Take a look at our list of the financial terms associated with trading and the markets. From beginners starting their trading journey to experts with decades of experience, all traders need to clearly understand a huge number of terms.
RSI stands for Relative Strength Index and is a technical analysis indicator that measures the strength of a security's price action, by comparing the magnitude of recent gains to recent losses. The RSI ranges from 0 to 100, with values above 70 indicating overbought conditions and values below 30 indicating oversold conditions. Traders often use the RSI as a buy or sell signal, depending on whether the RSI is above or below a certain level.
Is a higher RSI value better?
A higher RSI value generally indicates that a security is overbought, which means that it is trading at a relatively high price compared to its recent price history. Traders may interpret this as a signal to sell, or to be cautious about buying. Traditionally, an RSI value of 70 or above is considered to be overbought, and a value of 30 or below is considered to be oversold.
Rice is a “soft” commodity - referring to those that are grown and not mined - and is the third most-farmed grain in the world, behind cotton and wheat. It is a food staple for billions of people, spread throughout Asia, the Middle East, and Latin America.
Rice is priced in USD per hundredweight (CWT). In April 2008 prices of the grain peaked at $24.46/CWT, while in February 1982 they hit a low of $0.75/CWT.
China produces the bulk of the world's rice. India, Indonesia, Bangladesh, Vietnam, and Thailand are also big producers.
Rice prices are affected by many factors, including stock levels, the pace of demand growth, and changes in government spending on agriculture. One of the biggest drivers of volatility is crude oil prices - rising prices push up the cost of production and transportation.
Rice futures allow you to speculate on, or hedge against, changes in the price of rice. Futures rollover on the fourth Friday of February, April, June, August, October, and December.
Silver (XAG) has long-been synonymous with money, indeed, in some languages the two words are the same. The white metal has been used for investment and jewellery for thousands of years, and its distinctive characteristics ensure it continues to be in high-demand.
Silver is priced in USD per troy ounce. Its price peaked at $49.45 in January 1980, and reached an all-time low of $3.55 in February 1991.
The majority (85%) of silver production comes from mining, with the remainder sourced from scrap and stockpiles. While silver can be recycled, it is less economical to do so than with other precious metals. The top producers of silver are Mexico, Peru and China.
Silver is widely used in photographic, industrial, medical and telecommunications technology. It is also highly sought after for investment purposes. Its price is influenced by industrial demand, demand for jewellery, coins, medals and silverware, as well as the price of gold and the strength of the US Dollar.
What is a Position in trading?
A position in trading refers to the amount of a security or financial instrument that is held by an investor or trader. It can be a long position, where the trader has bought the security and expects its price to rise, or a short position, where the trader has sold the security and expects its price to fall. The size of the position is typically measured in units of the security or financial instrument, such as shares or contracts. The trader or investor can then make a profit or loss based on the movement of the price of that security or instrument. In addition, an open position is one that has been entered into but not yet closed or settled, and a closed position is one that has been settled or offset by an opposing trade.
What is a margin in finance?
A margin in finance is the amount of money an investor borrows to purchase or trade securities. It is the difference between the total value of the borrowed funds and the market value of the collateral provided as security for the loan. Margin trading allows investors to buy more securities than they would otherwise be able to purchase with just their own capital.
What is margin vs profit?
Margin and profit are related but different concepts in finance and trading.
Margin refers to the amount of money or collateral that is required to open a leveraged position, such as a margin account, which allows traders to buy securities by borrowing money from a broker. Profit, on the other hand, refers to the amount of money that is gained from a trade or investment, after all costs and expenses have been subtracted. Profit is the result of a successful trade, which is the difference between the buying and selling price.
How do I calculate margin?
There are a few different ways to calculate margin, depending on the context and the type of trade or investment.
One of the most common ways to calculate margin is to use the following formula:
Margin = (Value of Trade / Leverage) x 100%
Amortization is the process of charging the cost of an asset to expense over a specific timeframe. Amortization also defines the practice of spreading the repayment of a loan. This shifts the asset from the balance sheet to the income statement.
Amortization reflects the consumption of an intangible asset over what is considered a useful timeframe. It is used for the gradual write-down of the cost of those intangible assets that have a specific useful life. It is common to charge interest which is calculated based on the duration and other variables.
Amortization should not be confused with Depreciation. The difference between them is that amortization is about charging “Intangible Assets” to expense over time. While depreciation is about charging “Tangible Assets” to expense over time.
How to calculate amortization?
As we do not provide economic or trading advice we can only include here what is considered to be a generally agreed upon explanation. As stated, generally an Amortization can be calculated by using a straight-line formula such as: (book value - residual value) / useful life.
An Acquisition is a business transaction where one company buys all, or part, of another company's shares or assets. This can be done in an attempt to gain control of, and expand on, the target company's market while also gaining or at least conserving resources.
There are three main forms of “pairing business together”:
As part of the Acquisition process, the acquiring company purchases the target business's shares or assets, which gives it the authority to make use of the target’s assets as if they are its own.
Why do companies make acquisitions?
Companies make acquisitions as there are several benefits to doing so, including lower entry barriers, growth and market influence. There are also some challenges and difficulties associated with this process. These include conflicts of cultures, redundancy, contradicting objectives and unmatched businesses.
What are the four types of acquisitions?
There are four types of acquisitions that companies perform.
A Reversal is when the direction of a financial market or asset moves in the opposite direction from its current trend. Reversals can occur over a period of time and can be either bullish (price increasing) or bearish (price decreasing). Being aware of these trends can help traders maximize their profits.
What is an example of reversal?
If the stock market has been rising for several weeks and then begins to fall, that's considered a reversal. Reversals are an important concept for investors to understand as they can indicate a change in sentiment that could lead to further movement in the same direction.
Risk management in trading is a strategy for mitigating losses. It involves understanding and analyzing risks, taking preventive steps to protect against potential losses, and having plans in place to address unanticipated situations. Good risk management practices help traders limit their downside and stay ahead of market volatility.
How do you manage risk in trading?
Traders can practise risk management in lots of different ways. It can be done by using strategies like position sizing, stop-loss orders, diversifying investments, and hedging. Through careful planning, you can set limits on your potential losses, identify potential opportunities and adjust your strategy accordingly. With disciplined risk management, you can protect your capital while you trade.
The risk/reward ratio is a known concept for those engaging in business. So, what is a Risk/Reward Ratio in trading, and does it follow the same guidelines and practices of the business world?
In trading, the Risk/Reward Ratio measures the expected gains of a given trade, asset, or position against the risk of potential loss. It is typically shown as a figure for the assessed risk separated by a ':' from the figure for the prospective reward.
What is a good Risk/Reward Ratio?
Acceptable ratios can vary, based on multiple factors. You can calculate this by dividing your "reward" (the end result or net profit) by the price of your maximum risk. It is generally accepted that if a risk is equal or greater than the corresponding reward, the trade position will not be worth the risk. Equally generally acceptable is the notion that a ratio greater than 1:3 is minimally required in order to justify the risk, i.e. a good risk/reward ratio.
By definition, this ratio quantifies the relationship between the potential currency lost, if the trade or action taken do fail, versus realized sum (gained) if all goes as planned.
Traders make use of the Risk/Reward Ratio to as one of the means to determine viability or worthiness of a given investment. One way to limit risk is to issue stop-loss orders, which trigger automatic sales of stock or other assets when they hit a specific value. This enables traders to limit potential risks.
A “Rights Issue” is when a company offers an issue of its shares at a special price by to its existing shareholders. This new and reduced price is in proportion to their existing holding of the company’s “old” shares. An after effect common to offering a Rights Issue is that the share price is further reduced due to additional dilution of the share value. A typical reason for any given company to offer a rights issue would be to raise capital.
Is a rights issue a good thing?
It depends on the specific circumstances and the reasons for the rights issue. A rights issue can provide a company with additional funding to invest in growth or to address financial difficulties. However, if a company is issuing new shares at a lower price than the current market value, existing shareholders may feel diluted and the stock price may decrease. Additionally, if the company is issuing new shares to address financial difficulties, it may be a sign of financial distress.
Does share price fall after a rights issue?
A share price may fall after a rights issue due to dilution of existing shareholders' ownership in the company, as more shares are issued, thus reducing the value of each individual share. Additionally, if the new shares are issued at a lower price than the current market value, the stock price may decrease. However, this is not always the case as the company may have a good reason for the rights issue such as investing in growth opportunities or raising funds to pay off debt, that could also boost the stock price.
Can a rights issue be sold to anyone?
A rights issue is typically offered to existing shareholders of a company, allowing them to purchase additional shares in proportion to their current holdings. However, the company may choose to offer the rights issue to a broader group of investors, such as institutional investors or the general public. The terms of the rights issue will be outlined in the prospectus and the decision of who can participate will be made by the company.
In trading, resistance level is a price point at which the price of a security or financial instrument tends to encounter selling pressure, making it difficult for the price to rise above that level. The resistance level is seen as a ceiling, as the price has a hard time going above it. Traders use resistance levels to identify areas where they expect the price to stall or reverse direction. This can be determined by observing the historical price movement of a security or financial instrument, looking for areas where the price has consistently failed to break above. Resistance levels are also used in combination with support levels to identify potential price ranges and trade entry or exit points.
What happens when a stock hits resistance?
If a stock hits a resistance level it can cause the stock to stall, move sideways, or even reverse direction. At resistance level traders that have taken a long position might decide to take profits, while traders that have not yet taken a position might decide to wait for a break above the resistance before buying.
When a stock hits resistance, traders will typically observe the stock's behavior at that level to determine if the resistance level is likely to hold or if the stock is likely to break through it. If the stock breaks through resistance, it can be considered a bullish sign, indicating that the stock is likely to continue to rise. On the other hand, if the stock fails to break through resistance, it can be considered a bearish sign, indicating that the stock is likely to stall or reverse direction.
Ripple (XRP) is among the largest cryptocurrencies by market cap, following Bitcoin and Ethereum.
Ripple, known as XRP, is priced in USD. It saw a high of $3.20 in January 2018.
When people talk about Ripple they are not just talking about the currency, but the Ripple network which could change the way people complete currency transfers.
Unlike other crypto payment networks, Ripple allows you to make money transfers in any form - be that Ripple, Bitcoin, USD, Yen or GDP. Plus, you can receive money in a different form to how it has been sent. For example, you could be sent Bitcoin but collect your money in USD.
Payments can happen in seconds, a significant improvement on the days or weeks required for a wire transfer with a bank.
The payment network has already seen endorsements, with American Express and Santander partnering with it for cross-border payments between the US and UK.
A basis point (abbreviated as BP, bps or “bips”) measures changes in the interest rate of a financial instrument. It is also used describe the percentage change in the value of financial instruments or the rate change of an index. They are less ambiguous than percentages as they represent an absolute, set figure instead of a ratio.
Why do we use Basis Points?
In the bond market, a basis point is used to refer to the yield that a bond pays to the investor. They are also used when referring to the cost of mutual funds and exchange-traded funds.
Working orders, also known as pending orders, include Stop orders and Limit orders. Essentially, they’re instructions for a broker to perform a trade when an asset hits a certain price. These orders inform brokers that traders wish to make that trade only if something happens to the asset price.
What is the best order type when buying stock?
The best order type depends on the individual's specific needs and market conditions. It's important to understand the trade-off between speed and price certainty when choosing an order type. Market orders provide immediate execution but at the current market price, while limit orders offer price certainty but may not be executed if the desired price is not reached.
What is an open work order?
An open work order in trading is an outstanding order to buy or sell a security that has not yet been executed. It remains open until it is either filled or cancelled by the trader.
Margin trading refers to the practice of borrowing money from a broker to purchase securities. It allows traders to buy more securities than they could afford to buy with cash alone, by leveraging the securities they already own as collateral. This increases the potential returns but also increases the potential risks, as the trader is responsible for paying interest on the borrowed money and must also cover any losses. Margin trading is considered to be a high-risk strategy and is only suitable for experienced traders with a good understanding of the risks involved.
How much money do you need for margin?
The amount of money required for margin trading depends on the minimum deposit requirement set by the broker. For markets.com this is 100 of your local currency, with the exception of South Africa where it is 1000 rand.
What level of margin is safe?
The level of margin that is considered safe depends on the trader's risk tolerance and investment goals. A lower margin level is generally considered to be safer, as it reduces the potential for large losses
The closing price is the final price at which a security is traded during a trading session. It is used to determine the settlement price for trades and the value of securities at the end of the trading day.
Why is closing price important?
The closing price is important for several key reasons. Market players such as traders, investors, banks and financial institutions as well as regulators use the closing price as a reference point for determining a stock’s performance over time (which can range from a as little as seconds or minutes prior or past the closing price to durations such as a week, through a month and over the course of a year).
What is 'after-hours' trading?
After hours trading refers to the buying and selling of securities outside of the regular trading hours of the major stock exchanges, typically 4:00 PM to 8:00 PM Eastern Standard Time. This can include both electronic trading and trading by phone. It is usually less liquid than regular trading hours and prices may be more volatile.
Can you sell at closing price?
Yes, you can sell a security at the closing price. The closing price is the final price at which a security is traded during a trading session, and can be used as a reference point for determining the settlement price for trades. If you sell a security at the closing price, you will receive the price of the security at the end of the trading day.
A margin call is a demand from a broker to a trader that additional funds must be added to the trader’s account in order to maintain their current positions.
What would trigger a margin call?
A margin call occurs when an investor using margin (borrowed money) to trade in securities or other financial instruments, does not have enough money or equity in their account to meet the minimum margin requirement set by their broker. This can happen when the value of the securities in the account falls below a certain level, resulting in a negative balance in the margin account. A margin call can be a warning sign that the investor is taking on too much risk, and it can be a good opportunity to re-evaluate their investment strategy.
