Trading terms and definitions

Also known as the Nikkei 225 index, this stock index tracks the performance of 225 large, publicly-owned companies listed on the Tokyo Stock Exchange.

Explore other Stock Indices available for trading on Deriv.

A process to verify the identity of clients and assess their risk levels to mitigate risk and adhere to compliance regulations. In Deriv, the KYC documents requested may include proof of identity, proof of address, and proof of wealth.

A measure of the total value of a company's outstanding shares of stock with a market capitalisation of 10 billion USD or more. It is also referred to as "big cap".

Leverage lets you hold larger market positions than what your initial capital would allow. This way, you would amplify both your potential profits and losses.

For example, a leverage ratio of 1:1000 means that Deriv provides USD 1,000 in trading capital for every USD 1 you deposit. This gives you greater market exposure but at the same time increases your risk if trades don't go as expected.

The higher the leverage ratio, the more capital you can command with your own equity deposit. While higher leverage has the potential to magnify profits, it also comes with the risk of bigger losses if trades don't go your way. You should consider if the risk tolerance and capital that come with the leverage levels suit your trading style and goals.

A type of order to buy or sell a security at a specific price or better. When you place the order, it will only be executed if the asset price reaches the limit price specified.

Liquidity in trading refers to the degree to which an asset can be bought or sold in the market without causing a significant impact on its price. Higher liquidity indicates a more active market, and narrower spreads between bid and ask prices, allowing traders to enter or exit positions smoothly and at stable prices.

A trading institution that participates in financial markets by providing liquidity or the ability to buy or sell a particular asset, security, or currency pair.

The possibility that an asset such as a stock, bond, or other financial instrument cannot be quickly sold or converted into cash without causing a significant loss in value due to market liquidity.

A trading position where you buy instruments in the expectation that their value will increase.

A situation where the value of a trade decreases, leading to a financial loss. This occurs when the price of the asset being traded moves in a direction that is unfavourable to the trade's position. It is often referred to as trade loss or loss trading.

The amount of units or contracts of an asset that are being bought or sold in a single trade. It is used to determine the trade volume.

Forex major pairs, or forex major currency pairs, are the most commonly traded currency pairs in the forex market. These pairs are made up of the currencies of the world's most developed economies, and are highly liquid with high trading volumes and narrow bid-ask spreads.

Learn more about major pairs on our Forex page.

A margin is the amount of funds (expressed in the trader's account currency) required for opening and keeping a leveraged position open.

A trading tool to calculate the margin required to increase your market exposure. 

Use our Margin calculator to calculate your margin.

A request from a broker for a trader to deposit more funds into their trading account to maintain the lowest level of margin required. When you receive a margin call, you should take immediate action to address it.

The amount of funds you'd need to put in to open a leveraged trading position or to maintain the required margin for all your trading positions.

The margin deposit amount for each trade is calculated based on the size of the position, leverage, and any other margin requirements. Financial instruments may have different margin requirements depending on their volatility and liquidity.

The percentage of funds that you must have in your trading account in order to open or hold a position. Margin requirement is calculated as below:

Required margin = (volume × contract size × asset price) ÷ leverage

The platform where various financial instruments such as stocks, currencies, commodities, and derivatives are bought and sold. It is also known as a trading market or trade market.

A financial metric that measures the total market value of a publicly traded company's outstanding shares of stock, also known as market cap. The market capitalisation formula is calculated by multiplying the company's current stock price by the total number of outstanding shares.

The real-time information about market activity, such as pricing, trading volume, bid and ask, quotes, and other relevant trading statistics. You can use market data to monitor trends, assess conditions, and make informed trading decisions.

Market execution in MT5 means executing a trade at the best available market price. You may get a different price than the one you intended if the market moves quickly.

The degree to which market fluctuations can affect you. It can be measured by considering various things, such as your investment size, how much the asset's price moves, and how long you intend to hold the trade.

A financial institution or individual that offers both a buy and a sell price for a security and facilitates trading by providing liquidity to the market. Market makers play a crucial role in maintaining an orderly and liquid market.

The price at which a financial instrument can be bought or sold on the open market at a particular time. It represents the current asset value based on the interaction of buyers and sellers in the market.

The maximum amount of a financial instrument that you can trade in a single order.

The highest number of shares, contracts, or units of an asset traded within a single trading day, reflecting the level of trading activities. It provides insight into the liquidity and activity of a particular asset, helping you assess market conditions and potential price movements.

