below (a discount) its NAV.

• Open and Closed PositionsBeginner3 min read

  An open position is a trade you still hold, whose result changes with the price; a closed position has been exited, so its profit or loss is final.

• Retail TraderBeginner3 min read

  A retail trader is an individual who trades with their own money through a broker or exchange, rather than on behalf of an institution.

• Ticker SymbolBeginner3 min read

  A ticker is the short code used to identify a tradable asset, such as AAPL for Apple shares or BTC for bitcoin.

• TradeBeginner3 min read

  A trade is a single purchase or sale of an asset; traders also use the word for the whole round trip of opening and later closing a position.

• WatchlistBeginner3 min read

  A watchlist is a list of assets you follow closely so you can spot opportunities without scanning the whole market.

• Winning and Losing TradesBeginner4 min read

  A winning trade closes with a profit and a losing trade with a loss; whether a small result counts as a win depends on whether costs are included, so define it consistently.

• StockBeginner5 min read

  A stock, or share, is a unit of ownership in a company. Shareholders own a slice of the business, can profit when its value rises and may receive dividends, and common shares usually come with voting rights.

• Forex MarketBeginner4 min read

  The forex market is the global market for exchanging currencies, and the largest financial market by trading volume. It has no central exchange, trades around the clock from Monday to Friday, and quotes currencies in pairs such as EUR/USD.

• Stock Market IndexBeginner4 min read

  A stock market index tracks the combined price of a group of shares, such as the S&P 500 (about 500 large US companies), the Dow Jones Industrial Average (30 companies) or the Nasdaq Composite. You cannot buy an index itself, only funds, futures or CFDs that follow it.

• Compound InterestBeginner4 min read

  Compound interest means earning returns on your earlier returns as well as on the original amount. At 10% a year, $1,000 grows to $1,100 after one year and $1,210 after two, because the second year's interest is also paid on the first year's $100.

• Wash Sale RuleIntermediate5 min read

  The wash sale rule is a US tax rule that blocks deducting a loss on a security if you buy the same or a substantially identical one within 30 days before or after the sale. The loss is not lost forever: it is added to the cost basis of the new shares.

• Tax-Loss HarvestingIntermediate4 min read

  Tax-loss harvesting means selling investments that are below their purchase price to realise a capital loss, then using that loss to reduce the tax on capital gains. In the US, leftover losses can offset up to $3,000 of ordinary income a year and carry forward.

• Mutual FundBeginner4 min read

  A mutual fund pools money from many investors and invests it in a portfolio of stocks, bonds or other assets run by a professional manager. Shares are bought from and sold back to the fund at its net asset value, calculated once a day.

• Index FundBeginner4 min read

  An index fund is a mutual fund or ETF that tries to match the return of a market index, such as the S&P 500, by holding the same securities. It trades less and usually charges far lower fees than actively managed funds.

• Hedge FundIntermediate4 min read

  A hedge fund is a private investment fund for wealthy and institutional investors that can use leverage, short selling and other flexible strategies. It faces fewer rules than mutual funds and usually charges a management fee plus a share of profits.

• Penny StocksBeginner4 min read

  Penny stocks are shares of very small companies that trade at low prices, often on over-the-counter markets. They are cheap per share but thinly traded, poorly researched and a frequent target for manipulation, so they carry very high risk.

• Preferred StockBeginner4 min read

  Preferred stock is a class of shares that usually pays a fixed dividend and ranks ahead of common stock for dividends and in bankruptcy, but behind bonds. Holders usually have no voting rights, and the price moves less than common stock.

Each term is defined in one sentence. Terms marked “Article in preparation” will get a full step-by-step article.

• 3-D Secure3DS

  BeginnerGlossary

  When an online checkout pauses and your banking app asks you to confirm the purchase, that is 3-D Secure at work. In the EU and UK it is how banks meet the strong-authentication rules for most card payments on the internet.

• Accredited Investor

  IntermediateGlossary

  In the US, an accredited investor meets income or wealth tests — for individuals, broadly over $200,000 in annual income ($300,000 with a spouse) or over $1 million in net worth excluding the home — and may invest in private offerings closed to the public.

  Rules differ between countries; this is general information, not tax or legal advice.

• Active and Passive Management

  BeginnerArticle in preparation

  Active managers pick investments and timing to try to beat a benchmark; passive managers simply hold the benchmark, usually through index funds. Passive funds charge far less, and after fees most active funds have historically trailed their index over long periods.

• Alternative Investments

  IntermediateGlossary

  Alternative investments are anything outside ordinary stocks, bonds and cash — hedge funds, private equity, real estate, commodities, collectibles and, by many definitions, crypto. They can diversify a portfolio but are often less liquid, less transparent and pricier.

• Assets Under ManagementAUM

  BeginnerGlossary

  Assets under management is the total market value of the money a fund or firm invests for clients. It shows size and, because fees are usually a percentage of it, roughly how much the manager earns; large inflows can also make a strategy harder to run.