What happens if you get a margin call?
When a margin call happens, the broker will contact the investor and ask them to deposit additional funds into their account or sell some of their profiting securities to bring the account equity back above the minimum margin requirement. If the investor is unable to meet the margin call, the broker may take action to liquidate the investor's securities in order to bring the account back to a positive balance.
Do you lose money on a margin call?
A margin call itself does not necessarily mean that you will lose money, but it does indicate that you are at risk of losing money if you do not take action to meet the call. When a margin call occurs, it is a warning that your account balance has dropped below the minimum margin requirement set by your broker, and if you do not take action to bring it back above that level, your broker may take action to liquidate your securities in order to bring the account back to a positive balance.
A bearish market is a condition in the stock market where prices are on a downward trend, characterized by widespread pessimism and investor fear. This often results in a decline in the value of securities, leading to a decline in the overall market.
How long do bear markets last?
The duration of a bear market can vary and can last anywhere from a few months to several years. It depends on a number of factors, including the underlying cause of the market downturn, the state of the overall economy, and government or central bank interventions.
How do you know if a market is bearish?
A market is considered bearish if there is a persistent downward trend in the prices of securities, typically accompanied by increased selling pressure and declining market indices such as the S&P 500. This can be indicated by technical analysis, such as chart patterns showing lower highs and lower lows, or by broader economic indicators such as declining gross domestic product (GDP) and rising unemployment.
What is the longest bear market in history?
The longest bear market in history is the Great Depression, which lasted from 1929 to 1939. During this time, the stock market experienced a severe decline, with the Dow Jones Industrial Average losing 89% of its value. The Great Depression was a global economic downturn that had far-reaching impacts and was marked by high levels of unemployment, homelessness, and economic hardship.
The US Dollar Index, introduced in 1973, allows you to take a position on the overall strength of USD as measured by its performance against a basket of currencies. When it was launched the index had a base level of 100; it reached an all-time high of 164.72 in February 1985, and struck a low of 70.698 in March 2008.
Unlike the trade-weighted index of the US Dollar produced by the US Federal Reserve, the composition of the USDX has remained unaltered since its inception, save for one change: in January 1999 the euro was created, so many individual European currencies were removed from the index and replaced by the euro. Despite this change, the euro still has the same weighting in the index (57.6%) as all the currencies that it replaced combined.
After the euro, the Japanese yen is the second-largest proponent in the dollar index, with a weighting of 13.6%. The British pound with 11.9%, and the Canadian dollar, with 9.1%, are the next two largest components.
An open position in trading refers to a trade that has been entered into but not yet closed or settled. The position remains open until the trader decides to close it by executing an opposing order or if the order reaches its expiration. It can refer to a long or short position in a security or financial instrument.
When should you close your position?
A trader should close their position in trading when their predetermined criteria for exiting the trade have been met, such as reaching a certain profit level or stop-loss point. It could also be closed because the trade no longer aligns with their overall strategy or market conditions have changed.
A long position is a market position where the investor has purchased a security such as a stock, commodity, or currency in expectation of it increasing in value. The holder of the position will benefit if the asset increases in value. A long position may also refer to an investor buying an option, where they will be able to purchase an underlying security at a specific price on or before the expiration date.
What is riskier a long or a short position?
A short position is considered riskier than a long position because the potential loss is theoretically unlimited, while the potential profit is limited to the amount of depreciation in the value of the security. When an investor short sells a stock, they borrow shares from someone else and sell them, with the hope that the price will drop so they can buy the shares back at a lower price and return them to the lender, pocketing the difference. In case the price of the stock rises instead, the loss for the short seller is theoretically unlimited as there is no limit to how high the stock price can go.
When should I buy a long position?
When an investor believes that the market will rise, they could consider purchasing a long position.
How can I protect my long position?
Protecting a long position often involves setting up a stop-loss order, which automatically sells the asset at a predetermined price. This ensures that any sharp market drops don't result in excessive losses for the investor.
A spot price is the current market value of an asset or security. It's the amount you would pay to buy or sell it at that exact moment in time. Spot prices are constantly changing, as they depend on supply and demand forces in the marketplace. Spot prices provide important insights into market trends and can be used by traders to make investment decisions.
Why is it called a spot price?
It is called a "spot" price because it refers to the price at which an asset can be bought or sold "on the spot" or immediately.
How is spot price calculated?
The spot price of a commodity, security, or currency is typically determined by supply and demand factors in the market. The price is influenced by a variety of factors such as production costs, political and economic conditions, and speculation.
A quoted price is the most recent price at which an asset was traded at. Global and local events, either of a financial nature or completely unrelated to finances continually affect the quoted prices of assets such as stocks, bonds, commodities, and derivatives changes continually throughout a trading. Additionally, It is often the price point where buyers and sellers agree on, the most up-to-date agreement between buyers and sellers, or the bid and ask prices. It is also where supply meets demand.
Is a quoted price legally binding?
In most cases, when trading in an exchange, the quoted price is binding and the trade is executed at the quoted price, with the exchange acting as a counterparty to the trade. However, when trading OTC (over-the-counter), the quoted price is not necessarily binding as the parties have more flexibility in negotiating the final price, and the counterparty risk is higher.
Arbitrage is trading that makes use of small differences in price between identical assets in two or more markets. An asset will most likely be sold in different markets, forms or via a different financial products.
Arbitrage is one alternative trading strategy that can prove exceptionally profitable when leveraged by sophisticated traders. It also carries risks which need to be considered prior and during an arbitrage.
Arbitrage as a trading strategy is when an asset is simultaneously bought and sold in different markets, thus taking advantage of a price difference, and generating a potential profit. Arbitrage is commonly leveraged by hedge funds and other sophisticated investors.
What is an example of arbitrage?
Without going into actual trading advice, here are several examples of Arbitrage in Trading:
• Exchange rates
• Offshore operations
• Cryptocurrency
And perhaps the most obvious and common form of arbitrage which is acting as a go between or affiliate, earning commission on price differences between the seller and the buyer.
Types of arbitrage traders use:
• Pure arbitrage - Traders simultaneously buying and selling assets in different markets to take advantage of a price differences.
• Merger arbitrage – When two publicly traded companies merge. If the target is a publicly traded company, the acquiring company must purchase its outstanding shares Convertible arbitrage.
• Convertible Arbitrage. It is related to convertible bonds, also called convertible notes or convertible debt.
Trailing Stop Orders are a type of stock order that lets investors adjust the stop price as a security rises or falls. This order works by continuously monitoring the price of a security and dynamically adjusts the stop price with every tick. The advantage of this type of order is that it allows investors to limit their losses, while locking in profits, without having to manually modify the stop-loss point.
Are Trailing Stop Orders good?
Trailing Stop Orders can be a good way to protect profits in your trading. They allow you to set an automated stop-loss that trails the price of a stock, adjusting up as it rises, while allowing you to lock in some gains if the stock begins to fall. This is especially useful when dealing with volatile stocks, giving you more control over your position.
What is a disadvantage of a trailing stop loss?
Trailing stop losses can help minimize risk when trading, however they also limit potential gains. The stop price adjusts based on market conditions, so as the price increases, the stop loss will move up. If the stock drops significantly and your trailing stop loss is too close, it may be triggered before you have a chance to react.
Which is better stop limit or trailing stop?
It depends entirely on the trader. A stop limit will sell at the specified price, while a trailing stop will track price changes and sell when the specified amount is exceeded. Different traders may have different needs and objectives, so which type of order is best will vary. Consider your goals before deciding which option is right for you.
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The Opening Price is the price at which a security first trades upon the opening of an exchange on a trading day. It is important to note that it may not identical to the previous day’s closing price. Also, for new stock offerings (IPO etc), Opening Price refers to the initial share price at the beginning of trade of the first day. Yet there are some cases when an opening price will also be the share price which was established by the first trade of the day, instead of being based on a price that was already in place when at the beginning of trade of that day at that specific exchange.
How is opening price calculated?
The opening price is can be calculated by taking the first trade price executed in that trading session. In case of stock trading it is the price of the first trade executed on the exchange when the market opens. Opening price is usually used to calculate the performance of the stock or any other asset for the day.
What is the difference between opening price and closing price?
The opening price is the price of an asset at the start of a trading session, while the closing price is the price of an asset at the end of a trading session.
Who sets the opening price of a stock?
The opening price of a stock is typically set by the stock exchange or market maker responsible for trading that stock.
Stop Orders are a type of stock order that helps limit the investor’s risk. The order triggers a purchase or sale once a set price is reached, either above (stop buy) or below (stop sell). Stop Orders are used to protect investors against an unfavorable price movements and lock in potential gains.
How long do stop orders last?
Stop orders are instructions given to a broker to buy or sell an asset when its price reaches a predetermined level. Stop orders remain in effect until the stop price is triggered, at which point the order becomes a market order and will be executed. This means that stop orders may last for an indefinite amount of time. It is important to monitor the current market price closely as stop orders do not guarantee execution.
Are stop orders a good idea?
Stop orders can be useful as they can help limit an investor's loss or protect a profit on a security. They are often used to automatically exit a position when the market moves against the investor. However, the use of stop orders may be subject to market conditions and the specific investment strategy of an investor, so whether or not they are a good idea depends on the individual's financial situation and risk tolerance.
An Overnight Index Swap (Swap Fee) is a process where the settlement of a deal is rolled forward to another value date, and a charge is levied based on the difference in the interest rates of the two currencies. Every day at 21:00 GMT, open positions are rolled over to the next day and the positions gain or lose interest based on the interest differential between the bought and sold currencies.
What is OIS compound?
The index rate is typically the rate for overnight lending between banks, either non-secured or secured. The fixed rate of OIS is typically an interest rate considered less risky than the corresponding interbank rate (LIBOR) because there is limited counterparty risk.
The LIBOR–OIS spread is the difference between IRS rates, based on the LIBOR, and OIS rates, based on overnight rates, for the same term.
Market Makers are financial institutions or investors that provide liquidity to the markets by placing buy and sell orders at specific prices. They are incentivized to do this in order to make profits from the bid-ask spread.
What is the difference between dealer and market maker?
A dealer and a market maker are both intermediaries in the securities market that provide liquidity and help facilitate trades. However, they have some key differences. A dealer is a person or entity that buys and sells securities for their own account and risk. They hold inventory of securities and make a profit by buying at a lower price and selling at a higher price.A market maker is a firm or individual that provides liquidity to the market by continuously buying and selling a security at publicly quoted prices. They are also called liquidity providers, and they make money by charging a bid-ask spread, the difference between the prices they are willing to buy and sell a security. They do not hold inventory of securities like dealers do.
Do market makers manipulate price?
Market makers are allowed to buy and sell securities at their own discretion, and they may adjust the prices they are willing to buy and sell a security in order to make a profit. However, they are also subject to regulatory oversight, and they must act in a fair and transparent manner. They are not allowed to manipulate prices, and any illegal activities such as insider trading, wash trading or any other form of market manipulation are strictly prohibited.
A reverse stock split, also known as a "reverse split," is a corporate action in which a company reduces the number of outstanding shares by canceling a portion of its shares and increasing the par value of its remaining shares. This means that for every N shares that a shareholder owns, they will end up owning 1 share, where N is the reverse split ratio. For example, if a company performs a 1-for-2 reverse stock split, a shareholder who previously owned 100 shares would now own 50 shares.
Is it better to buy before or after a reverse stock split?
It is not necessarily better to buy before or after a reverse stock split, as it depends on the specific circumstances of the company and the stock. A reverse stock split does not change the underlying value of the company, it only changes the number of shares outstanding and the stock price. However, it is important to understand that in general, companies that perform reverse stock splits tend to be struggling and have a low stock price. Buying before a reverse stock split may allow you to buy shares at a lower price, but it also means you're probably buying into a struggling company.
Is a reverse stock split good?
As with all things in the market, the answer is that it depends. The main reason for a company to perform a reverse stock split is to increase the per-share price of the stock, which can make the stock appear more attractive to investors and also bring it above a certain listing requirement in stock exchanges. Additionally, a reverse split can also help to reduce the number of shareholders and increase the liquidity of the stock, making it easier to trade. However, a reverse stock split can also be a sign of a struggling company, and it can also dilute the value of shares for the existing shareholders.
Online brokers are digital trading platforms that allow users to trade stocks, options, ETFs and other financial products online. They offer convenience and competitive pricing, making them popular among individual investors and traders.
What are the three types of brokers?
Trading brokers come in three main varieties: full-service, discount, and online. Full-service brokers offer a variety of services such as research, advice, and account management. Discount brokers are low-cost and may only offer basic services. Online brokers provide customers access to the markets with limited assistance.
Are online brokers safe?
Online brokers are generally safe when used correctly. It is important to use trusted and reliable providers, keep your account secure, and be mindful of any potential risks when trading online. For example, markets.com is fully regulated and controlled for maximum security and safety while you trade.
Financial Derivatives are financial products that derive their value from the price of an underlying asset. These derivatives are often used by traders as a device to speculate on the future price movements of an asset, whether that be up or down, without having to buy the asset itself.
What are the four financial derivatives?
The four most common types of financial derivatives are futures contracts, options contracts, swaps and forward contracts.
What are the advantages of financial derivatives?
Financial derivatives can provide several benefits such as hedging, leveraging and portfolio diversification. These financial instruments help in managing risk by protecting investors from price volatility, enable high leverage to increase profits and also allow for better portfolio diversification through a wider range of investments.
