Below is a glossary of terms that are used in the online trading industry. Select the first letter of the word you are seeking from the list above to jump to the appropriate section of the glossary.
Introducing broker. A person, company or corporation that introduces traders to a broker in return for a certain payment fee. Please see our Partnerships page for more specific details.
Securities and other financial instruments are considered illiquid if there are few traders buying and selling them. An illiquid market is one with few participants and a low-volume trading activity. The opposite of liquidity.
An abbreviation for International Monetary Fund. The IMF promotes global monetary cooperation and provides policy advice, financing and technical assistance to help countries build and maintain macroeconomic stability. It consists of over 180 member countries.
A statistical measure of the change in value of an economy or a securities market. The US’s S&P500, the UK’s FTSE100 and Germany’s DAX30 are just a few examples of indices. You can find a list of some of the most popular indices we offer here.
The percentage of the purchase price of securities that the trader can purchase for (either in cash or in marginable securities).
The money periodically paid by a lender to a creditor in return for use of money lent or for postponing the payment of a debt. It is usually predetermined according to the size of the loan/debt, duration and interest rate.
What is an Interest rate?
Interest rates reflect the amount that a creditor charges for borrowing money, or other tradeable assets. The size of an interest rate is generally expressed in terms of a percentage of the amount being borrowed, and the size of the interest rate may vary depending on how high- or low-risk the borrowing party is considered to be. Interest rates are most commonly given on an annual basis, known as the annual percentage rate. Interest rates take into account the projected inflation rate for the lending period. That is to say. If the creditor believes the inflation rate over the coming year will be 3%, he may charge an interest rate of 5% (also known as the nominal rate), so that if the inflation rate causes the value of the amount lent by 3%, the creditor will still see a 2% return on his investment, also known as the expected real interest rate.
Simple interest rate charges a base percentage per year on the amount of money borrowed. A compound interest rate is higher, and is accrued on a monthly basis and factors in not only the principal amount borrowed, but also charges interest for the amount of interest added to the total due at that point. Factors that can affect interest rates include geopolitical events, such as military conflicts, or gas shortages, federal government decisions, such as adjusting the prime lending rate of the federal banks, and supply and demand of a national currency.
How do Interest rates affect forex traders?
Very often. The most successful investors are those who are able to follow closely the interest rates and are aware of how the changes in rates will affect their fixed-income and equity markets. A prime example is when investing in bonds. The bond, or currency pair may yield what seems like a high interest rate, but if the projected inflation rate is also high, an investor may choose not to invest in that bond at the time, or to negotiate different, more favorable terms.
A trading activity in which traders frequently buy and sell securities, foreign currencies or derivatives throughout the day in the hope of making a substantial profit in a short period of time. Intraday trading can be highly speculative in nature and carry substantial risk of loss. If you are a day trader or are thinking about intraday trading, please read our complete Risk Disclosure Statement beforehand. Click here to open a 100% free intraday trading account today.