A
Accumulator: A strategy combining options to leverage a position for a potentially favorable price.
Aggregate Demand: Total demand for goods and services in a specific market, reflecting the relationship between price and GDP (gross domestic product).
Aggregate Supply: Total value of goods and services offered in a specific market, showing the amount that can be produced at different times.
Alligator Indicator: A technical indicator used to identify trends and ranging markets.
Arbitrage: Profiting by exploiting price differences between markets by simultaneously buying and selling an asset.
Ask Price: The lowest price at which a seller is willing to sell an asset.
Asset: A resource controlled or owned to generate financial benefit, including stocks, bonds, commodities, or even intellectual property.
At the Money (ATM): An option contract where the strike price is equal to the current market price of the underlying asset.
Averaging Down/Up: Buying or selling additional shares of a security to lower or raise the overall average cost per share.
B
Backwardation: A market condition where the price of a futures contract is lower than the spot price, typically seen when supply exceeds demand.
Bar Charts: Charts that use bars to represent price movements over a specific period, showing the open, high, low, and close prices.
Base Rate: The interest rate a central bank charges commercial banks or institutions for loans.
Bearish: An expectation that a market will experience a downward trend.
Bear Call Spread: An options strategy where a short call option is combined with a long call option with a higher strike price, aiming to profit from a declining market while limiting potential losses.
Bid: The highest price a buyer is willing to pay for an asset.
Bid-Ask Spread: The difference between the bid and ask price, representing the cost to trade an asset.
Binary Options Accounts: A type of account offering speculative bets on whether an asset's price will go above or below a certain level by a specific time. These can be highly risky and unregulated in some areas.
Book Value: The net value of a company's assets based on its accounting records, also known as shareholders' equity.
Bollinger Bands: A technical indicator that uses volatility to create bands around a moving average, helping identify potential overbought or oversold conditions.
Borrowing: Borrowing shares from a broker to execute a short sale, requiring eventual repurchase to return the borrowed shares.
Broker: An intermediary who facilitates trades between buyers and sellers in a financial market.
Bullish: An expectation that a market will experience an upward trend.
Bull Call Spread: An options strategy where a long call option is combined with a short call option with a higher strike price, aiming to profit from a rising market while limiting potential gains.
Blue Chip: A term for well-established, financially sound companies with a history of stable growth.
Bottom Line: A company's net income, calculated by subtracting total expenses from total revenue.
Buying Power: The total amount of money available for trading, including cash and margin (if applicable).
C
Calendar Spread: The difference in price between futures contracts of the same asset with different expiry dates.
Call Option: A contract granting the buyer the right, but not the obligation, to purchase a specific asset at a predetermined price (strike price) by a specific time (expiry date).
Candlestick Charts: A type of chart that uses candlesticks to represent price movements over a specific period, providing more information than bar charts.
Cash Account: A brokerage account where trades must be settled with available cash, requiring a waiting period (settlement time) before funds are available for further trades.
Cash Flow: The movement of cash in and out of a company.
Cash Price: The current spot price of a commodity for immediate delivery, distinct from futures contract prices.
Chart Time Frames: Different time periods used to analyze price movements on charts, such as daily, hourly, or minute charts.
CFD Accounts (Contract for Difference): Accounts offering contracts to speculate on price movements of underlying assets without directly owning them. These can be complex and may not be available in all regions.
Circuit Breaker Halts: Temporary trading suspensions implemented to prevent excessive price swings due to sudden events.
Closing Price: The last traded price of an asset before the market closes for the day.
Commodity: A resource with a standard form that can be easily traded, like gold, oil, or coffee.
Company: A legal entity formed for the purpose of conducting business and generating a profit.
Contract: A legally binding agreement between two or more parties.
Currency: The official medium of exchange for a particular country.
D
Dark Pools of Liquidity: Electronic pools where buy and sell orders are privately matched between participants without being displayed on public exchanges.
Derivative: A financial product that derives its value from the price of an underlying asset (e.g sugar).
Dividend: A distribution of a portion of a company's profits to its shareholders.