Financial Derivatives examples
The most common underlying assets for derivatives are:
• Stocks
• Bonds
• Commodities
• Currencies
• Interest Rates
• Market Indexes (Indices)
Note: In CFD Trading traders get access to all the above Financial Derivatives as well as additional ones more suitable for trading CFDs. As such, CFDs enable traders to buy a prediction on a stock (up or down) without owning the stock itself.
A Trading Commission is a service fee paid to a broker for services in facilitating or completing a trade.
How does a trade commission work?
Trade Commissions can be structured as a flat fee, or as a percentage of the revenue, gross margin or profit generated by the trade. At markets.com we do not charge our traders any commission fees on their trades and positions.
SLV, also known as iShares Silver Trust, tracks the price of silver bullion held in London. This ETF provides investors with direct exposure to silver as the ETF physically holds the precious metal in vaults in London. This fund is one of the most liquid of its peer group and is popular among retail and institutional investors.
This ETF is suitable for buy and hold strategies. Traders should consider this asset to gain exposure to the day to day price of silver bullion, to get access to physical silver or to diversify your portfolio and protect against inflation.
CFDs are a leveraged financial instrument that allow traders to gain exposure to an underlying asset, such as shares, commodities or indices. While this provides great potential for profits, it also carries significant risks. The main risk is the possibility of losses greater than your initial deposit if the market moves against you. CFDs also have costs associated with trading such as commissions and spreads. Make sure you understand the risks before trading with CFDs.
What are the disadvantages of CFDs?
CFDs are complex instruments and may not be suitable for everyone due to the risk of leverage. CFDs also come with costs, including spreads and commissions which can cut into potential profits. Furthermore, it's important to understand how margin calls work as well as potential losses from unanticipated price movements or illiquidity in the market.
How much can you lose in a CFD trade?
In a CFD trade, you can potentially lose more than your initial investment, as the loss is based on the difference between the entry and exit price of the trade. It is important to set stop loss orders to limit potential losses. Additionally, using proper risk management strategies can help to minimize losses.
Technical analysis is a type of financial analysis that looks at historical price movements and trading volumes to predict future price movements in the market. It involves studying trends, chart patterns, momentum indicators, and other factors to make informed decisions about trading. Technical analysis can help traders and investors gain insight into market sentiment, timing their trades for optimal returns.
Why is technical analysis important?
Technical analysis is a critical component of successful financial and trading strategies. It helps investors understand the past performance of a security, identify current trends and anticipate future price movements. Technical analysis relies on mathematical calculations and charting techniques to evaluate securities, which can be an invaluable tool for traders to optimize returns and manage risk.
Which tool is best for technical analysis?
There are many tools that can be used for technical analysis, and different traders may have different preferences. Some commonly used tools include:
Ultimately, the best tool for technical analysis will depend on the individual trader's preferences and the market conditions they are trading in. it's important to use multiple tools and indicators to validate the signals and make better decisions.
Maintenance Margin, or “variation margin,” is considered as the minimum amount of equity (i.e., funds) which needs to be maintained in a trader’s margin account before a margin call is issued as due to the account value being below a minimum threshold and not being able to support open margin trade positions. Margin accounts are what leveraged trades use to trade, where they can purchase securities such as stocks, bonds, or options with funds borrowed from the brokerage.
How do you avoid maintenance margin?
To avoid maintenance margin issues, traders should monitor their account closely and adjust their leverage if needed. If your maintenance margin is not maintained it will result in a margin call, which may indicate that the trader should reconsider the risk exposure of their portfolio.
Why are maintenance margins important?
Maintenance margins are important to protect against losses due to fluctuations in the market. They ensure that traders maintain adequate capital reserves and can cover any potential losses.
Earnings Per Share (EPS) is a financial metric that measures the amount of profit a company makes for each outstanding share of its common stock. It's calculated by dividing net income by the number of shares outstanding. Investors use EPS to measure how profitable a company is and to compare different companies in the same sector.
What is a good earnings per share? Is it better to have a high or low earnings per share?
There is no definitive answer to what constitutes a "good" earnings per share (EPS) as it can vary depending on the industry, the size of the company, and the expectations of the market. Generally, a higher EPS is considered better, as it indicates that a company is generating more profit per share of stock.
What is earnings per share vs dividend?
A dividend is a payment made by a company to its shareholders out of its profits or reserves. Whereas EPS is an indicator of a company's profitability.
The FTSE/JSE index, also known as the South Africa 40, is a market capitalisation-weighted index of the largest and most liquid 40 companies trading on the Johannesburg Stock Exchange.
The index was launched on 24th June 2002, with a base date of 21st June 2002 and a base value of 10300.31.
The largest sector in the index is Media, which accounts for 22.27% of the total index weighting. Basic Resources is the second largest, accounting for 19.9% of the total weighting, followed by Personal & Household Goods and Banks, with 12.43% and 12.35% respectively.
South Africa 40 futures allow you to speculate on, or hedge against, changes in the price of major stocks on the Johannesburg Stock Exchange. Contracts rollover on the second Friday of March, June, September, and December.
Materials Select Sector SPDR Fund (XLB) tracks US basic materials companies within the S&P 500. This asset uses the Materials Select Sector Index as its tracking benchmark. The limited spread and niche sector mean that it is heavily concentrated. Just a few holdings make up a big part of the portfolio, and there are only 24 holdings in total.
Top holdings for the benchmark index include DowDuPont Inc, Linde Plc, Ecolab Inc and The Sherwin-Williams Co.
Consumer Price Index or CPI is a measure of the average change over time in the prices paid by consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. It is considered as one of the most popular measures of inflation and deflation. CPI is also used to estimate the purchasing power of a country’s currency.
How is CPI Calculated?
CPI is calculated by considering Key contributors, including retail and services businesses as well as the U.S. rental housing market (housing accounts for approx. 30% of the CPI). There are several CPI variations:
• CPI-U index reviews the spending habits of urban consumers in the U.S.A. This constitutes for approx. 88% of the U.S population.
• CPI-W index for calculates changes in the costs of benefits paid to “urban wage earners and clerical workers,” which is used to calculate changes in the costs of benefits paid via Social Security.
• CPI ex-food and energy – is highly volatile and thus is excluded from the overall CPI.
A Purchasing Managers' Index (PMI) is a leading indicator that measures the health of the manufacturing sector and the broader economy. It is based on a survey of purchasing managers, who are asked to rate the relative level of business conditions, including employment, production, new orders, prices, supplier deliveries, and inventories.
How is PMI related to inflation?
PMI can be related to inflation because it is an indicator of economic activity and growth. When purchasing managers report increased activity, it can indicate an increase in demand for goods and services, which can lead to higher prices (inflation). On the other hand, when purchasing managers report a decrease in activity, it can indicate a decrease in demand, which can lead to lower prices (deflation). A high PMI reading can indicate that the manufacturing sector is expanding, which can lead to higher prices and inflation, while a low PMI reading can indicate that the manufacturing sector is contracting, which can lead to lower prices and deflation. Additionally, when prices of raw materials and other inputs rise, the PMI will decrease as the purchasing managers will be paying more for the raw materials used in production, and this can lead to inflation as well.
Is PMI a good indicator?
PMI is considered a good indicator of economic activity and growth, particularly in the manufacturing sector. It is widely used by economists and financial analysts to predict future trends and is considered a leading indicator of economic activity. The survey data used to calculate PMI is based on input from purchasing managers, who are typically considered to be well-informed about the state of the economy. Additionally, the PMI is released on a monthly basis, providing a timely view of the manufacturing sector and the broader economy. However, it is important to note that PMI is not perfect and should be used in conjunction with other economic indicators to get a comprehensive understanding of the economy.
ProShares Ultra Silver, also known as AGQ, is a single-day bet, not a buy-and-hold ETF. AGQ is a leveraged ETF that aims to deliver daily investment results that equate to twice the daily price performance of silver bullion, measured by US Dollar for delivery in London.
The foreign exchange market, also known as forex, is a decentralized market where currencies are traded 24/5. It has an average daily trading volume of over $5 trillion and facilitates the exchange of one currency into another for businesses, investors, and traders. It is influenced by economic and political events.
Why is Foreign Exchange important?
The foreign exchange market is important because it allows businesses, investors and traders to convert one currency into another, facilitating international trade and investment. It also enables countries to maintain control over their monetary policy and stabilize their economies. Additionally, the foreign exchange market is a major source of financial market liquidity and is used by a wide range of market participants, including banks, corporations, governments, and individual traders. It also enables people to manage the risk associated with currency fluctuations.
How is Forex trading done?
Forex trading is done by buying and selling currency pairs, using a platform provided by a Forex broker such as markets.com. Traders use different strategies and analysis to predict the price movements and decide whether to buy or sell a certain currency pair. It can also be done through contracts for difference (CFDs) which allow traders to speculate on price movements without owning the underlying currency.
The Sprott Silver Investment Trust (PSLV) seeks to provide a secure, convenient, and exchange-traded investment alternative for investors interested in holding physical silver bullion without the inconvenience that is typical of a direct investment in physical silver bullion. The Trust intends to achieve this by investing primarily in long-term holdings of unencumbered, fully allocated, physical silver bullion and does not speculate with regard to short-term changes in silver prices.
Industrial Select Sector SPDR Fund (XLI) tracks US industrial companies within the S&P 500. This asset uses the Industrial Select Sector Index as its tracking benchmark. The ETF provides concentrated exposure large-cap US industrial companies, with limited small and midcap companies.
The index comprises just 70 holdings from the industrial sector. Top holdings for the benchmark index include Boeing Co, 3M Co, Union Pacific Corp and Honeywell International Inc.
China AMC CSI 300 Index comprises 300 stocks from A-share companies in China. A-shares are stocks trades on the Shenzhen or Shanghai stock exchanges and are generally only available to Chinese citizens. This ensures they command a significant premium compared to H-shares which are listed on the Hong Kong Stock Exchange and available primarily for foreign investors.
China AMC CSI 300 Index ETF mirrors the performance of the CSI 300 Index. It is a benchmark of the 300 largest and most liquid Chinese stocks.
The VanEck Vectors Social Sentiment ETF (BUZZ) will track the BUZZ NextGen AI US Sentiment Leaders Index. This index consists of the most-favourably talked about stocks online, whether on blogs, social media or Reddit.
NUGT, also known as the Direxion Daily Gold Miners Index Bull 3x Shares, aims to deliver three times the daily return of the NYSE Arca Gold Miners Index. This is a leveraged fund. It is designed for intraday trades and it is not recommended for periods of greater than one day.
The NYSE Arca Gold Miners Index is a market-cap weighted index of public companies with global operations in developed and emerging markets. The companies in the index are primarily involved in gold mining, with some also involved in silver mining. Top holdings include Newmont Mining, Barrick Gold, Franco Nevada and Newcrest Mining. Canadian companies represent 52.14% of the asset.
The Xtrackers MSCI U.S.A. ESG Leaders Equity ETF (USSG) holds a basket of companies that score highly for environmental, social, and governance (ESG) factors, with roughly marketlike sector exposure. The fund’s index uses MSCI’s ESG rating methodology to assign a score to all US large- and midcap stocks.
The WisdomTree Emerging Markets High Dividend ETF (DEM) tracks the WisdomTree Emerging Markets Dividend Index. The index is a fundamentally weighted index that is comprised of the highest dividend-yielding common stocks selected from the WisdomTree Emerging Markets Dividend Index. This provides it with some downside protection from market volatility.
DEM is an equity fund, and has a mix of market sectors. It includes stocks from key emerging markets such as Russia and China, with assets including China Contruction Bank, China Mobile and Norilsk Nickel.
The iShares ESG MSCI USA Leaders ETF (SUSL) seeks to track the investment results of an index composed of U.S. large and mid-capitalization stocks of companies with high environmental, social, and governance performance relative to their sector peers as determined by the index provider.
Dow Jones Industrial Average - SPDR (DIA) mirrors the USA 30, which tracks 30 large-cap blue-chip companies – many of which are household names. The Dow Jones is one of the oldest indices in the world and is not considered to be volatile. However, because it is only 30 companies it is heavily influenced by the fortunes of those firms and is not a good indicator of the economy as a whole.
Stocks in the fund include Coca-Cola, Disney, Apple and Visa. The ETF is a good way to invest in the index. However, it is not ideal for those looking for broad exposure to US caps, as it only follows the top 30 companies. It is extremely liquid with a strong track record.
The Financial Conduct Authority (FCA) is a regulatory body in the United Kingdom that oversees and regulates financial firms to ensure they operate in an honest and fair manner, and to protect consumers. It is responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
The FCA’s functions include:
• Regulating the conduct of 50,000 businesses
• Supervising 48,000 firms
• Setting specific standards for 18,000 firms
What are the main objectives of the FCA?
The main objectives of the Financial Conduct Authority (FCA) are to protect consumers, protect and enhance the integrity of the UK financial system, and promote competition in the interests of consumers. This includes taking action to address any conduct that falls below the standards the FCA expects and working to ensure that firms compete in ways that are fair, transparent and not detrimental to consumers.
An IPO (initial public offering) is when a company makes its shares available to the public. This means the stock can be bought and sold by both retail and institutional investors. An IPO is usually underwritten by investment banks, who set up the sale of the shares on exchanges.
What is the difference between an IPO and a Stock?
An IPO is the process of a privately held company being transformed into a public one. The difference between stock and an IPO is that an IPO refers to public shares of a stock and not shares offered after that.
Initial public offerings can be used to raise new equity capital for a company. It monetizes the investments of private shareholders such as company founders or private equity investors. This enables easy trading of existing holdings or future capital raising. The disadvantages of IPO are the same trade-offs between equity and debt financing.
