Trading Dictionary
ACTIVE SHARES: Share in which there are frequent and day to day dealings,
as distinguished from partly active shares in which dealings are not so
frequent. Most shares of leading companies would be active, particularly those
which are sensitive to economic and political events and are therefore, subject
to sudden price movements. Some market analysts would define active shares as
those which are bought and sold at least three times a week, East to buy or
sell.
AUTOMATED SCREEN TRADING: Electronic
Trading in Stocks through visual display units. The associated computer unit
enters, matches, and executes deals. It makes possible a floor less exchange
and brings transparency to deals.
BLOCK TRADE: Trading large blocks of
shares, usually by mutual funds or institutional investors. There are
specialist brokers who carryout the trade discreetly, without unduly affecting
the price movement of shares.
BLUE CHIPS: Shares of particularly
well known and established companies which have shown consistent growth over
the years, have bright future prospects, and are expected to continue sustained
growth in the future.
BOND: An instrument of loan raised by
the government, bank or a company against a specified interest rate and a
promised date of repayment. Company bonds are called Debentures, which are
secured by mortgage against company assets, as distinguished from fixed deposits accepted by companies, which are un secured.
BOOK CLOSURE: A company before
declaring a Dividend, Issue of bonus or rights shares, closes its register of
members for a certain period during which no transfer of shares is registered.
Only those share holders whose names appear on the register after the book
closure are eligible to receive dividends and bonus shares and entitlement to
rights shares.
BOOK LOSS: A trader will sustain loss
only when he sells shares whose prices are fallen. Until then he will incur
only book loss. Loss not actually sustained.
BOOKING PROFIT: Practically earning
profit by selling the shares whose prices are appreciated. When the prices of
shares which a trader holds go up in price, the trader has made only book
profit. When he actually sells them he practically earns profit.
BOOM: The continuous movement of share
prices in upward direction.
BOTTOM: Bottom is the lowest price of
a share within a day, week, month, year or any other stipulated time period.
BOTTOM OUT: When share prices hits
their lowest price level and recovers slowly from that level, they are called
as bottomed out.
BOZU: A stock either achieving new
high or falling to a new low in a trading cycle, indicating a bull or bear
dominance.
BREATH OF THE MARKET: It indicates
the percentage of advancing stocks with that of the declining stocks. If the
total advancing number of stocks is more than the declining number of stocks,
it indicates that the market breath is positive. If the total advancing number
of stocks is less than the declining number of stocks, it indicates that the
market breath is negative.
BULL: A stock market operator, who
keeps buying shares to sell later at much higher price to earn profits
believing that the share prices are going to rise.
BULL MARKET: A continuous upward
movement of share prices sustained by buying pressure of actual investors or
Bulls.
BUSINESS DAY: When the stock exchange is open for trading. It is also called as Trading day.
BUYING CLIMAX: When a rapid rise in
price of shares has attracted most of the buyers and reaches certain stage
leaving hardly anyone to buy at even higher prices, it is called as Buying
climax. From this stage share prices will fall sharply.
CHARTISTS: A Technical analyst who
forecasts the future prices of shares by analyzing the price and volume charts
of shares. Chartists believe that share price movements have meaningful patters
which reflects the demand and supply forces of shares to understand the future price
movements of shares.
CIRCUIT BREAKER: A system to check
excessive speculation in the stock market applied by the stock market
authorities when the index rises or falls by more than 5% Trading is suspended
at Circuit Breaker level for some time to let the market cool down.
CLOSE: The last traded price of a
share transaction on a particular trading session in the Stock Exchange.
CONTRARILY: A trader who does the
exact opposite of what every one else is doing. He buys shares when every one
is selling and sells shares when everyone is buying. The contrarily believes
that the markets perform the opposite of what the majority of traders think.
CORRECTION: A sharp reversal in downwards direction of the majority of share prices after a bull run.
CRASH: A share fall in share prices within a short period of time generally due to panic among traders and investors due to certain sudden factors.
DAISY CHAIN: A large quantity of buying and selling among themselves by a group of Stock Market Manipulators to give the impression that the share is being largely traded and that the price is risking. After certain point, the manipulators sell their shares to innocent investors, who then discover that there is no one to buy from them at high prices.
DART BOARD INVESTING: The strategy of investing in roughly selected stocks in the belief that this stocks will also perform at par or better than carefully selected stocks which is selected basing on fundamental and technical analysis. This theory became popular when a group of people in New York in the year 1967, selected a page of stock market quotations and threw darts at the share prices. They picked all the twenty eight shares the darts had hit and notionally invested equal amounts in each share. Fifteen years later their investments had far out-performed the stock market average of appreciation.
