is the amount of money that you have in your account for the betting that you are doing. Also, the total deposit required from a client based upon the size of the trade(s)
is the first stage of a bull market, when the wisest investors are buying even though public sentiment is against the stock or market.
After hours dealing
Bets placed on securities after the regular trading hours have closed.
is a term used in various contexts and markets, that basically involves exploiting small differences in price between markets, or between spread betting companies. Arbitrage refers to an attempt to profit from the pricing differential of a single financial instrument between one spread betting company and another
is used when plotting price charts. With the arithmetic scale, each price increment is represented by the same distance vertically.
is the price you can buy at, also called the offer price. The price, or offer, at which at bet can be made. See also ‘Offer Price’
Regularly-held bets where buyers and sellers enter competitive bides and offers at the same time.
A call or put option whose exercise price is equal to the current price of the underlying market.
stands for Bankers Automated Clearing System, and is a way that banks and building societies use to transfer funds electronically. This is the system designed by the banking industry to allow electronic funds to be transferred from one institution to another.
One hundredth of a percentage point.
is a period where there is a general decline in prices. Sometimes can be split into three phases, starting with “distribution”, then “panic”, followed by “sell out”, when most people give up and liquidate their holdings.
is a measure of the security’s sensitivity to overall market movements. A beta greater than one means that the security will fluctuate more than the market as a whole, and a fractional bets means it is not as volatile as the market.
The minimum movement you can bet on. This may differ from the underlying market tick size.
Bet Size Factor
Used to determine the margin required to make a specific trade, this is calculated as the number that is multiplied by your stake to reach the margin. Bet size factor is a number that multiplied by your stake size will tell you how much margin you need for the bet. If your bet is £5 and your bet size factor is 12, then you need £5×12=£60 for your margin.
is the price at which a financial security can be sold, i.e. the price someone would “bid” for it. The price at which a stock, index, commodity or trade can be sold.
Bid-Offer Spread or Bid-Ask Spread
The difference between the buy (bid) and sell (offer) price of a financial instrument.
is a win or lose fixed odds bet offered by some companies. Consider it a real gamble, rather than a way to trade.
is a term for the dramatic end of an up-trend, when the price advances sharply accompanied by large trading volumes. Usually followed by a correction or a reversal.
A certificate of debt issued by either a government or corporation, which guarantees that the initial investment will be repayed at some specified future date, with a fixed level of interest applied. Bond refers to a debt issued by a government or by a company, which if you invest in it will pay you back with interest after the loan period – provided the issuer is still in business.
is someone who buys a bond.
is a betting company that will take the other side of any bet you make. Commonly for many years was associated with the horse racing and sports betting areas, and also now a term for a financial spread betting company.
is a gap in pricing which comes from a breakout and usually heralds a significant price move. Usually has a large volume of trading.
A company or individual who acts as an intermediary between the buyer and seller of a trade, typically for an agreed fee. A broker is an intermediary between a buyer and a seller. In financial markets you have for example stock brokers who you would use for share purchases. Will usually take a fee for their services.
is a period when prices are generally increasing. The three phases of a bull market are “accumulation”, followed by a period of steady and increasing buying, and finally the public articipation when everybody is piling in.
is a bet that a financial instrument will increase in value, and you will profit if it does. A bet that the price of the instruments within a trade will rise. Also known as an up-bet or going long.
is measured by the volume of traders wanting to buy a financial security.
Also called Ask or Offer price. The price at which you can buy.
An option giving the right to buy the underlying market at a specified price within a specified time. So in effect the option buyer the right to buy the underlying stock or financial security at a certain price on or before the option expiry date. The option seller is obliged to provide the security at the price stated, the option buyer will only buy if it is of advantage to him.
Capital Gains Tax
is applied in most countries by the government to profits made on any asset that you have bought and sold.
is also known as a margin call, and is a demand by the spread betting company for more funds to cover a losing bet.
is a line drawn parallel to a trend-line, on the other side of the prices, forming a channel within which the price fluctuations appear to be contained.
stands for Clearing House Automated Payment System, used in the UK to make cash payments electronically on the same day.
are used to show the movement in price and other factors of a traded commodity. Very useful as a visual representation, they are key to technical analysis.