An Order in trading is a request sent by a trader to a broker or trading platform to make a trade on a financial instrument such as shares, Crypto, CFDs, currency pairs and assets. This can be done on a trading venue such as a stock market, bond market, commodity market, financial derivative market, or cryptocurrency exchange
What are the most common types of orders?
Common types of orders are:
• Market Orders. A market order is given by traders and investors as an order to immediately buy or sell an asset, security, or share. Such an order guarantees that the order will be executed, yet the actual execution price is not guaranteed.
• Limit Orders. A limit order is an order to buy or sell an asset such as a security at a specific price or better than that price. Traders wishing to define a maximum price for either buying or selling an asset can use limit orders.
• Stop Orders. Stop orders instruct brokers to execute a trade when the asset’s price reaches a certain level.
A MetaTrader is an electronic trading platform widely used by online retail traders. The MetaTrader application consists of both a client and server component. The server component is run by the broker and the client software is provided to the broker’s customers, who use it to see live streaming prices and charts, to place orders, and to manage their accounts.The platform works on Microsoft Windows-based applications as well as on Andriod and Mac OS applications.
Marktets.com supports the use of both the MetaTrader 4 and MetaTrader 5 trading platforms with its traders.
Metatrader 4 is still one of the most popular and easy-to-use trading platforms. With Expert Advisors, micro-lots, hedging and one-click trading.
Metatrader 5 is a powerful upgrade and the most advanced online trading platform It is a multi-asset derivatives platform for trading on CFDs and enables traders to perform hedging and netting, and delivers more technical indicators as well as more insight with market depth and a wider number of timeframes.
Can I trade on MetaTrader without a broker?
While you can download and use the MetaTrader software without a broker, it is not possible to trade without one. In order to execute trades on MetaTrader, you will need to open an account with a broker that offers the platform and deposit funds into that account.
While all traders know that crypto is traded online, they may not be aware that they can also trade more traditional markets such as bonds. So, what are Bonds, what is a bond, and where can you trade them?
A bond is a form of financial derivative trading. Traders take position on the price of the underlying instrument and not purchasing the instrument itself. As such, they buy a Bond CFD or Contract for Difference of that instrument. If a Bond CFD is expected to go up in value, traders can take a long position. The opposite is true of course and if the value of a bond is expected to fall, traders can take a short position.
A bond is a loan that the trader (now bond holder) makes to the issuer. Bonds can be issued by governments, corporations or companies looking to raise capital. When traders buy a bond, they are providing the issuer with a loan in return for that bond. The issuer takes on a commitment to pay the bondholder interest and to return the principal sum when the bond matures.
A bid is the highest price that a trader will pay to buy a stock or any other asset. On the other hand, the seller has a limit as to the lowest price he will accept, which is called an “ask”. The difference between the buyer’s bid and the seller’s ask is a spread. The smaller the spread, the greater the liquidity of the any asset.
What is difference between bid and offer in trading?
There are several differences between a bid and an offer in trading. One important key differentiator is that a bid describes how buyers are willing to want to buy for a lower price than what the seller indicated. While an offer represents the higher price initially requested by the seller.
Bitcoin is the first of the ‘cryptocurrencies' and remains the most stable. It was created in 2009 by Satoshi Nakamoto, whose identity remains a mystery.
His creation - Bitcoin - is a cashless currency. Balances are kept online and it is decentralised, allowing anonymity. Despite Bitcoin not being legal tender in most countries, it has continued to increase in popularity and its launch has sparked the creation of a number of other cryptocurrencies
It is priced in USD per Bitcoin and saw a record high of $68,789.63 in November 2021. Bitcoin futures trade as BTC.
Bitcoin has been criticised for its links to illegal activity and the dark web, as well as the high demand for energy created by ‘mining' Bitcoins. A PIN is necessary to access your Bitcoins, with as many as 20% of all Bitcoins thought to be lost to forgotten PINs
Bitcoin futures allow you to speculate on, or hedge against, changes in the price of Bitcoin. Futures rollover on the last Thursday of every month.
A market order is a type of stock order that allows an investor to purchase or sell securities at the current market price. It is one of the most common types of orders and it is executed as soon as it is placed, meaning the investor will get whatever price is currently available on the exchange.
Is it good to use market order?
A market order is an order to buy or sell a security at the best available current price. This type of order may provide an advantage over other types of orders by executing quickly, but it could also mean that the trade may not be filled at the desired price.
Why would you use a market order?
A market order is typically used when an investor wants to execute a trade quickly, and is willing to accept the current market price. This type of order is often used when an investor wants to take advantage of a price change or when they want to enter or exit a position quickly.
How long does a market order take?
A Market order is generally the fastest order to execute as it simply takes the current market price. You can expect a market order to be executed usually within seconds or minutes of being placed, as long as there is sufficient liquidity in the market.
Liquidity refers to how easily or quickly an asset can be bought or sold in a secondary market. Liquid investments can be sold readily and without paying considerable fees. This enables their holders to trade them for cash when needed.
What are the three types of liquidity?
Traders and business owners use three types of liquidity ratio to assess an enterprise. Quick ratio, cash ratio and current ratio. These different measures of liquidity are often used in tandem, but each have their own merits and applications independently.
What happens when liquidity is low?
Stocks with low liquidity are more difficult to sell. Traders may take a bigger loss if they cannot sell the shares when they want to. Liquidity risk is the risk that traders won’t find a market for their assets. This may prevent them from entering or exiting at the desired moment.
What is a good liquidity for a stock?
A stock is considered to have good liquidity when it can be easily bought or sold without significantly affecting the stock's price. This means that there are a large number of buyers and sellers actively trading the stock, and the bid-ask spread (the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept) is small.
A CFD is a derivative financial instrument based on the price movements of an underlying asset. CFDs enable traders to trade shares, Forex, indices, bonds, or commodities without actually owning the assets being traded.
A CFD (Contract for Difference) is made between two parties, typically described as "buyer" and "seller", stating that the buyer will pay the seller the difference between the current value of an asset and its value when the contract was initially made. If the closing trade price is higher than the opening price, then the seller (the broker) will pay the buyer (the trader) the difference, and that will be the buyer’s profit. The opposite is also true. That is, if the current asset price is lower at the exit price than the value at the contract’s opening, then the seller, rather than the buyer, will benefit from the difference.
What is the difference between CFD trading and share trading?
While both “regular stock trading” and CFD Share trading are executed via trading platforms and applications, there are key differences between them. As indicated above, the main difference between stock share and CFD trading is that when you trade a CFD you are speculating on an asset’s price without actually owning the underlying asset. While regular stock trading requires the parties to have ownership of the underlying stocks.
An economic calendar is a schedule of dates when significant news releases or events are expected, which may affect the global or local financial markets volatility as well as currency exchange rates. Traders and all functions involved in the markets and financial issues make use of the economic calendar to follow up and prepare on what is going to happen, where and when.
Due to the impact of financial events and announcements, on exchange rates, the forex market is highly affected by monetary and fiscal policy announcements. As such, traders make use the economic calendar to plan ahead on their positions and trades and to be aware of any issues that may affect them.
What is Financial Market volatility?
Financial Market volatility is the degree of variation of a trading price series over time. Many traders will consider the historic volatility of a stock. This is the fluctuations of price in a given time frame. Historic volatility creates forward looking implied volatility. This allows us to predict price variation in the future.
Yield in trading refers to the return on an investment, expressed as a percentage of the investment's cost. It represents the income generated by an investment, such as interest or dividends, divided by the cost of the investment. The yield can be used to compare the returns of different investments and is an important metric for investors evaluating the performance of their portfolios.
How do I calculate yield?
Yield is calculated as (income generated by investment / cost of investment) * 100. The cost of the investment is usually the purchase price, and the income generated can come from various sources such as dividends, interest, or rent.
Is yield same as return?
No, yield and return are not the same. Yield is the income generated by an investment as a percentage of the cost, while return is the total gain or loss on the investment including both income and capital appreciation or depreciation.
A Currency Pair is a term used in the Foreign Exchange, or Forex, domain. Currency pairs compare the value of one currency to another — the base currency versus a second comparative or 'quote' currency. A currency pair shows how much of a currency is required to buy a single unit of the currency it is being compared to. It is also known as an exchange rate and is used for all currencies traded in FX markets.
What is a foreign currency?
A foreign currency is, very simply, any currency used in a country that isn't your own.
What is the structure of a foreign exchange market?
The foreign exchange market is a decentralized market where global currencies are traded. In this market, participants buy, sell, exchange and speculate on currencies. It operates through a global network of banks, corporations, and individual traders, who buy and sell currencies for both hedging and speculative purposes. The market is open 24 hours a day and it is considered the largest and most liquid financial market in the world.
What are the most commonly traded currency pairs?
The most commonly traded currency pairs are USD/CAD, EUR/JPY, GBP/USD and AUD/CAD.
What is an ISO code?
Each currency is identified by an ISO code. An ISO code is a three-character abbreviated name that is standardised and internationally recognised. For example, the ISO code for the United States Dollar is USD.
A range refers to the difference between the highest and lowest prices a stock may reach during a specific time frame. This range gives investors an indication of how volatile a particular asset might be in terms of its price movements, as well as what opportunities they might have to make money. By analyzing historical data and keeping up-to-date with market news, investors can develop strategies to capitalize on different ranges.
How do you use ranges in trading?
Range trading is a popular trading strategy in finance, particularly for traders looking to limit their risk and profit from a given market movement. When using ranges, traders identify support and resistance levels for a security or asset, and look to take profits when prices reach either level. By using a range-trading strategy, traders can limit the amount of capital they are willing to risk per trade, as well as capitalize on both long-term and short-term movements in the market.
What is trend in trading?
A trend in trading is the general direction of a security's price over a period of time. Trend analysis helps traders make predictions about future market movements, allowing them to enter and exit positions at optimal times. Trends can be either upward or downward and often take weeks, months or even years to develop. To identify trends, technical analysis tools such as support and resistance levels, trend lines, and chart patterns are used by traders to detect buying and selling opportunities in the markets. Fundamental analysis also plays a role in recognizing potential profitable trading opportunities since underlying economic conditions may influence a security’s price.
A limit order is an order to buy or sell an asset such as a security at a specific price or better than that price. Traders wishing to define a maximum price for either buying or selling an asset can use limit orders. By placing a limit order they tell a broker to buy or sell a particular stock at a certain price or better than that price (lower for buying, higher for selling). This order is executed only if the transaction can be processed at the limit set in the order.
Is a limit order a good idea?
A key benefit of using a limit order is to ensure that the stock is bought or sold at a certain price point or better than that price point. There is of course the risk of not being able to execute that order as that specific price may never reach that limit as set in the order.
What are the types of limit order?
There are several types of limit orders in trading:
Buy Limit Order: An order to buy a security at a specific price or lower.
Sell Limit Order: An order to sell a security at a specific price or higher.
Buy Stop Limit Order: A stop order to buy a security at a specific price or higher, only activated once a specified stop price has been reached.
Sell Stop Limit Order: A stop order to sell a security at a specific price or lower, only activated once a specified stop price has been reached.
Trailing Stop Limit Order: A type of stop order where the stop price is set at a fixed amount or percentage below or above the market price, and adjusts as the market price moves.
A Stop Loss Order is a type of order that investors can use to limit losses when trading securities. This order instructs a broker to automatically sell a security when it reaches a certain price, known as the stop loss price. By using this order, investors can reduce their risk exposure by locking in gains and preventing larger losses.
How does a stop-loss order work?
A stop-loss order is an investment strategy that helps you limit losses by automatically selling your securities when they drop to a predetermined price. By setting up this order, you can avoid having to monitor the stock's performance every day and ensure that any potential losses are minimized.
What is the difference between a stop-loss and a stop limit order?
A stop-loss order is used to limit losses on a security position by automatically selling when the price drops below a specified level. Whereas a stop-limit order combines the features of a stop-loss with those of a limit order, enabling traders to specify both the price at which they are willing to sell and the maximum loss they are willing to take.
What is a good stop-loss order?
A good stop-loss order is one that is placed at a level that effectively limits potential losses on a trade. The specific level at which to place a stop-loss order will depend on the trader's risk tolerance and the price action of the security being traded. Generally, traders will place stop-loss orders at levels that are below the current price for long positions, or above the current price for short positions, in order to limit potential losses if the price moves in the opposite direction. It's important to note that stop loss orders act as a protective measure, but they don't guarantee that a trade will be executed at the exact stop loss level.
Financial leverage refers to the use of borrowed money to increase the potential return on an investment. It is the process of using borrowed money to increase the purchasing power of an investor, by using debt to amplify the trading outcomes from an investment. This leverage can increase returns but also increases the risk of loss, as the interest and principal payments on the debt must be made regardless of the performance of the investment. In other words, it is the amount of debt used to finance a firm's assets and it is measured by debt-to-equity ratio.
What is a financial leverage ratio?
In trading, financial leverage ratio is a metric used to measure the level of leverage used by a trader or a trading firm. It is the ratio of the value of the trader's or firm's assets to the value of their equity capital. Leverage ratios in trading can be used to identify traders or firms that are using a high level of leverage, meaning they are using a large amount of borrowed money to invest in markets.
What affects financial leverage?
In trading, financial leverage is affected by a number of factors, including:
Margin requirements: The amount of money or collateral required by a broker to open a leveraged position.
Risk tolerance: A trader's willingness to take on risk and their ability to handle potential losses.
Investment horizon: A trader's investment time frame and goals can affect their use of leverage.
Market conditions: Volatility, liquidity, and other market conditions can influence a trader's decision to use leverage.
Capital: The amount of capital a trader has available to invest, will influence their use of leverage.
Amortization is the process of charging the cost of an asset to expense over a specific timeframe. Amortization also defines the practice of spreading the repayment of a loan. This shifts the asset from the balance sheet to the income statement.
