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Investment Glossary

A comprehensive guide to investment and trading terminology used throughout the OpportunityDAO platform.

A​

Account Balance​

Definition: The total amount of money in a trading account, including realised profits but excluding unrealised profit/loss from open positions.

Formula:

Account Balance = Starting Capital + Realised Profit/Loss - Withdrawals

Explanation:

Account balance represents only the "settled" or "booked" money in the account. It doesn't fluctuate with market movements because it only includes closed positions.

Key Characteristics:

  • Stable value: Only changes when positions are closed or funds are added/withdrawn
  • Realised transactions only: Does not include paper profits or losses
  • Withdrawal basis: The amount available for withdrawal (minus margin requirements)
  • Historical record: Reflects the cumulative result of all closed trades

Comparison with Current Equity:

MetricIncludes Open Positions?Fluctuates with Market?Withdrawable?
Account BalanceNoNoYes (minus margin)
Current EquityYesYesNo (until closed)

In OpportunityDAO Context:

The mt5_account_balance metric shows the account balance for each broker account. During an active cycle:

  • Balance reflects starting capital plus any realised profits from closed positions
  • Equity shows balance plus unrealised P&L from open positions
  • The difference between equity and balance indicates how much profit/loss is still at risk

Related Terms:

C​

Carry Trade​

Definition: A trading strategy that involves borrowing in a low-interest-rate currency and investing in a higher-interest-rate currency to profit from the interest rate differential.

Also known as:

  • Interest rate arbitrage
  • Positive swap trading

Explanation:

Carry trades profit from the difference in interest rates between two currencies. When you hold a position where the currency you bought has a higher interest rate than the currency you sold, you receive positive swap payments each day.

Key Characteristics:

  • Interest income: Earns daily swap credits from interest rate differential
  • Currency risk: Exposed to exchange rate movements that can offset interest gains
  • Leverage amplification: Returns (and risks) are amplified by leverage
  • Popular pairs: Typically involves currencies like JPY (low rate) vs AUD/NZD (higher rates)

Example:

Going long AUD/JPY when:

  • Australian interest rate: 4%
  • Japanese interest rate: 0.5%
  • You earn approximately 3.5% annualised in swap credits
  • However, if AUD/JPY falls 5%, the currency loss exceeds swap earnings

In OpportunityDAO Context:

The platform may utilize carry trade strategies when interest rate differentials are favourable and currency risk is managed. Swap earnings are tracked and included in cycle profit calculations.

Related Terms:

  • Swap - The interest payment mechanism for carry trades
  • Commission - Trading costs that reduce carry trade profits

Current Equity​

Definition: The total value of a trading account including unrealised profit/loss from open positions.

Formula:

Current Equity = Account Balance + Unrealised Profit/Loss

Explanation:

Current equity represents the total amount you would have if all open positions were closed at current market prices. It's the most accurate measure of account value at any given moment.

Key Characteristics:

  • Dynamic value: Changes constantly with market prices
  • Includes unrealised P&L: Reflects mark-to-market valuation
  • Risk indicator: Shows current exposure and potential loss
  • Margin calculation basis: Used to determine available margin for new trades

Example:

  • Account Balance: $50,000 (starting capital + realised profit)
  • Unrealised Profit on Position 1: +$2,000
  • Unrealised Loss on Position 2: -$500
  • Current Equity: $50,000 + $2,000 - $500 = $51,500

In OpportunityDAO Context:

The MT5 scraper exports mt5_account_equity metrics for each broker account, which shows the real-time equity value. This is displayed on the reserves page alongside balance to provide a complete picture of account health.

Related Terms:

F​

Free Margin​

Definition: The amount of equity in a trading account that is not being used as margin for open positions and is available for opening new trades or withdrawing.

Formula:

Free Margin = Current Equity - Used Margin

Also known as:

  • Available margin
  • Usable margin
  • Withdrawable funds (approximately)

Explanation:

Free margin represents the "unused" portion of your trading account. It's the buffer between your current equity and the margin required to maintain open positions. When free margin reaches zero, you cannot open new positions and may face margin calls.

