Celticheart Investor
A beginner's guide to trading and investing
One of the things that initially confused me was the vast number of obscure terms and acronyms that are used when discussing investing or share trading.
I have complied a glossary of the more commonly used terms to try and help you make sense of some of these.
I will add to and expand this glossary as new terms become known to me or when people advise me of additional terms they would like to be included.
Glossary
A
Accumulation - When an investor are is
building up a volume of stock.
Agent - Another name for a broker, acting as
the agent between the buyer and a seller.
AIM - The Alternative Investment Market, a sub
division of the London Stock Exchange set up for smaller companies, with
cheaper listing costs and a lighter regulatory environment.
Amortization - Writing off an intangible asset
investment over the projected life of that asset.
Analyst - A person with expertise in
evaluating a company's financial assets, they will analyse available data and
make recommendations to institutional and retail investors to buy, sell, or
hold.
Annual Report - A legally required publication
sent by companies to shareholders annually outlining the company's operations,
development, balance sheets, profit and loss accounts, and any other relevant
information about the company.
Arbitration - A common method of settling
disputes by a panel of one or more arbitrators who will make a decision for or
against one or other of those companies.
Ask Price - The lowest price at which a dealer
is willing to sell a share or commodity, also called the offer price. One of
the two main factors to look at in level 2 trading.
Asset Allocation - Balancing risk and return
by spreading investment assets over a range of options such as stocks, mutual
funds, bonds, commodities etc.
Assets - Any possessions or holdings that have
a monetary value.
At Best - An instruction given to a broker to
buy or sell at the best available daily rate.
Automatic Trade (AT) - An automatic trade
generated by the SETS system through the order book.
Averaging down - The tactic of buying
additional shares in a company stock at a lower price as the price falls
resulting in bringing the average
price of the shares down.
B
Bear Market - A declining market in which
prices are falling or are are likely to fall. Sellers are dominant in a bear
market. A bear is a term used to describe someone who believes a market is in a
downward or negative trend.
Bid / Ask Spread - The difference between
the price at which a dealer is willing to buy (bid) and sell (offer/ask) a
security, stock or commodity. The bid will be the lower of the two prices and
the offer price the higher
Bid Price - The highest price at which a
dealer is willing to buy security, stock or commodity.
Block Trade - A trade of a large number of
shares, usually 10,000 shares or more.
Blue Chip Stocks - Generally used when
referring to Footsie 100 companies or well established corporations with a
history of paying dividends. These are considered some of the lowest risk
stocks, based on their proven track record.
Book Value - A company's total assets less its
intangible assets and liabilities.
Break-away gap - A technical analysis term for
a significant gap in a price chart that signals the end of a upward or a
downward trend and often signifies a directional change.
Breakeven Point - The point at which the
equity becomes worth what we paid for it
Broker - Also called the agent, an
intermediary between a buyer and seller. The term broker can refer to the
individual person or the company they work for.
Broker to Broker - A transaction between two
member firms where neither firm is registered as a market maker in the security
in question and neither is a designated fund manager.
Bull Market - An ascending market in which
prices are rising or are are likely to rise. Buyers are dominant in a bull
market. A bull is a term used to describe someone who believes a market is in
an upward or positive trend.
C
Candlestick Chart - A traditional Japanese
chart that has been widely adopted by the West that indicates the trading range
for the day as well as the opening and closing price.
Capital Gain - The profit achieved when buying
an equity at a lower price and selling it at a higher price. This does not
include dividend or income achieved through interest.
Capitalisation - The underlying financial
value of a company or corporation, including that provided by the shareholder's
equity and any long term bonds
Cash flow - The flow of income through a
company effectively the balance of sales and expenses
Contracts For Difference (CFD) - A leveraged equity
derivative security that allow users to speculate on share price movements,
without the need for ownership of the underlying shares.
Consolidation - Reducing the number of shares
in issue e.g. 10 for 1 to increase the shareprice. It should be noted that the
value of the shares held is unchanged only the number of those shares.
Charting - The analysis and interpretation of
bar charts or candlestick charts in order to predict the future performance of
a security based on historical data. Also known as technical analysis or TA
Closing Price - The price at the end of the
day's trading on a commodity market or stock exchange.
