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Trading Glossary

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.

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Liquidity

What is Liquidity?

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. 

Dividends

What is a Dividend and how does it work?

A dividend is a payment made by a company to its shareholders out of its profits. It's typically paid quarterly, with the amount of each dividend depending on how profitable the company is and how much the board of directors chooses to distribute. Dividends can be used as income or reinvested back into the company to purchase additional shares.

How many shares do you need to get dividends?
The exact number of shares you need to get dividends depends on the company's policy and dividend payout rate. Generally, owning at least one share qualifies you for receiving dividends.

Is a dividend a good thing for traders?
Yes. Dividends provide traders with regular income and the potential for capital gains if the dividend is reinvested into more shares. This can be beneficial to traders, as it can create a passive stream of income and add to their overall yeild.
 

Acquisition

What is an Acquisition?

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”:

  • Acquisitions – When both business entities continue their operations in one form or another.
  • Mergers – When only one of the entities remains while the other is taken over.
  • Conglomeration / Amalgamation – When both business entities are reformed into a new one.

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.

  1. A Horizontal acquisition happens when company acquires another company that is in the same business.
  2. A Vertical acquisition is defined as one company acquiring another which is in a different position on market or the supply chain.
  3. Conglomerate acquisitions happen when the company buying the target and the target company itself operate in unrelated industries or are engaged in unrelated functions.
  4. Congeneric acquisition occurs when an acquiring company and the acquired company market different products or services, yet sell to the same customers. 

Limit Order

What is a Limit Order?

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.
 

Ex-Dividend Date

What is an Ex-Dividend Date?

The term Ex-Dividend date refers to a cut-off date where shareholders buying shares from a company will not be eligible for upcoming dividends for those shares. 

Why is it important to know the ex-dividend date?
Knowing the ex-dividend date is important for investors as it determines whether they are eligible to receive the next dividend payment. On this day, stocks typically drop in price by an amount equal to the dividend paid, so understanding this date is essential for making informed decisions.

The Ex-Dividend Date is one of four dates relevant to a company’s dividends: The other three are:
• Declaration Date – When a company announces that it plans to issue dividends in the foreseeable future
• Record Date - When the dividend issuing company examines and closes its list of shareholders
• Payable Date - When the eligible shareholders are to be paid by the company 


What happens if I sell on ex-dividend date?
If you sell the stock on its ex-dividend date, you will not receive the next dividend. The buyer of the stock will receive the dividend and any capital gains, but you as the seller will miss out on this benefit.

US Utilities

IDU, also known as the iShares US Utilities ETF, tracks a broad range of market-cap-weighted US utilities stock. This asset provides exposure to US electricity, gas and water companies and has 51 holdings.

This ETF is an opportunity for traders looking for exposure to the sector, or to US holdings. Stocks included in the portfolio include Nextera Energy Inc, Duke Energy Corp, Dominion Energy Inc and Southern. It is comprised of 56.67% electric utilities, 31.10% multi-utilities, 5.3 gas utilities. Water utilities and independent power producers or energy traders make up the remainder.

Equity in Trading

What is equity in trading?

Equity is the value of a trader's account, representing the total assets minus any margin used to open trades. It reflects their financial position and potential financial outcomes from any trading activities as they currently stand. Traders can use equity to decide when to enter or exit positions and what size positions to take.

What is difference equity and stock?
For traders, stock and equity are synonymous terms as stocks represent equity ownership in a company. Assets, liabilities, and shareholders' equity are items found on the balance sheet.

What is difference between equity and account balance?
Equity is the total account balance including profits/losses from open positions, whereas the account balance is simply the total money deposited in an account before any trades have been made.

Delisting a Stock

What is Delisting?

Delisting is the removal of a security from a stock exchange. This can happen voluntarily by the company, or involuntarily by the exchange if the security no longer meets certain listing criteria. When a security is delisted, it cannot be traded on the exchange, although investors may still hold it as an unlisted investment.

