CFD Glossary

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CFD

CFD stands for ‘Contract for Difference’. The trading of CFDs allows traders to speculate on the movement of fast-moving financial markets. They are derivative financial instruments that allow traders to invest in commodities without actually owning the asset.

Close

The ‘Close’ is the end of a trading session, the exiting of a trade or denotes when the market closes.

Expiry

The expiry of a CFD is the date and time in which a derivative contract ‘expires’ – these contracts only ever exist for a specified period.

Gapping

Gapping occurs when there is a sudden, sharp movement in the price of CFDs when no actual trading has happened. They are usually caused by external factors – like news announcements or changes in analyst outlooks.

Leverage

Leverage allows traders to trade without putting up the full amount. This allows people to maximise their trade earnings, but can also incur substantial losses.

Limit order

A limit order is the price you will sell at or better.

Long

A long trade is a trade initiated by buying.

Pip

A pip is the smallest price move that a given exchange rate makes, based on market convention. Most currencies are measured to four decimal places, so there for that smallest change will occur in this final decimal point – this is usually the equivalent of 1%.

Point                                    

A point equates to one dollar. Saying that stock has gained or lost X amount of points, is the same as saying they have gained or lost X amount of dollars.

Short

A short trade is a trade initiated by selling.

Slippage

This is the difference between the expected price change and the actual price change.

Spread

The spread is simply the difference between the price the trader can buy or sell at.

Stop-loss

This is an order to sell at a certain point. They are designed to limit an investor’s losses and safeguard their deposit.

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