Trading Terminology : Warrior Trading

The process of reducing risk via investments is called ‘hedging’. Specifically, gamma is the movement of delta in regard to the price of the underlying asset. Fundamental analysis is a method of evaluating the intrinsic value of an asset and analysing the factors that could influence its price in the future. Forex is how market participants convert one currency to another. The ‘force open’ function on the trading platform allows you to enter a new bet in the opposite direction to an existing bet on the same market. The contract represents an asset to one party (the buyer) and a financial liability to the other party (the seller).

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For example, in a 2-for-1 split, each shareholder receives two shares for every one previously owned. Stocks are a cornerstone of most investment portfolios. A stock is a type of security that signifies ownership in a corporation.

Understanding Market Dynamics

It consists of five key lines and a shaded area (the cloud) that helps traders identify bullish and bearish conditions. A comprehensive technical analysis tool that provides insight into market trends, momentum, and potential support and resistance levels. An extremely rapid and out-of-control increase in prices within an economy, often exceeding 50% per month. These securities offer flexible investment opportunities with unique risk-return profiles. A price level at which an asset consistently finds buying interest, preventing it from falling below that point.

We are much more than just a place to Trading Terminology learn how to trade stocks. Well, for starters, we’re just real everyday people who like trade stocks. People come here to learn, hang out, practice, trade stocks, and more. As you can probably tell, the stock market is rife with unique terms and industry-specific phrases. Be sure to check out our internal guide on Introduction to Financial Markets, which explains how stocks, forex, commodities, and crypto interact in real-time. This in-depth guide includes 50+ must-know trading terms broken down into categories like order types, technical analysis, strategy, and trader slang.

Arbitrage can occur in various forms, including spatial arbitrage (between different markets), temporal arbitrage (across different time periods), and statistical arbitrage (based on statistical models). Arbitrage opportunities often arise due to inefficiencies or delays in information dissemination across markets, and arbitrageurs seek to exploit these temporary price divergences. It involves buying the asset in the market where it is undervalued and simultaneously selling it in the market where it is overvalued, thereby profiting from the price discrepancy. Traders use algorithms to execute large orders with minimal market impact, capitalize on price discrepancies, and manage risk more effectively. Yield is one of the ways in which investments can earn a trader money, with the other being the eventual closing of a position for profit. It is used to advise your broker to execute a trade when an asset reaches a specific price.

Outstanding Shares

They trade in high volumes and significantly influence market movements. Hedge funds are typically open to accredited investors due to their higher risk. A financial advisor provides guidance to individuals or businesses on investments, retirement planning, and wealth management. An exchange is a regulated marketplace where securities, commodities, or derivatives are bought and sold. They rely on short-term price fluctuations and technical indicators rather than long-term fundamentals. A day trader is an individual who buys and sells securities within the same trading day.

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This system is used to stabilize exchange rates and control inflation. A policy in which a country’s currency value is fixed or pegged to another currency, a basket of currencies, or a commodity like gold. This can result from lower interest rates, poor economic performance, or negative investor sentiment. A wider credit spread indicates higher perceived risk, while a narrower spread suggests lower risk. It is widely used by economists and policymakers to assess price stability and guide monetary policy decisions.

The best traders didn’t become successful by chance; they mastered the basics, built strong foundations, and stayed committed to constant learning. You subtract your buy price from your sell price and multiply by the number of shares. A market order executes immediately at the current price, while a limit order only executes at a specific price or better.

Technical Analysis

• Passive management is an investing style whereby investment portfolios try and generate returns that mirror the returns of the underlying constituents of the portfolios.
• A trading benchmark that calculates the average price of a security over a specific time period.
• A gearing ratio is a measure used by investors to establish a company’s financial leverage.
• Paper hands sold their Bitcoin during the March 2020 crash, missing the subsequent rally to all-time highs.
• An individual who buys and sells financial instruments, either for themselves or on behalf of others.

This transactions will appear red if they occur at the bid price, green if they occur at the ask price, and white if they occur in between the spread. When we see full market depth on both the Bid side an the Ask side we are seeing complete level 2. If the bid is 10.00, there is a buyer sitting waiting to buy shares at 10.00. Using Dark Pool Routing, you can now ping the dark pools to see if they have shares available. This may not always be in the best interest of the trader.

Price Channel

Electronic trading venues that match buy and sell orders but are not registered as national securities exchanges. An AON order for 1,000 shares will only execute if all 1,000 shares can be filled at the specified price or better. An arrangement with a broker that allows you to deposit funds and trade financial instruments. When large volume hits the market at a key level but price doesn’t move significantly, indicating strong opposing interest. Searchable glossary with examples and practical applications for traders of all levels.

Base Currency

• Financing provided to startups and small businesses with high growth potential.
• A stock exchange is a centralized venue where stocks are listed and traded under regulatory oversight.
• A buy stop is a type of pending order that is used to buy a security only when the price reaches the specified stop price.
• Margin is borrowed money from a broker that allows an investor to purchase securities.

This means 95% of all price action will take place in between the top and bottom bands. If they are close together, the stock isn’t moving in much of any direction. A stock with an RSI of 100 is extremely overbought and may be due for a reversal.

A unique series of letters representing a publicly traded company (e.g., AAPL for Apple). If you own 10 shares, you own 10 pieces of that company. A single unit of a company’s stock. Trading stocks is not a get-rich-quick scheme. We realize that everyone was once a new trader and needs help along the way on their trading journey and that’s what we’re here for.

The law requires an independent person (an ‘Auditor’) to sign off that a firm’s financial statements are “true and fair” and have been prepared using the relevant legislation. An American Depository Receipt (ADR) allows US investors easier access to ownership of foreign public companies. Devised in the 1960s by Edward Altman, the Altman Z-Score indicates the probability of a company entering bankruptcy within the next two years. Often specified as a percentage, an alpha of 1% means that the return on investment was 1% better than the benchmark.

Leverage amplifies losses and gains

Many traders use them when short term movement is the primary focus. Weekly expiries are common for index options, while stocks usually come with monthly ones. Choosing a strike price becomes a judgement call based on market expectation and risk comfort.

This is the point at which, if the trade were closed at that moment, there would be a net $0 gain. This website is operated by Trading.com Markets UK Limited, trading as Trading.com. Save my name, email, and website in this browser for the next time I comment. Remember that successful trading is a marathon, not a sprint – focus on consistent improvement rather than immediate results.

The goal is to continually adapt and grow your stock portfolio. Once you’ve got the terminology down, what’s next? Knowing the terms is one thing, but understanding how to apply them in real-world investing scenarios is another. I’ve been teaching this stuff for years, and I can tell you that a well-informed trader is often a successful one.