Glossary Archive - TradeLocker

GLOSSARY

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Glossary

Welcome to TradeLocker's glossary, your concise guide to trading terminology. Dive in to demystify complex jargon and enhance your trading knowledge, one term at a time.

Algorithmic Trading

Algorithmic trading is the art of using computer programs to execute trading strategies at lightning speed. This high-tech approach to buying and selling in financial markets harnesses complex algorithms to analyze market data and execute trades based on pre-set criteria.

What Is Ask Size? The ‘Ask Size’ refers to the quantity of a security that a seller is willing to sell at a specific ‘ask’ price. It represents the amount of stock, currency, or other financial instruments available for purchase at a given moment. The ask size is a crucial component of market data, providing […]

What Is Arbitrage? Arbitrage is a financial strategy that seeks to exploit price discrepancies of identical or similar financial instruments across different markets or in various forms. It involves simultaneously buying and selling these instruments to benefit from the price differences. Understanding Arbitrage Arbitrage is based on the principle of market efficiency and the law […]

A balance sheet is a fundamental financial statement that provides a snapshot of a company’s financial position at a specific point in time. It details the company’s assets, liabilities, and shareholders’ equity, offering crucial insights into its financial stability and liquidity. This article will explore the balance sheet’s structure and the key factors that indicate […]

Bollinger Bands

A Bollinger Band® is a technical analysis instrument consisting of trendlines established at two standard deviations, both above and below, from a security’s price simple moving average (SMA). Users can customize these bands to suit their analysis needs. Developed by technical analyst John Bollinger, Bollinger Bands® are crafted to provide investors with a more likely […]

Bull Trap Trading Guide: How to Identify And Escape

Every trader recalls trades that seemed like sure wins, but once they jumped in, the trades reversed and resulted in losses. These are called “trap trades,” which entice traders and then turn sharply once they’re committed. A well-known example among traders is the bull trap. In this article, we’ll define what a bull trap is, […]

What’s a Bull Market? A bull market is characterized by a sustained upward trend in the stock market, with widespread expectations of continued price increases. However, this term isn’t exclusive to stocks. It also applies to other financial markets like bonds, real estate, currencies, and commodities. These periods of prosperity can span several months or […]

Understanding Bull Investors A bull investor is someone who anticipates growth in the stock market. They purchase stocks and other securities with the expectation of selling them at a higher price later on. Bull Investors Explained Bull investors focus on stocks or sectors they believe will appreciate in value. They are the optimists in the […]

What’s a Budget? A budget functions as a strategic plan for managing your finances. It enables you to assess your total income, identify necessary expenses, and determine the amount you can allocate for savings or discretionary spending. Budgeting isn’t solely for individuals with limited financial resources; it’s a beneficial tool for everyone, providing a clear […]

Counterparty: Definition, Types of Counterparties, and Examples

What Is a Counterparty? A counterparty in finance is essentially the other participant in a financial transaction. Every financial deal involves two sides; similar to having a dance partner, you can’t engage in a financial transaction alone. For example, if a person wants to buy an asset, such as an option, there needs to be […]

What Is a Correction? In forex trading, a correction refers to a temporary reversal in the trend of a currency pair’s price. This normal phenomenon happens when prices have moved significantly in one direction, leading to a counter movement. Reasons for corrections include profit-taking, shifts in market sentiment, or the release of economic data. How […]

Contract for Differences

What Is a Contract for Differences (CFD)? A contract for differences (CFD) is an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash-settled . There is no delivery of physical goods or securities with CFDs. Contracts for differences is an advanced trading strategy used by […]

Capital dividend

What Is a Capital Dividend? A capital dividend, also known as a return of capital, is a distribution made by a company to its investors, sourced from its paid-in capital or shareholders’ equity. In contrast, regular dividends are paid out of the company’s earnings. Typically, a company opts to pay a capital dividend when its […]

What Is A Candlestick? A candlestick chart is a valuable tool in financial analysis, showing an asset’s high, low, open, and closing prices within a set time frame. Originally utilized by Japanese rice traders to track market prices and momentum, this type of chart later gained widespread use in the United States. The key feature […]

What Is a Drawdown? A drawdown is a peak-to- trough decline during a specific period for an investment, trading account, or fund. A drawdown measures the historical risk of different investments, compares fund performance, or monitors personal trading performance. It is usually quoted as the percentage between the peak and the subsequent trough. If a trading account […]

Diversification

What Is Diversification? Diversification is a risk management strategy that creates a mix of various investments within a portfolio. A diversified portfolio contains a mix of distinct asset types and investment vehicles in an attempt to limit exposure to any single asset or risk . The short answer: The better you spread your investments across different assets, […]

What is a derivative? Derivatives are a type of financial product whose value comes from other things, like the changes in prices of stocks, bonds, commodities, currencies, interest rates, or even entire market indexes. They can also be based on other things that affect money matters, like the weather or the cost of shipping. Most […]

What Is De-Hedging? De-hedging is the act of unwinding positions initially established as hedges in a trade or investment portfolio. A hedge is essentially a protective measure, taken to minimize potential losses in an existing position or investment. The process of de-hedging can be executed in different ways. It might happen all at once, with […]

What Is Deflation? Deflation is a general decline in prices for goods and services, typically associated with a contraction in the supply of money and credit in the economy. During deflation, the purchasing power of currency rises over time. Understanding Deflation Deflation causes the nominal costs of capital, labor, goods, and services to fall, though […]

Earnings Per Share

What Is Earnings Per Share (EPS)? Earnings Per Share (EPS) is calculated by taking a company’s profit and dividing it by the number of common shares it has out there. This number shows how much profit the company makes for each share. Sometimes, companies change this EPS number a bit to account for unusual things […]

