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.
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.
Polkadot (DOT) fuses two blockchains: the main, relay chain, where transactions are permanently agreed upon, and user-generated chains. Tradeable in USD, Polkadot is priced in USD and uses the DOT/USD spot rate.
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.
LIBOR, is an acronym for “London Interbank Offer Rate”, and is the global reference rate for unsecured short-term borrowing in the interbank market. It is used as a benchmark for short-term interest rates, and is also used for pricing of interest rate swaps, currency rate swaps as well as mortgages. LIBOR can also be used as an indicator of the health of the financial system,
Who controls the LIBOR?
LIBOR is administered by the Intercontinental Exchange or ICE. It is computed for five currencies (Swiss franc, euro, pound sterling, Japanese yen and US dollar) with seven different maturities ranging from overnight to a year. ICE benchmark administration consists of 11 to 18 banks that contribute for each currency. These rates are then arranged in descending order, with top and bottom results taken of the list to exclude outliers. This data is then computed to get the LIBOR rate, which is calculated for each of the 5 currencies and 7 maturities, thereby producing 35 reference rates. A 3 month LIBOR is the most commonly used reference rate.
A PIP, or "point in percentage" generally refers to a unit of measurement used in the foreign exchange (Forex) market to represent the change in value between two currencies. One PIP is equal to the smallest price change that a given exchange rate can make, typically equal to 0.0001 for most currency pairs. Traders use PIPs to determine the profit or loss on a trade, as well as to set stop-loss and take-profit levels. However, in other markets, such as futures or stocks, a PIP can also refer to the smallest price change that a given contract or security can make and the terms 'PIP', 'points' and 'ticks' can be used interchangably.
What is the value of a PIP?
The value of a PIP can vary depending on the currency pair being traded and the size of the trade.
For example, if a trader buys 100,000 units of the EUR/USD currency pair at an exchange rate of 1.1850 and then sells it at an exchange rate of 1.1851, the price has increased by one PIP. The value of this one PIP movement is $0.0001 x 100,000 = $10.
However, if a trader buys or sells a mini lot (10,000 units) the value of a PIP would be $1 and if the trade is a micro lot (1,000 units) the value of a PIP would be $0.1.
It is important to note that the value of a PIP is also affected by the currency denomination of the account. For example, if the account is denominated in USD, the value of a PIP will be in USD, but if the account is denominated in JPY the value of a PIP will be in JPY.
Slippage is a common occurrence in trading when the price of an asset changes before an order can be filled. Slippage often happens when large orders are placed and market conditions change quickly, meaning that traders must accept the new price for their order or risk having it rejected. It’s important for traders to factor slippage into their trading strategies as unexpected slippage can affect trade outcomes.
What is a good slippage tolerance?
A good slippage tolerance is a matter of personal preference and depends on the trading strategy and risk tolerance. Generally, a low slippage tolerance is preferred as it allows for more precise execution of trades at the desired price. A high slippage tolerance allows for more flexibility in trade execution, but may result in less favorable prices. A slippage tolerance of 1-2% is considered to be reasonable for many traders.
How do traders avoid big losses when it comes to slippage?
Traders can avoid big losses due to slippage by using proper risk management strategies, such as setting stop-loss orders, using smaller position sizes, and using limit orders instead of market orders. Additionally, traders can look for a trustworthy and reliable broker with low slippage levels. Trading during less volatile periods can also help to minimize slippage.
What is maximum slippage?
Maximum slippage in trading refers to the largest difference between the expected price and the actual execution price of a trade. It is a measure of the worst-case scenario for slippage and can represent the largest potential loss a trader may face due to slippage. It is usually set by the trader in advance and if the slippage exceeds that level, the trade will not execute. The level of maximum slippage a trader is willing to accept is generally based on their individual risk tolerance.
Compound cryptocurrency is all about supply and demand. Its protocol, based on Ethereum blockchain, creates money markets with interests algorithmically derived from supply and demand levels. Users can earn or pay a floating interest rate without need for negotiating with other parties. Compound is priced in USD and tradeable through the COMP/USD symbol.
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.
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.
The WIG 20 Index, or Poland 20, is a blue-chip stock market index of the 20 most actively traded and liquid companies on the Warsaw Stock Exchange. Constituents are chosen from the top 20 companies trading on the Warsaw Stock Exchange as of the third Friday of February, May, August, and November.
The ranking is based upon turnover values for the previous 12 months and a closing price from the previous five trading sessions is used to calculate free float capitalisation.
