Terms

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All Terms

130-30 Strategy
This strategy is often used to improve returns on portfolio. It uses financial leverage by shorting poor performing stocks and purchasing shares that are expected to have high returns. A 130-30 ratio implies shorting stocks up to 30% of the portfolio value and then using the proceeds to take a long position in the stocks the investor thinks will outperform the market. Often, investors will mimic an index such as the S&P 500 when choosing stocks for this strategy.
52-Week Range
Technical analysts compare a stock's current trading price to its 52-week range to get a broad sense of how the stock is doing, as well as how much the stock's price has fluctuated. If the stock price moves above its 52-week high, it is usually considered bullish. Similarly, if the stock price goes below its 52-week low it is considered bearish. Additionally, this information may indicate the potential future range of the stock and how volatile the shares are compared to index.
90/10 Strategy
For conservative investors, an investing strategy that involves deploying 90% of one's investment capital in interest-bearing instruments that have a lower degree of risk, and the balance 10% in high-risk investments. The 10% investment in high-risk investements is used to increase returns on the portfolio while the 90% capital is used to preserve the portfolio. This is a relatively conservative investment strategy that aims to generate higher yields on the overall portfolio. Potential losses will typically be limited to the 10% that is invested in the high-risk investments, depending on the quality of bonds purchased.
Abandoned Baby
This is one of the very rare candlestick patterns for top or bottom reversal signal. It is same as Western island top or bottom in which the island session is also a doji. It is comprised of a doji star that gaps away (also the shadows) from the prior and following sessions' candlesticks.
ABC
Elliott Wave corrective wave for a three-wave countertrend price movement. Wave A is the first price wave against the trend of the market. Wave B is a corrective wave to wave A. Wave C is the final price move to complete the countertrend price move.
Accumulation
The process where excess supply of a stock is absorbed by increasing demand from buyers. It is considered that the smart money buys the stocks during this phase. Public interest in the security is low during this phase. Prices usually rise afterwards with a breakout of key resistance levels. End of this phase also attracts pattern traders and positional traders who are looking to capture large movements.
Advance Block
In Japanese candlestick charting a variation of the three white soldiers in which the last two soldiers (i.e. candles with white real bodies) display weakening upside momentum. This weakness could be in the form of tall upper shadows or progressively smaller real bodies. It signifies a reduction of buying pressure or an increase in selling pressure.
ADX
Some technicians find ADX to be one of the most powerful and reliable technical indicators. The indicator gives a basic buy signal when +DI (green) cross above ?DI (red), and the reverse for a sell. The signal is that much more potent if the ADX line is or soon after the signal begins trending up. ADX gives a somewhat late signal, but it is typically very reliable. I like to filter it with other tools such as MACD, Wilder's parabolic, etc.
Algorithmic trading
Algorithmic trading is a term which refers to the use of various technical indicators and advanced mathematics to make decisions about the timing, price and quantity of a market order. Trades are made without human intervention using information received electronically. It is widely used by banks, hedge funds, pension funds and mutual funds. Large trades are broken down into smaller ones to minimise market impact and risk. Millions of orders can be executed each second and dozens of public and private exchanges can be scanned simultaneously.
Alpha
A coefficient which measures risk-adjusted performance, factoring in the stock specific risk, rather than the market risk. A high value for alpha implies that the stock or mutual fund has performed better than would have been expected given its beta (volatility).
Andrew's Pitchfork
This technical indicator uses three parallel trendlines to identify possible levels of support and resistance. The trendlines are created by placing three points at the end of identified trends. This is usually achieved by placing the points in three consecutive peaks or troughs. Once the points have been placed, a straight line is drawn from the first point that intersects the midpoint of the other two. It is also known as 'median line studies'.
Aroon Indicator
Arron indicator in based on the assumption that a stock's price will close at record highs in an uptrend, and record lows in a downtrend. It is made up of two lines: one line is called "Aroon up", which measures the strength of the uptrend, and the other line is called "Aroon down", which measures the downtrend. Both the Aroon up and the Aroon down fluctuate between zero and 100, with values close to 100 indicating a strong trend, and zero indicating a weak trend. The higher the Aroon up, the stronger the uptrend and the weaker the downtrend, and vice versa. This indicator is very similar to the directional movement index (DMI) that was developed by Welles Wilder, which is also a very popular indicator used to measure the strength of a given trend.
Ascending Triangle
Patterns traders look for this chart formation produced by a series of lows, each successively higher than the last, and a series of highs that are at approximately the same level. It is considered a bullish formation when volume increases on the ascending legs. When a breakout through the level of the highs is made, the pattern is completed.
ATR
The true range indicator is the greatest of the following: -current high less the current low. -the absolute value of the current high less the previous close. -the absolute value of the current low less the previous close. The average true range (ATR) is a moving average (generally 14-days) of the true ranges.
Authorized Share Capital
The maximum value of the shares (calculated at par value) that can be issued under a firm's articles of association. It can be increased only with shareholders' approval after modifying articles of approval. Most companies' authorised capital exceeds the amount that has been issued as it allows them to quickly issue more shares if necessary.
AVERAGE DIRECTIONAL INDEX (ADX)
ADX is non-directional and it only quantifies the strength of the trend regardless of whether it is up or down. ADX is usually plotted in a chart window along with two lines known as the DMI (Directional Movement Indicators). ADX is derived from the relationship of the DMI lines.
Back Testing
Optimizing a moving average or trading strategy on historical data. This is an important skill to acquire for traders.
Base Metals
Base metals are major industrial non-ferrous metals, notably copper, lead, tin, zinc, aluminium, nickel.
Basis Trading
It is an arbitrage position made up of short position in futures contract and long in underlying using the cash proceeds.
Bear Raid
It is a form of fraud. An attempt to depress a market to cover a short position by the dissemination of negative rumours or widespread short- selling.
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