Commission - The fee an investor pays a broker
for buying or selling a security.
Commodity - A physical product traded on a
commodity market, these are classed as either hard commodities e.g. Gold,
platinum, copper, oil or soft commodities e.g. grain, cotton and rubber.
Common Stocks - The basic form of equity
ownership in a corporation.
Counter-party - One of two participants in any
financial transaction.
Current Assets - Any company assets that are
converted to cash within the financial year.
Current Liabilities - Obligations that must be
paid within the financial year
Current Yield - The value of any stock
dividend, catagorised as either high or low yield.
Cyclical Stock - A company whose share price
is linked with the ups and downs of the economy.
D
Day trader - A stock market trader who will
open and close positions (buy/sell) during a trading day to make a profit.
Although in theory these trades are not held overnight the term has come to
mean someone who trades short term rather than just for one day.
Dealer - An individual or organisation that
buys and sells products on behalf of others.
Debt to equity Ratio - A company's debt
divided by the shareholders' equity
Depreciation - The reducing value to a company
of non-cash assets such as machinery or property
De-ramper – Someone who
talks down a share on a bulletin board.
Derivative Security - A contract whose value
depends on the performance of some other form of security, or investment. e.g.
a stock option is a derivative security whose value depends on the value of the
underlying stock.
Dilution - The release of additional stock
onto the market which has the effect of reducing the share price because the
market capital being divided by a greater number of shares in issue.
Diversification - Investing in a range of
unconnected assets or commodities to reduce the risk associated with any one
investment. This could be diversification across companies, trading sectors or
even geography.
Dividend - A payment made to shareholders,
proportional to their holding in that company
Dow Jones - One of the main US indices, the
closest equaivalent to the FTSE
Dummy trade (buy/sell) - To place a provisional trade to check the shareprice
Earnings Per Share (EPS) - A company's profits
divided by the number of shares in issue
E
EBITDA - Earnings before interest, taxes,
depreciation, and amortization.
Entry point - The price at which a stock or
trade share is entered.
EPIC code - The alphabetical index used by the
stock market to identify a company
Ex-dividend - The time between the
announcement of a dividend and the payment of that dividend. Buying shares
within this period does not entitle you to that dividend, depending on the
company you would then have to wait 6 months to a year or the next dividend
payment.
Exchanges - Central organisations for the
control of trading in equities, commodities etc.
i.e. in the UK the primary exchange is the LSE
(London stock exchange).
Exit point - The price at which a stock or
trade share is exited.
F
Fibonacci - The man responsible for the
introduction the ancient Hindu–Arabic numerical system in Europe, primarily
through its publication in 1202 in his book Liber Abaci (Book of Calculation).
Fibonacci numbers - In the Fibonacci sequence
of numbers, each number is the sum of the previous two numbers, starting with 0
and 1. This sequence begins 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233,
377, 610, 987 and so forth. Also called Fib numbers.
Fibonacci retracement - In technical analysis a bullish rise
will often retrace to a key Fib number and also the reverse is true, a bearish
downtrend will often reverse at a key Fib number
Forwards Contract - An obligation to buy or
sell an asset on a specific date at a set price, similar to futures, but
usually a private transaction between two parties and not actively traded.
FRA (Forward Rate Agreement) - An arrangement
that allows for borrowing and lending at a constant interest rate for a
specified period of time in the future.
Fundamental Analysis - The practuce of
studying a company's general financial position. This would encompass looking
at financial statements, company management, competitors, markets and also
external economic such as interest rates, unemployment, consumer price index
and general economic climate.
Futures Contract - A contract to buy or sell a
fixed quantity of a specified equity for delivery at a fixed date in the future
at a fixed price. Futures contracts are standardised agreements traded on
Futures Exchanges.
G-H No entries to date
I
II - The acronym for an Institutional investor
Illiquidity - When the market is experiencing
low levels of trading, with little underlying stock readily available. Buying
and selling can cause exaggerated price fluctuations in such a market.
Insiders - The board of directors and officers
of a company. It can also be someone who has a large voting share in the
company. These insiders are said to possess "insider information."