The index has been calculated since 16th April, 1994 as a base value of 1,000 points. To keep the index diverse, no more than five companies from a single sector may be included in the index at any one time. Sectors covered by the index includes Commercial Banks, Oil & Gas Exploration & Production, Insurance, Metals Mining, and more.
Poland 20 futures allow you to speculate on, or hedge against, changes in the price of major stocks on the Warsaw Stock Exchange. Futures rollover on the 2nd Friday of March, June, September, and December.
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.
Fibonacci retracement is a technical analysis tool that uses horizontal lines to indicate areas where a stock's price may experience support or resistance at the key Fibonacci levels before it continues to move in the original direction. These levels are derived from the Fibonacci sequence and are commonly used in conjunction with trend lines to find entry and exit points in the market. The key levels are 23.6%, 38.2%, 50%, 61.8% and 100%.
Unlike moving averages, Fibonacci retracement levels are static prices. They do not change. This allows quick and simple identification and allows traders and investors to react when price levels are tested. Because these levels are inflection points, traders expect some type of price action, either a break or a rejection.
Why do people use Fibonacci in trading?
Fibonacci retracement is used in trading as it enables traders to identify long-term trends by determining when an asset's price is likely to change direction. This is useful to traders since it can help them to decide when to open or close trading positions, or when to apply stops and limits to their trades.
Is Fibonacci retracement a good strategy?
Fibonacci retracement can be a powerful trading tool when used correctly. It is based on the principle of support and resistance levels and can help identify key levels of entry and exit. When combined with other technical indicators it can help traders take better informed decisions.
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.
What are Support Levels?
Support levels refer to the levels at which the price of an asset tends to stop falling and stabilize. These levels are determined by analyzing past price movements and identifying a floor at which buying pressure is strong enough to prevent the price from falling further. Traders and investors use support levels as a guide for placing buy orders, and as a signal for potential buying opportunities.
What does support level mean in Crypto?
Support levels mean the same thing regardless of the asset class in question.
What is the best indicator for support and resistance?
There are several indicators that can be used to identify support and resistance levels in a market. Some commonly used indicators include moving averages, Fibonacci retracements, and pivot points. However, no single indicator is considered to be the "best" as different indicators may work better in different market conditions and for different traders. Ultimately, the best indicator is the one that works best for you and fits your individual trading style and strategy.
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 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.
Blue-chip stocks are shares of very large, successful, and reputable and financially companies. Blue-chip companies are mostly common household names.
What is the difference between a regular stock and a blue-chip stock?
A blue-chip stock refers to a stock of a well-established, financially stable and reliable company with a long history of steady growth and stability. Regular stocks are any other stocks. Blue-chip stocks are generally considered a lower risk investment, while regular stocks can have varying degrees of risk.
How do you know if a stock is blue-chip?
Blue chip stocks are usually large, well-established and financially stable companies with a long history of steady growth, consistent profits and strong brand recognition.
What are some examples of bluechip stocks?
Some examples of blue chip stocks are:
Apple Inc.
Microsoft Corporation
Amazon.com Inc.
Berkshire Hathaway
Innovation ETF (ARKK) is based on “disruptive innovation”, focusing on technologies or services that have the potential to change the world.
Companies within ARKK cover those that rely on or benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of DNA technologies, industrial innovation in energy, automation and manufacturing, the increased use of shared technology, infrastructure and services, and technologies that make financial services more efficient.
iShares MSCI Mexico ETF (EWW) offers traders exposure to a broad range of companies in Mexico and access to targeted Mexican stocks. It has 58 holdings, which include America Movil L, Formento Economico Mexicano, Walmart de Mexico and GPO Finance Banorte.
The fund has almost no technology, energy or utilities stocks as these sectors are government-run in Mexico. The sector-mix is 29.57% Consumer Staples, 21.13% Communication, 15.48% Financials, 12.27% Materials, 10.92% Industrials and the remaining split between real estate, consumer discretionary and health care.
Stock dilution is the decrease in existing shareholders' ownership of a company as a result of the issuance of new shares. It typically occurs when companies raise capital by issuing additional shares, thereby reducing the stake of existing shareholders.
Why do companies dilute stock?
Companies dilute stock to raise capital for future growth and investments, often through the sale of additional shares. This allows companies to raise money without having to take out loans or issue bonds. Diluting stock can help reduce overall debt and create a healthier financial situation for the company.
Is stock dilution a good thing?
It depends. If done properly, diluting stock can help raise funds for business operations and growth. It also encourages investors to purchase shares due to the lower price per share. However, too much dilution can weaken shareholder equity and damage investor confidence.