What happens when stock is delisted?
A company can undergo voluntary or compulsory delisting. 
• In voluntary delisting, a company removes its own securities / shares from a stock exchange. 
• In compulsory (or involuntary) delisting, the securities of a company are removed by regulatory functions, usually for not complying with Listing Agreement.

Can I sell delisted shares?
Delisted stocks often continue to trade over-the-counter. Shareholders can still trade the stock, though it is likely that the market will be less liquid.

Will I get my money back if a stock is delisted?
It depends on the type of delisting. Generally, investors receive their initial investment if a stock is voluntarily delisted. However, in cases of involuntary delisting, investors may not be entitled to any reimbursement.

Lithium and Battery Tech

Lithium and Battery Tech ETF (LIT) tracks a market-cap weighted index of global lithium miners and battery producers. The asset invests in the full cycle of lithium, from mining to refining and battery production.  

For this reason, it doesn't offer the exposure of other assets to metals and mining sectors, instead is an investment for niche lithium exposure. Holdings in the ETF include Tesla, Albemarle corp, Panasonic, Samsung SDI and Enersys.
 

Utilities Staples Select Sector Fund

Utilities Staples Select Sector SPDR Fund (XLU) tracks US utilities companies within the S&P 500. This asset uses the Utilities Select Sector Index as its tracking benchmark. The fund is concentrated to just a few large firms, as the index comprises just 30 holdings from the utilities sector. This can be a pro or a con depending on your trading strategy.

Top holdings include Nextera Energy Inc, Duke Energy Corp, Dominion Energy Inc and Southern Co.

Curve DAO Token

Curve acts as a liquidity pool for stable cryptocurrencies. CRV DAO Tokens are given to users who provide liquidity in their pools. Those pooled funds are used by traders to exchange different stable coins, thus avoiding slippage and high fees. Curve DAO Token are priced in USD and is tradeable via the CRV/USD symbol.

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Dividends

What is a Dividend and how does it work?

A dividend is a payment made by a company to its shareholders out of its profits. It's typically paid quarterly, with the amount of each dividend depending on how profitable the company is and how much the board of directors chooses to distribute. Dividends can be used as income or reinvested back into the company to purchase additional shares.

How many shares do you need to get dividends?
The exact number of shares you need to get dividends depends on the company's policy and dividend payout rate. Generally, owning at least one share qualifies you for receiving dividends.

Is a dividend a good thing for traders?
Yes. Dividends provide traders with regular income and the potential for capital gains if the dividend is reinvested into more shares. This can be beneficial to traders, as it can create a passive stream of income and add to their overall yeild.
 

Acquisition

What is an Acquisition?

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”:

  • Acquisitions – When both business entities continue their operations in one form or another.
  • Mergers – When only one of the entities remains while the other is taken over.
  • Conglomeration / Amalgamation – When both business entities are reformed into a new one.

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.

  1. A Horizontal acquisition happens when company acquires another company that is in the same business.
  2. A Vertical acquisition is defined as one company acquiring another which is in a different position on market or the supply chain.
  3. Conglomerate acquisitions happen when the company buying the target and the target company itself operate in unrelated industries or are engaged in unrelated functions.
  4. Congeneric acquisition occurs when an acquiring company and the acquired company market different products or services, yet sell to the same customers. 

Delisting a Stock

What is Delisting?

Delisting is the removal of a security from a stock exchange. This can happen voluntarily by the company, or involuntarily by the exchange if the security no longer meets certain listing criteria. When a security is delisted, it cannot be traded on the exchange, although investors may still hold it as an unlisted investment.

What happens when stock is delisted?
A company can undergo voluntary or compulsory delisting. 
• In voluntary delisting, a company removes its own securities / shares from a stock exchange. 
• In compulsory (or involuntary) delisting, the securities of a company are removed by regulatory functions, usually for not complying with Listing Agreement.