Closing Bet or Closing Trade
is how you end your bet, basically a same size bet in the opposite direction to your initial bet. This is when you realize your profit or loss.
are real goods, which can be bought and sold in commercial quantities to a set quality standard. Includes agricultural goods, metals, and energy products. Usually traded on the futures markets, and popular with speculators because of their leverage and volatility.
are those that depend on one thing happening before doing the next; for instance, a limit order might need to happen before a stop loss order is placed.
refers to the standard amount which is traded, typically used for commodities.
stands for Contracts for Difference, a leveraged financial product popular in many countries including the UK and Australia, but not permitted in the USA. It allows trading at bid and offer prices very similar to the underlying markets, but has an advantage that the trading is on margin, requiring typically 10% or sometimes less of the underlying value.
The minimum amount that can be traded i.e. Daily FTSE often £5 per point.
is a measure of the market sentiment. Some traders believe that it is best to trade against the mass opinion, perhaps on the known basis that most traders lose money.
Controlled Risk Bet
A bet where you control your losses.
is to exit or buy back a short position.
is granted when a company extends a borrowing capacity to the account holder. It usually requires some type of proof of other assets to cover the amount borrowed.
is the total amount that you can owe before taking some action, such as sending in additional funds, or receiving a margin call.
The exchange rate between two currencies.
refer to money in general circulation, in various countries.
as discussed in our course, and include any rhythmic variations in price, whether seasonal such as for commodities, or caused by other circumstances.
is the official closing price each day on a particular market.
(you don’t need to know what that stands for) is the German stock market index, which is based on the prices of thirty stocks.
is the initial amount put down on a bet, or into an account. In other words fund that need to be on your account in order to place or hold a bet. It is not the total amount that can be lost on a trade.
is the opposite of a credit account, as you pay in money first, and use it to finance your betting.
is a financial instrument that takes its value from another security, or even another derivative if you want to get complicated. Basically, it derives its value from something else, and how that something else changes in value affects it – but it never gives ownership of the something else. Examples include options, futures contracts, CFDs, spread bets, and credit default swaps which were fundamental to the US housing crisis.
is the first phase of a bear market, when savvy investors realize that the prices have reached unsustainable levels.
is an important factor in technical analysis. It refers to contra-indications, that is
is a method of spreading out the risk by investing in different and preferably unrelated financial instruments.
A Cash Dividend is the cash payment of a dividend to the shareholder per share held. Cash dividends are booked on Ex-Date reflecting the market price movement. Spread traders receive an adjustment to their account equivalent to the cash dividend.
is short for Dow Jones Industrial Average, one of several US stock indices. It is based on only 30 US stocks, the prices of which are weighted to maintain an industry spread, and companies are rarely changed, although only one, General Electric, has been on the list since the index was started over a hundred years ago.
arises from Charles Dow’s work in the late 19th century, developing market averages and hypothesising about their movement. The theory was assembled after his death by others from his editorial writings in the Wall Street Journal.
Also known as a sell or a short – a bet that backs the markets falling. In other words is a bet that the price of the underlying instrument will go down, which will give a profitable bet. Similar to “going short” on stocks.
is simply the regular overall downward movement of a price. Usually defined by seeing successively lower highs and lower lows.
of a company are its revenues less expenses, such as taxes, costs of sales and operating costs.
stands for Earnings Per Share, which divides the earnings by the number of shares outstanding, and can be used in working out what a share might be worth.
are figures often issued by governments to let you know how well the economy is doing.
Elliott Wave Theory
was developed by R. N. Elliott, and attempts to describe qualitatively the action of the price charts.
is a gap in pricing, usually near the end of a trend, and sometimes characterised as the “last gasp” of the move. Usually the price comes back to trade in the range of values that has been missed.
The last day on which the holder of an option can exercise it. In other words is when a spread bet ends, unless extended (“rolled over”). Depending on your bet, the spread bet will be settled or closed automatically on this date, unless you close it earlier.