What does dilution do to stock price?
Dilution decreases a stock's price by decreasing its earnings per share (EPS). This happens when a company issues new shares to the public, increasing the total number of shares outstanding and resulting in lower EPS for existing shareholders. Dilution can also occur through corporate acquisitions, mergers or issuing debt that is converted into equity.
A trade execution is the process of executing a trading order in the financial markets. This typically involves verifying all of the parameters for the order, sending the request to the market or exchange, monitoring execution, and ensuring all transaction requirements have been met.
Brokers execute Trade Execution Order in the following ways:
• By sending orders to a Stock Exchange
• Sending them to market makers
• Via their own inventory of securities
Why is execution of trade important?
Trade execution is important due to the fact that even digital orders are not fully instantaneous. Trade orders can be split into several batches to sell since price quotes are only for a specific number of shares. The trade execution price may differ from the price seen on the order screen.
What is trade execution time?
Trade execution time is the period of time between a trade being placed and the completion of the trade. This includes market access, pricing, liquidity sourcing, risk management and settlement of funds. Trade execution time can vary depending on asset class, liquidity levels and other factors.
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.
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.
Currency appreciation in relation to Forex trading is defined as when one currency in a forex pair increases in value relative to the other currency in that pair. As such, the now “stronger” currency will cost more of the “weaker” one to buy. The reverse is also true, as that same stronger currency can now buy more of the weaker one when sold.
Is it good if a currency appreciates?
As one of the currencies in a currency pair goes up (or down), as the demand for it drives it up (or lack of it) or demand for the other currency) drives it down, than the supply does also follows – either less (when in demand) or more of it (when not in demand).
There are several reasons for Currency Appreciation, including the balance of trade, speculation on any of the currencies in that pair, or issues occurring within the international capital market. Traders may attempt to predict currency appreciation by utilizing the economic calendar. This calendar details economic issues which might determine the strengths and weaknesses of the global or local economies and currencies.
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.
Exposure in finance and trading refers to the potential financial loss or gain that an individual or entity may incur as a result of changes in market conditions or prices. It can refer to the overall risk of a portfolio, or to the specific risk associated with a particular security or market.
What is Leverage? How does leverage effect exposure?
Leverage refers to the use of debt or other financial instruments to increase the potential return on an investment. In trading, leverage allows an investor to control a larger position with a smaller amount of capital. Leverage can increase exposure to potential losses as well as gains, as a small change in the value of the underlying asset can have a larger impact on the value of a leveraged position.
How do you calculate exposure in trading?
Exposure in trading can be calculated by multiplying the size of a position by the current market price of the underlying asset. The VaR method also can be used by taking into account the volatility of the market and any potential correlation with other assets in the portfolio.
Expiry date, also known as expiration date or maturity date, is the date on which a financial contract, such as a futures contract or option, will expire and can no longer be traded. At the expiry date, the terms of the contract, such as the price and quantity, will be settled or exercised. For options, if the holder of the option chooses to exercise it, they will buy or sell the underlying asset at the strike price. For futures contracts, the holder will have to buy or sell the underlying asset at the agreed-upon price.
How does a expiry date work?
One key takeaway about Expiration Dates is that the further away they are the better. In this aspect, the potential value of an option can benefit from a longer time an option prior to expiring. I.e., the said option is more likely it is to hit its strike price and actually become valuable the longer it is on the market.
Are Expiry dates good for day trading?
expiry dates can be an important factor to consider for day trading options and futures contracts as they determine when the contract must be settled or exercised. Day traders should take into account the expiration date when planning their trades and adjust their strategy accordingly. It's important to remember that expiry dates are just one of many factors that can influence the price of financial instruments, and traders should always consider multiple factors when making trades.
Negative balance protection is a safety measure for retail traders, designed to ensure that they do not lose more than the balance on their own account while trading leveraged products such as CFDs. This feature takes into account instances where market moves quickly. The markets.com trading platforms provides retail clients with Negative Balance Protection, making it a good option for traders that benefit from this feature.
Can you trade with negative balance?
No, you cannot trade with a negative balance as it is not financially viable.
What happens if you go into negative balance?
If you go into negative balance on your trading account, you may be subject to additional fees and/or penalties. You may also be restricted from making any further trades until the balance is brought back up to a positive amount.
Does mt4 have negative balance protection?
Yes, MetaTrader 4 has negative balance protection which prevents trading accounts from going into debt.
