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Glossary Terms For Market Traders

A list of definitions in trading is termed as a glossary that traders, investors, and analysts use to understand general concepts in the market. It clarifies intricate financial jargon to expedite news interpretation charts and investment strategies. A trading glossary includes order types, risk management, margin, OTC, and financial instruments. 

Newcomers can get assistance with the given definitions and will clearly understand the fundamental concept of these terms to refine their knowledge. Whether analysing market movements or executing trades, having a well-structured glossary enhances communication in financial markets.

Liquidity 

Liquidity indicates quickly selling or buying an asset without affecting the price. Leading to price volatility, an illiquid market has fewer sellers and buyers. A highly-liquid market allows smooth transactions such as major stock exchanges and Forex.

Margin

Brokers require margin to maintain and open leveraged positions in trading. Additionally, margin trading permits the traders to escalate potential returns by increasing risk. Brokers set a minimum margin requirement based on the liquidity and volatility of the asset.

Market Order

Selling or buying an asset in the market at the best available price is a market order. Like limit orders, market orders also ensure quick execution, resulting in slippage in a highly volatile market.

Moving Average

An analysis tool that technically calculates the average price over a specific period by weaving out price fluctuations. Traders use these moving averages to identify potential exit, entry points, and trends. There are two moving average types: exponential moving average EMA and simple moving average SMA. 

Net Asset Value

It represents the per-share value of an ETF or mutual fund, calculated as total liabilities divided by the number of outstanding shares. Investors use net value assets to determine the exact value of their points.

Non-Farm Payrolls

Non-farm payrolls are an indicator that shows the number of jobs in non-agricultural sectors economically. The U.S. Bureau of Labour Statistics releases NFP. A strong NFP report suggests influencing forex, stock markets, and the country’s economic growth.

Nominal Value

Nominal values, also known as face value, are the values of financial instruments, including stocks or bonds. It expresses value without accounting for inflation or market fluctuations. 

Open Interest

Open interest is the number of total derivative contracts that are unsettled. A high open interest rate indicates liquidity and strong market participation. Meanwhile, low open interest suggests the investor has no interest in the contract. 

Option 

A financial contract that gives the holder the right to Cell or by an underlying asset determines price within a specific period. Two main types of options that are widely used for speculative and hedging purposes:

  • Call Option: Grant the right to the holder to buy an asset.
  • Put Option: Grant the right to the holder to sell an asset.

Over The Counter Market

It is a decentralised market in which different parties trade financial instruments without centralised exchange. Some typical products of OTC bonds, derivatives, and Forex. However, the over-the-counter market provides flexibility as compared to the exchange trade market because they may lack transparency. 

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