A series of numbers that appear to have predictive properties.
is to complete an order. So fill refers to the execution of an order and the price it is executed at.
stands for Financial Services Authority, one of the major financial governing bodies which regulates market activities.
is the London based stock index, and is based on the largest 100 companies traded on the London Stock Exchange.
is a way of determining the value of a company, and consequently how well its shares are priced, both now and for the future. It works with basic data of performance and equity.
is a form of derivative. It is a binding contract for the buying and selling of a commodity at a set price and date in the future. The seller is required to provide the commodity and the buyer is required to pay the agreed price for it. Futures are traded on a standardised market which provides participants with guarantees of contract execution.
is when a price jumps over a price range without ever trading in that range. Found in technical analysis. It can also affect your orders, if you specify a certain buying or selling price and the price never trades there.
The market trades through the level specified in your order, without actually trading at that given level.
is the amount that you can borrow against your funds, and one of the reasons that spread betting and other derivatives are so popular as well as dangerous.
Good For Day
refers to an order modifier where it will be cancelled if not fulfilled by the end of the day.
Good For The Day (GFD)
An order, which if not filled, expires at close of business on the day it is received. Thus a good for the day spread betting order or trading position will automatically be terminated at the end of the day if it wasn’t executed during the trading hours. This order also means that you would have to place another order the next day because the original order would have been cancelled at the close of the trading day.
Good Till Cancelled
is another order modifier that tells your broker to keep trying the order until it is filled, or you separately cancel it. In other words a good till cancelled order is one that will be carried forward indefinitely until it is either filled or cancelled by you. A good til cancelled order may remain for a few days or even weeks or until you cancel it.
Good Till Date
An order, which if not filled, expires at close of business on a date specified by you.
Guaranteed Stop Loss
is a special type of order covered in Chapter 3, which effectively costs more but makes sure that you can close a bet at the value you dictate.
Hang Seng Index
is the Hong Kong stock index, which is based on the 33 largest companies on that exchange.
is a bet or trade that seeks to neutralize too much risk from an adverse price change. It usually costs something to do, often in reduced profits if the security keeps going in the desired direction, but limits or reduces losses.
An index shows how the value of any item changes over time. In other words is a measure of the underlying stock market and the health of the economy. Compiled in various ways, but usually with the intent of providing the best overall gauge of the economy, it provides a benchmark to compare to other countries economies, and to gauge how well individual companies are performing compared to the market in general.
Initial Margin Requirment
This is the amount needed on deposit in order to place a trade. Also known as Notional Trading Requirement (NTR).
An option which exhibits a reasonable difference between its actual and future price.
are bets that must be settled on the day that they are made, unless ‘rolled over’.
is regarded as a low-risk top-grade bond, and is issued by a government or body with a good credit rating. Because it is regarded as safe from default, usually you will not get much interest.
is the opposite of the investment-grade bond, and carries a higher risk of default, which means you may have trouble getting your money back. This would be issued by a company that has a lesser credit rating, but would offer a higher yield as compensation for the risk.
is a 54 year (very) long-term cycle, discovered by a Russian economist. It’s so long-term, that it has only cycled a few times in the life of the financial stock markets. Generally, you can look for rising prices, a growing economy, and overall up-trending during the first part of the cycle; the middle is has stable prices and a strong economy. The latter part of the cycle includes falling prices, a bearish economy, and often a major war.
Last Dealing Day
The last day upon which you may bet on a particular market.
is the same idea as gearing – the amount that you can borrow compared to how much you put up. Spread betting is highly leveraged, as the initial amount is small compared to potential profits.
stands for the London Inter Bank Offered Rate which is a reference rate that banks use in lending money to each other. It is used as a base rate for some interest calculations.
An order to sell above or buy below the current price. In other words, is an order for a trade to take place when a certain price is reached.
is a price market where there is sufficient trading going on that the price stays reasonably steady. The alternative of an illiquid market has little trading going on, and the price is affected greatly every time a trade takes place. Usually an illiquid market will exhibit wide bid-to-offer spreads, and is best avoided if you want to enjoy trading freely, buying and selling on your own schedule.
The volume of business that can be transacted in the market. Highly liquid markets typically have narrow spreads and can accommodate large deal sizes. Illiquid markets have wide spreads, small deal sizes and are often erratic. In other words is another way of putting it, and is a measure of how easily you can convert a financial security into cash or vice-versa. Large companies normally have good liquidity, and small companies can pose a problem due to the lack of free trade in them.
is used on price charts to represent movement of the price. With the logarithmic scale, each similar percentage change in price is represented by a similar vertical distance. For example, the distance from 2 to 3 (a 50% increase in price) is the same as the distance from 20 to 30 (similarly a 50% increase). Compare to the arithmetic scale.