The Consumer Discretionary Select Sector SPDR Fund (XLY) tracks US consumer discretionary companies within the S&P 500. This asset uses the Consumer Discretionary Select Sector Index as its tracking benchmark. The top ten holdings account for 66.2% of the fund’s portfolio.
The index comprises just 66 holdings from the consumer sector and includes many household names. Top holdings include Amazon, Home Depot, McDonalds and Nike.
The ARK Space Exploration & Innovation ETF's (ARKX) investment objective is long-term growth of capital. ARKX is an actively-managed exchange-traded fund (“ETF”) that will invest under normal circumstances primarily (at least 80% of its assets) in domestic and foreign equity securities of companies that are engaged in the Fund’s investment theme of Space Exploration and innovation. The Adviser defines “Space Exploration” as leading, enabling, or benefiting from technologically enabled products and/or services that occur beyond the surface of the Earth.
DBC, also known as the PowerShares DB Commodity Tracking ETF, tracks 14 commodities based on the futures curve. It aims to limit the effect of contango and maximise the effect of backwardation so that investors improve their returns. The commodities included in the ETF are gasoline, heating oil, Brent crude oil, WTI crude oil, gold, wheat, corn, soybeans, sugar, natural gas, zinc, copper, aluminium and silver.
Unlike other commodity ETFs, DBC rolls future contracts based on the shape of the future curve, rather than following a schedule. This allows the ETF to generate the best roll yield by minimising losses and maximising backwardation.
IWO, also known as iShares USA2000 Growth ETF, replicated the performance of the USA2000 Growth Index. This ETF is comprised of small public US companies that are expected to grow at an above-average rate. The index uses two-year growth forecasts and historical sales to identify growth.
Unsurprisingly, given that the focus is on growth, technology features heavily in the sector breakdown. Health care, Information Technology and Industrials account for 62.07% of the portfolio. It has over 1,200 holdings and stocks include Etsy, Haemonetics, Hubspot and Trade Desk Inc.
The Direxion Work From Home ETF (WFH) offers exposure to companies across four technology pillars, allowing investors to gain exposure to those companies that stand to benefit from an increasingly flexible work environment. The four pillars include Cloud Technologies, Cybersecurity, Online Project and Document Management, and Remote Communications. Companies are selected for inclusion in the index by ARTIS, a proprietary natural language processing algorithm, which uses key words to evaluate large volumes of publicly available information, such as annual reports, business descriptions and financial news.
The definition of Assets in trading is as resources which provide an economic value. Assets include but are not limited to cash, property, rights, as well as resources that have the potential of generating. Assets are what businesses require and use to operate. Assets are considered as one of the three fundamentals of any financial calculation, together with liabilities and equity.
Trading Assets Definition
There are several ways of defining and classifying assets:
• Convertible – Liquidity based, as in how fast they can be converted into cash.
• Current Assets – Liquid assets that are expected to be converted to cash within a year.
• Fixed Assets – Cannot be easily and readily converted into cash.
• Physical Existence – Tangible or intangible assets defined by their material presence.
• Tangible Assets – Having physical substance, such as hardware, cash, & inventory.
• Intangible Assets – Resources without physical substance patents, licenses, & copyrights.
• Operating Assets – Necessary to the ongoing operation of a business.
• Non-Operating Assets – Non-functional such as idle equipment & vacant land.
Market capitalization, commonly referred to as market cap, is a measure of a company's size and is calculated by multiplying the total number of its shares outstanding by the current market price of each share. Market cap can be used to help assess how much a company is worth in the eyes of investors.
Is high market cap good?
A high market capitalization (market cap) generally indicates that a company is well-established, has a strong financial performance, and is considered to be a reliable investment by the market. High market cap companies are often considered to be blue-chip stocks and are more stable and less risky than lower market cap companies.
However, a high market cap does not guarantee that a company will perform well in the future, it just reflects the current market's perception of the company, the stock price and the number of shares outstanding. The company may still be facing internal or external challenges, and the stock may be overvalued. Therefore, it's always important to do your own research and analysis before investing in any stock regardless of its market capitalization.
What is a good market capitalization?
A good market capitalization for an investment depends on the investor's individual preferences and goals. Generally, companies with a high market capitalization are considered to be well-established and financially stable, making them a more reliable investment. However, it is important to note that high market capitalization does not always guarantee future performance.
Is it better to have a small or large market cap?
Small-cap companies tend to be more risky but have higher growth potential. Large-cap companies are considered to be more stable but have lower growth potential. At the end of the day it will all depend on the investor's preference for risk and tolerance for profit/loss.
