This is the current market price of an asset at which the market will sell. Prices are quoted two-ways, as Bid/Ask prices. The Ask price is also known as the Offer. In CFD trading, the Ask price represents the price at which a trader can buy the contract. For example, the quote for gold is 1250/1252. Here, the product quoted is GOLD and the Ask price is 1252 for one unit of the underlying asset, which in this case is gold.
An asset is an economic value of a corporation or a country. It is also the type of financial instrument available in the financial markets. The primary asset categories in CFD trading are forex, commodities, indices and shares. The euro, or a share of Apple, are examples of assets you can trade.
This is one of the most popular types of financial charts. Each bar on a chart represents the open, high, low and close prices for that time period, displayed as a bar. This type of chart is sometimes referred to as an OHLC.
Bears are the negative traders, those that expect the market or an asset to decline. In the battle of the bulls and the bears, it is the bears who weigh down the market. Bears are denoted in red and a bearish market is a declining one.
The Bid price is associated with the Ask price. Every asset traded is quoted in a Bid/Ask format. The Bid price is the price you can sell a product for. Refer to Spreads for more information.
Bullish or bull market is the positive side of the market or an asset, when things are expected to climb and remain positive.
This is one of the oldest charting methods as well as a trading system. Japanese candlesticks were developed by rice traders in the 1700s. A candlestick is drawn on a financial chart to represent the movement of an asset in a specific time period. The wicks denote the price highs and the lows and the body of the candle shows the movement between the open and the close prices. Candlesticks are colored in bullish and bearish color codes, depending on if the price moved up from the open price to the closing price, or if it declined from the open price to the close price. There are over 32 distinct candlestick patterns and they offer great trading insights.
CFD/Contract for Difference
A CFD is an investment style that defines a type of derivative that gives exposure to the change in value of an underlying asset. CFDs allows traders to leverage their capital and provides all the benefits of trading securities, without actually owning the product. Refer to Gearing or Leverage for more information. CFDs, or contract for difference, is one of the fastest growing investment vehicles in the world and are regulated by the financial conduct authorities (ASIC).
Charts/Financial Charts/Forex Charts
For each asset, you can plot a chart of price movements over a specific time period. This is an important tool, allowing traders to analyze historical prices and forecast future activity. A chart is a picture or image of price movements. Patterns develop on charts which help traders understand market movements and trader psychology.
Close means the end of a trading period. In the share market, it is the end of the trading day but in forex, which trades 24 hours a day, it can be the end of a time period or the end of the day, at midnight. Close is also what you do when you want to end your position. The process of stopping (closing) a real trade can be done by executing a trade that is the exact opposite of the open trade.
Commodities are marketable goods or services that are produced to meet a demand, whether that be a want or a need. Commodities are also interchangeable with others of the same type. In the financial markets, commodities refer to energy, metals, agricultural, and more. Speculators buy and sell commodities but usually do not ever take delivery of these assets.
In the commodities market, traders invest in contracts for assets. These keep the assets standardized and make speculating easier. In the context of CFD trading, the contract is the definition of the asset being traded and the rules and specifications for that asset’s trade.
In most cases, a demo account is a risk free trading account that uses demo or virtual money, not real money, and it allows a trader to test the platform and learn to understand how to execute a trade. Demo accounts are also used by experienced traders to back test strategies and to develop new strategies in a risk free environment.
The time and day at which your CFD will be closed and settled automatically, i.e. the end of the contract period. If you want to extend your position, you can specify that you want it to rollover. There is no expiry date/time if your position is a Rolling Contract. Most CFD contracts do not have an expiry unless designed or requested.
Forex, FX or the foreign exchange market, is the buying and selling of currencies issued by governments around the globe and processed via central banks. The forex market is an over-the-counter (OTC) market consisting of computers around the globe that facilitate transactions. An estimated $7 billion per day is traded through this marketplace.
Gap, or gapping, refers to a market that moves to a new price without moving through the in-between prices. In other words, the price of an asset will jump up or down, usually in response to surprising economic events or new headlines.