Quarterly Earnings Report

What Is a Quarterly Earnings Report? A quarterly earnings report is a filing made by public companies every three months to report on their recent financial performance. Quarterly earnings reports include items such as net income, earnings per share, earnings from continuing operations, and net sales. Stock analysts and investors use quarterly earnings reports as one way to gauge […]

Economic Indicator

Economic indicators play a crucial role in assessing the health and performance of a nation’s economy. They are vital tools for investors, policymakers, and businesses, providing valuable insights into various aspects of economic activity. In this comprehensive guide, we will delve into the world of economic indicators, exploring what they are, the different types, and […]

HODL, a term derived from a misspelled word “hold,” has become synonymous with the act of buying and retaining cryptocurrencies, particularly Bitcoin. Over time, it has evolved to signify “hold on for dear life,” representing the determination of crypto investors to weather the storm in volatile markets. In this article, we will explore the origin […]

Income Statement

An income statement is one of the core financial statements used to evaluate a company’s financial performance over a specific period. Often referred to as the profit and loss statement, it provides a summary of how a company generates its revenues and incurs its expenses, ultimately revealing its net profit or loss. Here we delve […]

Initial margin is essentially the down payment you need to make when using a margin account to purchase securities.

What Is a Moving Average (MA)? In finance, a moving average (MA) is a stock indicator commonly used in technical analysis. The purpose of calculating the average of a stock is to smooth out the price data by creating a constantly updated average price. By calculating it, we can mitigate the impact of random, short-term […]

What Is Oversold? Oversold is a term used to describe when an asset has traded at a lower price and has the potential for a price bounce. However, being oversold doesn’t guarantee that a price rally will come soon or at all. There are many technical indicators that can identify oversold and overbought levels, which […]

What is Over-the-Counter (OTC)? Many stocks are traded on well-known stock exchanges such as Nasdaq or the New York Stock Exchange. However, certain securities are traded in decentralized marketplaces, commonly referred to as over-the-counter (OTC) markets. Stocks often end up trading on OTC markets if they don’t meet the rigorous listing criteria of major exchanges. […]

What is a Pip? “Pip” stands for “percentage in point” or “price interest point.” It’s the tiniest amount a currency exchange rate can change in the forex (foreign exchange) market. Usually, currency values are shown with four decimal places, and a pip is the value of the fourth decimal place, which is 1/10,000th of a […]

What is Paper Trade? It’s a way for investors to practice buying and selling stocks without risking any real money. Back in the day, traders used to practice on paper before trading with real money, but now we have stock market simulators that look and feel like real trading platforms. If you want to try […]

Forex Portfolio Diversification an Effective Management

What Is a Financial Portfolio? A financial portfolio is a collection of investments that can include stocks, bonds, commodities, cash, and cash equivalents like closed-end funds and exchange-traded funds (ETFs). While stocks, bonds, and cash are often considered the core of a portfolio, there are no strict rules. Portfolios can also include assets like real […]

What is a Ticker Symbol? A stock ticker symbol, also known as a stock symbol or ticker, is a unique series of letters assigned to a security for trading purposes. It’s basically a shorthand way of describing a company’s stock. Stocks listed on the New York Stock Exchange (NYSE) can have up to four letters, […]

Short selling aims to profit from a stock’s decline in value. This strategy involves borrowing a security from your brokerage, which you believe will decrease in price, and selling it on the open market. The goal is to buy the same stock back later at a lower price than what you sold it for. The […]

What is a Stop Loss Order

What Is a Stop-Loss Order? A stop-loss order is a risk management tool for traders and investors. It involves setting a predetermined price level, and if the investment’s price reaches that level, the order automatically exits the position, limiting potential losses and reducing overall risk in the trade. This helps traders control their losses in […]

What is a Stop Limit Order

A stop-limit order is a strategic method employed by traders to minimize risks associated with stock trading. This approach involves setting two key prices: a stop price and a limit price. The stop price is essentially a trigger point; it’s the specified price at which the order to buy or sell a stock is activated. […]

What’s Short Selling? Short selling is a strategy used by traders who anticipate that a stock’s price will decline. In this approach, a trader borrows shares from a broker and sells them on the market at the current price. Here’s how it works: You borrow shares of a stock from a broker and sell them. […]

What’s a Short Hedge? A short hedge is a way to protect against the chance that the price of something you own, like a stock or commodity, will go down in the future. It’s like an insurance policy for investments. Companies and investors use this tactic to lock in a sale price for something they’ll […]

Why Trade Forex

Overflowing with opportunities around the clock during market hours and no commissions with tight spreads for a standard account – see why forex is the most traded market in the world. Nine reasons to trade forex 1. Great for short-term opportunities As the forex market is so vast, it’s constantly offering new opportunities. In fact, […]

Understanding Trends Trend trading is a trading strategy focused on capitalizing on the momentum of an asset as it moves consistently in a particular direction, whether that direction is upward, downward, or sideways. Conceptually, trend trading can be compared to choosing the path of least resistance. If the market is on an upward trajectory, traders […]

What Is the Volume-Weighted Average Price (VWAP)? The Volume-Weighted Average Price (VWAP) is a tool used by traders to analyze intraday charts. It resets at the start of each trading session and represents the average price a security has traded at throughout the day, considering both volume and price. VWAP is essential for traders as […]

Volume of trade

What Is Volume of Trade? Volume of trade refers to the total number of shares or contracts that are traded for a specific security. It can be measured for various types of securities, including stocks, bonds, options contracts, futures contracts, and commodities. Understanding Volume of Trade The volume of trade represents the total number of […]

What Is Yield? Yield refers to the earnings you make on an investment over a specific period of time. It is expressed as a percentage based on the amount you invested, the current market value, or the face value of the security. Yield includes the interest you earn or dividends you receive from holding a […]

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