Compound cryptocurrency is all about supply and demand. Its protocol, based on Ethereum blockchain, creates money markets with interests algorithmically derived from supply and demand levels. Users can earn or pay a floating interest rate without need for negotiating with other parties. Compound is priced in USD and tradeable through the COMP/USD symbol.
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.
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.
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.
Blue-chip stocks are shares of very large, successful, and reputable and financially companies. Blue-chip companies are mostly common household names.
What is the difference between a regular stock and a blue-chip stock?
A blue-chip stock refers to a stock of a well-established, financially stable and reliable company with a long history of steady growth and stability. Regular stocks are any other stocks. Blue-chip stocks are generally considered a lower risk investment, while regular stocks can have varying degrees of risk.
How do you know if a stock is blue-chip?
Blue chip stocks are usually large, well-established and financially stable companies with a long history of steady growth, consistent profits and strong brand recognition.
What are some examples of bluechip stocks?
Some examples of blue chip stocks are:
Apple Inc.
Microsoft Corporation
Amazon.com Inc.
Berkshire Hathaway
Currency appreciation in relation to Forex trading is defined as when one currency in a forex pair increases in value relative to the other currency in that pair. As such, the now “stronger” currency will cost more of the “weaker” one to buy. The reverse is also true, as that same stronger currency can now buy more of the weaker one when sold.
Is it good if a currency appreciates?
As one of the currencies in a currency pair goes up (or down), as the demand for it drives it up (or lack of it) or demand for the other currency) drives it down, than the supply does also follows – either less (when in demand) or more of it (when not in demand).
There are several reasons for Currency Appreciation, including the balance of trade, speculation on any of the currencies in that pair, or issues occurring within the international capital market. Traders may attempt to predict currency appreciation by utilizing the economic calendar. This calendar details economic issues which might determine the strengths and weaknesses of the global or local economies and currencies.
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The Consumer Discretionary Select Sector SPDR Fund (XLY) tracks US consumer discretionary companies within the S&P 500. This asset uses the Consumer Discretionary Select Sector Index as its tracking benchmark. The top ten holdings account for 66.2% of the fund’s portfolio.
The index comprises just 66 holdings from the consumer sector and includes many household names. Top holdings include Amazon, Home Depot, McDonalds and Nike.
The ARK Space Exploration & Innovation ETF's (ARKX) investment objective is long-term growth of capital. ARKX is an actively-managed exchange-traded fund (“ETF”) that will invest under normal circumstances primarily (at least 80% of its assets) in domestic and foreign equity securities of companies that are engaged in the Fund’s investment theme of Space Exploration and innovation. The Adviser defines “Space Exploration” as leading, enabling, or benefiting from technologically enabled products and/or services that occur beyond the surface of the Earth.
DBC, also known as the PowerShares DB Commodity Tracking ETF, tracks 14 commodities based on the futures curve. It aims to limit the effect of contango and maximise the effect of backwardation so that investors improve their returns. The commodities included in the ETF are gasoline, heating oil, Brent crude oil, WTI crude oil, gold, wheat, corn, soybeans, sugar, natural gas, zinc, copper, aluminium and silver.
Unlike other commodity ETFs, DBC rolls future contracts based on the shape of the future curve, rather than following a schedule. This allows the ETF to generate the best roll yield by minimising losses and maximising backwardation.
The definition of Assets in trading is as resources which provide an economic value. Assets include but are not limited to cash, property, rights, as well as resources that have the potential of generating. Assets are what businesses require and use to operate. Assets are considered as one of the three fundamentals of any financial calculation, together with liabilities and equity.
Trading Assets Definition
There are several ways of defining and classifying assets:
• Convertible – Liquidity based, as in how fast they can be converted into cash.
• Current Assets – Liquid assets that are expected to be converted to cash within a year.
• Fixed Assets – Cannot be easily and readily converted into cash.
• Physical Existence – Tangible or intangible assets defined by their material presence.
• Tangible Assets – Having physical substance, such as hardware, cash, & inventory.
• Intangible Assets – Resources without physical substance patents, licenses, & copyrights.
• Operating Assets – Necessary to the ongoing operation of a business.
• Non-Operating Assets – Non-functional such as idle equipment & vacant land.
Fibonacci retracement is a technical analysis tool that uses horizontal lines to indicate areas where a stock's price may experience support or resistance at the key Fibonacci levels before it continues to move in the original direction. These levels are derived from the Fibonacci sequence and are commonly used in conjunction with trend lines to find entry and exit points in the market. The key levels are 23.6%, 38.2%, 50%, 61.8% and 100%.
