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Trading Terminology

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Updated 12 July 2021

ACQUISITION

An acquisition refers to the process of one company acquiring another by purchasing either the entire company or a majority share in the company.

APPRECIATION

Appreciation refers to the rise in market value of an asset. Appreciating assets increase the overall value of an investor’s portfolio.

ARBITRAGE

Arbitrage is when a trader purchases and then immediately sells an asset to profit from a price imbalance. It exploits the price difference of a financial instrument across different markets or platforms.

ASK

This is the price a dealer will accept for a financial instrument, also sometimes referred to as an offer.

ASSET

On the financial markets, an asset is any tradable financial instrument, including individual commodities, currencies and stocks.

ASSET CLASSES

An asset class refers to a specific category of investment such as stocks, bonds, currencies or options.

AT THE MONEY

The term “at the money” is used to describe an asset that has a price equal or nearly equal to the current price of the underlying asset.

AUTOMATED TRADING

An automated trading system uses software or a computer program to automatically execute buying and selling orders.

AVERAGING DOWN

This is a method of reducing the cost of purchase of an asset by buying additional shares in a long position as the price moves down, therefore reducing the average price per share.

In order to understand the financial markets, it’s vital to get familiar with the terminology and understand the words, phrases and terms commonly used by traders, brokers and the financial press. Check out our glossary where we break down commonly used terms to allow even beginner traders to understand the basic language, slang and abbreviations used when talking about the international finance markets. The glossary is arranged alphabetically, allowing you to quickly check the meanings of anything you are unsure about.

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