Buying and selling an asset in different markets to profit from price differences.
Ask Price
The lowest price a seller is willing to accept for a security.
Asset
Anything of value that can be traded.
At the Money (ATM)
Option with strike price equal to the current price of the asset.
B
Bear Market
A market with declining prices.
Beta
Measure of stock volatility relative to the market.
Bid Price
The highest price a buyer is willing to pay.
Blue-Chip Stocks
Stocks of established, financially sound companies.
Breakout
Price movement beyond support or resistance.
Bull Market
A market with rising prices.
C
Call Option
A contract that gives the holder the right, but not the obligation, to buy a security at a specific price within a certain time frame.
Candlestick Chart
A type of financial chart used to describe price movements. Each "candlestick" shows the open, high, low, and close prices for a specific period.
Capital Gain
The profit realized from the sale of a capital asset, such as stocks or real estate, when the selling price exceeds the purchase price.
Circuit Breaker
A mechanism used by exchanges to temporarily halt trading to prevent panic-selling and extreme market volatility.
Commission
A service charge by a broker for executing a trade. It can be a flat fee or a percentage of the transaction value.
D
Day Trading
The practice of buying and selling financial instruments within the same trading day, often using technical analysis and high leverage.
Derivative
A financial instrument whose value is based on the value of an underlying asset, index, or rate. Examples include options, futures, and swaps.
Diversification
A risk management strategy that involves spreading investments across various assets to reduce exposure to any single asset or risk.
Dividend
A portion of a company's earnings paid to shareholders, typically in cash or additional shares.
Drawdown
A peak-to-trough decline during a specific period for an investment, trading account, or fund. It's used to measure the risk of a strategy.
E
Earnings Per Share (EPS)
A company's profit divided by the number of outstanding shares. It is a key metric in assessing company performance.
Equity
Ownership value in an asset or company, commonly represented by shares of stock.
Ex-Dividend Date
The cutoff date on which a stock starts trading without the value of its next dividend payment. Investors who buy on or after this date do not receive the upcoming dividend.
Exchange-Traded Fund (ETF)
A type of investment fund that is traded on stock exchanges, similar to stocks. ETFs track indices, sectors, or commodities.
Execution
The process of completing a buy or sell order in the market.
F
Fill or Kill (FOK)
A type of order that must be executed immediately in its entirety or not at all.
Forex (FX)
The global marketplace for trading national currencies against one another. It is the most liquid market in the world.
Fundamental Analysis
A method of evaluating a security's intrinsic value by examining related economic, financial, and qualitative and quantitative factors.
Futures Contract
A legal agreement to buy or sell a particular asset at a predetermined price at a specified future date.
G
Gamma
A measure of the rate of change in an option’s delta relative to the underlying asset’s price changes.
Gap
A break between prices on a chart where no trading has occurred, often caused by news or earnings reports.
Gross Domestic Product (GDP)
A measure of the economic output of a country over a specified period, used as a broad indicator of economic performance.
Growth Stock
A stock from a company expected to grow faster than the overall market, often reinvesting profits back into the business.
H
Head and Shoulders
A chart pattern used in technical analysis to predict a reversal of a current trend, resembling a head and two shoulders.
Hedging
A strategy used to offset potential losses in one position by taking an opposing position in a related asset.
High-Frequency Trading (HFT)
A form of algorithmic trading that involves executing a large number of orders at extremely high speeds using powerful computers.
Hypothetical Trading
Simulated trading that uses virtual money to practice and test strategies without actual financial risk.
I
Implied Volatility
The market’s forecast of the likely movement of a security’s price, derived from option prices.
Index
A statistical measure of a segment of the financial market, often used as a benchmark to track market performance (e.g., S&P 500).
Initial Public Offering (IPO)
The first sale of stock by a private company to the public, marking its transition to a publicly traded company.
Interest Rate
The cost of borrowing money, expressed as a percentage of the loan amount, typically set by central banks.
Intraday Trading
Buying and selling securities within the same trading day to capitalize on small price movements.
J
Jobless Claims
A weekly statistic released by the U.S. Department of Labor indicating the number of people filing for unemployment benefits.
Junk Bond
A high-yield, high-risk bond issued by a company with lower credit ratings.
K
Kagi Chart
A type of chart used in technical analysis that changes direction when prices reverse by a predefined amount.
Know Your Customer (KYC)
A regulation requiring financial institutions to verify the identity of clients.
L
Leverage
The use of borrowed funds to increase potential return on investment.
Limit Order
An order to buy or sell a security at a specific price or better.