Key Characteristics:

  • Dynamic value: Changes with market movements as equity fluctuates
  • Trade capacity: Determines how many new positions you can open
  • Safety buffer: Protects against margin calls during adverse price movements
  • Withdrawal limit: Approximately the maximum amount you can withdraw

Example:

  • Current Equity: $50,000
  • Used Margin (for open positions): $10,000
  • Free Margin: $50,000 - $10,000 = $40,000

With $40,000 free margin, you could:

  • Open additional positions requiring up to $40,000 margin
  • Withdraw up to approximately $40,000 (broker policies vary)

Warning Signs:

  • Free margin approaching zero indicates high leverage/risk
  • Negative free margin triggers margin calls
  • Rapid decline in free margin during volatile markets is dangerous

In OpportunityDAO Context:

Monitoring free margin across broker accounts helps assess risk exposure. Adequate free margin ensures positions can be maintained through normal market volatility without forced liquidations.

Related Terms:

M​

Mark-to-Market​

Definition: The accounting practice of valuing an asset or position based on its current market price rather than its book value or purchase price.

Also known as:

  • MTM
  • Market valuation
  • Fair value accounting

Explanation:

Mark-to-market valuation provides a real-time assessment of investment portfolio value by using current market prices. This method is essential for accurately reporting unrealised gains and losses.

Key Characteristics:

  • Real-time valuation: Updates as market prices change
  • Transparency: Provides accurate picture of current portfolio value
  • Regulatory requirement: Required by many financial regulations
  • Volatility reflection: Shows true exposure to market movements

In OpportunityDAO Context:

The MT5 scraper performs mark-to-market valuation by:

  1. Fetching current market prices for all open positions
  2. Calculating unrealised P&L based on current prices vs. entry prices
  3. Updating metrics every collection cycle (typically every few minutes)
  4. Exporting valuation data to Prometheus for real-time monitoring

This allows investors to see live potential returns before cycle closure, providing transparency into trading performance.

Related Terms:

P​

Profit Distribution​

Definition: The process of allocating trading profits among participants (investors, traders, treasury, affiliates) according to predetermined rules and share percentages.

Also known as:

  • Profit sharing
  • Distribution event
  • Settlement

Explanation:

Profit distribution is the mechanism by which trading gains are divided among all stakeholders at the end of each cycle. The distribution follows tiered rules based on the profit percentage achieved, ensuring fair allocation that protects investors during lower-performing periods while rewarding all participants during successful cycles.

Key Characteristics:

  • Cycle-based: Occurs at the end of each trading cycle
  • Tiered rules: Distribution percentages change based on profit level achieved
  • Role-based shares: Different percentages for investors, traders, treasury, affiliates
  • Automated: Executed via database functions for accuracy and audit trail

Distribution Tiers:

Profit RangeInvestor ShareNotes
< 3%100%Investor Only rule - all profit to investors
3-6%ScaledGradual transition to normal distribution
≥ 6%50%Normal distribution with role-based shares

Normal Distribution (≥ 6% profit):

  • Investors: 50%
  • Traders: 30%
  • Treasury: 10%
  • Affiliates: 10%

In OpportunityDAO Context:

When a cycle closes, the distribute_cycle_profits() PostgreSQL function:

  1. Validates cycle state and calculates final profit
  2. Determines applicable tier based on profit percentage
  3. Calculates each investor's share based on their participation
  4. Returns principal to capitalAvailable
  5. Allocates profits to profitAvailable (or capitalAvailable if compounding)
  6. Creates audit records for all distributions

Related Terms:

R​

Realised Profit/Loss​

Definition: Actual profit or loss that has been locked in by closing a trading position.

Also known as:

  • Realised P&L
  • Closed position P&L
  • Actual profit/loss
  • Booked profit/loss

Explanation:

Realised profit or loss is the final profit or loss from a trade after the position has been closed. Unlike unrealised profit, this value is fixed and can be withdrawn or reinvested.

Key Characteristics:

  • Fixed value: Once realised, the profit or loss amount does not change
  • Cash available: Can be withdrawn or reinvested
  • Permanent record: Becomes part of trading history and tax records
  • No market risk: Not subject to further market price fluctuations

Example:

Continuing the previous example, if the trader closes the BTC position at $45,000:

  • Entry price: $40,000
  • Exit price: $45,000
  • Realised profit: $5,000 (now fixed)

This $5,000 is now realised profit that can be withdrawn or reinvested, regardless of future BTC price movements.

