Education – Glossary

Account with Zero established under the Account Terms, including all Trading Accounts and all Transactions recorded in them.

The lowest seller in the market at that time. Also known as offer.

The highest buyer in the market at the time.

Amount payable by you to the service provider in respect of each Transaction.

An agreement between two or more parties. (disclaimer: this is not legal advice).

An agreement between buyer and seller to exchange the difference in value of a particular instrument between when the contract is opened and when it is closed.

Number of units for a security in one standard contract. An indication of the standard transaction sizes for the Zero OTC contracts is available on Zero Markets MT4. If you have more questions, contact our email ([email protected])

Pair of currency that are compared when trading Forex – e.g. a contract of Australian Dollars vs US Dollar would be expressed as AUDUSD.

A security with a price that is dependent upon or derived from one of more underlying assets.

Model of pricing and execution where an order is placed directly, or virtually directly, into an Exchange without any broker intervention. In practice, there are many variations to the general model and brokers always retain the right to filter orders for regulatory or compliance reasons.

The gap between the peak and trough decline of a specific recorded period of an investment.

Electronic Communication Network (RAW)

Model of pricing and execution where an order is placed directly, or virtually directly, via a Hedge Counterparty without any broker intervention. In practice, there are many variations to the general model and brokers always retain the right to filter orders for regulatory or compliance reasons.

To execute an order in the market. The price is known as the entry or opening price.

To create an order that is the opposite of a position that is currently held

Amount in dollar, or percentage of capital that is being invested in a particular type of security, market sector or industry.

Cost associated to products and services of the broker, but not the trade.

Financing is applicable on all CFD positions held overnight. The financial rate is applied to the full value of your position. If you hold a long ‘buy’ position you will be charged a financial interest, if you hold a short ‘sell’ position you may receive interest.

Free equity refers to your available funds that can be used to place new positions in your account

Contract between two parties to buy or sell a specified asset of standardized quantity and quality for a price agreed today.

Going long refers to opening a buy CFD position to profit from a price increase.

Going short refers to opening a sell CFD position to profit from a price decrease.

Your GLV is the total value of your account if you closed out all positions at the current market price minus any transaction charges or adjustments. If your GLV goes below 0, you will be in debt.

An investment to reduce the risk of adverse price movement in another investment or an asset, normally consisting of taking an offsetting position in a related security.

An aggregate statistical measure of a particular market. E.g., the ASX S&P200 seeks to measure the value of the top 200 stocks on the ASX.

Initial Margin

Every trader in the ASX CFD market is required to put up an Initial Margin (deposit) for each contract they trade. This applies to both buyers and sellers. This Initial Margin is returned when the contract is closed out. The amount is normally set at a level designed to cover reasonably foreseeable losses on a position between the close of business on one day and the next. The amount of Initial Margin for each contract varies according to the price volatility.

A tradeable asset or negotiable item – such as security, commodity, derivative, index or any item that underlies a derivative.

Trading platform used primarily to trade equity CFDs.

When trading with borrowed capital, you are trading with leverage.

A liquidation is forced closure of positions due to the equity in your account not being able to support the margin requirements of the open positions – A position can also be Auto liquidated, your GLV is 50% of your margin requirement.

A lot is the term used to describe the amount for a standard contract. For example, 1 lot of gold refers to 100 troy ounce of gold. 1 lot of AUDUSD refers to $100,000 AUD worth of US Dollar.

When your free equity drops below 0. Your position can be liquidated at any point when you are in margin call.

A system whereby the value of an open position is revalued against the current market for the purpose of calculating variation margins.

Market Maker

Where the ASX CFD provider acts as principal, providing a two-way spread based which may not be the same as the market price. Market makers are price markers and make money when clients lose money.

Trading platform used primarily to trade FX.

Contract for a financial product, including options and contracts in respect of foreign exchange or metals. OTC contracts are not traded or settled with any Exchange.

Profit and Loss.

The smallest increment by which a unit of currency (such as for an FX FPM OTC contract) changes and is quoted depending on the number of decimal places in which the currency is quoted. For example a USDJPY margin FX is quoted with only two decimal places (meaning one Pip Value (or “Point”) = JPY 0.01).

Transaction which has not been Closed Out, or settled prior to the time agreed for settlement.

The size (e.g., number of shares) or the dollar amount of an particular investment placed.

A system that identifies, measures, seeks to reduce and reports/monitors risk to avoid losses.

A system of rules for evaluating stocks and identifying trading opportunities.

Another term for a financial instrument.

Difference between the price of trade and actual execution. Often occurs at the stage of high volatility, where the fluctuation of price is high.

Difference between the bid and ask price.

An order placed which becomes activated when the market price reaches a designated level. Stop-loss orders are used to close out losing positions to prevent further loss.

An agreement between 2 parties to exchange financial instruments. Brokers may undertake a swap agreement with Prime Brokers to take positions on financial markets.

A strategy on what, and how you will place a trade.

A water mark stop loss that tracks the movement of the underlying security.

The asset which a derivative’s price is based on. E.g., an equity CFD on BHP has an underlying asset of a of share of BHP.

Refers to the payment of profits or losses following revaluation of a CFD contract. For this purpose, open positions are revalued (or marked-to-market) daily.

Indication of the movement of price in the instrument in question. Highly volatile instrument fluctuates rapidly in price, while low volatile instrument is (relatively) stable in price.

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