Means to buy something in the expectation that it will increase in value. Going long means that you place a buy bet, in the spread betting context. In other words is a position taken in anticipation of a rising market. To go long means to buy. Holding an open “buy” trade because you think the market will rise.
stands for the London Stock Exchange.
Or variation margin. Occurs when an investor or trader doesn’t have to pay the full value of whatever is being traded. In a spread betting trade margin pertains to the amount of money required to be in your trading account for you to open a spreadbet. The balance is effectively borrowed from the broker, the exact arrangements depend on the instrument that is being traded. In other words is the amount requested from a client to cover a possible loss. The deposit needed on your account in order to keep your positions open. Margins may vary from one spread betting provider to another and also depending on the market you want to trade. For instance, some spread betting providers will only require 5% to 10% margin for share CFDs in the top FTSE 100 index. Other spread bets outside the top 100 constituents may require extra margin.
The call made by a spread betting company to a client whose account has fallen below the minimum requirement. In other words a call for additional funds on your account in order to cover your current exposure. You will get a margin call when the amount of your position has gone lower than what you have put in. This occurs when the markets have moved against your bet. In other words is the dreaded “call” from the spread betting company asking you to deposit more funds quickly to cover a losing position that you have. Margin calls may vary from one spread betting provider to another; however some brokers give you a buffer of 5% before your trade is liquidated. When you get a margin call you have two choices: you can either deposit more money into your trading account to bring the balance to the required level; or you may opt to close the trade.
Margin Close Out
This is a tool which is an in built feature of some spread betting providers. The system monitors your close out Margin Level (a percentage figure representing the ratio of net equity to total margin) to ensure it does not fall too low. If it does, the system will automatically close out positions to reduce the possibility of further losses. Help sheets detailing how this works precisely can be found on the trading platform.
is the same as bet size factor.
are the normal operating hours for a market, usually something like 8.00am to 4.30pm although some markets have limited operations outside these times. When spread betting on non-local financial products, you may need to have the market hours in a different country worked out to anticipate their effects.
This is an order you place to buy or sell a spreadbet at the present market price. If you are a buyer, you are willing to pay the price on the Offer, and if you are a seller you are willing to accept the price on the Bid.
Orders can be left on a market basis. This means that if the underlying market triggers your order, you will be filled on our current quote.
are the people or companies who set the prices of the financial securities.
is a measure of the strength behind a price move. Available in various forms from technical analysis, it can be used to trade by assuming that strong momentum shows the price will keep on going.
is one of the basic tools of technical analysis. It is the average of the price in the preceding “x” number of periods, that is the sum of them divided by “x”. It’s called a moving average because it is recalculated every period, and forms a moving line over time.
Moving Average Crossover
is a method used by analysts for various trading purposes. It consists of plotting two or more moving averages on the same chart, each with a different time period. When they cross it can be taken as a buy or sell signal, depending which is on top.
is an electronically based stock exchange in the USA, and doesn’t have a trading floor. It tends towards all the electronic stocks, so the DJIA is a better overall indicator of the economy.
is another index, this time covering 225 stocks that are traded on the Tokyo Stock Exchange.
is the price at which you can buy a stock or commodity, that is the price that it is offered to you. Compare to “bid price”.
On Balance Volume
is a momentum indicator which shows volume related to price. It is assumed to precede price changes, and shows in basic terms whether money is flowing into or out of a security.
One Cancels Other
Two linked orders where, if one is filled, the other is automatically cancelled. In other words, is an order modifier that does what it says; for instance, if you are sure that the price is going to move, but do not know which way, you could set orders above and below the market level. When one is triggered, the other is cancelled.
is a measure used in futures or options trading, and counts the number of open contracts that could potentially have to be filled.
To take out a trade by betting up or down on a particular market.
is any bet that you make, until you end it (close it).
is a type of derivative. An option gives the buyer a right, but no obligation, to buy or sell the underlying financial security at a certain price on a set day (in some option types, the buyer can exercise that right on any day up to the set day). If the option buyer would not make money doing so, then he doesn’t have to do it, and can walk away from the contract, losing just the cost of the option that he already paid. This is what makes the option different from most other contracts such as futures, where the transaction is locked in and must occur.
is a technical analysis indicator that indicates market sentiment. It shows when the security may be considered (according to its method of calculation) to be oversold or overbought, which means it is overextended and likely to pull back. The usual signal is a high or low value, sometimes crossing the zero (middle) value may be used, and when the oscillator is going in the opposite direction to the price it generally means an unsustainable situation.
