Glossary of Stock Trading and Investment Terminology

Beta


Also referred to as "beta coefficient," beta is a number describing the relation of returns compared with that of the market. It measures an investment’s volatility and indicates sensitivity of a stock’s rate of return. For example, a beta higher than 1 means higher price volatility than market volatility. A beta below 1 means lower price volatility than the market. The beta coefficient is an important element in the Capital Asset Pricing Model (CAPM).

Contingent Order


Contingent order (also called a net order or a "not held" order) is the placement of two share orders; one order cannot be initiated without the other. For example, customer A places a buy order and a sell limit order in the market. The buy cannot proceed unless the sell limit order is also executed. An example of a contingent order is a buy-write. When two separate transactions must occur at the same time, contingent orders are usually placed.

Scanning Software


If you want to identify the potential trading opportunities through technical or fundamental analysis, then you can always try out the Stock Scanning Software to get the job done. In today’s world, scanning software is seen as an important tool for the technical traders.

The Basic Function of a Stock Scanning Software

Fundamental Analysis


Fundamental analysis is a technique of estimating the future returns from the stocks of a company by analysing its financial statements, market share, competency of management, competitive advantage and many other factors. In order to forecast an accurate return in future, fundamental analysis considers the current as well as historic data.

When it comes to fundamental analysis of a company, there are two types of fundamental factors a trader needs to take under consideration:

  • the quantitative factors; and
  • the qualitative factors

Listed Investment Company (LIC)


The listed investment companies or LICs are the ones that are managed by investment professionals who invest in assets like local and international shares as well as in infrastructure assets. LICs have a long history in the Australian market. The Australian Foundation Investment Company (AFIC) is one of the oldest LICs of the country which is about 79 years old. Some other old LICs include Choiseul and Milton and Argo Investments.

Day Trading


Day trading refers to purchasing and selling various types of financial instruments within the same day in order to make profits from the price discrepancy. The person who follows this type of trading approach is called- a day trader. Usually the new traders tend to be more attracted to day trading as they want to get out of the pressure of holding a large amount of money at stake and want to sell off the instrument for profit as soon as the price goes up.

Alpha


Alpha is a measure of stock performance adjusted based on risk. Alpha takes mutual fund volatility (price risk) and compares its risk-adjusted performance to a benchmark index. Alpha is the fund's excess return relative to benchmark index return.

Platform (Master Trust and Wrap Account)


Master trusts and wrap accounts are mainly used by the financial planners for monitoring and recording the investments of the clients. These days often you will find the financial advisers asking their clients to make their investments through a wrap or master account which is also known as an administrative platform. Some advisers may go even further offering their clients a variety of platforms, coming with different selections of shares or managed funds on each.

Average Down


Averaging down means buying shares from the same company at lower prices than previously paid. This brings the total price paid for the stock lower and allow for higher returns. The idea is to lower the average acquisition cost. The investor gets more share per dollar by averaging down. If the price of the stock increases, the investor makes a profit.

Spreads (Forex)


Just like the equity market, Forex is also quoted by the bid and ask prices where the difference or gap between the bid and ask is termed as the “Spread”. It is important to keep in mind that Forex trading is not commission free. As far as the Forex is taken under consideration, the brokers might come up with the claim that they do not charge any typical brokerage but instead of that, the commission is added in the spread.

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