Amortization reflects the consumption of an intangible asset over what is considered a useful timeframe. It is used for the gradual write-down of the cost of those intangible assets that have a specific useful life. It is common to charge interest which is calculated based on the duration and other variables.
Amortization should not be confused with Depreciation. The difference between them is that amortization is about charging “Intangible Assets” to expense over time. While depreciation is about charging “Tangible Assets” to expense over time.
How to calculate amortization?
As we do not provide economic or trading advice we can only include here what is considered to be a generally agreed upon explanation. As stated, generally an Amortization can be calculated by using a straight-line formula such as: (book value - residual value) / useful life.
An Acquisition is a business transaction where one company buys all, or part, of another company's shares or assets. This can be done in an attempt to gain control of, and expand on, the target company's market while also gaining or at least conserving resources.
There are three main forms of “pairing business together”:
As part of the Acquisition process, the acquiring company purchases the target business's shares or assets, which gives it the authority to make use of the target’s assets as if they are its own.
Why do companies make acquisitions?
Companies make acquisitions as there are several benefits to doing so, including lower entry barriers, growth and market influence. There are also some challenges and difficulties associated with this process. These include conflicts of cultures, redundancy, contradicting objectives and unmatched businesses.
What are the four types of acquisitions?
There are four types of acquisitions that companies perform.
A basis point (abbreviated as BP, bps or “bips”) measures changes in the interest rate of a financial instrument. It is also used describe the percentage change in the value of financial instruments or the rate change of an index. They are less ambiguous than percentages as they represent an absolute, set figure instead of a ratio.
Why do we use Basis Points?
In the bond market, a basis point is used to refer to the yield that a bond pays to the investor. They are also used when referring to the cost of mutual funds and exchange-traded funds.
The closing price is the final price at which a security is traded during a trading session. It is used to determine the settlement price for trades and the value of securities at the end of the trading day.
Why is closing price important?
The closing price is important for several key reasons. Market players such as traders, investors, banks and financial institutions as well as regulators use the closing price as a reference point for determining a stock’s performance over time (which can range from a as little as seconds or minutes prior or past the closing price to durations such as a week, through a month and over the course of a year).
What is 'after-hours' trading?
After hours trading refers to the buying and selling of securities outside of the regular trading hours of the major stock exchanges, typically 4:00 PM to 8:00 PM Eastern Standard Time. This can include both electronic trading and trading by phone. It is usually less liquid than regular trading hours and prices may be more volatile.
Can you sell at closing price?
Yes, you can sell a security at the closing price. The closing price is the final price at which a security is traded during a trading session, and can be used as a reference point for determining the settlement price for trades. If you sell a security at the closing price, you will receive the price of the security at the end of the trading day.
A bearish market is a condition in the stock market where prices are on a downward trend, characterized by widespread pessimism and investor fear. This often results in a decline in the value of securities, leading to a decline in the overall market.
How long do bear markets last?
The duration of a bear market can vary and can last anywhere from a few months to several years. It depends on a number of factors, including the underlying cause of the market downturn, the state of the overall economy, and government or central bank interventions.
How do you know if a market is bearish?
A market is considered bearish if there is a persistent downward trend in the prices of securities, typically accompanied by increased selling pressure and declining market indices such as the S&P 500. This can be indicated by technical analysis, such as chart patterns showing lower highs and lower lows, or by broader economic indicators such as declining gross domestic product (GDP) and rising unemployment.
What is the longest bear market in history?
The longest bear market in history is the Great Depression, which lasted from 1929 to 1939. During this time, the stock market experienced a severe decline, with the Dow Jones Industrial Average losing 89% of its value. The Great Depression was a global economic downturn that had far-reaching impacts and was marked by high levels of unemployment, homelessness, and economic hardship.
The US Dollar Index, introduced in 1973, allows you to take a position on the overall strength of USD as measured by its performance against a basket of currencies. When it was launched the index had a base level of 100; it reached an all-time high of 164.72 in February 1985, and struck a low of 70.698 in March 2008.
Unlike the trade-weighted index of the US Dollar produced by the US Federal Reserve, the composition of the USDX has remained unaltered since its inception, save for one change: in January 1999 the euro was created, so many individual European currencies were removed from the index and replaced by the euro. Despite this change, the euro still has the same weighting in the index (57.6%) as all the currencies that it replaced combined.
After the euro, the Japanese yen is the second-largest proponent in the dollar index, with a weighting of 13.6%. The British pound with 11.9%, and the Canadian dollar, with 9.1%, are the next two largest components.
Arbitrage is trading that makes use of small differences in price between identical assets in two or more markets. An asset will most likely be sold in different markets, forms or via a different financial products.
Arbitrage is one alternative trading strategy that can prove exceptionally profitable when leveraged by sophisticated traders. It also carries risks which need to be considered prior and during an arbitrage.
Arbitrage as a trading strategy is when an asset is simultaneously bought and sold in different markets, thus taking advantage of a price difference, and generating a potential profit. Arbitrage is commonly leveraged by hedge funds and other sophisticated investors.
What is an example of arbitrage?
Without going into actual trading advice, here are several examples of Arbitrage in Trading:
• Exchange rates
• Offshore operations
• Cryptocurrency
And perhaps the most obvious and common form of arbitrage which is acting as a go between or affiliate, earning commission on price differences between the seller and the buyer.
Types of arbitrage traders use:
• Pure arbitrage - Traders simultaneously buying and selling assets in different markets to take advantage of a price differences.
• Merger arbitrage – When two publicly traded companies merge. If the target is a publicly traded company, the acquiring company must purchase its outstanding shares Convertible arbitrage.
• Convertible Arbitrage. It is related to convertible bonds, also called convertible notes or convertible debt.
Basic Attention Token (BAT) crypto was built to improve the security, fairness, and efficiency of digital advertising through the use of blockchain technology. Users are rewarded with BAT for viewing ad content, publishers can deliver higher-impact ads and advertisers can be assured their messaging is being viewed by a willing audience. Trade BAT in USD using the BAT/USD symbol.
Consumer Price Index or CPI is a measure of the average change over time in the prices paid by consumers for a market basket of consumer goods and services. Indexes are available for the U.S. and various geographic areas. It is considered as one of the most popular measures of inflation and deflation. CPI is also used to estimate the purchasing power of a country’s currency.
How is CPI Calculated?
CPI is calculated by considering Key contributors, including retail and services businesses as well as the U.S. rental housing market (housing accounts for approx. 30% of the CPI). There are several CPI variations:
• CPI-U index reviews the spending habits of urban consumers in the U.S.A. This constitutes for approx. 88% of the U.S population.
• CPI-W index for calculates changes in the costs of benefits paid to “urban wage earners and clerical workers,” which is used to calculate changes in the costs of benefits paid via Social Security.
• CPI ex-food and energy – is highly volatile and thus is excluded from the overall CPI.
China AMC CSI 300 Index comprises 300 stocks from A-share companies in China. A-shares are stocks trades on the Shenzhen or Shanghai stock exchanges and are generally only available to Chinese citizens. This ensures they command a significant premium compared to H-shares which are listed on the Hong Kong Stock Exchange and available primarily for foreign investors.
China AMC CSI 300 Index ETF mirrors the performance of the CSI 300 Index. It is a benchmark of the 300 largest and most liquid Chinese stocks.
Dow Jones Industrial Average - SPDR (DIA) mirrors the USA 30, which tracks 30 large-cap blue-chip companies – many of which are household names. The Dow Jones is one of the oldest indices in the world and is not considered to be volatile. However, because it is only 30 companies it is heavily influenced by the fortunes of those firms and is not a good indicator of the economy as a whole.
Stocks in the fund include Coca-Cola, Disney, Apple and Visa. The ETF is a good way to invest in the index. However, it is not ideal for those looking for broad exposure to US caps, as it only follows the top 30 companies. It is extremely liquid with a strong track record.
While all traders know that crypto is traded online, they may not be aware that they can also trade more traditional markets such as bonds. So, what are Bonds, what is a bond, and where can you trade them?
A bond is a form of financial derivative trading. Traders take position on the price of the underlying instrument and not purchasing the instrument itself. As such, they buy a Bond CFD or Contract for Difference of that instrument. If a Bond CFD is expected to go up in value, traders can take a long position. The opposite is true of course and if the value of a bond is expected to fall, traders can take a short position.
A bond is a loan that the trader (now bond holder) makes to the issuer. Bonds can be issued by governments, corporations or companies looking to raise capital. When traders buy a bond, they are providing the issuer with a loan in return for that bond. The issuer takes on a commitment to pay the bondholder interest and to return the principal sum when the bond matures.
A bid is the highest price that a trader will pay to buy a stock or any other asset. On the other hand, the seller has a limit as to the lowest price he will accept, which is called an “ask”. The difference between the buyer’s bid and the seller’s ask is a spread. The smaller the spread, the greater the liquidity of the any asset.
What is difference between bid and offer in trading?
There are several differences between a bid and an offer in trading. One important key differentiator is that a bid describes how buyers are willing to want to buy for a lower price than what the seller indicated. While an offer represents the higher price initially requested by the seller.
Bitcoin is the first of the ‘cryptocurrencies' and remains the most stable. It was created in 2009 by Satoshi Nakamoto, whose identity remains a mystery.
His creation - Bitcoin - is a cashless currency. Balances are kept online and it is decentralised, allowing anonymity. Despite Bitcoin not being legal tender in most countries, it has continued to increase in popularity and its launch has sparked the creation of a number of other cryptocurrencies
It is priced in USD per Bitcoin and saw a record high of $68,789.63 in November 2021. Bitcoin futures trade as BTC.
Bitcoin has been criticised for its links to illegal activity and the dark web, as well as the high demand for energy created by ‘mining' Bitcoins. A PIN is necessary to access your Bitcoins, with as many as 20% of all Bitcoins thought to be lost to forgotten PINs
Bitcoin futures allow you to speculate on, or hedge against, changes in the price of Bitcoin. Futures rollover on the last Thursday of every month.
A CFD is a derivative financial instrument based on the price movements of an underlying asset. CFDs enable traders to trade shares, Forex, indices, bonds, or commodities without actually owning the assets being traded.
A CFD (Contract for Difference) is made between two parties, typically described as "buyer" and "seller", stating that the buyer will pay the seller the difference between the current value of an asset and its value when the contract was initially made. If the closing trade price is higher than the opening price, then the seller (the broker) will pay the buyer (the trader) the difference, and that will be the buyer’s profit. The opposite is also true. That is, if the current asset price is lower at the exit price than the value at the contract’s opening, then the seller, rather than the buyer, will benefit from the difference.
What is the difference between CFD trading and share trading?
While both “regular stock trading” and CFD Share trading are executed via trading platforms and applications, there are key differences between them. As indicated above, the main difference between stock share and CFD trading is that when you trade a CFD you are speculating on an asset’s price without actually owning the underlying asset. While regular stock trading requires the parties to have ownership of the underlying stocks.
A Currency Pair is a term used in the Foreign Exchange, or Forex, domain. Currency pairs compare the value of one currency to another — the base currency versus a second comparative or 'quote' currency. A currency pair shows how much of a currency is required to buy a single unit of the currency it is being compared to. It is also known as an exchange rate and is used for all currencies traded in FX markets.
What is a foreign currency?
A foreign currency is, very simply, any currency used in a country that isn't your own.
What is the structure of a foreign exchange market?
The foreign exchange market is a decentralized market where global currencies are traded. In this market, participants buy, sell, exchange and speculate on currencies. It operates through a global network of banks, corporations, and individual traders, who buy and sell currencies for both hedging and speculative purposes. The market is open 24 hours a day and it is considered the largest and most liquid financial market in the world.
What are the most commonly traded currency pairs?
The most commonly traded currency pairs are USD/CAD, EUR/JPY, GBP/USD and AUD/CAD.
What is an ISO code?
Each currency is identified by an ISO code. An ISO code is a three-character abbreviated name that is standardised and internationally recognised. For example, the ISO code for the United States Dollar is USD.
Financial Derivatives are financial products that derive their value from the price of an underlying asset. These derivatives are often used by traders as a device to speculate on the future price movements of an asset, whether that be up or down, without having to buy the asset itself.
What are the four financial derivatives?
The four most common types of financial derivatives are futures contracts, options contracts, swaps and forward contracts.
What are the advantages of financial derivatives?
Financial derivatives can provide several benefits such as hedging, leveraging and portfolio diversification. These financial instruments help in managing risk by protecting investors from price volatility, enable high leverage to increase profits and also allow for better portfolio diversification through a wider range of investments.
Financial Derivatives examples
The most common underlying assets for derivatives are:
• Stocks
• Bonds
• Commodities
• Currencies
• Interest Rates
• Market Indexes (Indices)
Note: In CFD Trading traders get access to all the above Financial Derivatives as well as additional ones more suitable for trading CFDs. As such, CFDs enable traders to buy a prediction on a stock (up or down) without owning the stock itself.
Earnings Per Share (EPS) is a financial metric that measures the amount of profit a company makes for each outstanding share of its common stock. It's calculated by dividing net income by the number of shares outstanding. Investors use EPS to measure how profitable a company is and to compare different companies in the same sector.
What is a good earnings per share? Is it better to have a high or low earnings per share?
There is no definitive answer to what constitutes a "good" earnings per share (EPS) as it can vary depending on the industry, the size of the company, and the expectations of the market. Generally, a higher EPS is considered better, as it indicates that a company is generating more profit per share of stock.
What is earnings per share vs dividend?
A dividend is a payment made by a company to its shareholders out of its profits or reserves. Whereas EPS is an indicator of a company's profitability.
