Interest rate refers to the cost of borrowing money or the return earned on savings, usually expressed as a percentage of the amount borrowed or invested. In the context of central banks, the interest rate is the benchmark rate set to influence economic activity. When a central bank raises or lowers interest rates, it affects…
Inflation is the rate at which the general level of prices for goods and services rises over time, leading to a decrease in the purchasing power of money. In other words, when inflation occurs, each unit of currency buys fewer goods and services than it did before. Central banks and governments closely monitor inflation because…
High-Frequency Trading (HFT) is a type of algorithmic trading that uses powerful computers and advanced technology to execute a large number of orders at extremely high speeds. These speeds are often in fractions of a second. HFT strategies are typically used by institutional traders and rely on small price differences. These price differences exist for…
Hedging is a risk management strategy used by traders and investors to protect their positions from unwanted price movements. In simple terms, it involves opening a second trade that will gain value if the original trade starts to lose. This way, potential losses in one position can be offset by gains in another. Hedging is…
Grid trading is a trading strategy that involves placing a series of buy and sell orders at set intervals above and below a fixed price level. This forms a “grid” of orders. The idea is to profit from price fluctuations without needing to predict market direction. When the market moves, some of these orders are…
Gross Domestic Product (GDP) is a key economic indicator. It measures the total value of all goods and services produced within a country over a specific period, usually a quarter or a year. It reflects the overall health and size of a country’s economy. Additionally, it is widely used by traders, investors, and policymakers to…
Futures are standardized financial contracts that obligate the buyer to purchase, or the seller to sell, an asset at a predetermined price on a specific future date. These contracts are traded on organized exchanges, such as the Chicago Mercantile Exchange (CME). Futures cover a wide range of assets including currencies, commodities, stock indices, and interest…
Free margin is the amount of available funds in a trading account that can be used to open new positions. It is calculated by subtracting the margin currently being used for open trades from the account equity. The account equity includes the balance plus or minus any unrealized profits or losses. In simple terms, free…
A flat position refers to a situation where a trader has no active trades in the market—they are neither long (buying) nor short (selling) any assets. Being flat means the trader is not exposed to market risk at that moment. Their account is fully in cash or settled equity. This is a common state for…