DEAD CAT BOUNCE: A temporary recovery in share price basing on deceptive factors.
DEFLATION: It is opposite to inflation. Deflation is a reduction in national income and output, accompanied by a general fall in prices. During a deflationary period the stock market usually suffers form Depression.
DELTA STOCKS: The least liquid stocks in a Stock Exchange.
DEPRESSION: A state of falling economic activity reflected by falling prices, excess of supply over demand, low economic activity, increased UN-employment and Deflation. An economic depression administers shocks to the stock market causing prices to fall drastically.
DERIVATIVE: A financial instrument which derives it value from an underlying asset like Stocks, Index, commodities, Bonds, Currency, Foreign exchange etc.,
DISCOUNTING: The stock market reacting quickly to news or other factors that have an impact on stock market either directly or indirectly.
DOW JONES OR DOW JONES INDUSTRIAL AVERAGE: First stock market index in the world comprising of US Blue chip companies.
DRY RUN PORTFOLIO: An imaginary portfolio maintained by an investor without actually buying and selling of shares. This dry run portfolio gives experience to an investor to invest wisely in stock market.
DULL MARKET: A period in which little buying and selling activity take place in stock market.
FII: Foreign Institutional Investor. Foreign Institutions or Foreign Financial companies are ow permitted to operate in the Indian Stock Market. With large amounts of funds their participation gives strength to the stock markets.
FOLLOW UP SUPPORT: In strong uptrend of stock prices, the price increases for many reasons. This needs to be followed up by further purchases in bulk quantities. If this is lacking, the share price may remain struck at the slightly higher price or it may fall.
FORMULA PLANS: Stock market investment plans with clear courses of action which overcomes the problems of timing the buying and selling decisions.
FREE LUNCH THEOREM: The theorem states that if one wishes to make money in the stock market, one must work hard and take calculated risks.
GAP: A gap is noticed when the intra day high and low price of shares out distance the previous trading day's high and low. A gap is usually a sign of over bought and over sold market and indicates a correction.
HAMMERING: Continuous selling of shares by operators to bring the stock prices down, often short selling heavily generally done by bears.
HEAVY MARKET: A market with larger quantities of shares for sale with evry few buyers resulting in falling prices.
HIT THE BID: If Ask price of a share is higher than the Bid price, the seller of share hits the bid price if he accepts the lower bid price.
HORIZONTAL PRICE MOVEMENT: The movement of share price within a narrow range of ups and downs.
IMBALANCE OF ORDERS: Too many people trying to buy or sell the same share without opposite matching orders to balance the trades.
INACTIVE SHARES: Shares which are brought and sold rarely in the stock market. A listed share which is transacted less than four times a year may be called as inactive shares.
IN-AND-OUT TRADER: A trader who buys and sells the same share in the course of the trading day to profit from sharp price movements.
INFLATION: A general and sustained price increase across the market resulting in the fall of the real value of money which can buy only less and less.
LIQUIDITY: In Stock market Bid is the buyer's price. It is this price that you need to know when you have to sell a stock. Bid is the rate/price at which there is a ready buyer for the stock, which you intend to sell. The Ask (or offer) is what you need to know when you're buying i.e this is the rate/price at which there is seller ready to sell his stock. The seller will sell his stock if he gets the quoted Ask price.
The difference in the prices of the best bid and ask is called as the Bid-Ask spread and often is an indicator of liquidity in a stock. The narrower the difference the more liquid or highly traded is the stock.
LISTED COMPANY: A company which has a listing agreement with a stock exchange and whose shares are quoted and listed at the Stock Exchange.
LONG TRADES: In long trades you buy stocks first wait for some time till the price increases and sell it afterwards at higher price to make profit. You will have long position if you buy first and you close your long position by selling stocks which you have purchased. In long trades you buy stocks expecting that the price will increase and you will earn profit if the price increases as expected by you. On the other hand if the price falls you will incur loss on that trade. In long trades you keep you stop loss below your purchase price.
MARKET FORCES: The forces of demand and supply which influences the prices of stocks. The imbalance in demand and supply results in rise and fall of stock prices.
MARKET TIMING: Taking a decision regarding when to buy or sell a share.