Unlike moving averages, Fibonacci retracement levels are static prices. They do not change. This allows quick and simple identification and allows traders and investors to react when price levels are tested. Because these levels are inflection points, traders expect some type of price action, either a break or a rejection.
Why do people use Fibonacci in trading?
Fibonacci retracement is used in trading as it enables traders to identify long-term trends by determining when an asset's price is likely to change direction. This is useful to traders since it can help them to decide when to open or close trading positions, or when to apply stops and limits to their trades.
Is Fibonacci retracement a good strategy?
Fibonacci retracement can be a powerful trading tool when used correctly. It is based on the principle of support and resistance levels and can help identify key levels of entry and exit. When combined with other technical indicators it can help traders take better informed decisions.
Exposure in finance and trading refers to the potential financial loss or gain that an individual or entity may incur as a result of changes in market conditions or prices. It can refer to the overall risk of a portfolio, or to the specific risk associated with a particular security or market.
What is Leverage? How does leverage effect exposure?
Leverage refers to the use of debt or other financial instruments to increase the potential return on an investment. In trading, leverage allows an investor to control a larger position with a smaller amount of capital. Leverage can increase exposure to potential losses as well as gains, as a small change in the value of the underlying asset can have a larger impact on the value of a leveraged position.
How do you calculate exposure in trading?
Exposure in trading can be calculated by multiplying the size of a position by the current market price of the underlying asset. The VaR method also can be used by taking into account the volatility of the market and any potential correlation with other assets in the portfolio.
Expiry date, also known as expiration date or maturity date, is the date on which a financial contract, such as a futures contract or option, will expire and can no longer be traded. At the expiry date, the terms of the contract, such as the price and quantity, will be settled or exercised. For options, if the holder of the option chooses to exercise it, they will buy or sell the underlying asset at the strike price. For futures contracts, the holder will have to buy or sell the underlying asset at the agreed-upon price.
How does a expiry date work?
One key takeaway about Expiration Dates is that the further away they are the better. In this aspect, the potential value of an option can benefit from a longer time an option prior to expiring. I.e., the said option is more likely it is to hit its strike price and actually become valuable the longer it is on the market.
Are Expiry dates good for day trading?
expiry dates can be an important factor to consider for day trading options and futures contracts as they determine when the contract must be settled or exercised. Day traders should take into account the expiration date when planning their trades and adjust their strategy accordingly. It's important to remember that expiry dates are just one of many factors that can influence the price of financial instruments, and traders should always consider multiple factors when making trades.
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.
LIBOR, is an acronym for “London Interbank Offer Rate”, and is the global reference rate for unsecured short-term borrowing in the interbank market. It is used as a benchmark for short-term interest rates, and is also used for pricing of interest rate swaps, currency rate swaps as well as mortgages. LIBOR can also be used as an indicator of the health of the financial system,
Who controls the LIBOR?
LIBOR is administered by the Intercontinental Exchange or ICE. It is computed for five currencies (Swiss franc, euro, pound sterling, Japanese yen and US dollar) with seven different maturities ranging from overnight to a year. ICE benchmark administration consists of 11 to 18 banks that contribute for each currency. These rates are then arranged in descending order, with top and bottom results taken of the list to exclude outliers. This data is then computed to get the LIBOR rate, which is calculated for each of the 5 currencies and 7 maturities, thereby producing 35 reference rates. A 3 month LIBOR is the most commonly used reference rate.
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.
Innovation ETF (ARKK) is based on “disruptive innovation”, focusing on technologies or services that have the potential to change the world.
Companies within ARKK cover those that rely on or benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of DNA technologies, industrial innovation in energy, automation and manufacturing, the increased use of shared technology, infrastructure and services, and technologies that make financial services more efficient.
Polkadot (DOT) fuses two blockchains: the main, relay chain, where transactions are permanently agreed upon, and user-generated chains. Tradeable in USD, Polkadot is priced in USD and uses the DOT/USD spot rate.
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.
A PIP, or "point in percentage" generally refers to a unit of measurement used in the foreign exchange (Forex) market to represent the change in value between two currencies. One PIP is equal to the smallest price change that a given exchange rate can make, typically equal to 0.0001 for most currency pairs. Traders use PIPs to determine the profit or loss on a trade, as well as to set stop-loss and take-profit levels. However, in other markets, such as futures or stocks, a PIP can also refer to the smallest price change that a given contract or security can make and the terms 'PIP', 'points' and 'ticks' can be used interchangably.
