Important Trading Terms to Know
Sorry but the truth is…
You can’t get away from the trading lingo.
There are at least 7 terms you need to deal with a day.
But fortunately, they repeat and before you know it – they’re second nature.
Let’s start with the most important terms – you’ll face every day as a trader.
Symbol – Name of market you want to trade:
The symbol represents the unique identifier of a specific financial instrument or market.
It is the special name that is given for each market.
For example, in the stock market, symbols are typically a combination of letters that represent a particular company’s shares.
In the forex market, symbols are currency pairs such as EUR/USD or GBP/JPY.
In the commodity market each have their own symbol i.e. Gold = XAU/USD, GCI
Go to TradingView head over to Symbol search and start searching and adding to your watch list.
Side: Buy (go long) or Sell (go short):
The “side” refers to the direction of your trade.
Buying (going long) means you believe the price of the instrument will rise, and you aim to profit from the increase.
Selling (going short) means you anticipate the price will fall, allowing you to profit from the downward movement.
The choice of the side depends on your market analysis and trading strategy.
Quantity: No. of CFDs or lots:
The quantity represents the number of Contracts for Difference (CFDs) or lots you want to trade.
This is all dependent on your risk profile and portfolio size.
CFDs allow you to speculate on the price movements of an underlying asset without owning the asset itself.
The quantity determines the exposure and potential profit or loss of your trade.
It’s important to consider your risk tolerance and account size when determining the appropriate quantity to trade.
Order type (Market or limit):
The order type specifies how you want your trade to be executed.
A market order is executed immediately at the most current market price.
This type of order guarantees execution but does not guarantee a specific price. So there might be slippage (where you get in versus where you wanted to get in) which can interfere with your Risk to Reward.
A limit order allows you to set a specific price at which you want the trade to be executed.
So basically, you LIMIT The price you wish to enter.
The order will be executed only if the market reaches or exceeds your specified price.
Validity: How long to hold:
Validity refers to the duration for which your order remains active.
Common options include:
GTC: “Good Till Cancelled” where the order remains active until you manually cancel it.
FOK: Fill or Kill: This type of order requires immediate execution of the entire order quantity. If the full amount is not executed, it is then cancelled.
GTD: “Good Till Date” (GTD), where you can specify a specific date until which the order is valid.
MIT: Market if Touched: This order is triggered when the market price reaches a specified level (trigger price). It then becomes a market order and is executed at the best available price.
LIT: Limit if Touched: If a Limit if Touched order is triggered when the market price reaches a trigger price.
However, it becomes a limit order with a specified limit price and will only be executed at or better than the limit price.
Levels: Entry, Stop loss, and Take profit:
These levels are essential in managing your risk and potential profits.
Entry Level: The price at which you enter the market by opening a trade.
Stop Loss Level: A predetermined price level at which your trade will automatically close to limit potential losses if the market moves against you.
Take Profit Level:
A predetermined price level at which your trade will automatically close if the market moves in your favour.
What trading term do you want to know more about and let us know if this was useful!
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