Glossary of Trading Terms and Definitions For Beginners

An asset is an economic resource owned by an individual, corporation, or country. It can be anything that has economic value. Its owner may completely own it or have exclusive access to it. Cars, buildings, and cash or accounts receivable are some common examples of an asset. Let us take a deeper look at what is an asset, along with examples and types of assets.

In simple words, arbitrage trading refers to making profits off differences in prices in different forms or markets. Arbitrage traders would make the most of even the tiniest price differences in two or more markets.

Traders who pull out liquidity from the markets are known as aggressors in trading. Aggressors purchase at-market at the existing ask price instead of placing bids for shares. Instead of stating a selling price, they will trade at the prevailing at-market bid pricing.

Basis trading is a popular trading strategy across all asset classes where derivative products are available but primarily used in futures trading focused on commodity markets. Basis trading crypto is another sector that experiences an increase in this trading strategy due to its extreme volatility and availability of 24/7 trading.

The ask and bid price is a price quotation that states the best rate at which a security can be bought or sold at any point in time. The difference between the two price points is called a bid ask spread. The bid ask price is of significance to investors because it directly impacts their buying and selling of shares. They can’t sell at the price they buy something.

An American option is a popular stock option that gives traders greater freedom to exercise option rights.

The exact definition of aggregate risk can be very complicated, but in simple terms, it can be defined as how exposed an institution is to foreign exchange counterparty risk due to one client.