Trading Knowledge Blog

30 Terms of Trading Knowledge

1. Arbitrage: The simultaneous purchase and sale of an asset to profit from a difference in the price.

2. Bear Market: A market condition where prices are falling or are expected to fall.

3. Bull Market: A market condition where prices are rising or are expected to rise.

4. Call Option: A financial contract that gives the buyer the right, but not the obligation, to buy an asset at a specified price within a specific time period.

5. Commodity: A basic good used in commerce that is interchangeable with other goods of the same type.

6. Derivative: A financial security whose value is dependent upon or derived from an underlying asset or group of assets.

7. Dividend: A distribution of a portion of a company's earnings to its shareholders.

8. ETF (Exchange-Traded Fund): A type of investment fund that is traded on stock exchanges, much like stocks.

9. Forex (Foreign Exchange): The global marketplace for trading national currencies against one another.

10. Futures Contract: A legal agreement to buy or sell a particular commodity asset, or security at a predetermined price at a specified time in the future.

11. Hedge: An investment to reduce the risk of adverse price movements in an asset.

12. Index Fund: A type of mutual fund with a portfolio constructed to match or track the components of a market index.

13. IPO (Initial Public Offering): The process of offering shares of a private corporation to the public in a new stock issuance.

14. Leverage: The use of various financial instruments or borrowed capital to increase the potential return of an investment.

15. Liquidity: The ease with which an asset can be converted into cash without affecting its market price.

16. Margin: Borrowed money that is used to purchase securities.

17. Mutual Fund: An investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and other assets.

18. Option: A financial derivative that represents a contract sold by one party (option writer) to another party (option holder).

19. Portfolio: A range of investments held by a person or organization.

20. Put Option: A financial contract that gives the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

21. Short Selling: The sale of a security that the seller has borrowed and does not own.

22. Spread: The difference between the bid and the ask price of a security or asset.

23. Stock: A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

24. Stop-Loss Order: An order placed with a broker to buy or sell once the stock reaches a certain price.

25. Swap: A derivative contract through which two parties exchange financial instruments.

26. Technical Analysis: An analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume.

27. Volatility: A statistical measure of the dispersion of returns for a given security or market index.

28. Yield: The income return on an investment, such as the interest or dividends received from holding a particular security.

29. Zero-Coupon Bond: A bond that is issued at a discount to its face value and does not pay interest.

30. Zero-Sum Game: A situation in which one participant's gains result only from another participant's equivalent losses.

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