The foreign exchange market, also known as forex, is a decentralized market where currencies are traded 24/5. It has an average daily trading volume of over $5 trillion and facilitates the exchange of one currency into another for businesses, investors, and traders. It is influenced by economic and political events.
Why is Foreign Exchange important?
The foreign exchange market is important because it allows businesses, investors and traders to convert one currency into another, facilitating international trade and investment. It also enables countries to maintain control over their monetary policy and stabilize their economies. Additionally, the foreign exchange market is a major source of financial market liquidity and is used by a wide range of market participants, including banks, corporations, governments, and individual traders. It also enables people to manage the risk associated with currency fluctuations.
How is Forex trading done?
Forex trading is done by buying and selling currency pairs, using a platform provided by a Forex broker such as markets.com. Traders use different strategies and analysis to predict the price movements and decide whether to buy or sell a certain currency pair. It can also be done through contracts for difference (CFDs) which allow traders to speculate on price movements without owning the underlying currency.
NUGT, also known as the Direxion Daily Gold Miners Index Bull 3x Shares, aims to deliver three times the daily return of the NYSE Arca Gold Miners Index. This is a leveraged fund. It is designed for intraday trades and it is not recommended for periods of greater than one day.
The NYSE Arca Gold Miners Index is a market-cap weighted index of public companies with global operations in developed and emerging markets. The companies in the index are primarily involved in gold mining, with some also involved in silver mining. Top holdings include Newmont Mining, Barrick Gold, Franco Nevada and Newcrest Mining. Canadian companies represent 52.14% of the asset.
The iShares ESG MSCI USA Leaders ETF (SUSL) seeks to track the investment results of an index composed of U.S. large and mid-capitalization stocks of companies with high environmental, social, and governance performance relative to their sector peers as determined by the index provider.
The Financial Conduct Authority (FCA) is a regulatory body in the United Kingdom that oversees and regulates financial firms to ensure they operate in an honest and fair manner, and to protect consumers. It is responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
The FCA’s functions include:
• Regulating the conduct of 50,000 businesses
• Supervising 48,000 firms
• Setting specific standards for 18,000 firms
What are the main objectives of the FCA?
The main objectives of the Financial Conduct Authority (FCA) are to protect consumers, protect and enhance the integrity of the UK financial system, and promote competition in the interests of consumers. This includes taking action to address any conduct that falls below the standards the FCA expects and working to ensure that firms compete in ways that are fair, transparent and not detrimental to consumers.
An economic calendar is a schedule of dates when significant news releases or events are expected, which may affect the global or local financial markets volatility as well as currency exchange rates. Traders and all functions involved in the markets and financial issues make use of the economic calendar to follow up and prepare on what is going to happen, where and when.
Due to the impact of financial events and announcements, on exchange rates, the forex market is highly affected by monetary and fiscal policy announcements. As such, traders make use the economic calendar to plan ahead on their positions and trades and to be aware of any issues that may affect them.
What is Financial Market volatility?
Financial Market volatility is the degree of variation of a trading price series over time. Many traders will consider the historic volatility of a stock. This is the fluctuations of price in a given time frame. Historic volatility creates forward looking implied volatility. This allows us to predict price variation in the future.
A long position is a market position where the investor has purchased a security such as a stock, commodity, or currency in expectation of it increasing in value. The holder of the position will benefit if the asset increases in value. A long position may also refer to an investor buying an option, where they will be able to purchase an underlying security at a specific price on or before the expiration date.
What is riskier a long or a short position?
A short position is considered riskier than a long position because the potential loss is theoretically unlimited, while the potential profit is limited to the amount of depreciation in the value of the security. When an investor short sells a stock, they borrow shares from someone else and sell them, with the hope that the price will drop so they can buy the shares back at a lower price and return them to the lender, pocketing the difference. In case the price of the stock rises instead, the loss for the short seller is theoretically unlimited as there is no limit to how high the stock price can go.
When should I buy a long position?
When an investor believes that the market will rise, they could consider purchasing a long position.
How can I protect my long position?
Protecting a long position often involves setting up a stop-loss order, which automatically sells the asset at a predetermined price. This ensures that any sharp market drops don't result in excessive losses for the investor.
Industrial Select Sector SPDR Fund (XLI) tracks US industrial companies within the S&P 500. This asset uses the Industrial Select Sector Index as its tracking benchmark. The ETF provides concentrated exposure large-cap US industrial companies, with limited small and midcap companies.
The index comprises just 70 holdings from the industrial sector. Top holdings for the benchmark index include Boeing Co, 3M Co, Union Pacific Corp and Honeywell International Inc.
An IPO (initial public offering) is when a company makes its shares available to the public. This means the stock can be bought and sold by both retail and institutional investors. An IPO is usually underwritten by investment banks, who set up the sale of the shares on exchanges.
What is the difference between an IPO and a Stock?
An IPO is the process of a privately held company being transformed into a public one. The difference between stock and an IPO is that an IPO refers to public shares of a stock and not shares offered after that.
Initial public offerings can be used to raise new equity capital for a company. It monetizes the investments of private shareholders such as company founders or private equity investors. This enables easy trading of existing holdings or future capital raising. The disadvantages of IPO are the same trade-offs between equity and debt financing.
Liquidity refers to how easily or quickly an asset can be bought or sold in a secondary market. Liquid investments can be sold readily and without paying considerable fees. This enables their holders to trade them for cash when needed.
What are the three types of liquidity?
Traders and business owners use three types of liquidity ratio to assess an enterprise. Quick ratio, cash ratio and current ratio. These different measures of liquidity are often used in tandem, but each have their own merits and applications independently.
What happens when liquidity is low?
Stocks with low liquidity are more difficult to sell. Traders may take a bigger loss if they cannot sell the shares when they want to. Liquidity risk is the risk that traders won’t find a market for their assets. This may prevent them from entering or exiting at the desired moment.
What is a good liquidity for a stock?
A stock is considered to have good liquidity when it can be easily bought or sold without significantly affecting the stock's price. This means that there are a large number of buyers and sellers actively trading the stock, and the bid-ask spread (the difference between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept) is small.
A limit order is an order to buy or sell an asset such as a security at a specific price or better than that price. Traders wishing to define a maximum price for either buying or selling an asset can use limit orders. By placing a limit order they tell a broker to buy or sell a particular stock at a certain price or better than that price (lower for buying, higher for selling). This order is executed only if the transaction can be processed at the limit set in the order.
Is a limit order a good idea?
A key benefit of using a limit order is to ensure that the stock is bought or sold at a certain price point or better than that price point. There is of course the risk of not being able to execute that order as that specific price may never reach that limit as set in the order.
What are the types of limit order?
There are several types of limit orders in trading:
Buy Limit Order: An order to buy a security at a specific price or lower.
Sell Limit Order: An order to sell a security at a specific price or higher.
Buy Stop Limit Order: A stop order to buy a security at a specific price or higher, only activated once a specified stop price has been reached.
Sell Stop Limit Order: A stop order to sell a security at a specific price or lower, only activated once a specified stop price has been reached.
Trailing Stop Limit Order: A type of stop order where the stop price is set at a fixed amount or percentage below or above the market price, and adjusts as the market price moves.
Financial leverage refers to the use of borrowed money to increase the potential return on an investment. It is the process of using borrowed money to increase the purchasing power of an investor, by using debt to amplify the trading outcomes from an investment. This leverage can increase returns but also increases the risk of loss, as the interest and principal payments on the debt must be made regardless of the performance of the investment. In other words, it is the amount of debt used to finance a firm's assets and it is measured by debt-to-equity ratio.
What is a financial leverage ratio?
In trading, financial leverage ratio is a metric used to measure the level of leverage used by a trader or a trading firm. It is the ratio of the value of the trader's or firm's assets to the value of their equity capital. Leverage ratios in trading can be used to identify traders or firms that are using a high level of leverage, meaning they are using a large amount of borrowed money to invest in markets.
What affects financial leverage?
In trading, financial leverage is affected by a number of factors, including:
Margin requirements: The amount of money or collateral required by a broker to open a leveraged position.
Risk tolerance: A trader's willingness to take on risk and their ability to handle potential losses.
Investment horizon: A trader's investment time frame and goals can affect their use of leverage.
Market conditions: Volatility, liquidity, and other market conditions can influence a trader's decision to use leverage.
Capital: The amount of capital a trader has available to invest, will influence their use of leverage.
What is a Position in trading?
A position in trading refers to the amount of a security or financial instrument that is held by an investor or trader. It can be a long position, where the trader has bought the security and expects its price to rise, or a short position, where the trader has sold the security and expects its price to fall. The size of the position is typically measured in units of the security or financial instrument, such as shares or contracts. The trader or investor can then make a profit or loss based on the movement of the price of that security or instrument. In addition, an open position is one that has been entered into but not yet closed or settled, and a closed position is one that has been settled or offset by an opposing trade.
What is a margin in finance?
A margin in finance is the amount of money an investor borrows to purchase or trade securities. It is the difference between the total value of the borrowed funds and the market value of the collateral provided as security for the loan. Margin trading allows investors to buy more securities than they would otherwise be able to purchase with just their own capital.
What is margin vs profit?
Margin and profit are related but different concepts in finance and trading.
Margin refers to the amount of money or collateral that is required to open a leveraged position, such as a margin account, which allows traders to buy securities by borrowing money from a broker. Profit, on the other hand, refers to the amount of money that is gained from a trade or investment, after all costs and expenses have been subtracted. Profit is the result of a successful trade, which is the difference between the buying and selling price.
How do I calculate margin?
There are a few different ways to calculate margin, depending on the context and the type of trade or investment.
One of the most common ways to calculate margin is to use the following formula:
Margin = (Value of Trade / Leverage) x 100%
Margin trading refers to the practice of borrowing money from a broker to purchase securities. It allows traders to buy more securities than they could afford to buy with cash alone, by leveraging the securities they already own as collateral. This increases the potential returns but also increases the potential risks, as the trader is responsible for paying interest on the borrowed money and must also cover any losses. Margin trading is considered to be a high-risk strategy and is only suitable for experienced traders with a good understanding of the risks involved.
How much money do you need for margin?
The amount of money required for margin trading depends on the minimum deposit requirement set by the broker. For markets.com this is 100 of your local currency, with the exception of South Africa where it is 1000 rand.
What level of margin is safe?
The level of margin that is considered safe depends on the trader's risk tolerance and investment goals. A lower margin level is generally considered to be safer, as it reduces the potential for large losses
A margin call is a demand from a broker to a trader that additional funds must be added to the trader’s account in order to maintain their current positions.
What would trigger a margin call?
A margin call occurs when an investor using margin (borrowed money) to trade in securities or other financial instruments, does not have enough money or equity in their account to meet the minimum margin requirement set by their broker. This can happen when the value of the securities in the account falls below a certain level, resulting in a negative balance in the margin account. A margin call can be a warning sign that the investor is taking on too much risk, and it can be a good opportunity to re-evaluate their investment strategy.
What happens if you get a margin call?
When a margin call happens, the broker will contact the investor and ask them to deposit additional funds into their account or sell some of their profiting securities to bring the account equity back above the minimum margin requirement. If the investor is unable to meet the margin call, the broker may take action to liquidate the investor's securities in order to bring the account back to a positive balance.
Do you lose money on a margin call?
A margin call itself does not necessarily mean that you will lose money, but it does indicate that you are at risk of losing money if you do not take action to meet the call. When a margin call occurs, it is a warning that your account balance has dropped below the minimum margin requirement set by your broker, and if you do not take action to bring it back above that level, your broker may take action to liquidate your securities in order to bring the account back to a positive balance.
An open position in trading refers to a trade that has been entered into but not yet closed or settled. The position remains open until the trader decides to close it by executing an opposing order or if the order reaches its expiration. It can refer to a long or short position in a security or financial instrument.
When should you close your position?
A trader should close their position in trading when their predetermined criteria for exiting the trade have been met, such as reaching a certain profit level or stop-loss point. It could also be closed because the trade no longer aligns with their overall strategy or market conditions have changed.
The Opening Price is the price at which a security first trades upon the opening of an exchange on a trading day. It is important to note that it may not identical to the previous day’s closing price. Also, for new stock offerings (IPO etc), Opening Price refers to the initial share price at the beginning of trade of the first day. Yet there are some cases when an opening price will also be the share price which was established by the first trade of the day, instead of being based on a price that was already in place when at the beginning of trade of that day at that specific exchange.
How is opening price calculated?
The opening price is can be calculated by taking the first trade price executed in that trading session. In case of stock trading it is the price of the first trade executed on the exchange when the market opens. Opening price is usually used to calculate the performance of the stock or any other asset for the day.
What is the difference between opening price and closing price?
The opening price is the price of an asset at the start of a trading session, while the closing price is the price of an asset at the end of a trading session.
Who sets the opening price of a stock?
The opening price of a stock is typically set by the stock exchange or market maker responsible for trading that stock.
An Overnight Index Swap (Swap Fee) is a process where the settlement of a deal is rolled forward to another value date, and a charge is levied based on the difference in the interest rates of the two currencies. Every day at 21:00 GMT, open positions are rolled over to the next day and the positions gain or lose interest based on the interest differential between the bought and sold currencies.
What is OIS compound?
The index rate is typically the rate for overnight lending between banks, either non-secured or secured. The fixed rate of OIS is typically an interest rate considered less risky than the corresponding interbank rate (LIBOR) because there is limited counterparty risk.
The LIBOR–OIS spread is the difference between IRS rates, based on the LIBOR, and OIS rates, based on overnight rates, for the same term.
Market Makers are financial institutions or investors that provide liquidity to the markets by placing buy and sell orders at specific prices. They are incentivized to do this in order to make profits from the bid-ask spread.