• Balanced Fund

  BeginnerGlossary

  A balanced fund holds stocks and bonds in a fairly steady mix, such as 60% stocks and 40% bonds, to give growth with fewer swings than an all-stock fund.

• Blue-Chip Stocks

  BeginnerArticle in preparation

  Blue-chip stocks are shares of large, well-established and financially strong companies with a long record of steady results, often paying dividends. They are seen as relatively stable, but they can still fall sharply.

• Broker Commission

  BeginnerGlossary

  On raw-spread forex and CFD accounts, the broker earns a fixed charge per lot instead of padding the spread. Add spread and commission together — per round trip — to compare accounts fairly.

• Buying Power

  BeginnerGlossary

  Buying power is how much you can currently spend on new positions: your cash in a cash account, or cash plus available margin in a margin account. High buying power from leverage is not money you can afford to lose.

• Card Limits and Top-Ups

  BeginnerGlossary

  Issuers cap how much a card can spend, withdraw at ATMs or receive within set periods. Topping up — adding money from a bank transfer, another card or a crypto wallet — can differ in speed and fees, so check both before relying on a card for travel.

  The exact rules and formulas differ between brokers and exchanges — check your platform’s documentation.

• Cash Account

  BeginnerArticle in preparation

  A cash account is a brokerage account in which you pay for every purchase in full with your own money, with no borrowing. It rules out margin and most short selling, and you may have to wait for sales to settle before reusing the cash.

• Chargeback

  IntermediateGlossary

  If a seller never delivers or a charge was fraudulent, you can ask your card issuer to claw the money back — a chargeback. Nothing equivalent exists for blockchain transfers, which is why scammers so often insist on crypto.

• Closed-End FundCEF

  IntermediateGlossary

  A closed-end fund issues a fixed number of shares that then trade on an exchange. Because supply does not expand or shrink with demand, its price can sit well above or below the value of its holdings.

• Cross-Border Transfers

  BeginnerGlossary

  Sending money to another country — often called a remittance — can go through banks, specialist transfer apps or stablecoins. The fair comparison is how much actually lands in the recipient's account after fees and the exchange-rate markup.

• Currency Conversion Fee

  BeginnerGlossary

  Whenever money changes currency — a card payment abroad, a deposit to a broker in dollars, a withdrawal back to euros — someone charges for the swap, either as a visible percentage or through a worse exchange rate. Many traders lose more here than they notice.

• Discount and Full-Service Brokers

  BeginnerArticle in preparation

  A discount broker executes your trades cheaply, often online and commission-free, but leaves the decisions to you. A full-service broker adds advice, research and planning for higher fees. Many firms now offer both styles of account.

• Dividend Reinvestment PlanDRIP

  BeginnerGlossary

  A dividend reinvestment plan automatically uses each dividend to buy more shares of the same company or fund instead of paying it out as cash, so holdings compound over time. Reinvested dividends are usually still taxable.

• Emerging MarketsEM

  BeginnerArticle in preparation

  Emerging markets are economies moving towards developed status, such as India, Brazil or Indonesia. They can offer faster growth but also more political, currency and liquidity risk.

• Expense Ratio

  BeginnerArticle in preparation

  A fund's expense ratio is its annual running cost as a percentage of assets. At 0.10%, you pay about $10 a year on every $10,000 invested; the cost is taken from the fund, so it quietly reduces your return.

• Fiat Currency

  BeginnerArticle in preparation

  Dollars, euros and pounds are fiat money: they are valuable because governments declare them legal tender and people trust the central bank, not because they can be swapped for gold. Crypto traders use “fiat” for any such government currency.

• Fractional Shares

  BeginnerArticle in preparation

  Fractional shares let you own part of a single share, so you can invest a set amount such as $50 in a stock priced at $500. Not every broker offers them, and they may not be transferable between brokers.

• Fund of FundsFoF

  IntermediateGlossary

  A fund of funds invests in other funds rather than directly in securities. It offers diversification across managers, but you pay two layers of fees.

• Fund Sales Loads

  BeginnerGlossary

  A load is a sales charge on a mutual fund: front-end loads are taken when you buy, back-end loads when you sell. No-load funds charge neither.

• Fungibility

  IntermediateGlossary

  Fungibility means units are interchangeable: one share of a company, one dollar or one standard futures contract is identical to another. It is what lets assets trade easily — and why tainted or unique items, such as NFTs, are harder to trade.

• Index Weighting

  IntermediateArticle in preparation

  Index weighting decides how much each company counts in an index. The S&P 500 weights by market value, so giants dominate; the Dow weights by share price; equal-weight versions give every member the same share, which tilts toward smaller companies.

• Lump Sum vs Dollar-Cost Averaging

  BeginnerGlossary

  Lump-sum investing puts the whole amount in at once; dollar-cost averaging spreads it over time. Because markets rise more often than they fall, a lump sum has historically come out ahead more often, while spreading purchases reduces regret if prices drop soon after.