What is the value of a PIP?
The value of a PIP can vary depending on the currency pair being traded and the size of the trade.
For example, if a trader buys 100,000 units of the EUR/USD currency pair at an exchange rate of 1.1850 and then sells it at an exchange rate of 1.1851, the price has increased by one PIP. The value of this one PIP movement is $0.0001 x 100,000 = $10.
However, if a trader buys or sells a mini lot (10,000 units) the value of a PIP would be $1 and if the trade is a micro lot (1,000 units) the value of a PIP would be $0.1.
It is important to note that the value of a PIP is also affected by the currency denomination of the account. For example, if the account is denominated in USD, the value of a PIP will be in USD, but if the account is denominated in JPY the value of a PIP will be in JPY.
The WIG 20 Index, or Poland 20, is a blue-chip stock market index of the 20 most actively traded and liquid companies on the Warsaw Stock Exchange. Constituents are chosen from the top 20 companies trading on the Warsaw Stock Exchange as of the third Friday of February, May, August, and November.
The ranking is based upon turnover values for the previous 12 months and a closing price from the previous five trading sessions is used to calculate free float capitalisation.
The index has been calculated since 16th April, 1994 as a base value of 1,000 points. To keep the index diverse, no more than five companies from a single sector may be included in the index at any one time. Sectors covered by the index includes Commercial Banks, Oil & Gas Exploration & Production, Insurance, Metals Mining, and more.
Poland 20 futures allow you to speculate on, or hedge against, changes in the price of major stocks on the Warsaw Stock Exchange. Futures rollover on the 2nd Friday of March, June, September, and December.
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.
iShares MSCI Mexico ETF (EWW) offers traders exposure to a broad range of companies in Mexico and access to targeted Mexican stocks. It has 58 holdings, which include America Movil L, Formento Economico Mexicano, Walmart de Mexico and GPO Finance Banorte.
The fund has almost no technology, energy or utilities stocks as these sectors are government-run in Mexico. The sector-mix is 29.57% Consumer Staples, 21.13% Communication, 15.48% Financials, 12.27% Materials, 10.92% Industrials and the remaining split between real estate, consumer discretionary and health care.
Negative balance protection is a safety measure for retail traders, designed to ensure that they do not lose more than the balance on their own account while trading leveraged products such as CFDs. This feature takes into account instances where market moves quickly. The markets.com trading platforms provides retail clients with Negative Balance Protection, making it a good option for traders that benefit from this feature.
Can you trade with negative balance?
No, you cannot trade with a negative balance as it is not financially viable.
What happens if you go into negative balance?
If you go into negative balance on your trading account, you may be subject to additional fees and/or penalties. You may also be restricted from making any further trades until the balance is brought back up to a positive amount.
Does mt4 have negative balance protection?
Yes, MetaTrader 4 has negative balance protection which prevents trading accounts from going into debt.
Market capitalization, commonly referred to as market cap, is a measure of a company's size and is calculated by multiplying the total number of its shares outstanding by the current market price of each share. Market cap can be used to help assess how much a company is worth in the eyes of investors.
Is high market cap good?
A high market capitalization (market cap) generally indicates that a company is well-established, has a strong financial performance, and is considered to be a reliable investment by the market. High market cap companies are often considered to be blue-chip stocks and are more stable and less risky than lower market cap companies.
However, a high market cap does not guarantee that a company will perform well in the future, it just reflects the current market's perception of the company, the stock price and the number of shares outstanding. The company may still be facing internal or external challenges, and the stock may be overvalued. Therefore, it's always important to do your own research and analysis before investing in any stock regardless of its market capitalization.
What is a good market capitalization?
A good market capitalization for an investment depends on the investor's individual preferences and goals. Generally, companies with a high market capitalization are considered to be well-established and financially stable, making them a more reliable investment. However, it is important to note that high market capitalization does not always guarantee future performance.
Is it better to have a small or large market cap?
Small-cap companies tend to be more risky but have higher growth potential. Large-cap companies are considered to be more stable but have lower growth potential. At the end of the day it will all depend on the investor's preference for risk and tolerance for profit/loss.
Slippage is a common occurrence in trading when the price of an asset changes before an order can be filled. Slippage often happens when large orders are placed and market conditions change quickly, meaning that traders must accept the new price for their order or risk having it rejected. It’s important for traders to factor slippage into their trading strategies as unexpected slippage can affect trade outcomes.
What is a good slippage tolerance?