Liquidity
The ease with which an asset can be quickly bought or sold in the market.
Long Position
Buying a financial instrument with the expectation that its value will increase.
Lot
A standardized quantity of a financial instrument used in trading.
M
Margin
Money borrowed from a broker to purchase an investment.
Market Maker
A firm or individual who actively quotes two-sided markets to provide liquidity.
Market Order
An order to buy or sell a security immediately at the best available price.
Momentum
The rate of acceleration of a security’s price.
Moving Average
A technical analysis tool that smooths out price data by creating a constantly updated average.
N
Nasdaq
A U.S. stock exchange known for technology stocks and growth companies.
Net Asset Value (NAV)
The value per share of a mutual fund or ETF.
Non-Farm Payrolls (NFP)
A major economic indicator of job creation in the U.S. excluding the farming sector.
O
Open Interest
The number of active contracts not yet settled.
Option
A financial derivative that gives the right, but not the obligation, to buy or sell an asset.
Order Book
A list of buy and sell orders for a specific financial instrument.
Over-the-Counter (OTC)
Trading done directly between two parties, not on an exchange.
P
P/E Ratio
Price-to-earnings ratio, a valuation measure.
Pip
A unit of movement in forex pricing.
Portfolio
A collection of investments.
Position Sizing
Calculating trade size based on risk and capital.
Put Option
Gives the holder the right to sell an asset at a specified price.
Q
Quantitative Easing (QE)
A central bank policy of purchasing securities to stimulate the economy.
Quote
The most recent price of a security including bid and ask.
R
Rally
A period during which the price of an asset or the market as a whole experiences a sustained increase.
Relative Strength Index (RSI)
A momentum oscillator that measures the speed and change of price movements, often used to identify overbought or oversold conditions.
Resistance Level
A price point at which an asset experiences selling pressure and struggles to move higher. It's often used by traders to identify potential reversal zones.
Return on Investment (ROI)
A measure used to evaluate the efficiency or profitability of an investment, calculated by dividing net profit by the initial cost.
Risk Management
The process of identifying, analyzing, and mitigating the potential for loss in an investment strategy. This includes setting stop-loss orders, position sizing, and diversification.
S
Scalping
A short-term trading strategy that aims to profit from small price changes, often involving dozens or hundreds of trades per day.
Short Selling
A strategy where an investor borrows shares and sells them with the intent to buy them back at a lower price, profiting from the price decline.
Slippage
The difference between the expected price of a trade and the price at which it is actually executed, often occurring in volatile markets.
Spread
The difference between the bid and ask prices of a financial instrument. It represents transaction costs and market liquidity.
Stop-Loss Order
A pre-set order to sell a security when it reaches a certain price, used to limit losses on a position.
Support Level
A price point where an asset tends to stop falling due to increased buying interest. It's used as a technical indicator of price floors.
T
Take Profit (TP)
An order placed to automatically close a trade at a predefined profit level.
Technical Analysis
A method of evaluating securities by analyzing statistics from market activity, such as price movement and volume.
Ticker Symbol
A unique series of letters assigned to a security or stock for trading purposes.
Trading Volume
The number of shares or contracts traded in a given period, often used to gauge market activity and strength.
Trailing Stop
A type of stop-loss order that moves with the market price to lock in profits as a trade becomes favorable.
U
Underlying Asset
The financial instrument (e.g., stock, commodity, index) on which a derivative's value is based.
Unrealized Gain/Loss
A profit or loss that exists on paper due to a current position that has not yet been closed or settled.
V
Volatility
A measure of the rate at which the price of a security increases or decreases. High volatility indicates large price swings.
Volume
The number of shares or contracts traded in a given period. Higher volume often signals greater interest or activity in the asset.
VWAP (Volume Weighted Average Price)
A trading benchmark that gives the average price a security has traded at throughout the day, weighted by volume.
W
Wash Sale
A sale of a security at a loss followed by a repurchase of the same or a substantially identical security, typically disallowed for tax deduction purposes.
Whipsaw
A condition where a security's price heads in one direction, but then quickly reverses in the opposite direction, leading to potential losses.
X
X-Dividend
Another term for Ex-Dividend, indicating a stock is trading without the value of the next dividend payment.
Y
Yield
The income return on an investment, such as interest or dividends received, usually expressed as an annual percentage.
Yield Curve
A graph that plots interest rates of bonds with equal credit quality but different maturities, often used to predict changes in economic output.
Z
Z-Score
Measure of how many standard deviations a value is from the mean.
Zero-Coupon Bond
Bond issued at a discount without periodic interest.
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