The two-way (bid/offer) price made by MF Global Spreads on which you can trade.
An option with no intrinsic value.
is a condition when it is thought that there has been too much buying for a stable condition, meaning that the prices have been inflated by the demand past their true balance level. It should presage a downward adjustment, or at least a horizontal price period.
is the opposite, when there has been a sell off that may have undervalued the security. You would look for the price to come back up.
is when you take out two separate bets or trades that are related, perhaps by being in the same market sector. You choose to go long on the strong one and short on the weak one. This means that you are immune from the effects of the movement of the market as a whole, as one compensates for the other. You are simply betting on the relative merits of the stocks.
A point is the unit of price movement used for a spread bet, and the stake is how much money per point you are willing to bet. For example, for a bet on a UK share a point will usually be equal to penny movement in the share price. So if you think Vodafone shares will rise from 145p, you could place a ‘buy’ a spread bet at 144-146 with a stake of £10 per point. If the price of spread bet then rose from 146 to 150, you could close your bet and win 150-146*£10=£40.
Point and Figure
is a type of price charting that used to be much more popular than it is now. Plots are only made when there is some change to show, so they do not have regular time-scales.
this is essentially a trading strategy that involves allocating different amounts of money per trade so as to help preserve your trading capital. This means not risking all your trading capital in one trade because if the spread trade goes against you it may wipe out you spread betting account.
Pounds Per Point
is the usual way to talk about the size of a bet in the UK
is an additional cost for a financial instrument, over and above the expected price, because of a perceived value.
is the most important long-term trend in a price chart. You will also see secondary and other trends.
An option giving the right to sell the underlying market at a specified price within a specified time.
is the price that you can buy or sell a share or index.
is a rise following a decline or consolidation in a market.
is trading a stock or other security which appears to be trapped in a price range, or “moving sideways” in price. You would buy or go long at the low end of the price range, and sell or go short at the high end.
usually means the strength of an individual stock compared to the market or market sector that it is in. It measures how well a stock is doing, compared to its peers.
Relative Strength Indicator (RSI)
on the other hand is an indicator calculated simply on one financial security, and measures how well the stock is performing compared to its historic levels.
is a price area or line above the market price where selling pressure is greater than the buying pressure, so the price can go no higher in the current market sentiment.
is a move against the prevailing trend. It refers to the tendency of a price to settle back after a move, before continuing going in the direction of the trend. Often the expected extent of the retracement can be described in terms of a percentage of the last move, for instance the minimum retracement is one-third up to 38%, often 50 % is seen, and any retracement will not be more than 67% or the overall trend is failing.
A Rights Issue is when a existing stockholder is offered a number of new shares proportional to their holding at a specified price for subscription by a specified date. These new shares may be renounceable (tradable) or nonrenounceable. If the Client is holding a stock where there is a Right Issue the Client will receive the rights and have the opportunity to subscribe for new stocks, ignore the rights or sell the rights, if possible. With spread betting, the provider will aim to mimic the corporate action without shares changing hands.
The procedure of closing one bet and opening another on the same market. In other words rollover is to extend the expiry date of a particular bet or trade, by moving it on to the next expiry date. Effectively you sell the existing trade and buy a new one for the later date.
is an annual cycle caused by seasonal changes in the supply and/or demand. The sale of ice-cream tends to have a seasonal cycle.
is usually a correction to the primary trend, and may be a dip or rally before the primary trend prevails.
a spreadbet based on a specific industry sector such as Energy, Financial Services, Industrials, Materials, Consumer Discretionary, Telecommunications and Utilities..etc
Trading on our lower (bid) price because you think the market will fall.
is a bet that the underlying security will go down in value. This is equivalent of going short on the security.
is the price at which the order to close the bet actually gets filled.