Insider trading - The illegal activity of
using insider information prior to its release to the public domain to benefit
from trading in any for of equity or security.
Interest-Rate Swaps - The process of changing
the form of debts held by banks or companies, in which one party exchanges a
stream of interest for another stream. Interest rate swaps can be
fixed-to-floating, fixed-to-fixed or floating-to-floating rate swaps.
IPO (Initial Public Offering) - The first time
a company's shares are traded on the stock exchange, also referred to as a
flotation. Prior to flotation a
detailed prospectus is issued for potential investors to resaerch the
company,its prospects, directors and finances before investing.
IPO Date - The date that a company's shares
first started trading publicly.
J-K No entries to date
L
Level 1(L1) - This shows the lowest ask (buy)
and the highest bid (sell) price
Level 2 (L2) - Also referred to as the order book,
displays the best current bid and ask prices and also the depth of the market.
(the number of contracts currently pending at each of the available prices).
Leverage - Also called Gearing is the ratio
between potential profit or loss and the initial investment. A company with
high level of gearing or leverage is seen as a higher risk investment.
Limit Order - An order to buy or sell a stock
at a pre-determined maximum price.
Liquidity - When the market is experiencing
high levels of trading, with underlying stock readily available. Buying and
selling causes minimal price fluctuations in such a market.
Long / Long Position - When an investor buys a share
or other security expecting the market price to rise
LSE - London Stock Exchange, the UK's primary
stock market
M
Margin call - When a broker requests that
their client deposits further cash or securities to cover possible losses from
outstanding trades, they will sometimes even close the trade if the request is
not complied with.
Market capitalisation - Also referred to as the market cap
which is the value of a company as determined by the market. A company's market
capitalization is calculated by multiplying the number of shares in issue by
the company's share price.
Market Order - A Market Order is an order to
buy or sell a stock or equity at the market's current best displayed price.
Market Maker (MM) - A Securities firm which is
obliged to offer to buy and sell securities in which it is registered
throughout the mandatory quote period.
Market tend - The tendancy for a stock or
market to move in a particular direction, upwards (up-trend) or downwards (down-trend)
Maturity Date - The date on which the
principal amount of a bond is to be paid in full.
Moving Average - An average of a security's
price taken over a particular time period, frequently 20 day and 50 day
periods, referred to as the EMA 20 and EMA 50. Moving averages are used as a
technical trading tool to determine support and resistance.
Net Asset Value (NAV) - The market value of a
share or equity, synonymous with a bid price.
N
Net Assets - Also called net worth is the
value of a company's assets less its liabilites and is usually stated as at a
given point in time e.g a calendar year.
Net Income - Income after all expenses and
taxes have been deducted, and used in calculating a variety of profitability
and stock performance measures.
O
Offer price -The lowest price at which a
dealer or broker is willing to sell a commodity or currency (also known as the
ask price)
Open Order - An order to buy or sell a
security that remains in effect until it is either cancelled by the customer or
executed.
Open position - A long or short trading
position that is not yet closed. In either case the dealer remains vulnerable
to fluctuations in the share price until the position is closed.
Options Contract - A derivative investment,
giving the holder an option to buy or sell a specified quantity of an
underlying asset at some time in the future, at a price which is agreed when
the contract is executed.
Order - An offer to buy or sell a specified
amount of a security or commodity at a specific price
Order Book (L2) - A facility operated by the
Exchange for the electronic submission and automatic execution of orders in
order book securities.
Ordinary Trade - A standard trade made through
a broker
P
Price/Book (PB) Ratio - A stock analysis
statistic in which the price of a stock is divided by the reported book value
as of the date specified.
Price/Cash Flow (PCF) Ratio - A stock analysis
statistic that compares the price of a stock with the company's known cash flow
per shares in issue.
Price/Earnings (PE) Ratio - A stock analysis
statistic in which the current share price is divided by the reported actual
earnings per share (EPS) of the issuing firm, also called the
"multiple".
Price/Sales (PS) Ratio - A stock analysis
statistic that compares the share price with sales per share or market value
against total revenue.
Principal Orders - Trades carried out by a
broker or Agent for its own account and risk.