Can I sell delisted shares?
Delisted stocks often continue to trade over-the-counter. Shareholders can still trade the stock, though it is likely that the market will be less liquid.

Will I get my money back if a stock is delisted?
It depends on the type of delisting. Generally, investors receive their initial investment if a stock is voluntarily delisted. However, in cases of involuntary delisting, investors may not be entitled to any reimbursement.

Curve DAO Token

Curve acts as a liquidity pool for stable cryptocurrencies. CRV DAO Tokens are given to users who provide liquidity in their pools. Those pooled funds are used by traders to exchange different stable coins, thus avoiding slippage and high fees. Curve DAO Token are priced in USD and is tradeable via the CRV/USD symbol.

E-H

Ex-Dividend Date

What is an Ex-Dividend Date?

The term Ex-Dividend date refers to a cut-off date where shareholders buying shares from a company will not be eligible for upcoming dividends for those shares. 

Why is it important to know the ex-dividend date?
Knowing the ex-dividend date is important for investors as it determines whether they are eligible to receive the next dividend payment. On this day, stocks typically drop in price by an amount equal to the dividend paid, so understanding this date is essential for making informed decisions.

The Ex-Dividend Date is one of four dates relevant to a company’s dividends: The other three are:
• Declaration Date – When a company announces that it plans to issue dividends in the foreseeable future
• Record Date - When the dividend issuing company examines and closes its list of shareholders
• Payable Date - When the eligible shareholders are to be paid by the company 


What happens if I sell on ex-dividend date?
If you sell the stock on its ex-dividend date, you will not receive the next dividend. The buyer of the stock will receive the dividend and any capital gains, but you as the seller will miss out on this benefit.

Equity in Trading

What is equity in trading?

Equity is the value of a trader's account, representing the total assets minus any margin used to open trades. It reflects their financial position and potential financial outcomes from any trading activities as they currently stand. Traders can use equity to decide when to enter or exit positions and what size positions to take.

What is difference equity and stock?
For traders, stock and equity are synonymous terms as stocks represent equity ownership in a company. Assets, liabilities, and shareholders' equity are items found on the balance sheet.

What is difference between equity and account balance?
Equity is the total account balance including profits/losses from open positions, whereas the account balance is simply the total money deposited in an account before any trades have been made.

I-L

Liquidity

What is Liquidity?

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. 

Limit Order

What is a Limit Order?

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.
 

Lithium and Battery Tech

Lithium and Battery Tech ETF (LIT) tracks a market-cap weighted index of global lithium miners and battery producers. The asset invests in the full cycle of lithium, from mining to refining and battery production.  

For this reason, it doesn't offer the exposure of other assets to metals and mining sectors, instead is an investment for niche lithium exposure. Holdings in the ETF include Tesla, Albemarle corp, Panasonic, Samsung SDI and Enersys.
 

M-P

Q-T

U-Z

US Utilities

IDU, also known as the iShares US Utilities ETF, tracks a broad range of market-cap-weighted US utilities stock. This asset provides exposure to US electricity, gas and water companies and has 51 holdings.

This ETF is an opportunity for traders looking for exposure to the sector, or to US holdings. Stocks included in the portfolio include Nextera Energy Inc, Duke Energy Corp, Dominion Energy Inc and Southern. It is comprised of 56.67% electric utilities, 31.10% multi-utilities, 5.3 gas utilities. Water utilities and independent power producers or energy traders make up the remainder.

Utilities Staples Select Sector Fund

Utilities Staples Select Sector SPDR Fund (XLU) tracks US utilities companies within the S&P 500. This asset uses the Utilities Select Sector Index as its tracking benchmark. The fund is concentrated to just a few large firms, as the index comprises just 30 holdings from the utilities sector. This can be a pro or a con depending on your trading strategy.

Top holdings include Nextera Energy Inc, Duke Energy Corp, Dominion Energy Inc and Southern Co.

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