Aggressive -  This is when an investment strategy has an above-average risk tolerance. Usually the expectation is that it will yield high returns. Usually aggressive investments are better when buying on a margin or when large stocks of fast growing companies are purchased

Balance – The sum on the account of a client after the last transaction has been conducted.

Buy and Hold - This is when stocks are purchased for a long period of time say 10 to 20 years, with the belief that stock prices will go up in the long-term. Short-term fluctuatuions attributed to inflation and business cycles are usually ignored. With this investment strategy, trade commisions tend to be lower and so are taxes.

Buy at Open – This is when you place a market order before the opening of the trading day (at 9.30 Eastern). With this, your trad will be t whatever the price is that morning.

Capital gain - This is the profit realized from the sale of an asset or investment. Simply put it is the amount the investment sold for minus how much it was bought for. Unrealized capital gain is when an investment that has not been sold yet but will result in a profit if sold. There are tax benefits associated with capital gains, in contrast to ordinary gains.

Capital loss – This is loss incurred on the sale of a capital asset or investment. Ordinary income can be offset by capital losses up to a maximum of $3000. The rest, can be carried forward indefinitely.

Close a Position - Ending an investment by selling

Conservative – Conservtive investors tend to take minimum risk with investment. Protecting their capital is of paramount importance.

Day Trader – This is a stock trader who undertakes a large number of trades each day. They generally buy and sell very quickly, closing all positions by the end of each trading day.

Diversification – A diversified portforlio contains a variety of investments such as real estate, bonds and stock. The idea is to minimize risk by making this combination as they are all unlikely to move in the same direction at the same time. Although this means a more consistent performance overtime, it reduces the downside as well as the upside potential of the investment

Equity – This is similar to “net value”. This is expressed the total value of asset minus total liabilities. For a brokerage accounts, equity is the net value of securities in the account after all margin requirements are considered. For future trading accounts, it is the value of all the securities at current market price.

Floating Profit – The current profit of open positions

Floating storage – Fee charged for postponement of an opened position over midnight GMT.

Fundamental Analysis - This is a method of analysis used by investors to evalute a company’s finances and operations. All assets, sales, debt, products and current competition are thorougly examined. This is in contrast to technical analysis which takes the whole market into consideration.

Growth Strategy – This is when investment is made into companies that are growing faster th with the purpose of generating capital gains rather than dividends

Hedge funds – These types of funds are allowed to use very aggresive trading strategies that are not available to mutual funds. Some of the strategies used include program trading, selling short, arbitrage, leverage, swaps, and derivatives. Hedge funds are high risk and are restricted by law to no more than 100 investors per fund. Consequently, the initial investment amount required tends to be high – generally from $300,000 to $1 million.

Individual Retirement Account (IRA) – This is a tax-deferred retirement account to which an individual can make contributions of up $2000/year.

Leverage – The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

Limit Order – This is the maximum price an investor is willing to pay for a stock. It prevents you from entering a position at an extreme price.  It can also be combined with “buy” or “sell on stop” orders.

Long Position – This is when stocks are purchased with the hope of a rise in price. Opposite of a short sale.

Margin - The amount of equity contributed by a customer as a percentage of the current market value of the securities held in a margin account.

Margin Account – A fairly complex account that allows a customer to buy securities using money borrowed from the brokerage firm. Brokerage firms offer low-interest loans to encourage their customers to buy on margin. There are tight rules regulating this practice. The Federal Reserve only allows up to 50% of total amount invested.

Margin Requirement - A required sum to be deposited, calculated according to the formula 100,000 / X + 100,000 / K, where X = leverage, and the number of items equals the number of open positions.

Open A Position - Same as opening an investment. A short position requires selling and a long position requires buying.

Overbought/Oversold Indicator – This used to define when prices move far and fast in either direction. This indicator is calculated based on a moving average of the difference between the number of advancing and declining issues over a certain period of time. The analyst will sell if the market is considered overbought, and vice versa.

Percentage - This is Equity / Margin Requirement. When Percentage is lower than 50 % it will not be possible to open new positions.

Pip – The smallest price change that a given exchange rate can make.

Risk Management – The process of analyzing risk exposure and how it can be handled.

Risk Tolerance – Ability to handle declines in a portfolio.

Short – This is when a stock is sold short without having covered it.

Short Selling – Borrowing a security or commodity futures contract from a broker and selling it, with the understanding that it must later be bought back and returned to the broker. Short selling is a technique used by investors who try to profit from the falling price of a stock. The investor’s broker will borrow the shares from someone who owns them with the promise that the investor will return them later. The investor immediately sells the borrowed shares at the current market price. If the price of the shares drops, he/she “covers the short position” by buying back the shares, and his/her broker returns them to the lender. The profit is the difference between the price at which the stock was sold and the cost to buy it back, minus commissions and expenses for borrowing the stock. But if the price of the shares increases, the potential losses are unlimited.

Spread - The difference between the current bid and the current ask (in over-the-counter trading) or offered (in exchange trading) of a given security .

S&P 500 - This is the most commonly used benchnmark for the US stock market. Unlike the Dow Jones Industrial Average (DJIA), which contains only 30 companies, the S&P 500 has 500 companies which are carefully chosen by the S&P Index Committee using information such as the liquidity of the company, the market size and sector. The S&P 500 is a market-value weighted index, meaning each stock’s weight in the index is proportionate to its market value. To most experts it is really the definition of the US market.

Technical Analysis – A method of evaluating securities by relying on the assumption that market data, such as charts of price, volume, and open interest, can help predict future market trends. Technical analysts believe that they can accurately predict the future price of a stock by looking at its historical prices and other trading variables. Technical analysis assumes that market psychology influences trading in a way that enables predicting when a stock will rise or fall. For that reason, many technical analysts are also market timers, who believe that technical analysis can be applied just as easily to the market as a whole as to an individual stock. Unlike fundamental analysis, the intrinsic value of the security is not considered

Ticker Symbol – A system of letters used to uniquely identify a stock or mutual fund. Symbols with up to three letters are used for stocks which are listed and trade on an exchange. Symbols with four letters are used for NASDAQ stocks. Symbols with five letters are used for NASDAQ stocks other than single issues of common stock. Symbols with five letters ending in X are used for mutual funds.

Volatility – The relative rate at which a stock price moves up or down. High volatility is when the price of a security moves rapidly up and down over a short period of time. The opposite is said to be low volatility.

Volume - The total number of shares, bonds or contracts traded during a given period, for a security or an entire exhange market

See also:

Forex Trading Systems

Regulated Forex Broker