What is the difference between dealer and market maker?
A dealer and a market maker are both intermediaries in the securities market that provide liquidity and help facilitate trades. However, they have some key differences. A dealer is a person or entity that buys and sells securities for their own account and risk. They hold inventory of securities and make a profit by buying at a lower price and selling at a higher price.A market maker is a firm or individual that provides liquidity to the market by continuously buying and selling a security at publicly quoted prices. They are also called liquidity providers, and they make money by charging a bid-ask spread, the difference between the prices they are willing to buy and sell a security. They do not hold inventory of securities like dealers do.
Do market makers manipulate price?
Market makers are allowed to buy and sell securities at their own discretion, and they may adjust the prices they are willing to buy and sell a security in order to make a profit. However, they are also subject to regulatory oversight, and they must act in a fair and transparent manner. They are not allowed to manipulate prices, and any illegal activities such as insider trading, wash trading or any other form of market manipulation are strictly prohibited.
Online brokers are digital trading platforms that allow users to trade stocks, options, ETFs and other financial products online. They offer convenience and competitive pricing, making them popular among individual investors and traders.
What are the three types of brokers?
Trading brokers come in three main varieties: full-service, discount, and online. Full-service brokers offer a variety of services such as research, advice, and account management. Discount brokers are low-cost and may only offer basic services. Online brokers provide customers access to the markets with limited assistance.
Are online brokers safe?
Online brokers are generally safe when used correctly. It is important to use trusted and reliable providers, keep your account secure, and be mindful of any potential risks when trading online. For example, markets.com is fully regulated and controlled for maximum security and safety while you trade.
Maintenance Margin, or “variation margin,” is considered as the minimum amount of equity (i.e., funds) which needs to be maintained in a trader’s margin account before a margin call is issued as due to the account value being below a minimum threshold and not being able to support open margin trade positions. Margin accounts are what leveraged trades use to trade, where they can purchase securities such as stocks, bonds, or options with funds borrowed from the brokerage.
How do you avoid maintenance margin?
To avoid maintenance margin issues, traders should monitor their account closely and adjust their leverage if needed. If your maintenance margin is not maintained it will result in a margin call, which may indicate that the trader should reconsider the risk exposure of their portfolio.
Why are maintenance margins important?
Maintenance margins are important to protect against losses due to fluctuations in the market. They ensure that traders maintain adequate capital reserves and can cover any potential losses.
Materials Select Sector SPDR Fund (XLB) tracks US basic materials companies within the S&P 500. This asset uses the Materials Select Sector Index as its tracking benchmark. The limited spread and niche sector mean that it is heavily concentrated. Just a few holdings make up a big part of the portfolio, and there are only 24 holdings in total.
Top holdings for the benchmark index include DowDuPont Inc, Linde Plc, Ecolab Inc and The Sherwin-Williams Co.
A Purchasing Managers' Index (PMI) is a leading indicator that measures the health of the manufacturing sector and the broader economy. It is based on a survey of purchasing managers, who are asked to rate the relative level of business conditions, including employment, production, new orders, prices, supplier deliveries, and inventories.
How is PMI related to inflation?
PMI can be related to inflation because it is an indicator of economic activity and growth. When purchasing managers report increased activity, it can indicate an increase in demand for goods and services, which can lead to higher prices (inflation). On the other hand, when purchasing managers report a decrease in activity, it can indicate a decrease in demand, which can lead to lower prices (deflation). A high PMI reading can indicate that the manufacturing sector is expanding, which can lead to higher prices and inflation, while a low PMI reading can indicate that the manufacturing sector is contracting, which can lead to lower prices and deflation. Additionally, when prices of raw materials and other inputs rise, the PMI will decrease as the purchasing managers will be paying more for the raw materials used in production, and this can lead to inflation as well.
Is PMI a good indicator?
PMI is considered a good indicator of economic activity and growth, particularly in the manufacturing sector. It is widely used by economists and financial analysts to predict future trends and is considered a leading indicator of economic activity. The survey data used to calculate PMI is based on input from purchasing managers, who are typically considered to be well-informed about the state of the economy. Additionally, the PMI is released on a monthly basis, providing a timely view of the manufacturing sector and the broader economy. However, it is important to note that PMI is not perfect and should be used in conjunction with other economic indicators to get a comprehensive understanding of the economy.
An Order in trading is a request sent by a trader to a broker or trading platform to make a trade on a financial instrument such as shares, Crypto, CFDs, currency pairs and assets. This can be done on a trading venue such as a stock market, bond market, commodity market, financial derivative market, or cryptocurrency exchange
What are the most common types of orders?
Common types of orders are:
• Market Orders. A market order is given by traders and investors as an order to immediately buy or sell an asset, security, or share. Such an order guarantees that the order will be executed, yet the actual execution price is not guaranteed.
• Limit Orders. A limit order is an order to buy or sell an asset such as a security at a specific price or better than that price. Traders wishing to define a maximum price for either buying or selling an asset can use limit orders.
• Stop Orders. Stop orders instruct brokers to execute a trade when the asset’s price reaches a certain level.
A MetaTrader is an electronic trading platform widely used by online retail traders. The MetaTrader application consists of both a client and server component. The server component is run by the broker and the client software is provided to the broker’s customers, who use it to see live streaming prices and charts, to place orders, and to manage their accounts.The platform works on Microsoft Windows-based applications as well as on Andriod and Mac OS applications.
Marktets.com supports the use of both the MetaTrader 4 and MetaTrader 5 trading platforms with its traders.
Metatrader 4 is still one of the most popular and easy-to-use trading platforms. With Expert Advisors, micro-lots, hedging and one-click trading.
Metatrader 5 is a powerful upgrade and the most advanced online trading platform It is a multi-asset derivatives platform for trading on CFDs and enables traders to perform hedging and netting, and delivers more technical indicators as well as more insight with market depth and a wider number of timeframes.
Can I trade on MetaTrader without a broker?
While you can download and use the MetaTrader software without a broker, it is not possible to trade without one. In order to execute trades on MetaTrader, you will need to open an account with a broker that offers the platform and deposit funds into that account.
A market order is a type of stock order that allows an investor to purchase or sell securities at the current market price. It is one of the most common types of orders and it is executed as soon as it is placed, meaning the investor will get whatever price is currently available on the exchange.
Is it good to use market order?
A market order is an order to buy or sell a security at the best available current price. This type of order may provide an advantage over other types of orders by executing quickly, but it could also mean that the trade may not be filled at the desired price.
Why would you use a market order?
A market order is typically used when an investor wants to execute a trade quickly, and is willing to accept the current market price. This type of order is often used when an investor wants to take advantage of a price change or when they want to enter or exit a position quickly.
How long does a market order take?
A Market order is generally the fastest order to execute as it simply takes the current market price. You can expect a market order to be executed usually within seconds or minutes of being placed, as long as there is sufficient liquidity in the market.
RSI stands for Relative Strength Index and is a technical analysis indicator that measures the strength of a security's price action, by comparing the magnitude of recent gains to recent losses. The RSI ranges from 0 to 100, with values above 70 indicating overbought conditions and values below 30 indicating oversold conditions. Traders often use the RSI as a buy or sell signal, depending on whether the RSI is above or below a certain level.
Is a higher RSI value better?
A higher RSI value generally indicates that a security is overbought, which means that it is trading at a relatively high price compared to its recent price history. Traders may interpret this as a signal to sell, or to be cautious about buying. Traditionally, an RSI value of 70 or above is considered to be overbought, and a value of 30 or below is considered to be oversold.
Rice is a “soft” commodity - referring to those that are grown and not mined - and is the third most-farmed grain in the world, behind cotton and wheat. It is a food staple for billions of people, spread throughout Asia, the Middle East, and Latin America.
Rice is priced in USD per hundredweight (CWT). In April 2008 prices of the grain peaked at $24.46/CWT, while in February 1982 they hit a low of $0.75/CWT.
China produces the bulk of the world's rice. India, Indonesia, Bangladesh, Vietnam, and Thailand are also big producers.
Rice prices are affected by many factors, including stock levels, the pace of demand growth, and changes in government spending on agriculture. One of the biggest drivers of volatility is crude oil prices - rising prices push up the cost of production and transportation.
Rice futures allow you to speculate on, or hedge against, changes in the price of rice. Futures rollover on the fourth Friday of February, April, June, August, October, and December.
Silver (XAG) has long-been synonymous with money, indeed, in some languages the two words are the same. The white metal has been used for investment and jewellery for thousands of years, and its distinctive characteristics ensure it continues to be in high-demand.
Silver is priced in USD per troy ounce. Its price peaked at $49.45 in January 1980, and reached an all-time low of $3.55 in February 1991.
The majority (85%) of silver production comes from mining, with the remainder sourced from scrap and stockpiles. While silver can be recycled, it is less economical to do so than with other precious metals. The top producers of silver are Mexico, Peru and China.
Silver is widely used in photographic, industrial, medical and telecommunications technology. It is also highly sought after for investment purposes. Its price is influenced by industrial demand, demand for jewellery, coins, medals and silverware, as well as the price of gold and the strength of the US Dollar.
A Reversal is when the direction of a financial market or asset moves in the opposite direction from its current trend. Reversals can occur over a period of time and can be either bullish (price increasing) or bearish (price decreasing). Being aware of these trends can help traders maximize their profits.
What is an example of reversal?
If the stock market has been rising for several weeks and then begins to fall, that's considered a reversal. Reversals are an important concept for investors to understand as they can indicate a change in sentiment that could lead to further movement in the same direction.
Risk management in trading is a strategy for mitigating losses. It involves understanding and analyzing risks, taking preventive steps to protect against potential losses, and having plans in place to address unanticipated situations. Good risk management practices help traders limit their downside and stay ahead of market volatility.
How do you manage risk in trading?
Traders can practise risk management in lots of different ways. It can be done by using strategies like position sizing, stop-loss orders, diversifying investments, and hedging. Through careful planning, you can set limits on your potential losses, identify potential opportunities and adjust your strategy accordingly. With disciplined risk management, you can protect your capital while you trade.
The risk/reward ratio is a known concept for those engaging in business. So, what is a Risk/Reward Ratio in trading, and does it follow the same guidelines and practices of the business world?
In trading, the Risk/Reward Ratio measures the expected gains of a given trade, asset, or position against the risk of potential loss. It is typically shown as a figure for the assessed risk separated by a ':' from the figure for the prospective reward.
What is a good Risk/Reward Ratio?
Acceptable ratios can vary, based on multiple factors. You can calculate this by dividing your "reward" (the end result or net profit) by the price of your maximum risk. It is generally accepted that if a risk is equal or greater than the corresponding reward, the trade position will not be worth the risk. Equally generally acceptable is the notion that a ratio greater than 1:3 is minimally required in order to justify the risk, i.e. a good risk/reward ratio.
By definition, this ratio quantifies the relationship between the potential currency lost, if the trade or action taken do fail, versus realized sum (gained) if all goes as planned.
Traders make use of the Risk/Reward Ratio to as one of the means to determine viability or worthiness of a given investment. One way to limit risk is to issue stop-loss orders, which trigger automatic sales of stock or other assets when they hit a specific value. This enables traders to limit potential risks.
A “Rights Issue” is when a company offers an issue of its shares at a special price by to its existing shareholders. This new and reduced price is in proportion to their existing holding of the company’s “old” shares. An after effect common to offering a Rights Issue is that the share price is further reduced due to additional dilution of the share value. A typical reason for any given company to offer a rights issue would be to raise capital.
Is a rights issue a good thing?
It depends on the specific circumstances and the reasons for the rights issue. A rights issue can provide a company with additional funding to invest in growth or to address financial difficulties. However, if a company is issuing new shares at a lower price than the current market value, existing shareholders may feel diluted and the stock price may decrease. Additionally, if the company is issuing new shares to address financial difficulties, it may be a sign of financial distress.
Does share price fall after a rights issue?
A share price may fall after a rights issue due to dilution of existing shareholders' ownership in the company, as more shares are issued, thus reducing the value of each individual share. Additionally, if the new shares are issued at a lower price than the current market value, the stock price may decrease. However, this is not always the case as the company may have a good reason for the rights issue such as investing in growth opportunities or raising funds to pay off debt, that could also boost the stock price.
Can a rights issue be sold to anyone?
A rights issue is typically offered to existing shareholders of a company, allowing them to purchase additional shares in proportion to their current holdings. However, the company may choose to offer the rights issue to a broader group of investors, such as institutional investors or the general public. The terms of the rights issue will be outlined in the prospectus and the decision of who can participate will be made by the company.
In trading, resistance level is a price point at which the price of a security or financial instrument tends to encounter selling pressure, making it difficult for the price to rise above that level. The resistance level is seen as a ceiling, as the price has a hard time going above it. Traders use resistance levels to identify areas where they expect the price to stall or reverse direction. This can be determined by observing the historical price movement of a security or financial instrument, looking for areas where the price has consistently failed to break above. Resistance levels are also used in combination with support levels to identify potential price ranges and trade entry or exit points.
What happens when a stock hits resistance?
If a stock hits a resistance level it can cause the stock to stall, move sideways, or even reverse direction. At resistance level traders that have taken a long position might decide to take profits, while traders that have not yet taken a position might decide to wait for a break above the resistance before buying.
When a stock hits resistance, traders will typically observe the stock's behavior at that level to determine if the resistance level is likely to hold or if the stock is likely to break through it. If the stock breaks through resistance, it can be considered a bullish sign, indicating that the stock is likely to continue to rise. On the other hand, if the stock fails to break through resistance, it can be considered a bearish sign, indicating that the stock is likely to stall or reverse direction.
