Getting into trading can be a tedious process since you have to learn about many things – how the market works, the kinds of strategies, risks involved, operations, risk management, and trading terms.

Before opening a position and trading, it’s essential to know everything about it, especially its terminology since this is something you’ll face every time. Also, for a beginner trader, CFD trading words can be perplexing and, if not understood, might negatively impact trade.

So to help you on your CFD trading journey, here’s a list of important CFD terms you have to know from A to G!

CFD terms that start with: A

Average true range 

In short, it is termed ATR. This is an indicator of market volatility over a predetermined time frame. Take the average difference between the highest and lowest price, including any gaps in between, for a specified number of days to get the ATR for a market.

CFD terms that start with: B

Backtesting 

It is a method traders use to check if their chosen strategy is lucrative and effective using historical data.

Base Currency

This term can be found in various markets and it refers to the first currency listed in a pair.

Bear market

This term is used to refer to a market that’s doing badly. The reason why it’s called a ‘bear’ market is that in analytical trading indicators, an image of a bear will show up to signal a trader to go short.

Bull market

A bull market, on the other hand, is the opposite of a bear market. This is a term used to refer to a market that’s going Up. It is known as a ‘bull’ market because when using analytical indicators to trade, a bull’s picture will appear to advise a trader to go long.

CFD terms that start with: C

Commodity CFD

This is a type of CFD that deals with commodities such as wheat, rice, oil, soybeans and so on. Once you hear this term, it refers to the underlying asset of commodities.

Consolidation marker

This term is used to identify stagnant markets that don’t move up or down.

Contract of difference

Is also known as CFD. It’s a written agreement between two parties outlining their intent to pay the price difference from the contract’s start until it is finished. Markets for shares, indices, commodities and currencies can all be used to trade CFDs.

Countertrend trading

This is a trading method traders use when they expect the market to reverse direction.

Currency pair

This term is usually used in Forex trading and it refers to the price quotation of the exchange rate of two different currencies.

CFD terms that start with: D

Debit-to-equity ratio

This term refers to a measure of how much capital shareholders have invested in a firm relative to its overall debt.

Derivatives

A derivative is a financial instrument that gets its price from underlying assets such as indexes, security, currency pairs, metals, commodities, etc.

Donchian Channel

This term refers to an indication with two boundary lines that are established by the peak and valley during the previous “X” number of days. This signal is useful for separating a breakthrough from a consolidation.

Downtrend

This phrase refers to a sequence of lower highs and lower lows in the market price of any asset over some time.

CFD terms that start with: E

Earning per share

This is also known as EPS and is the portion of the profits allocated to each share. A company’s net income is divided by the number of outstanding shares.

Ex-Dividend date

This refers to the first day a shareholder is no longer needed to pay off divided stock offers.

Exposure

The total worth of all of your market holdings at any given moment. A large win or defeat is more likely the more exposed you are overall.

CFD terms that start with: F

Finance charge

This refers to the expense of maintaining a certain position day by day. This fee is typically set by your broker and is based on the local currency rate plus a modest interest charge.

Fixed-Dollar model

This term refers to a risk management model where a trader sets aside a certain sum of money to risk each trade.

Forwarding testing

This is the opposite of backtesting. This is a kind of testing traders use to test their strategy in real-time. This is way slower than backtesting but is considered to be more reliable.

Fundamental analysis

This term refers to a technique for determining a company’s worth. This bases its decision on basics like its financial accounts, PE ratios, growth outlook and company income reports.

CFD terms that start with: G

Guaranteed stop-loss order

This is also known as GSL. This is a stop-order method that assures you a specific price at which you may terminate your deal, regardless of whether the market really traded at that price.