This trading glossary collects the words that appear most often across NeroxFinance, from share basics to currency and crypto jargon. Financial writing is full of terms that sound technical but describe simple ideas, and a few that sound simple but hide real risk. Each entry below explains what a word means in practice and, where it matters, what to watch out for.
The definitions are general and simplified for beginners. Exact meanings can vary slightly between countries, exchanges and providers, so when a term appears in a contract or fee schedule, the provider's own definition is the one that applies to you.
Jump to a letter, or use your browser's search to find a term. If a word you met elsewhere is missing, let us know through the contact page and we will consider adding it.
- Ask price
- The lowest price a seller is currently willing to accept, and therefore the price you pay when you buy at market. It always sits above the bid price. On busy large-company shares and major currency pairs the two are very close; on thinly traded assets the gap can be wide enough to matter.
- Asset allocation
- How a portfolio is divided between broad types of investment such as shares, bonds, property and cash, and between regions. It usually has more influence on how much a portfolio swings than the choice of individual holdings, which is why many investors decide it first and pick investments second.
- Bear market
- A prolonged period of falling prices, commonly described as a decline of 20% or more from a recent high. Bear markets can last months or years and often arrive alongside economic slowdowns. The opposite, a sustained rise, is called a bull market.
- Bid price
- The highest price a buyer is currently willing to pay, and therefore the price you receive when you sell at market. Together with the ask price it forms the quote you see on a trading screen; the difference between them is the spread.
- Blockchain
- A shared ledger of transactions grouped into blocks, each linked to the one before by a cryptographic fingerprint and copied across many independent computers. Because every copy would have to be changed at once, past entries are very hard to alter. See how crypto works.
- Bond
- A loan to a government or company that pays regular interest and returns the amount borrowed on a set date. Bond prices usually move in the opposite direction to interest rates, and the main risk is that the borrower cannot repay. Many portfolios hold bonds to balance the swings of shares.
- Broker
- A regulated firm that places buy and sell orders on exchanges for its clients and usually holds their investments in custody. Before using one, check its authorisation on your regulator's register and how it protects client assets. See how to choose a broker.
- Capital gain
- The profit made when an investment is sold for more than it cost, after allowable expenses such as dealing fees. Many countries tax capital gains above an annual allowance, and some offer tax-free wrappers, such as the UK ISA, that shelter gains altogether.
- CFD (contract for difference)
- A leveraged contract with a provider that pays the difference in an asset's price between opening and closing the position. You never own the underlying share or currency, you pay financing to hold it overnight, and losses can exceed your deposit where negative balance protection does not apply.
- Compounding
- Growth earned on earlier growth. When dividends and gains are reinvested, each year's return is earned on a larger base, so the effect accelerates over long periods. Annual fees compound too, in the opposite direction, which is why small percentage charges matter over decades.
- Custody
- The safekeeping of investments on a client's behalf. A regulated custodian or broker must keep client assets separate from its own, so that if the firm fails the assets can be returned to their owners rather than used to pay the firm's creditors.
- Diversification
- Spreading money across many holdings, sectors and regions so that a problem at any single company or market does less damage to the whole portfolio. It reduces company-specific risk but cannot remove the risk of the whole market falling at once.
- Dividend
- A payment of part of a company's profit to its shareholders, usually in cash and often quarterly or half-yearly. A dividend is decided by the board and is never guaranteed: it can be raised, cut or suspended, particularly when profits fall.
- Dividend yield
- The annual dividend per share divided by the share price, shown as a percentage. It lets you compare income across shares, but an unusually high yield can be a warning: it often means the share price has fallen because investors expect the dividend to be cut.
- Earnings per share (EPS)
- A company's net profit divided by the number of shares in issue. It shows how much profit belongs to each share and forms the bottom half of the price-to-earnings ratio. Watch for one-off items that inflate or depress a single year's figure.
- ETF (exchange-traded fund)
- A fund that holds a basket of assets, often tracking an index, and trades on a stock exchange throughout the day like a single share. ETFs charge an annual expense ratio and range from very broad market funds to narrow, concentrated themes.
- Ex-dividend date
- The date from which a buyer of a share is no longer entitled to the next declared dividend. To receive the payment you must own the share before this date. The share price often falls by roughly the dividend amount when it goes ex-dividend.
- Expense ratio
- The annual cost of running a fund, expressed as a percentage of its assets and deducted from the fund's value rather than billed separately. Also called the ongoing charge. Differences that look tiny, such as 0.1% against 1%, grow large over long holding periods.