Ripple (XRP) is among the largest cryptocurrencies by market cap, following Bitcoin and Ethereum.
Ripple, known as XRP, is priced in USD. It saw a high of $3.20 in January 2018.
When people talk about Ripple they are not just talking about the currency, but the Ripple network which could change the way people complete currency transfers.
Unlike other crypto payment networks, Ripple allows you to make money transfers in any form - be that Ripple, Bitcoin, USD, Yen or GDP. Plus, you can receive money in a different form to how it has been sent. For example, you could be sent Bitcoin but collect your money in USD.
Payments can happen in seconds, a significant improvement on the days or weeks required for a wire transfer with a bank.
The payment network has already seen endorsements, with American Express and Santander partnering with it for cross-border payments between the US and UK.
A spot price is the current market value of an asset or security. It's the amount you would pay to buy or sell it at that exact moment in time. Spot prices are constantly changing, as they depend on supply and demand forces in the marketplace. Spot prices provide important insights into market trends and can be used by traders to make investment decisions.
Why is it called a spot price?
It is called a "spot" price because it refers to the price at which an asset can be bought or sold "on the spot" or immediately.
How is spot price calculated?
The spot price of a commodity, security, or currency is typically determined by supply and demand factors in the market. The price is influenced by a variety of factors such as production costs, political and economic conditions, and speculation.
A quoted price is the most recent price at which an asset was traded at. Global and local events, either of a financial nature or completely unrelated to finances continually affect the quoted prices of assets such as stocks, bonds, commodities, and derivatives changes continually throughout a trading. Additionally, It is often the price point where buyers and sellers agree on, the most up-to-date agreement between buyers and sellers, or the bid and ask prices. It is also where supply meets demand.
Is a quoted price legally binding?
In most cases, when trading in an exchange, the quoted price is binding and the trade is executed at the quoted price, with the exchange acting as a counterparty to the trade. However, when trading OTC (over-the-counter), the quoted price is not necessarily binding as the parties have more flexibility in negotiating the final price, and the counterparty risk is higher.
Trailing Stop Orders are a type of stock order that lets investors adjust the stop price as a security rises or falls. This order works by continuously monitoring the price of a security and dynamically adjusts the stop price with every tick. The advantage of this type of order is that it allows investors to limit their losses, while locking in profits, without having to manually modify the stop-loss point.
Are Trailing Stop Orders good?
Trailing Stop Orders can be a good way to protect profits in your trading. They allow you to set an automated stop-loss that trails the price of a stock, adjusting up as it rises, while allowing you to lock in some gains if the stock begins to fall. This is especially useful when dealing with volatile stocks, giving you more control over your position.
What is a disadvantage of a trailing stop loss?
Trailing stop losses can help minimize risk when trading, however they also limit potential gains. The stop price adjusts based on market conditions, so as the price increases, the stop loss will move up. If the stock drops significantly and your trailing stop loss is too close, it may be triggered before you have a chance to react.
Which is better stop limit or trailing stop?
It depends entirely on the trader. A stop limit will sell at the specified price, while a trailing stop will track price changes and sell when the specified amount is exceeded. Different traders may have different needs and objectives, so which type of order is best will vary. Consider your goals before deciding which option is right for you.
Stop Orders are a type of stock order that helps limit the investor’s risk. The order triggers a purchase or sale once a set price is reached, either above (stop buy) or below (stop sell). Stop Orders are used to protect investors against an unfavorable price movements and lock in potential gains.
How long do stop orders last?
Stop orders are instructions given to a broker to buy or sell an asset when its price reaches a predetermined level. Stop orders remain in effect until the stop price is triggered, at which point the order becomes a market order and will be executed. This means that stop orders may last for an indefinite amount of time. It is important to monitor the current market price closely as stop orders do not guarantee execution.
Are stop orders a good idea?
Stop orders can be useful as they can help limit an investor's loss or protect a profit on a security. They are often used to automatically exit a position when the market moves against the investor. However, the use of stop orders may be subject to market conditions and the specific investment strategy of an investor, so whether or not they are a good idea depends on the individual's financial situation and risk tolerance.
A reverse stock split, also known as a "reverse split," is a corporate action in which a company reduces the number of outstanding shares by canceling a portion of its shares and increasing the par value of its remaining shares. This means that for every N shares that a shareholder owns, they will end up owning 1 share, where N is the reverse split ratio. For example, if a company performs a 1-for-2 reverse stock split, a shareholder who previously owned 100 shares would now own 50 shares.
Is it better to buy before or after a reverse stock split?
It is not necessarily better to buy before or after a reverse stock split, as it depends on the specific circumstances of the company and the stock. A reverse stock split does not change the underlying value of the company, it only changes the number of shares outstanding and the stock price. However, it is important to understand that in general, companies that perform reverse stock splits tend to be struggling and have a low stock price. Buying before a reverse stock split may allow you to buy shares at a lower price, but it also means you're probably buying into a struggling company.
Is a reverse stock split good?
As with all things in the market, the answer is that it depends. The main reason for a company to perform a reverse stock split is to increase the per-share price of the stock, which can make the stock appear more attractive to investors and also bring it above a certain listing requirement in stock exchanges. Additionally, a reverse split can also help to reduce the number of shareholders and increase the liquidity of the stock, making it easier to trade. However, a reverse stock split can also be a sign of a struggling company, and it can also dilute the value of shares for the existing shareholders.
A Trading Commission is a service fee paid to a broker for services in facilitating or completing a trade.
How does a trade commission work?
Trade Commissions can be structured as a flat fee, or as a percentage of the revenue, gross margin or profit generated by the trade. At markets.com we do not charge our traders any commission fees on their trades and positions.
SLV, also known as iShares Silver Trust, tracks the price of silver bullion held in London. This ETF provides investors with direct exposure to silver as the ETF physically holds the precious metal in vaults in London. This fund is one of the most liquid of its peer group and is popular among retail and institutional investors.
This ETF is suitable for buy and hold strategies. Traders should consider this asset to gain exposure to the day to day price of silver bullion, to get access to physical silver or to diversify your portfolio and protect against inflation.
CFDs are a leveraged financial instrument that allow traders to gain exposure to an underlying asset, such as shares, commodities or indices. While this provides great potential for profits, it also carries significant risks. The main risk is the possibility of losses greater than your initial deposit if the market moves against you. CFDs also have costs associated with trading such as commissions and spreads. Make sure you understand the risks before trading with CFDs.
What are the disadvantages of CFDs?
CFDs are complex instruments and may not be suitable for everyone due to the risk of leverage. CFDs also come with costs, including spreads and commissions which can cut into potential profits. Furthermore, it's important to understand how margin calls work as well as potential losses from unanticipated price movements or illiquidity in the market.
How much can you lose in a CFD trade?
In a CFD trade, you can potentially lose more than your initial investment, as the loss is based on the difference between the entry and exit price of the trade. It is important to set stop loss orders to limit potential losses. Additionally, using proper risk management strategies can help to minimize losses.
Technical analysis is a type of financial analysis that looks at historical price movements and trading volumes to predict future price movements in the market. It involves studying trends, chart patterns, momentum indicators, and other factors to make informed decisions about trading. Technical analysis can help traders and investors gain insight into market sentiment, timing their trades for optimal returns.
Why is technical analysis important?
Technical analysis is a critical component of successful financial and trading strategies. It helps investors understand the past performance of a security, identify current trends and anticipate future price movements. Technical analysis relies on mathematical calculations and charting techniques to evaluate securities, which can be an invaluable tool for traders to optimize returns and manage risk.
Which tool is best for technical analysis?
There are many tools that can be used for technical analysis, and different traders may have different preferences. Some commonly used tools include:
Ultimately, the best tool for technical analysis will depend on the individual trader's preferences and the market conditions they are trading in. it's important to use multiple tools and indicators to validate the signals and make better decisions.
The FTSE/JSE index, also known as the South Africa 40, is a market capitalisation-weighted index of the largest and most liquid 40 companies trading on the Johannesburg Stock Exchange.
The index was launched on 24th June 2002, with a base date of 21st June 2002 and a base value of 10300.31.
The largest sector in the index is Media, which accounts for 22.27% of the total index weighting. Basic Resources is the second largest, accounting for 19.9% of the total weighting, followed by Personal & Household Goods and Banks, with 12.43% and 12.35% respectively.
South Africa 40 futures allow you to speculate on, or hedge against, changes in the price of major stocks on the Johannesburg Stock Exchange. Contracts rollover on the second Friday of March, June, September, and December.
The Sprott Silver Investment Trust (PSLV) seeks to provide a secure, convenient, and exchange-traded investment alternative for investors interested in holding physical silver bullion without the inconvenience that is typical of a direct investment in physical silver bullion. The Trust intends to achieve this by investing primarily in long-term holdings of unencumbered, fully allocated, physical silver bullion and does not speculate with regard to short-term changes in silver prices.
A range refers to the difference between the highest and lowest prices a stock may reach during a specific time frame. This range gives investors an indication of how volatile a particular asset might be in terms of its price movements, as well as what opportunities they might have to make money. By analyzing historical data and keeping up-to-date with market news, investors can develop strategies to capitalize on different ranges.
How do you use ranges in trading?
Range trading is a popular trading strategy in finance, particularly for traders looking to limit their risk and profit from a given market movement. When using ranges, traders identify support and resistance levels for a security or asset, and look to take profits when prices reach either level. By using a range-trading strategy, traders can limit the amount of capital they are willing to risk per trade, as well as capitalize on both long-term and short-term movements in the market.
What is trend in trading?
A trend in trading is the general direction of a security's price over a period of time. Trend analysis helps traders make predictions about future market movements, allowing them to enter and exit positions at optimal times. Trends can be either upward or downward and often take weeks, months or even years to develop. To identify trends, technical analysis tools such as support and resistance levels, trend lines, and chart patterns are used by traders to detect buying and selling opportunities in the markets. Fundamental analysis also plays a role in recognizing potential profitable trading opportunities since underlying economic conditions may influence a security’s price.
A Stop Loss Order is a type of order that investors can use to limit losses when trading securities. This order instructs a broker to automatically sell a security when it reaches a certain price, known as the stop loss price. By using this order, investors can reduce their risk exposure by locking in gains and preventing larger losses.
How does a stop-loss order work?
A stop-loss order is an investment strategy that helps you limit losses by automatically selling your securities when they drop to a predetermined price. By setting up this order, you can avoid having to monitor the stock's performance every day and ensure that any potential losses are minimized.
What is the difference between a stop-loss and a stop limit order?
A stop-loss order is used to limit losses on a security position by automatically selling when the price drops below a specified level. Whereas a stop-limit order combines the features of a stop-loss with those of a limit order, enabling traders to specify both the price at which they are willing to sell and the maximum loss they are willing to take.
What is a good stop-loss order?
A good stop-loss order is one that is placed at a level that effectively limits potential losses on a trade. The specific level at which to place a stop-loss order will depend on the trader's risk tolerance and the price action of the security being traded. Generally, traders will place stop-loss orders at levels that are below the current price for long positions, or above the current price for short positions, in order to limit potential losses if the price moves in the opposite direction. It's important to note that stop loss orders act as a protective measure, but they don't guarantee that a trade will be executed at the exact stop loss level.
Working orders, also known as pending orders, include Stop orders and Limit orders. Essentially, they’re instructions for a broker to perform a trade when an asset hits a certain price. These orders inform brokers that traders wish to make that trade only if something happens to the asset price.
What is the best order type when buying stock?
The best order type depends on the individual's specific needs and market conditions. It's important to understand the trade-off between speed and price certainty when choosing an order type. Market orders provide immediate execution but at the current market price, while limit orders offer price certainty but may not be executed if the desired price is not reached.
What is an open work order?
An open work order in trading is an outstanding order to buy or sell a security that has not yet been executed. It remains open until it is either filled or cancelled by the trader.
ProShares Ultra Silver, also known as AGQ, is a single-day bet, not a buy-and-hold ETF. AGQ is a leveraged ETF that aims to deliver daily investment results that equate to twice the daily price performance of silver bullion, measured by US Dollar for delivery in London.
The VanEck Vectors Social Sentiment ETF (BUZZ) will track the BUZZ NextGen AI US Sentiment Leaders Index. This index consists of the most-favourably talked about stocks online, whether on blogs, social media or Reddit.
The Xtrackers MSCI U.S.A. ESG Leaders Equity ETF (USSG) holds a basket of companies that score highly for environmental, social, and governance (ESG) factors, with roughly marketlike sector exposure. The fund’s index uses MSCI’s ESG rating methodology to assign a score to all US large- and midcap stocks.
The WisdomTree Emerging Markets High Dividend ETF (DEM) tracks the WisdomTree Emerging Markets Dividend Index. The index is a fundamentally weighted index that is comprised of the highest dividend-yielding common stocks selected from the WisdomTree Emerging Markets Dividend Index. This provides it with some downside protection from market volatility.
DEM is an equity fund, and has a mix of market sectors. It includes stocks from key emerging markets such as Russia and China, with assets including China Contruction Bank, China Mobile and Norilsk Nickel.
Yield in trading refers to the return on an investment, expressed as a percentage of the investment's cost. It represents the income generated by an investment, such as interest or dividends, divided by the cost of the investment. The yield can be used to compare the returns of different investments and is an important metric for investors evaluating the performance of their portfolios.
How do I calculate yield?
Yield is calculated as (income generated by investment / cost of investment) * 100. The cost of the investment is usually the purchase price, and the income generated can come from various sources such as dividends, interest, or rent.
Is yield same as return?
No, yield and return are not the same. Yield is the income generated by an investment as a percentage of the cost, while return is the total gain or loss on the investment including both income and capital appreciation or depreciation.
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