Keys Terms In Trading Flashcards
(21 cards)
What’s a security?
What three things can it represent?
Refers to a fungible, negotiable financial instrument that holds some type of monetary value.
It represents an ownership position in a publicly-traded corporation via stock; a creditor relationship with a government body or a corporation represented by owning that entity’s bond; or rights to ownership as represented by an option.
What does fungibility / fungible mean?
An example?
Is the ability of a good or asset to be interchanged with other individual goods or assets of the same type.
For example money is a prime example of something fungible.
What is a financial instrument?
•A financial instrument is a real or virtual document representing a legal agreement involving any kind of monetary value.
What is equity?
In finance, equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets
What’s bearish?
Being bearish is the exact opposite of being bullish—it’s the belief that the price of an asset will fall. 2 To say “he’s bearish on stocks” means he believes the price of stocks will decline in value.
What’s bullish?
Bullish traders believe, based on their analysis, that a market will experience an upward price movement. Being bullish involves buying an underlying market – known as going long – in order to profit by selling the market in the future, once the price has risen.
What’s moving average (MA) used for?
Moving average is a simple, technical analysis tool. Moving averages are usually calculated to identify the trend direction of a stock or to determine its support and resistance levels. It is a trend-following—or lagging—indicator because it is based on past prices.
What value do you look for in the RSI?
Traditional interpretation and usage of the RSI are that values of 70 or above indicate that a security is becoming overbought or overvalued and may be primed for a trend reversal or corrective pullback in price. An RSI reading of 30 or below indicates an oversold or undervalued condition.
What are bollinger bands?
Bollinger bands help determine whether prices are high or low on a relative basis. They are used in pairs, both upper and lower bands and in conjunction with a moving average.
What does volatile or volatility mean?
Volatility is a statistical measure of the dispersion of returns for a given security or market index. In most cases, the higher the volatility, the riskier the security. … For example, when the stock market rises and falls more than one percent over a sustained period of time, it is called a “volatile” market.
MSCI USA Index?
Is designed to measure the performance of the large and mid cap segments of the us market.
- 627 constituents - covers 85% of the free-float adjusted market capitalisation in the US
What’s a value index?
An index tracking value stocks, which are stocks with prices lower than their intrinsic values.
Value stocks?
Stocks with low price/book ratios or price/earnings ratios. - historically, have enjoyed higher average returns than growth stocks in a variety if countries.
Growth stock?
Common stock of a company that has an opportunity to invest money and earn more than the opportunity cost of capital.
What’s a blue-chip index?
Tracks shares of the well-known and financially stable publicly traded companies - known as blue chips.
Are considered a gauge of the relative strength of an industry or economy
Bond yield?
A figure that shows the return you get on a bond.
Whats the P/E ratio?
The price-to-earnings (P/E) ratio relates a company’s share price to its earnings per share. A high P/E ratio could mean that a company’s stock is overvalued, or else that investors are expecting high growth rates in the future.
Whats enterprise value?
Enterprise value (EV) is a measure of a company’s total value, often used as a more comprehensive alternative to equity market capitalization. Enterprise value includes in its calculation the market capitalization of a company but also short-term and long-term debt as well as any cash on the company’s balance sheet.
Whats EPS?
Earnings per share (EPS) is calculated as a company’s profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company’s profitability
Whats return on equity?
Return on equity (ROE) is calculated by dividing a company’s net income by its shareholders’ equity, thereby arriving at a measure of how efficient a company is in generating profits. ROE can be distorted by a variety of factors, such as a company taking a large write-down or instituting a program of share buybacks.
Debt to equity ratio?
A good debt to equity ratio is around 1 to 1.5. However, the ideal debt to equity ratio will vary depending on the industry because some industries use more debt financing than others.