The highest amount of borrowed funds or leverage when executing trades. Knowing the maximum leverage allows you to assess your risk exposure and help control potential losses.

The maximum number of trading contracts that you're allowed to have open at any given time.

The maximum potential profit that you can earn on the trade.

Metals refer to precious metals, such as gold, silver, platinum, and palladium, as well as industrial metals, such as copper, aluminum, zinc, and nickel. 

Check what Commodities are available on Deriv.

A measure of the total value of a company's outstanding shares of the stock price with a market capitalisation between USD 2 and 10 billion.

The minimum amount of an instrument that you can trade in a single order.

The smallest position size or contract size that can be entered when making a trade. By knowing the minimum size, you can assess if you have sufficient capital to meet the requirements of a specific trade.

The smallest possible difference between the bid price and ask price of a financial instrument.

Forex minor pairs, or cross currency pairs, are currency pairs that do not include the US dollar as one of its components. Instead, it is made up of two other major currencies, such as the euro, Japanese yen, or British pound. These pairs are less frequently traded than major currency pairs, and typically have wider bid-ask spreads and lower market liquidity.

Learn more about minor pairs on our Forex page.

A technical analysis tool that calculates the average price of trading assets over a particular period. It is used to identify market trends and potential support or resistance levels.

A technical analysis indicator that identifies a financial asset's potential price trends and reversals. It shows the relationship between two exponential moving averages (EMAs) of an asset's price.

A risk management tool offered by some brokers to protect traders from losing more than their account balance.

If your MT5 account balance becomes negative due to a stop-out event, it will be automatically reset to 0.00 in your Wallet currency (AED or USD).

This protection applies only to trading losses. It does not cover other charges, such as admin fees on swap-free accounts or transaction-related costs. The applicability of this tool is subject to Deriv’s Terms and conditions.

Also known as the Dutch Stock Market Index, this index tracks the performance of the 25 most actively traded companies listed on the Euronext Amsterdam Stock Exchange.

Explore other Stock Indices available for trading on Deriv.

The total amount earned from a trade after deducting all applicable costs such as fees and commissions.

A mathematical calculation tool used to analyse and predict the future price movements of an asset.

An active trade that still has not been closed.

A request to buy or sell a financial instrument at a specific price.

A type of technical indicator used to identify potential market turning points by signaling when a financial instrument is losing momentum.

A situation where you hold a position in a specific financial asset that exceeds your risk appetite, trading capital, or diversification strategy.

The buying and selling of financial instruments that are not traded on a centralised exchange but directly between two parties, such as banks, corporations, or individual investors.

The specific values or settings that define a particular trading action, giving you more control over your trading. This includes risk management features such as stop loss, take profit, and deal cancellation.

A way to make deposits into or withdrawals from your trading account.

See which payment methods are supported on our Deposits and withdrawals page.

An order to buy or sell a security at a specific price, but it isn't placed in the market immediately. The order is held by the broker and is executed when the market reaches the specified price.

Pip, or percentage in point, is a standard unit used to measure how much the asset value changes. When an asset has a quote with five or three decimal places, we use a smaller unit called a 'pipette'. A pipette is one-tenth the size of a pip. Pipettes help measure smaller price movements more accurately.

Use our Pip calculator to calculate your pip.

A trading tool to determine the pip value of a trade.

Knowing the value of each pip in a trade is important because it can help you understand the possible risks and rewards involved. By using this information, you can set appropriate stop loss and take profit levels, and adjust your position sizes accordingly. 

Calculate how much each pip is worth using our Pip calculator.

Refers to how much 1 pip is worth, which is the smallest value change in a currency's exchange rate. 

Calculate pip value for your trades with our Pip calculator.

A collection of trading assets that are held by a trader.

The specific trade that you hold in a particular financial instrument, such as stocks, commodities, currencies, or derivatives. It shows how much you are affected by the price movements of that instrument when there's any open trading position.

A trading strategy in which positions are held for weeks to months or even years for long term investment.

The period of trading that occurs after the regular market has closed for the day. It is also known as after-hours trading.

An estimate of the profit or loss based on the current market price of the underlying asset and the current value of the options contract. It is not realised until you choose to exercise or sell the trade contract before expiry time.

The period of trading that occurs before the regular market opens for the day.

The amount you earn after deducting any associated costs from your trades. It is the difference between an asset's buy and sell price or a trade's opening and closing price.