- Forex
- Short for foreign exchange: the global market in which currencies are traded in pairs such as EUR/USD. It has no central exchange and runs around the clock on weekdays. Most retail access is leveraged. See how forex trading works.
- Fractional share
- A portion of a single share, offered by some brokers so that investors can buy high-priced shares with small sums or invest an exact amount each month. Rules on voting rights and transferring fractional holdings to another broker vary between firms.
- Futures contract
- A standardised agreement, traded on an exchange, to buy or sell a fixed quantity of an asset at a set price on a future date. Futures are leveraged and marked to market daily, so gains and losses are settled every day. See forex futures.
- Halving
- The scheduled cut, roughly every four years, in the number of new bitcoin paid to the miner of each block. The most recent took place in April 2024, reducing the reward to 3.125 BTC. It slows the growth of supply but does not determine demand. See Bitcoin explained.
- Index
- A single number that tracks the combined value of a defined group of shares, such as the S&P 500, FTSE 100 or Nasdaq-100. Indices differ in how many companies they include and how they weight them. See the Nasdaq index guide.
- Index fund
- A fund, either a mutual fund or an ETF, that aims to match the performance of an index by holding its member shares in the same proportions. Because it follows rules rather than a manager's judgement, it usually costs less than an actively managed fund.
- IPO (initial public offering)
- The first sale of a company's shares to the public, after which they are listed and trade on an exchange. Early trading after an IPO can be very volatile, and there is typically less published history to research than for long-listed companies.
- Leverage
- Using borrowed exposure to control a position larger than the cash you put down. A 30:1 leverage ratio means $1,000 of margin controls $30,000 of exposure, so gains and losses are both multiplied thirty times. See the margin calculator.
- Limit order
- An instruction to buy at or below a price you set, or to sell at or above it. It gives you control over the price you pay or receive, but the order will not be filled if the market never reaches your level.
- Liquidity
- How easily an asset can be bought or sold quickly without moving its price. Liquid markets have many active buyers and sellers and narrow spreads; illiquid ones can force you to accept a much worse price when you need to sell.
- Lot
- A standard trade size in forex. A standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000. Lot size, together with the pip size, determines what each price movement is worth in money.
- Margin
- The deposit a broker requires to open and keep a leveraged position. It is collateral against possible losses, not a fee. If losses reduce your equity too far relative to the margin required, the broker issues a margin call or closes positions.
- Market capitalisation
- The total market value of a company's shares: the share price multiplied by the number of shares in issue. It is used to classify companies as large, mid or small cap and to weight most major stock indices.
- Market order
- An instruction to buy or sell immediately at the best price currently available. It is almost certain to be filled, but in a fast-moving or thinly traded market the price you get can differ noticeably from the last price you saw.
- Pip
- The standard unit of price movement for a currency pair: 0.0001 for most pairs and 0.01 for pairs quoted in Japanese yen. On one standard lot of a USD-quoted pair, one pip is worth $10. See the pip calculator.
- Price-to-earnings ratio (P/E)
- The share price divided by earnings per share, showing how much investors are paying for each unit of annual profit. A high P/E often reflects expectations of fast growth; a low one may signal doubts. Compare it with similar companies and the firm's own history.
- Private key
- The secret number that authorises spending from a crypto address. Whoever holds it controls the funds, which is why it must never be shared. Wallets usually back it up as a recovery phrase of 12 or 24 words that should be stored offline.
- Spread
- The difference between the bid and ask prices. You effectively pay it each time you open and close a position, and it widens in quiet or volatile periods. Platforms advertising zero commission often earn through the spread. See trading fees explained.
- Stablecoin
- A crypto token designed to hold a steady value, usually one US dollar, backed by reserves its issuer says it holds. It is a claim on a private company, not a bank deposit, and it can lose its peg if confidence in the reserves weakens. See USDT explained.
- Stop-loss order
- An order that closes a position automatically once the price reaches a set level, to limit the loss on a trade. It becomes a market order when triggered, so in a sudden gap it can be filled at a noticeably worse price than the level you chose.
- Swap (rollover)
- The overnight financing charge or credit applied to a leveraged forex position held past the daily cut-off, based on the interest-rate difference between the two currencies plus the broker's mark-up. Many brokers apply three days' worth on Wednesday nights to cover the weekend.
- Total return
- An investment's price change plus any income it paid, such as dividends or interest, over a period, usually assuming the income is reinvested. It is the fairest way to compare investments, because a share with a small price gain may have paid substantial dividends.