MARKET TONE: Market Tone indicates the health of the stock market. It is good when the bid and offer prices have a small gap and the volumes are large. It is bad when there is little trading and the gap between bid and offer prices is large.
MELT DOWN: Fast and uncontrolled fall in share prices is referred as melt down.
MIDDLE PRICE: Center price between Bid Price and Ask price.
MIXED TREND: If there is Bullish trend for some shares and Bearish trend for other shares, it is called mixed trend.
MURAT TRADING: Short session trading on the auspicious day of Diwali.
NARROW MARKET: Inactive market in which there is low volume of trading and great fluctuations in price compared to average trading volume.
NASDAQ: National Association of Securities Dealers Automated Quotation System. NASDAQ was the first screen based, floor less computer trading system, now the second largest stock market in the United States.
NERVOUS MARKET: Stock market which is reacting sharply to sudden news, policy announcements, budget presentation etc.,
NYSE: The New York Stock Exchange. Established in the year 1793, it is the oldest and the largest and the best known among the stock exchanges in the world.
NIFTY: A select group of fifty shares of the National Stock Exchange of India
NIKKEI: Index of share prices of Tokyo Stock Exchange.
OVER BOUGHT: It indicates a sharp rise in the price of a shares as a result of heavy buying by investors and speculators in the hope of further rise. If the price of a share reaches this over bought zone, it is prone to an imminent correction, as profit booking will take place at this level by the holders of shares.
OVER SOLD: It indicates that the prices of share has fallen too fast as a result of excessive selling and there are few sellers left. If the price of a share reaches this over sold zone, the price will start rising as the low prices attracts buying interest.
PANIC: Heavy selling out of fear.
PEGGING: Stabilizing the price through intervention by the Government controlled agencies which buy when the price falls sharply and sell when the price recovers.
PERFECT COMPETITION: A market condition in which no buyer or seller has the power to influence the price.
PIVOTAL SHARES: Shares of Blue Chip companies act as pivot on which the market is balanced. If they turn bullish, the market looks up. If they turn bearish, the market follows.
POOL: A group of speculators, who get together and use their combined strength o manipulate share prices.
POSITION: An investors stake in a particular share. Long Position indicates number of shares owned and short position indicates number of share owed.
PER-MARKET: Trading that takes place before the official opening of a stock market.
PROFIT BOOKING: Selling shares to realize profit when their prices have risen above purchase price.
PUNTERS: Speculators who hopes to make quick profits by buying shares, holding them for short period and selling them to make quick profit.
QUOTATION: Highest bid price and lowest ask price of a share.
QUOTE DRIVEN: Electronic stock exchange in which quotations made by market players determine the prices of stocks.
QUOTED PRICE: The price at which a share was last bought and sold on the stock exchange.
QUOTED SHARES: The shares of a company which are quoted on the official list of the stock exchange.
RALLY: Continuous rise in the price of a share or in the overall stock market.
RAMPING: Heavy buying of a stock from the market to increase its demand and price. If the price rises, the ramper sells his holding and quits from the shares.
RANGE: The high and low of the price of a stock or the market over a period of time.
REACTION: Temporary reversals and changes in the market direction.
RECOVERY: Share prices increasing after a period of fall.
RESISTANCE LEVEL: Resistance defines that level where sellers are too strong to allow price to rise further. It is a level at which the rise in the price in the price of a share has repeatedly halted as there are more sellers at that price than buyers. If the price manages to move above this resistance level, it gains strength to move to further higher levels.
RETRACEMENT: The price of share moving in the opposite direction after sharp rise or sharp fall.
RIGGING: Manipulating the share prices to attract innocent investors to buy or sell shares.
SCAM: Fraud or cheating committed by an individual or group for financial gains.
SCRIP: Share certificate.
SHORT TRADES: In short trades you sell stocks first, wait for some time till the price falls and buy it afterwards at lower price to make profit. In stock market you can sell stocks without possessing (having) them. Generally you should sell stocks first and enter into short trades if you expect that the stocks price will fall from the existing level. You will have short position if you sell stocks first and you close your short position by buying the same stocks which you have sold. In short trades you sell stocks expecting that the price will fall and you will earn profit in the price falls as expected by you. On the other hand if the price increases you will incur loss on that trade. In short trades you keep your stock loss above your selling price.
In both long trades and short trades, you will earn profit if you sell at higher price and buy at lower price. In case if your selling price is lower than buying price you will incur loss in both long trades and short trades. The only difference between long trades and short trades is, In long trades you buy stocks first and sell it afterwards and in short trades you sell stocks first and buy if afterwards.