• Magnificent Seven Stocks

  BeginnerGlossary

  The Magnificent Seven is market shorthand for the giant US tech stocks Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla, which make up a large share of the S&P 500 and Nasdaq. An older label, FAANG, covered Facebook, Apple, Amazon, Netflix and Google.

• Majors, Minors and Exotics

  BeginnerArticle in preparation

  Forex pairs are sorted by how much they trade. The seven majors all include the US dollar, such as EUR/USD and USD/JPY; minors or crosses pair two big currencies without the dollar, like EUR/GBP; exotics add an emerging-market currency, like USD/TRY, and cost more to trade.

• Managed Account

  BeginnerGlossary

  A managed account is an investment account in which a professional manager makes the trading decisions for you, under authority you grant, usually for a fee based on assets or performance.

• MetaTrader 4 and 5MT4 · MT5

  BeginnerArticle in preparation

  MetaTrader, made by MetaQuotes, is the platform many forex and CFD brokers hand to clients. MT4 (2005) and MT5 (2010) offer charts, indicators and Expert Advisors that trade automatically; your broker, not the software, decides the prices and fills.

• Money Market FundMMF

  BeginnerGlossary

  A money market fund invests in short-term, high-quality debt such as Treasury bills and commercial paper. It aims to keep its value stable and the money easy to withdraw, but it is not a bank deposit and can, rarely, lose value.

• MSCI Indices

  IntermediateGlossary

  MSCI publishes widely tracked stock indexes, including MSCI World for about two dozen developed markets, MSCI Emerging Markets and MSCI ACWI for both. Changes to their country or stock weights force index funds to trade, moving prices.

• Pipette

  IntermediateGlossary

  Most brokers now quote currencies to one decimal place beyond the pip. That extra digit is the pipette: in USD/JPY at 151.234, the final 4 is pipettes. Platforms that call it a “point” mean the same unit.

• Prepaid and Virtual Cards

  BeginnerGlossary

  With a prepaid card you can only spend what you loaded beforehand, so there is no debt. A virtual card is card details without the plastic, living in an app — convenient for online shopping, and simple to freeze or swap for a new number.

• Price Alerts

  BeginnerGlossary

  Price alerts notify you — by app, email or text — when a market reaches a level, crosses an indicator or jumps in volume. They let you wait for your setup without staring at screens, but unlike orders they do not trade for you.

• Rule of 72

  BeginnerArticle in preparation

  The rule of 72 estimates how long money takes to double: divide 72 by the yearly return in percent. At 8% a year it doubles in about 9 years; at 3% it takes about 24. It works for inflation too, showing how fast purchasing power halves.

• Russell Indexes

  IntermediateGlossary

  The Russell indexes rank US stocks by size: the Russell 1000 covers large companies and the Russell 2000 the next 2,000 smaller ones, making it the standard small-cap benchmark. Their annual reconstitution in June causes some of the year's heaviest trading.

• Sovereign Wealth FundSWF

  IntermediateGlossary

  A sovereign wealth fund is a state-owned investment fund, usually built from oil revenue or trade surpluses, that invests globally for the long term. Norway's, worth well over a trillion dollars, owns a small slice of most large listed companies.

• Speculation

  BeginnerArticle in preparation

  Speculation is taking on price risk in the hope of profiting from price changes, rather than to offset an existing exposure, as hedgers do. Speculators supply much of the liquidity that lets hedgers trade.

• Stock Market Sectors

  BeginnerArticle in preparation

  Stocks are grouped into sectors by business type. The GICS system used by S&P and MSCI has 11 sectors, such as information technology, financials and energy. Sector moves show where money is flowing.

• Time Horizon

  BeginnerArticle in preparation

  Your time horizon is how long you expect to hold an investment before you need the money. Longer horizons can ride out deeper drops; short ones call for steadier assets.

• Two and Twenty

  IntermediateGlossary

  “Two and twenty” is the classic hedge fund fee: a 2% yearly management fee on assets plus 20% of profits, often above a high-water mark. Competition has pushed many funds to lower fees, but the phrase still describes the model.

• UCITS FundsUCITS

  IntermediateGlossary

  UCITS is the EU's framework for funds sold to ordinary investors, with rules on diversification, leverage, liquidity and disclosure. Most European-listed ETFs are UCITS funds, and the label lets a fund be sold across the EU.

  Rules differ between countries; this is general information, not tax or legal advice.

• Venture CapitalVC

  IntermediateGlossary

  Venture capital is equity investment in young, fast-growing private companies, in exchange for a stake and often a board seat. Most investments fail, so funds rely on a few huge winners; returns arrive only when companies are sold or go public.

• Zero-Sum Game

  IntermediateGlossary

  In a zero-sum game one side's gain is exactly the other's loss. Futures, options and forex trading are close to zero-sum between participants — and after fees and spreads, slightly negative-sum — while owning stocks over time is not, because companies create value.