Dividend Yield: The dividend yield, expressed as a percentage, is a financial ratio (dividend/price) that shows how much a company pays out in dividends each year relative to its stock price.
Doji Candlestick: A candlestick chart with a long upper wick or lower wick and a small body, indicating indecision in the market.
Dollar-Cost Averaging (DCA): An investment strategy of investing a fixed amount of money into a particular investment at regular intervals, regardless of the asset's price.
E
Electronic Communication Network (ECN): An electronic marketplace that matches buy and sell orders for securities.
Exchange: An open, organized marketplace for financial instruments including stocks, shares, commodities, and derivatives.
Expiry (of a Futures Contract): The date on which a futures contract automatically expires and settles.
F
Fill Price or Getting Filled: The price at which a trade is executed, becoming your average cost for the asset.
Float: The number of outstanding shares of a company's stock that are available for public trading.
Foreign Exchange (Forex): The market for trading currencies.
Forward Contract: A contract specifying the price at which an asset will be bought or sold on a future date.
Futures Contract: An agreement to buy or sell a particular asset at a predetermined price on a specific future date.
Fundamental Analysis: A method of evaluating a security by analyzing the underlying business factors of the company that issued it.
I
Iceberg Order: A large futures order divided into smaller segments to gradually enter the market and potentially achieve a better average price.
In the Money (ITM): An option contract where the strike price is favorable for the current market price. For example, a long call option with a strike price lower than the current market price is ITM.
Initial Public Offering (IPO): The first sale of a company's stock to the public to raise capital.
Inverted Hammer Candle: A candlestick pattern indicating a potential reversal at the top of an uptrend. It resembles an upside-down hammer with a long upper wick and a small body.
L
Leverage: Amplifying exposure in a financial market. Options offer more leverage compared to directly buying an asset, potentially leading to larger profits or losses.
Line Charts: Charts that use a line to track price movements over time, useful for understanding long-term trends but may lack detail for shorter timeframes.
Limit Order: An instruction to buy or sell an asset at a specific price or better. The order prioritizes price over immediate execution and may not be filled if the market moves away from the limit price. Limit orders can be "day" or "GTC" orders.
Long Position: A position that profits if the asset's price increases. This is also referred to as "going long" or "taking a long position."
Long Butterfly Spread: A complex options strategy involving four options (1 long ITM call, 2 short ATM calls, and 1 long OTM call) with limited potential profit but capped losses compared to a short straddle.
Long Straddle: A strategy involving buying a call and a put option with the same strike price. The trader profits if the market moves significantly in either direction but loses the premium paid for the options.
Lot: A standardized unit of an asset traded on an exchange. For example, a lot of sugar may represent 50 metric tons.
M
Margin Account: A brokerage account that allows borrowing money to trade securities. This enables day trading by providing immediate buying power, but comes with margin calls if the account value falls below a minimum threshold.
Margin Call: A demand from a broker to deposit additional funds into a margin account to maintain the minimum required balance due to a decline in the value of holdings.
Margin Rate: The interest rate charged by a broker for borrowing money in a margin account.
Market Maker: An institution that facilitates trading by quoting bid and ask prices and creating market liquidity. Market makers profit from the bid-ask spread.
Moving Average Convergence Divergence (MACD): A technical indicator that measures the relationship between two moving averages of an asset's price. It helps identify potential trend changes based on the convergence or divergence of the moving averages.
Moving Averages: Technical indicators that calculate the average price of an asset over a specific period. They can be simple moving averages (SMAs) or exponential moving averages (EMAs) that give more weight to recent prices.
Multiple Candlestick Patterns: Combinations of candlestick patterns that can signal potential future price movements, such as flat top breakouts, bull flags, or bear flags.
Market Order: An instruction to buy or sell a security at the best available price in the market, prioritizing immediate execution over a specific price. This order type is suitable for smaller orders in liquid markets.
N
O
OCO (One Cancels the Other) Order: An order that combines two conditional orders. When one order is filled, the other is automatically canceled. This helps manage risk and take advantage of volatility.
OTC Trade (Over-the-Counter): A trade executed directly between two parties, bypassing an exchange. This offers flexibility but less transparency compared to exchange-traded securities.