Much like the general definition of a hedge, it is a position that reduces the risk of your primary position; hence the phrase “hedging your bets.” There are many hedging strategies that can be learned and mastered to reduce risk and lock in profits.
Investopedia defines an index as a statistical measure of the changes in a portfolio of stocks, representing a portion of the overall market. The DAX, the ASX200 and the Dow Jones, are examples of indices. It’s important to note that an index is nothing more than a list of stocks; anybody can create one.
This is one of the most important concepts a trader needs to understand and is the backbone of CFD and forex trading. Leverage allows a trader to amplify their investment by only having to put up a small percentage of the value of the trade. The money needed to secure a trade is referred to as margin. For example, when you open a position with a value of $10,000, by putting down a margin deposit of $1,000, you have a gearing ratio of 10:1. This is also known as leverage.
Understanding the types of market orders is crucial when trading. A Limit order is an order to close your position, should the market rise to a specified price. It is also called a Take Profit order. You can use a Limit order to take your profit on a position automatically when the price reaches your specified target. This is the opposite of a Stop Loss order which protects you from losing your trade.
This means you are buying or expecting the market to rise. The opposite side is a Short, or to short the market.
Margin and leverage are linked hand and hand together. Margin is a deposit; it is not a cost for you to pay to open your CFD position. This represents the most you might expect to lose on your position, although it is important to note that you may lose more than your initial deposit.
A moving average smooths out the market or takes the ‘noise’ out of price movements by adding together a specified amount of closed or open prices and dividing the total by the number of the data set. If you plotted a 10 period simple moving average on a 1-hour chart, you would add up the closing prices for the last 10 hours, and then divide that number by 10. There are several variations of a moving average, like a weighed moving average or an exponential moving average.
In finance, there are two definitions of open: (1) it is when a market opens each day or a time segment, but it is also (2) when you buy or sell an asset or open your CFD position.
Oscillators are a technical analysis tool which denotes overbought and oversold conditions in the market. Some of the most well-known oscillators are RSI, Stochastics and MACD.
Pips are the smallest unit of movement of an asset. A pip originated in the forex market and is also used in the price of a CFD. Pips refer to digits which are added to or subtracted from the fourth decimal place. One unit of the price is known as a point. Your profit/loss is determined by the change in points, times your unit that you have traded.
Keep in mind that when trading forex and CFDs, you are using a Bid/Ask system. A quote is the price offered for any market on the NSXCOIN platform, but quotes change continuously as the markets never sit still.
The most important concept and skill in finance is risk management. If one manages their risk, they will negate heavy losses This concept must be employed for all trades and each trader needs to set their risk levels and understand their risks clearly. When you control your exposure, you will survive to trade another day.
Short is the opposite of long; it means selling an asset, or it refers to a falling market. It is an investment position that benefits from a fall in market price. When the base currency in the pair is sold, the position is said to be short and, in this case, you are hoping that the market falls.
This is the difference between the price that was requested and the price obtained, typically due to changing market conditions. Assets move continuously and the price shown on the platform is up to the moment but the price when you book a trade could have changed slightly as it takes just a few seconds for you to enter and complete a trade, while the market continues to move.
The spread is the difference between the ASK and the BID prices of an asset. All assets are quoted in a BID/ASK format. To better understand this, look at the definition of Bid and Ask in the glossary. The spread is small but can eat into your profits or magnify your losses as you must execute two sides of a trade to open and then close a position. Spreads for the most commonly traded assets, are relatively small.
This is a crucial step in executing a trade to protect from unexpected negative market moves and is part of your risk management strategy. A stop-loss is a computer command or order entered when you are executing your trade that instructs the platform to close your position if the market moves against you. You can set the level and you can change this setting whenever you wish to. The Stop Loss order will protect you from unexpected headlines and panic in the marketplace.
When you are trading in CFDs, you never own an asset, you simply are trading on the price difference between the time you open the trade and close of the trade. The price value that you are trading on is based on the asset you are opening the contract in, which is referred to as the underlying asset. The price or value of a CFD offered is derived from the real world market price.
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