Glossary of Stock Trading and Investment Terminology

Algorithmic Trading


An algorithm is a precise set of rules specifying how to solve problems. Algorithmic trading is automated trading used to find the best prices, where programs make trading decisions on markets. In short, the need for human intervention to buy/sell securities is eliminated. Algorithmic trading is also called algo, robo or black-box trading. Investments by hedge funds and other large institutions make use of algorithmic trading.

Inflation


The term inflation, also known as the Consumer Price Inflation (CPI) refers to the rise in the price level of goods and services which mean the consumers will have to spend more money to buy the same amount of goods or services. Inflation is one of those factors that reduces the buying power of the customers and is considered as a “true enemy” for the investors because of its negative influence over the market. Market forces as well as the Government policies usually play a key role in the rise and decline of inflation in a country.

What Causes Inflation?

Non-Renounceable Rights Issue


A non-renounceable rights issue is when a company offers its shareholders the right to purchase more of the company's stock, usually at a discount to market rate. Compared to renounceable rights, the offer is not transferable to other parties and cannot be bought or sold. Issuing more shares of a stock dilutes the value of current outstanding stock on the market.

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.

Monetary Policy


Monetary policy is a very important tool of the Government of a country which uses this particular tool in an attempt to influence the national economy. By implementing the monetary policy, a Government controls the availability of money in the country and also attempts to obtain its political goals through the process. Some of the main issues that a Government needs to address under its monetary policy are: economic growth of the nation, unemployment rate of the society and balance of external payments.

Monetary Policy and Role of Central Banks

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