SLEEPER: A share which has become inactive for a long time with little investor interest often selling below its value.
SLUMP: A period at which the prices and employment are at their lowest, reflected in the downward movement of share prices. Recovery from a slump is often slow.
SNOW BALLING: A sharply moving price action activates a number of stop orders, to buy or sell. This puts further pressure on the rising or falling price activating more stop orders creating further rise and fall in a snow balling effect.
SOFT MARKET: A market dominated by selling pressure without any buying interest. Further slight selling pressure causes the prices to drop further. Soft, because easily depressed.
SPECIFIED SHARES: The most widely and actively traded shares also know as Group A securities, Cleared Securities etc.,
SPECULATION: An activity in which a person assumes high risks to achieve large gains. The time span in which the gain is sought to be made is usually very short. The shorter the term, the more speculative the investment is.
SPREAD: The difference between highest Bid price and Lowest Ask price of a share.
STOP LOSS: An exit price level fixed by a trader to minimize his loss if the trade went against his expectations.
SUPPORT LEVEL: Support level defines that level where buyers are strong enough tokeep the price from falling further. It is a point at which the fall in price of a share has stopped since there is more demand for the stock than supply. If however the share price falls below this support level, it is expected to fall further.
TAKE A FLIER: Involving in a highly risky speculation, knowingly.
TAKE OUT: Withdrawing money from a trading brokerage account, when there is credit balance.
TARGET PRICE: When a trader has entered into a trade, usually he fixes a price which he expects the share to reach. This is the target price. In stock market most gains are made by closing the trades at target price and most losses are result of holding on to a share hoping that it has an endless possibility of appreciating.
TECHNICAL ANALYSIS: A method of forecasting the future share price movements based on a study of price and volume charts and graphs, on the assumption that share price trends are repetitive, since investor psychology follows a certain pattern, what is seen to have happened before is likely to be repeated.
TECHNICAL CORRECTION: A small downward movement of share prices in a rising market, generally as a result of investors booking their profit because prices have reached either their target level or major resistance level.
TECHNICAL RALLY: A temporary rise in stock prices in a falling market, generally as a result of investors buying at current low prices, or the prices might have reached support levels.
THIN MARKET: Stock market in which there is a very think volume of trading.
TIGHT MARKET: Actively traded market with a narrow bid ask spread.
TRADING RANGE: The range within which, a share has been traded between high and low for quite sometime.
TREND: A short term, medium term or long term direction of the stock prices in upward, downward or sideways movement. This shows the direction of the market at that particular time.
TREND LINE: A straight line drawn connecting the successive higher points or lower points of a share price over a period in the immediate past.
TWO SIDED MARKET: A market in which both Bid and Ask prices are firm and both buyer and sellers are assured of finishing their transactions.
UNDER VALUED SHARES: Shares selling below their book value or the price earning ration.
UNREALIZED PROFIT: Unrealized profit. A trader will earn profit only when he sells shares whose prices are appreciated. Until then he will have only Book Profit. Profits not actually realized.
UNLISTED SHARE: A share which is not registered with any stock exchange and therefore does not feature on any stock exchange list. These shares are very difficult to sell and carry a large risk.
UNLOADING: Selling shares when prices are sharply falling to avoid further loss. Bulls, when they get tired waiting for the price, unload when the market is falling, causing prices to fall to further lower levels.
UPTICK: A transactions data high price than the preceding one of the same stock.
VOLATILE SHARES: Shares subject to sharp and violent fluctuations in price, showing a considerable difference between their highest and lowest recorded prices.
VOLUME: The total number of shares traded on a particular day or over a particular time. It shows the strength or weakness of the trend.
WALL STREET JOURNAL: The most distinguished journal of Finance and investment published five days a week by Dow Jones and Company in the United States.
WARE HOUSING: Accumulation of shares in large numbers.
WASH SALE: Buying and selling of a share in large numbers within a short period of time to generate artificial market activity and a rise in the share price for fraudulent gains.
WEAK MARKET: A stock market in which there are more sellers and very few buyers resulting in a decline in stock prices.
WHIPSAWS: Losing money by buying stocks just before price falls and selling stocks just before prices rise.
WIDE OPENING: Considerable difference between the bid price and ask price of a share at the opening of a day's trading.
YO-YO STOCK: Highly volatile stocks which go up and down like a YO-YO.
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