A position taken in anticipation of a falling market. i.e. holding an open “sell” trade because you think the market will fall. To go short means to sell. In other words is the term for making a profit from the decline in value of a financial security. In stock trading, this is done by your broker ‘borrowing’ stocks from his own or a client’s account, and selling them on the market. When you close the short trade, the broker replaces the stocks by buying them on the market. So if the price has dropped, they cost less and you make a profit. If the price has gone up, you have to pay more and you lose. It’s a simple process that many people think is complicated. With spread betting, it’s even easier and more obvious to place a ‘down bet’.
Also known as going short. This is the opposite of going long. This means selling a share spreadbet with the expectation that the price will fall and buying it back at that lower price with a profit.
The current price for an index, currency, commodity or share.
The difference between a provider’s sell and buy (bid and offer) prices. In other words is the difference between the prices that you buy and sell at, and where the dealer makes his profit. This spread will be placed ‘around’ the price of the underlying asset in the market. For example, if the FTSE 100 index is at 5700, a spread betting firm may quote a spread of 5699-5701. You can choose to buy at the higher ‘offer’ price, or sell at the lower ‘bid’ price. So if you think the price will rise, you buy at 5701 and move into profit if the offer prices rises higher. Generally, the smaller the spread the better, as you need the price to move less in your direction before you start making a profit.
is a way of placing bets on the movement of various financial markets, making money if you bet in the correct direction and losing if you don’t. As you are betting on the movement of the price rather than buying and selling financial instruments, it turns out to be more tax and fee efficient.
Spread Betting Provider
this is the other party in a spread trade. The spread trade you enter into is between you and your spread betting provider. This is because spreadbets are over-the-counter products similar to currencies (FX). In the UK some of the spread betting providers include Capital Spreads, ETX Capital and IG Index.
is a tax paid to the government on share and property transactions, usually a percentage.
The bet size per unit of movement on our price. In Spread Betting this is NOT the total amount you could lose.
American term for share, but often also used around the world to mean share.
Stops are orders to sell below, or buy above, the current price. Stop orders are normally placed to close an existing position and restrict losses in the event of an adverse market movement. They can also be used to open a new position if the price breaks through a perceived support/resistance level.
is an order to close your bet or trade when the price reaches a certain level. It prevents you risking the price dropping further while you are not watching, and thus losing more money. But it doesn’t guarantee any particular price, just that the bet will be closed as quickly as possible when the price is reached. See also Guaranteed Stop Loss.
Stock Splits / Reverse Stock Splits / Spin Offs
A Stock Split is an increase in an issuer’s number of issued shares proportional to a reduction in the par value of the existing shares. The holders will receive additional stocks, allocated on Ex-Date, but at a reduced price.
A Reverse Stock Split is a decrease in the number of issued shares proportional to an increase in the par value of the existing shares. The shareholders will see their stock position being reduced, on Ex-Date, but at an increased price.
A Spin Off means that the shareholders will receive additional shares in a new share in proportion to the existing holding. Additional stocks are allocated on Ex- Date.
is a level that you don’t expect the price to go below. It may be a price level that has previously held up, and is a price that is so attractive to many traders that they feel compelled to buy, which prevents the price dropping further.
is the study and analysis of the market movements, which is utilised to try and predict future movements.
is the smallest possible movement in price of a stock or index.
is the software that is offered to you by the dealer, or the interface that you use to make your trades.
is a straight line connecting low points in an up-trend, or peaks in a down-trend, which you expect to continue indicating the progress of the price.
may sound musical, but refers to the stock, security, or other financial thing that is the basis of the value of a financial derivative. For spread betting, it’s whatever you are betting on, whether currencies, indices, stock values, or something else.
Also known as buy long – a bet that backs the markets rising. So in effect a buy bet is a bet that makes a profit if the price of the underlying goes up, similar to buying or going long in the security. The opposite of a down bet.
has a technical definition, and is basically a measure of the amount the price of something is expected to go up and down. A volatile stock changes price rapidly and by a large amount.
is the total amount of trading activity in a financial security over a certain period of time.
can be a good way to practice the actions of trading. Some spread betting companies, as well as other types of trading dealers, offer would-be clients a virtual trading account where ‘play money’ can be spent practising on the trading platform.
is the actual street in New York where the New York Stock Exchange is located, although the term can be used generically to refer to the conglomeration of financial institutions involved in the area.