A good slippage tolerance is a matter of personal preference and depends on the trading strategy and risk tolerance. Generally, a low slippage tolerance is preferred as it allows for more precise execution of trades at the desired price. A high slippage tolerance allows for more flexibility in trade execution, but may result in less favorable prices. A slippage tolerance of 1-2% is considered to be reasonable for many traders.
How do traders avoid big losses when it comes to slippage?
Traders can avoid big losses due to slippage by using proper risk management strategies, such as setting stop-loss orders, using smaller position sizes, and using limit orders instead of market orders. Additionally, traders can look for a trustworthy and reliable broker with low slippage levels. Trading during less volatile periods can also help to minimize slippage.
What is maximum slippage?
Maximum slippage in trading refers to the largest difference between the expected price and the actual execution price of a trade. It is a measure of the worst-case scenario for slippage and can represent the largest potential loss a trader may face due to slippage. It is usually set by the trader in advance and if the slippage exceeds that level, the trade will not execute. The level of maximum slippage a trader is willing to accept is generally based on their individual risk tolerance.
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.
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.
What are Support Levels?
Support levels refer to the levels at which the price of an asset tends to stop falling and stabilize. These levels are determined by analyzing past price movements and identifying a floor at which buying pressure is strong enough to prevent the price from falling further. Traders and investors use support levels as a guide for placing buy orders, and as a signal for potential buying opportunities.
What does support level mean in Crypto?
Support levels mean the same thing regardless of the asset class in question.
What is the best indicator for support and resistance?
There are several indicators that can be used to identify support and resistance levels in a market. Some commonly used indicators include moving averages, Fibonacci retracements, and pivot points. However, no single indicator is considered to be the "best" as different indicators may work better in different market conditions and for different traders. Ultimately, the best indicator is the one that works best for you and fits your individual trading style and strategy.
Stock dilution is the decrease in existing shareholders' ownership of a company as a result of the issuance of new shares. It typically occurs when companies raise capital by issuing additional shares, thereby reducing the stake of existing shareholders.
Why do companies dilute stock?
Companies dilute stock to raise capital for future growth and investments, often through the sale of additional shares. This allows companies to raise money without having to take out loans or issue bonds. Diluting stock can help reduce overall debt and create a healthier financial situation for the company.
Is stock dilution a good thing?
It depends. If done properly, diluting stock can help raise funds for business operations and growth. It also encourages investors to purchase shares due to the lower price per share. However, too much dilution can weaken shareholder equity and damage investor confidence.
What does dilution do to stock price?
Dilution decreases a stock's price by decreasing its earnings per share (EPS). This happens when a company issues new shares to the public, increasing the total number of shares outstanding and resulting in lower EPS for existing shareholders. Dilution can also occur through corporate acquisitions, mergers or issuing debt that is converted into equity.
A trade execution is the process of executing a trading order in the financial markets. This typically involves verifying all of the parameters for the order, sending the request to the market or exchange, monitoring execution, and ensuring all transaction requirements have been met.
Brokers execute Trade Execution Order in the following ways:
• By sending orders to a Stock Exchange
• Sending them to market makers
• Via their own inventory of securities
Why is execution of trade important?
Trade execution is important due to the fact that even digital orders are not fully instantaneous. Trade orders can be split into several batches to sell since price quotes are only for a specific number of shares. The trade execution price may differ from the price seen on the order screen.
What is trade execution time?
Trade execution time is the period of time between a trade being placed and the completion of the trade. This includes market access, pricing, liquidity sourcing, risk management and settlement of funds. Trade execution time can vary depending on asset class, liquidity levels and other factors.
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.
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.
IWO, also known as iShares USA2000 Growth ETF, replicated the performance of the USA2000 Growth Index. This ETF is comprised of small public US companies that are expected to grow at an above-average rate. The index uses two-year growth forecasts and historical sales to identify growth.
Unsurprisingly, given that the focus is on growth, technology features heavily in the sector breakdown. Health care, Information Technology and Industrials account for 62.07% of the portfolio. It has over 1,200 holdings and stocks include Etsy, Haemonetics, Hubspot and Trade Desk Inc.
The Direxion Work From Home ETF (WFH) offers exposure to companies across four technology pillars, allowing investors to gain exposure to those companies that stand to benefit from an increasingly flexible work environment. The four pillars include Cloud Technologies, Cybersecurity, Online Project and Document Management, and Remote Communications. Companies are selected for inclusion in the index by ARTIS, a proprietary natural language processing algorithm, which uses key words to evaluate large volumes of publicly available information, such as annual reports, business descriptions and financial news.
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