This part of the glossary is more technical. Unless you have been trading for some time, there is a high chance you may have to re-read this to understand.
Macroeconomics: The analysis of a country’s economy, which is dependent on trade, bilateral ties and more.
Margin: The amount of funds required to be put up for a leveraged position to be opened and maintained.
Eg. City Index and CMC Markets allow me to trade CFDs. CFDs are leveraged deriatives and my margin level is 10% for shares. This means I need to fork out 10% of the total value of the share’s CFD I would like to go long or short.
The stock price of Nike is $100. If I were to purchase 100 units of Nike’s CFD, I need to fork out $1,000 ($100 x 100 units x 10%) as margin.
Margin call: A request for more funds to be placed as margin due to adverse price movement.
Market breadth: The performance and behavior of the market indices or stock.
Market capitalization (Market cap): The total dollar value of a company’s outstanding shares. This tells us how big and valuable a company is.
Market order: An instruction from the trader to the broker to initiate or exit a position immediately, at the current price.
Merger: Two or more companies combining to become one entity.
Momentum: The power/strength of price movement.
Moving average: An indicator which helps to show trends and reduce the impact of random price spikes.
See exponential moving average.
Net asset value (NAV): A value which suggests that a company is at market value, undervalued, or overvalued.
Noise: Fluctuations in price and volume which confuse traders on the market’s overall direction. The amount of fluctuations tolerated depends on your trading horizon.
Opportunity cost: An expected return that would have been yours if you had traded this stock instead of another (or by not trading any counters at all).
Option: A derivative which gives buyers the right to buy or sell the underlying asset at a set price before expiry. Sellers of an option are obliged to buy or sell the underlying asset when the set price has been met.
Over-the-counter (OTC): Stocks that are not listed on a stock or derivatives exchange. To buy shares of such a company, you would have purchase them from a dealer.
Don’t worry if you are starting out or confused about the terminology of trading. You can connect with us on Facebook.
Build a solid foundation in trading and increase your learning speed by attending Jay’s private mentoring course. Happy New Year!
Swim Trading Resident Columnist