Option: A derivative contract that grants the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price (strike price) by a specific expiry date.
Out-of-the-Money (OTM) Option: An option contract where the strike price is less favorable than the current market price for a call option, or higher than the current market price for a put option. The option is currently unprofitable but may become profitable if the underlying asset price moves significantly.
Overnight Leverage: The leverage offered by a broker for positions held overnight, which is typically lower than intraday leverage to manage risk.
P
Partial Fill: A scenario where only part of a limit order is executed because the desired price cannot be immediately obtained. The remaining order quantity can be canceled or left open for potential future fill.
Pattern Day Trader (PDT): A trader designated by US regulations who executes day trades on a minimum of 3 days within a 5-day period, and is required to maintain a minimum account balance of $25,000 USD.
Position: A trader's holding in an asset, which can generate profit or loss depending on price movements. Open positions are still capable of profiting or losing, while closed positions are settled and no longer hold value.
Proprietary Trading Firm Account: An account offered by firms that employ traders to execute trades using the firm's capital. These accounts may require deposits and offer higher leverage but come with stricter regulations and licensing requirements.
Put Option: A contract granting the buyer the right, but not the obligation, to sell a specific quantity of an underlying asset at a predetermined price (strike price) by a specific expiry date.
R
Rally: A period of sustained upward price movement in an asset's price.
Relative Volume: An indicator that compares a stock's trading volume to its average volume for a specific timeframe. It helps gauge market activity and potential trading opportunities.
Relative Strength Index (RSI): A technical indicator that measures the magnitude of recent price changes to evaluate if a stock is overbought (high RSI) or oversold (low RSI), potentially signaling reversals.
Retirement Accounts: Investment accounts designated for retirement savings, with some restrictions on trading activity compared to regular brokerage accounts.
Routes: Different pathways for orders to reach the market, offered by market makers and ECNs. Choosing a route can affect order speed and execution. Popular routes include ARCA, NYSE, and EDGX.
S
Scaling In/Out: A strategy of entering or exiting a position gradually by placing multiple orders at different price levels to manage risk and potentially achieve a better average price.
Secondary Offering: An issuance of additional shares by a company after its initial public offering (IPO). This increases the number of outstanding shares and can dilute the value of existing shares.
Share Buyback: A company's repurchase of its own outstanding shares, reducing the float and potentially increasing the value of remaining shares.
Short: A trading position that profits if the asset's price declines. This involves borrowing and selling an asset with the obligation to buy it back at a future date, hoping to repurchase it at a lower price to pocket the difference.
Short Interest: The total number of shares currently held in short positions by traders. High short interest can indicate potential for short squeezes if the price rises.
Short Sale Restriction (SSR): A temporary rule implemented to limit short selling of a stock that has experienced a significant price drop within a day.
Short Squeeze: A rapid price increase in an asset due to a large number of short sellers being forced to buy back shares to cover their positions, further driving the price up.
Slippage: The difference between the expected price of a trade and the actual execution price, which can occur in volatile markets.
Smart Routing: An order routing system used by brokers to automatically choose the best available route for order execution, considering factors like execution speed and price.
Spot Price: The current market price for immediate delivery of an asset.
Spread: The difference between the bid (buy) and ask (sell)
V
Value at Risk (VAR): A statistical measure that estimates the potential financial loss within a portfolio over a specific timeframe at a given confidence level. It's widely used by financial institutions to assess and manage risk.
Vanilla Options/Derivatives: These are standardized option or derivative contracts with basic features, like plain vanilla calls or puts. They are simpler to understand and trade compared to complex derivative instruments.
Volume: The total number of shares or contracts traded in a security within a specific period, usually a day. High volume indicates active trading and potentially greater price volatility.
W
White Premium: In the sugar industry, this refers to the price difference between raw sugar and white sugar futures contracts, expressed in dollars per metric ton. A higher white premium signifies a potential profit opportunity by buying raw sugar, refining it, and selling the white sugar at a higher price.
Working Order: An open order to buy or sell a security, typically a stop-loss or limit order, that will be automatically triggered when a certain price condition is met.