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T U V W X Y Z
Algorithm A step-by-step problem-solving
procedure. Rules for computing.
Ask (price) The price at which a security is offered for sale.
Average True Range (ATR) The average over the last "X"
periods of the true range of prices which is the largest of the following:
(1) current period's high minus current period's low; (2) current period's
high minus previous period's close; or (3) current period's low minus
previous period's close. A common period used by traders is daily.
Bear A person who believes that prices will drop
in the future.
Bearish A negative sentiment or opinion about the direction of a
security, industry or the general market.
Bid (price) The price offered to purchase a security.
Bull A person who believes that prices will raise in the future.
Bullish A positive sentiment or opinion about the direction of a
security, industry or the general market.
Close (price) The price of a security at the end
of the trading period (usually the close of the regular session of a
Drawdown A decrease in the value of an account.
It includes "real losses" from securities sold and "paper
losses" which are declines in value of securities currently held. As
a measure of risk, drawdowns are measured from peak-to-trough. Peaks are
set when the account reaches a new high and the trough is the lowest value
between two peaks, i.e., in a given period, an account with an initial
value of 10K, going to a maximum of 15K, dropping to 9K and ending at 16K;
will have a peak-to-trough drawdown of 1-(9/15) = 1-0.60 = 0.40 or 40%
Equities Refers to stocks secured by ownership
in a company.
Equity The value of an account. It is the sum of all cash and
market value of any security held minus any obligations such as margin
Expectancy How much can be expected to be made on the average
over many trades. Expectancy is best stated in terms of how much can be
made per money risked.
High (price) The maximum price that a security
reached during a given period (usually the regular session of a trading
Indicator A way of summarizing data in a
friendlier way to help traders and investors make decisions.
Investing In broad financial terms, it refers to the art and
science of money making money. In market strategies terms, it refers to a
buy-and-hold approach used by most people. See Trading
Long A financial transaction in which a person
buys shares of a security with the expectation that its price will rise in
value in the near future.
Low (price) The minimum price that a security reached during a
given period (usually the regular session of a trading day).
Open (price) The price of a security at the
beginning of a given period (usually the regular session of a trading
R-value The initial risk taken in a given
position, as defined by one's initial stop loss.
R-multiple A value that expresses gains and losses as a multiple
of the initial risk or R-value. For example, if a trade yielded a $500
gain and the initial risk was $50, the R-multiple will be 500/50 = 10 or
Reliability Refers to how accurate something is or how often it
Retracement A price movement in the opposite direction of the
Reward-to-Risk Ratio A value that relates the average return on
an account (on an annual compound basis) with the maximum peak-to-trough
drawdown. Ratio = Return/Drawdown. It also might refer to the size of the
average wins divided by the size of the average losses.
Short A financial transaction in which a person
borrows shares of a security (normally this is done by the brokerage house
in which the persons has his/her account), and then sells them with the
expectation that its price will drop in value in the near future.
Slippage The difference in price between what is expected to pay
or receive when buying or selling and what is actually paid or received.
For example, if an purchase order is entered with an expectation of 12 and
is executed at 12.5, then the slippage is 0.50
Spread The difference between the bid and the ask.
Trading In broad financial terms, it refers to
the exchange of good and services. In market strategies terms, it refers
to an approach in which the person is frequently buying and selling
securities and/or is willing to go both, long and short.
Trend-following The systematic process of capturing extreme
moves in the market with the idea of staying in the market as long as the
market continues its move.
Volatility A term that refers to the variability
of prices in a given time period.