In OpportunityDAO Context:

When a cycle closes, all positions are liquidated and unrealised profits become realised. The distribute_cycle_profits() function then:

  1. Calculates total realised profit from all closed positions
  2. Adds swap and commission costs
  3. Applies tiered profit distribution rules
  4. Allocates profits to investors' profitAvailable balance
  5. Returns principal capital to investors' capitalAvailable balance

Related Terms:

S​

Swap​

Definition: An interest charge or credit applied to positions held overnight, based on the interest rate differential between the two currencies in a currency pair.

Also known as:

  • Rollover
  • Overnight interest
  • Tom-next (tomorrow-next)
  • Carry

Explanation:

When a forex position is held overnight, the broker either charges or credits interest based on the difference between the interest rates of the two currencies being traded. This is because forex trading involves borrowing one currency to buy another.

Key Characteristics:

  • Daily charge/credit: Applied at the end of each trading day (usually 5 PM EST)
  • Can be positive or negative: You may earn or pay depending on the position direction and interest rate differential
  • Cumulative cost: Adds up over time for long-held positions
  • Currency pair dependent: Each pair has different swap rates

Example:

If you hold a long position in EUR/USD:

  • You are buying EUR (borrowing USD)
  • If EUR interest rate is 3% and USD interest rate is 5%
  • Swap is negative (you pay 2% differential)
  • Daily swap charge ≈ -$2 per standard lot

In OpportunityDAO Context:

The MT5 scraper tracks cumulative swap from:

  1. All closed positions (from cycle start to now)
  2. Current open positions

This is included in the total profit calculation:

Total Profit = Realised Profit + Swap + Commission + Unrealised Profit

Swap can significantly impact profitability for positions held for extended periods. The platform tracks this separately to provide transparency into trading costs.

Related Terms:

  • Commission - Another trading cost
  • Spread - The bid-ask difference (implicit cost)
  • Carry Trade - Strategy that profits from positive swap

Commission​

Definition: A fee charged by the broker for executing a trade.

Explanation:

Commission is a direct cost paid to the broker for facilitating trade execution. Unlike spreads (which are hidden in the buy/sell price difference), commissions are explicit charges that appear as separate line items in the trading account.

Key Characteristics:

  • Fixed or percentage-based: Can be a flat fee per lot or a percentage of trade value
  • Per-trade cost: Charged when opening and/or closing positions
  • Transparent: Clearly shown in trade history
  • Broker-dependent: Varies significantly between brokers

Common Commission Structures:

  • Per-lot commission: e.g., $7 per standard lot round-turn (open + close)
  • Percentage-based: e.g., 0.1% of trade value
  • Tiered pricing: Lower commission rates for higher volume traders

Example:

If you trade 1 standard lot with $7 round-turn commission:

  • Opening commission: $3.50
  • Closing commission: $3.50
  • Total commission: $7.00

This reduces your profit or increases your loss by $7.

In OpportunityDAO Context:

The MT5 scraper tracks cumulative commission from all deals during the cycle. Commission is:

  1. Extracted from each closed trade in MT5 history
  2. Summed across all broker accounts
  3. Included in the profit calculation as a cost
  4. Displayed separately in Grafana for cost analysis

The formula accounts for commission:

Total Profit = Realised Profit + Swap + Commission + Unrealised Profit

Note that commission is typically negative (a cost), so it reduces total profit.

Related Terms:

  • Swap - Overnight interest charges
  • Spread - Implicit cost from bid-ask difference
  • Slippage - Price difference from expected to executed

Slippage​

Definition: The difference between the expected price of a trade and the actual price at which the trade is executed.

Also known as:

  • Price slippage
  • Execution slippage
  • Fill price deviation

Explanation:

Slippage occurs when market conditions change between the time a trade is initiated and when it's executed. This is most common during high volatility, low liquidity, or when trading large position sizes that move the market.