A financial metric that compares the total profits generated by successful trades to the total cost incurred by losing trades.

A type of document used to confirm a person's current country of residence. A proof of address can include a variety of documents, such as a utility bill or bank statement.

A type of document used for identity verification. A proof of identity can include a variety of documents, such as a government-issued ID card, passport, or driver's licence.

An economic policy in which a central bank buys large quantities of financial assets to increase the money supply and lower the interest rate to encourage lending and investment.

The second currency or counter currency listed in a currency pair. It is the currency that is being used to quote the value of the base currency.

The current market price of a financial instrument. It represents the latest bid and ask prices available in the market. This price is continuously changing in response to market demand and supply.

A period of sustained upward movement or increase in prices of a particular financial instrument over a short to medium term period. It is driven by positive factors and a bullish sentiment.

The spread or difference between the highest and lowest asset prices within a certain period of time. It is also known as a trading range.

A trading account that allows traders to trade with real money. It is also known as a live account or a funded account.

A technical analysis indicator used in trading to measure the magnitude and speed of price movements in a financial asset. This momentum indicator is primarily used to identify overbought or oversold conditions in an asset.

A term used in technical analysis to refer to a price level where the upward movement of an asset is expected to stop or reverse due to selling pressure.

An economic indicator that measures inflation in the UK economy by tracking the rate at which prices of goods and services are rising.

The profit or loss usually expressed as a percentage of the initial investment.

A change in the direction of a price trend.

The various factors or events that could lead to a loss of capital.

A measure of how much risk you are willing to take in your trading activities to achieve higher potential returns.

The process of identifying, assessing, and mitigating potential risks that could result in financial losses. This includes strategies like setting stop loss orders in option trading and determining optimal position sizing.

A metric used to measure the potential profit in relation to the potential loss, enabling you to assess and effectively manage risk.

The level of risk you are willing to endure in your trading decisions.

The process of extending the settlement date of an open position in a financial instrument to a future date.

A trading technique that involves making multiple trades within a short time. The scalping trading strategy usually lasts from a few seconds to a few minutes to profit from small price movements.

Financial instruments representing ownership or creditorship in public trading companies or organisations. For example, stocks and options.

The act of disposing of financial instruments such as stocks, bonds, or commodities through a sell order if you expect its value to decrease in the future. This strategy can involve both short selling and long selling.

A pending order to sell an asset at a price higher than the current market price.

The price at which a seller is willing to sell an asset. Also known as the ask price, it is typically displayed on the right-hand side of a quote.

A pending order to sell an asset at a price lower than the current market price.

A conditional order that combines the features of a sell stop order and a sell limit order. 

When a sell stop limit order is placed, it will only become a sell limit order once the specified stop price is reached or breached. Once the stop price is reached, the sell limit order becomes active and is executed at the limit price or better.

A financial metric used to assess the return of a trading strategy in relation to its risk.

A type of financial risk that occurs when an investment portfolio or asset fails to meet anticipated performance, leading to a shortfall risk in the expected returns.

A trading position where a trader sells a financial instrument that they have borrowed in the expectation that its value will decrease.

A type of moving average that shows the average price of an asset over a specified period. SMA is calculated by adding up the closing prices of an asset over a given time and dividing the sum by the number of periods.

The difference between the expected trade price and the price at which the trade is actually executed.

A measure of the total value of a company's outstanding shares of stock and refers to companies with a market capitalisation between 300 USD million and 2 USD billion.

The act of taking positions in derivative markets to make profits based on expectations of future price movements.

The current market price of an underlying asset.

The difference between the bid price and ask price. 

A variable spread refers to a spread that changes with the market conditions, while a fixed spread is where the spread is unaffected by market conditions but could be altered by the broker.

The time when our servers process and start your trade contract.

An account statement is a report that provides a summary of your trading activities during a specific period of time.

A statistical measure that tracks the performance of a specific group of publicly traded companies or a particular segment of the stock market.

Learn more about Stock Indices on Deriv.

Stocks, also known as shares or equities, represent the ownership of a fraction of the issuing corporation. Stock trading on Deriv doesn't require the buying or owning of the underlying stocks.

Discover the Stocks you can trade on Deriv.

A risk management feature that allows you to set the maximum level of potential loss you are willing to tolerate if the market moves against your prediction. When the market value falls to the set stop loss level, your trade will be automatically closed. 

It's important to consider slippage when setting the stop loss level, as prices may fluctuate during execution.