Support Center - CFD Trading Terminology

Markets.com is dedicated to providing you with all the relevant information to enhance your CFD trading experience. The following Frequently asked questions (“FAQ”) page has been created to address your queries and questions that may arise while using our Web and Mobile trading platforms.
Support Center > CFD Trading Terminology

 CFD Trading Terminology

 
What does Funds Available for Withdrawal mean?

Funds Available for Withdrawal is money you can withdraw once all your open positions are closed.

The formula to calculate your funds available for withdrawal is:

margin_level

 
 
What is Balance?

Balance is your account’s total value, excluding P&L from open positons. The formula to calculate Balance is:

margin_level

 
 
What does the term Bonus mean?

A Bonus is money Markets.com gives to you to trade with. Some bonuses are strictly for trading purposes, while others can be withdrawn when bonus terms and conditions are met.

 
 
What is a CFD?

CFD (Contracts for Difference) offer leveraged long-term or short-term trades, with a broad selection of financial instruments, including currencies, indices, commodities and shares. CFDs are a flexible and accessible trading option that is based on the change of price in multiple commodity and equity markets, with leverage and immediate execution. View a full list of the CFDs Markets.com offers.

 
 
What is Equity?

Equity is your account value using the following formula to calculate it:

margin_level

 
 
What is Free Margin?

Free Margin is the total sum of funds available for initial margin at the time new positions are opened. The formula to calculate your Free Margin is:

margin_level

 
 
What does Leverage mean?

Leverage is the sum of borrowed capital used to increase liquidity and potential for return opportunities.

Trading on leveraged capital means that you can trade in amounts significantly higher than the balance of your funds, which means your balance only serves as the margin. Heightened leverage can significantly increase your potential returns, but it can also increase chances of risk and loss.

Leverage is presented as a ratio, such as 200:1. This means that you can trade amounts 200 times higher than the sum of funds available in your account. For example: if you have $1,000 in your account, it means that you can now open trades worth $200,000.

 
 
What is Margin level?

Margin Level helps measure how close your account is to a margin call.

The formula to calculate your margin level is:

margin_level

When the margin ratio decreases, your account bears more risk of liquidation/stop out. You should monitor the margin level and if needed deposit more funds, or decrease open exposure in order to increase your margin level.

 
 
What is Maintenance Margin?

Maintenance Margin refers to the minimum equity you need to keep positions open.

 
 
What is Open P&L?

Open P&L is an abbreviation for Open Profit and Loss. It is the sum of your total profit and loss from open positions.

 
 
What is a Pip?

Pip is the acronym for Price Interest Point, which is the smallest price move that a given exchange rate can make.

 
 
What is Required Margin?

Required Margin refers to the amount required for you to open and maintain a position. Required Margin also factors in the initial loss as a result of spread. Required Margin is derived through the following formula:

margin_level

For example: If you buy 10 barrels of oil at 51.30, then the calculation for Required Margin is:

(10*51.30)/100 + (10*0.05) = 5.63 USD

 
 
What is Spread?

Spread is the difference between the bid price (selling price) and the ask price (buying price).

For example, if the quote for the EUR/USD currency pair is 1.2910 against 1.2913, then the Spread is 3 pips.

 
 
What is Used Margin?

Used Margin is the sum of margin currently used for your open positions. Used Margin is calculated by adding up all of the initial margins of all of your open positions.

 
 
What is Market Order?

Market Order refers to an order to buy or sell at the currently quoted market “ask” or “bid” prices.

 
 
What is a Stop Loss/Take Profit?

Stop Loss and Take Profit are protection orders which allow you to protect yourself against further losses or lock-in your profits when you are not able to monitor your positions.

 
 
What are Entry Orders?

Entry Orders are only initiated and automatically opened if your specified market prices are reached. Entry orders come in two forms: Entry Limit Orders and Entry Stop Orders.

 
 
What are Entry Limit Orders?

Entry Limit Orders

An Entry limit order is an order to buy (or sell) at a specified price which is better than the current market price at the time the order is entered.

 
 
What are Entry Stop Orders?

An Entry Stop order is an order to buy (or sell) at a specified price which is worse than the current market price at the time the order is entered.

 
 
What are Trailing Stop-Loss Orders?

A Trailing Stop-Loss Order is a Stop-Loss Order that you set at a fixed number of pips from your entry rate.
The Trailing Stop-Loss Order is automatically executed as the market price moves, but only in the chosen direction of your trade. This feature is currently only available on MetaTrader 4 and only works while the platform is open.

 
 
What is a Quote?

A Quote refers to the prevalent exchange rate of the quoted currency at that moment, providing a context that’s indicative of market price. Quotes are solely applicable to currency pairs, such as the EUR/USD, AUD/JPY or USD/JPY. The quoted currency is always the first of the pair; the second currency is referred to as the counterpart.

 
 
What is Bid/Ask?

A trader’s Bid, (also known as Selling Price), is the exchange rate at which a currency is sold or can be sold.
The Asking Price, (also known as Buying Price), is the exchange rate at which a currency is or can be bought.

 
 
What is a Lot?

A Lot is the standard number of units per transaction. Standard CFD trade Lots can range from 1 to 10000 units of the quoted CFD. This measurement is used only in MetaTrader 4.

 
 
What is Pip Value?

Pip Value can be variable or fixed, depending on two factors:

  1. The currency pair traded, (for example: EUR/USD).
  2. The base currency, (for example: EUR of the EUR/USD currency pair is the measuring currency).

The Pip Value is also a function of the volume traded. The simplest formula to calculate Pip Value is:

margin_level

This number offers The Pip Value in the quoted currency.

If your account’s base currency differs from the quoted currency, simply multiply the quoted currency by the relevant exchange rate.

 
 
What is Interest?

Interest, in practical terms, is the cost of money. Interest is the amount paid on loans by the borrower, or the funds received by an issuing party on deposits. Interest is usually calculated based on a set percentage administered by the institution, be it a bank, broker or other financial institution.

 
 
What does the term Going Long mean?

Going Long means that you are buying a CFD because you expect its price to rise.

 
 
What does the term Going Short mean?

Going Short means that you are selling a CFD because you expect its price to drop.

 
 
What is Value Date?

Value Date is the date on which counterparts of a financial transaction agree to settle their respective obligations, for example, payment transactions or exchange of funds.

 
 
What does Rollover (Swap) mean?

Rollover (Swap) is the process whereby the settlement of a deal is rolled forward to another value date, and a charge is levied based on the difference in the interest rates of the two currencies. Every day at 21:00 GMT, open positions are rolled over to the next day and the positions gain or lose interest based on the interest differential between the bought and sold currencies.

If you buy a currency pair overnight that has a base currency with a higher interest rate than the terms currency, then interest is received and vice versa. A full list of Rollover dates can be found here. In addition, Rollover is used to transfer open position(s) on future contracts, literally rolling over one month’s contract to the next month. Information on CFD expiration and Rollover dates can be found here.

 
 
What is Forex?

Known globally as the Foreign Exchange Market, Forex is the exchange or trade of international currencies. Having become one of the most significant markets worldwide, Forex plays the vital role of determining global currency exchange rates.

 
 
What is Fundamental Data?

Fundamental Data is a method of analysis applied strategically by traders. The method is based on the theory that an instrument’s market price may have the tendency to reach its “real value.” This type of data is based on analysis of the impact current global events and economic circumstances have on the Forex market, such as GDP, NFP, and monetary policy.

 
 
What is Technical Analysis?

Technical Analysis is used to predict the movement of market prices based on past performance of various shares, forex pairs, commodities and indices. Technical traders typically apply mathematical indicators and charts to trade strategically.