Key Characteristics:

  • Can be positive or negative: You may get a better or worse price than expected
  • Increases with volatility: More common during news events and market opens
  • Increases with size: Larger orders have more slippage
  • Broker-dependent: Execution quality varies between brokers

Types of Slippage:

  • Negative slippage: Execution price worse than expected (costs money)
  • Positive slippage: Execution price better than expected (saves money)
  • Gap slippage: Price gaps over weekend/news causing large deviation

Example:

You place a market order to buy EUR/USD at 1.1000:

  • Expected price: 1.1000
  • Actual fill price: 1.1003
  • Slippage: 3 pips (negative slippage, costs extra)

In a 1 standard lot trade, 3 pips slippage = approximately $30 additional cost.

In OpportunityDAO Context:

Slippage is an unavoidable trading cost that affects actual returns. Stop-loss orders during volatile markets may experience significant slippage, potentially resulting in larger losses than anticipated. This risk is disclosed in investment materials.

Related Terms:

Spread​

Definition: The difference between the bid (sell) price and the ask (buy) price of a financial instrument.

Also known as:

  • Bid-ask spread
  • Dealing spread
  • Trading spread

Explanation:

The spread represents an implicit cost of trading. When you buy, you pay the higher ask price; when you sell, you receive the lower bid price. The spread is how brokers and market makers profit from facilitating trades.

Formula:

Spread = Ask Price - Bid Price

Key Characteristics:

  • Always present: Unlike commission, spread exists on every trade
  • Variable: Widens during volatility, news events, and low liquidity periods
  • Pair-dependent: Major pairs have tighter spreads than exotic pairs
  • Hidden cost: Not shown as a separate charge, but embedded in prices

Spread Types:

  • Fixed spread: Remains constant regardless of market conditions
  • Variable spread: Changes based on market liquidity and volatility
  • Raw spread: True market spread (typically with separate commission)

Example:

EUR/USD quote:

  • Bid: 1.1000
  • Ask: 1.1002
  • Spread: 2 pips

If you buy 1 standard lot at 1.1002 and immediately sell at 1.1000, you lose $20 (2 pips × $10/pip) just from the spread.

Spread Comparison:

Pair TypeTypical Spread
Major pairs (EUR/USD)0.5-2 pips
Minor pairs (EUR/GBP)2-4 pips
Exotic pairs (USD/TRY)10-50+ pips

In OpportunityDAO Context:

Spread is a trading cost that affects cycle profitability. The platform typically uses brokers offering competitive spreads on major pairs to minimize this cost. Unlike commission and swap, spread is not tracked separately as it's embedded in trade entry/exit prices.

Related Terms:

  • Commission - Explicit trading fee
  • Slippage - Additional execution cost beyond spread
  • Swap - Overnight holding cost

U​

Unrealised Profit/Loss​

Definition: Profit or loss that exists on paper but has not yet been converted to actual cash through closing a position.

Also known as:

  • Unrealised P&L
  • Paper profit/loss
  • Floating profit/loss
  • Open position P&L

Explanation:

Unrealised profit or loss represents the current market value change of open trading positions that have not yet been closed. It is calculated as the difference between the current market price and the entry price of the position, multiplied by the position size.

Key Characteristics:

  • Not yet realised: The profit or loss only exists theoretically based on current market prices
  • Can change: The value fluctuates constantly as market prices move
  • Not withdrawable: Cannot be withdrawn until the position is closed and profit becomes "realised"
  • Risk exposure: Unrealised profits can turn into losses if the market moves against the position

Example:

If a trader buys 1 BTC at $40,000 and the price rises to $45,000:

  • Entry price: $40,000
  • Current price: $45,000
  • Unrealised profit: $5,000

The $5,000 is unrealised because the position is still open. If the price drops to $42,000 before closing, the unrealised profit becomes $2,000. The profit is only "realised" when the position is closed.

In OpportunityDAO Context:

During active trading cycles, the MT5 scraper tracks unrealised profit/loss for all open positions across broker accounts. This data is:

  1. Exported to Prometheus for monitoring via Grafana
  2. Included in the cumulative profit calculation displayed on the reserves page
  3. Used to show live potential returns to investors before cycle closure
  4. Monitored by founders to make informed decisions about when to close positions

The formula for cycle profit includes:

Total Profit = Realised Profit + Swap + Commission + Unrealised Profit

Related Terms:

More terms will be added to this glossary as the platform evolves. If you encounter investment terminology that needs clarification, please request it be added to this reference.