HomeFinanceThe Ultimate Glossary Of Terms About CFD Trading EditorOne July 22, 2016 Finance Amalgamation A method of calculating commission, in which a collective commission is charged after the total daily transaction instead of separate ones. The advantage of this method is that the cumulative commission will be paid even when individual transactions didn’t meet the minimum commission threshold. Ask “Ask” refers to the price where you can buy, where dealer or broker is willing to send at the upper limit of the spread. Also known as “offer” Benchmark Rate The reference rate where interests are charged on borrowing or paid on short sales. Bid In opposition to “ask”, a bid is the price where you can sell a market.The lower limit of the spread. Charts An important tool to plot movements of price over a specific period of time. Utilized to analyze past movements and predict future movements. Close Ending the exposure on a CFD position, realizing the loss or profit of the position. Commission The percentage paid to the broker every time a transaction occurs. Typically ranges from 0.2%-0.33% of contract value, minimum commission threshold applies. Contracts For Difference (CFD) A contract to settle the difference in value between the opening price and closing price of a financial market over a period of time. It is aimed to replicate similar exposure to making equivalent trades but eliminates the need for a physical buying and selling. CFD can be opened without paying the full contract value. A trading method offered by CMC Markets. Contract Value The full cost of equivalent physical purchase or sale. E.g. when the price of X is $100, the contract value of 100 X CFD will be 100 times 100p, or $10,000 Equity Balance Equity Balance=Ledger Carried forward+ unrealised profit/loss- unrealised finance charges Expiry The date and time when your CFD will be automatically closed and settled, when a contract period ends. When extending is preferable, one can rollover. No expiry period are available when your position is a rolling contract. Finance Charges Fee paid for borrowing from the brokerage to finance a purchase. Typically 3% to 8% Fixed spread Spread that was fixed to stay within the same range throughout a trading day. This way, the trading cost will not increase even during the most volatile conditions. Frequent Trader Discounts Discounts on fees and commission when trading turnover exceeds a certain level in a month. GFD Good for the day (a type of order) GTC Good until canceled (a type of order) Gapping Gapping refers to sudden price movement to without moving through in-between prices. This can cause the market to fall below your stop loss order, or above your stop entry order, without any trade made at those levels. Can be totally protected by a guaranteed stop. Gearing The ability to trade without making the full contract value. I.e. Opening a position of a $20,000 value by putting down a margin deposit of $1,000. This way, your gearing ratio is 20:1. see: leverage Guaranteed stop A special stop loss order. Thestop level is absolutely guaranteed during gapping or slippage by paying a small premium. Limit Order Order of purchase with an upper price limit, or order or sale with a lower price limit. Long Buying a market in an expectation of price increase. Margin Minimum cash deposit permitted to hold against an open position. I.e when the price moves against you. Margin Call A call (or notification) when the brokerage requires you to deposit cash for the required margin to maintain an open position. When not responded, the brokerage will close your position. Market Maker CFD provider who generate their quotes rather than reflecting the bid or ask, creating a market on their own. Wider bid-ask spreads than the actual market can happen, increasing the required cost. Market Order An order of purchase or sale at the current market price quoted. New Order An order to automatically open a position when the market reaches a certain price level. When the intended level is not realized, no position will be opened. Option The right of purchase of sale of a financial instrument on or before a specific date at a given price. Open During purchase or sale of a market, you open a spread betting position that will expose yourself to the market. Pip The price unit of forex markets. Your profit or loss is determined by multiplying your unit stake with the difference in pips. Point The price unit for non-forex markets. Your profit or loss is determined by multiplying your unit stake with the difference in points. Quote The offered price for each individual market. Will constantly change when a price movement happens. Rolling Daily The position that is renewed to be open from one day to thenext. Rollover Renewing your contract beyond its expiry period. Settlement The official expiry level of a market. Any open position will be automatically closed at this point. Short In opposition to long, selling with an expectation that the price will drop. Spread The difference between the bids and asks at a market. Spread Betting A method to bet on financial markets movements with variable returns. A margin trading form offered by CMC Markets. Spread Widening An occurrence when a CFD provider acts as a market maker, where bids may be lower and asks will be higher than the actual market. The wider the spread, the bigger the cost of the trade will be. Stop Entry A purchase order set above the current market price. The purchase will only be realized when the market price rises to the stop entry price. Stop Loss A sale order set below the current market price. The sale will only be realized when the market price falls to the stop loss price. Straight Through Processing When a market maker guarantees that no spread widening will happen, and any asks and bids will match the current market price. Tick The minimum price increment in a market. Trailing Stop Special stop-loss order utilized to lock on profitable positions. Your stop level moves automatically by a set increment when the market moves in your favor.