PI - The acronym for a Private investor
Q
Quoted price - The sell (Ask) or buy (Bid)
price offered by the broker or agent
Rally - A recovery in the value of a share,
commodity, security or market after a decline.
R
Ramper – Someone who
talks up a share on a bulletin board.
Registrar - The company or an official from
that company who maintains the shareholder database
Relative Strength (RS) - Strength of the stock
relative to other stocks in its category.
Relative Strength Index (RSI) - A technical
analysis tool for tracking the Relative strength.
RNS - is both a regulatory and financial
communications channel for companies to communicate with the professional
investor.
S
Scrip - A temporary substitute for a dividend.
Companies that are having cash flow difficulties sometimes pay scrip instead of
cash dividends, a promise to pay the dividend in full when it is liquid again.
Sell - A trade in which you exchange your
equity for cash
Shareholders' Equity - Another name for a
company's net worth.
Short / Short Position - A Position resulting
from selling a stock you do not own with a view to buying it at a lower price
prior to fulfilling the order. Not allowed in a falling market.
Short Covering - The act of buying back a
commodity to close out a short trade.
Short Selling / Shorting - A trade predicting
the shareprice will fall. For retail investors in stocks and shares it is is an
uncommon strategy as it involves the speculator "selling" a commodity
or security that they do not own in order to profit from a falling market.
SIPP - A Self Personal Pension from within which you can trade and invest in a tax free environment, similar to an ISA. Tax being paid on withdrawals only. Contributions to pension funds are supplemented by government.
Slippage - When the price at which a trade is
executed is not the same as the price placed. This can happen when the market is moving very
fast in either direction.
Spot Market - When commodities shres or equities are bought and
sold for cash and immediate delivery.
Spot Price - The price of a commodity being
traded live on a spot market.
Spread - The difference between the current
bid (sell) and ask (buy) prices
Spread Betting - A bet on whether the outcome
will be above or below the spread (see above).
SSAS (small self-administered scheme) - An occupational pension scheme set up under trust with fewer than 12 members.
Stock Dividend - Payment of a corporate dividend
in the form of stocks or shares instead of the usual cash dividend. The stock
dividend may be additional shares in the parent company, or shares in a
subsidiary being spun off to shareholders.
Stock Split - Issuing additional new shares to
replace or rank alongside the existing batch, this has the effect of splitting
current shares into multiple shares. This is the opposite of consolidation.
Stop Loss/Stop Order/Stop - An automatic
order placed to ensure that a trade will be protected from dropping below a
given percentage. The stop will automatically sell if the share price hits a
pre-determined trigger price.
Support / support level - A pattern used in
charting or technical analysis that indicates buying pressure or a price
"floor" that the market would be expected to bounce back from. If the
stock price declines below the support level, a technical analyst might view the
decline as a sell signal.
T
Target - A pre-determined point when profit is
taken.
Technical Analysis - A method of analysing
shareprice trends using a variety of charting techniques. This can be bottom up or top down analysis
Ticker symbol - The US term for an EPIC code
Trade Date - The date on which a trade is
executed.
Trading Volume - The number of shares traded
in a trading period usually the trading day, this is a total of all buys and sells.
U
Uncrossing Trade (UT) - This is used for the
single uncrossing trade detailing the total executed volume and uncrossing
price as a result of a SETS auction.
Underwriter - As well as insurance underwriters,
the term can refer to the investment bank that floated a company onto the stock
market.
V
Value Date - The date on which a commodity is
added to an account and also when payment is due.
Volatility - A general term for the amount of
price fluctuation of a share or security
Volume - The amount of shares traded in any
given period
W
Warrant - A certificate issued by a company
giving the holder the right to purchase securities at an agreed price within an
agreed time frame.
X No entries to date
Y
Yield - The return on an investor's capital
investment, often refers to the dividend.
Z
Zero uptick - A short-selling technique to
avoid having to wait for the market to increase.
A
cautionary note, trading and investing in shares carries a level of
risk, these blogs
are only meant as a basic guideline to investing and trading, always do
your own research and base your decisions on what you can afford to
lose. This blog is not intended to provide financial advice as I am not
qualified to do so, it is simply designed to provide information about
how the markets work that might be of some help to private investors
like myself.
