Glossary of Financial Terms

Funds set aside during an individual's working life, typically in tax-advantaged accounts, to provide income and financial security in retirement.

A chart formation that indicates a change in the direction of the price trend, suggesting that a security may reverse its current upward or downward trajectory.

A corporate action that reduces the number of a company’s outstanding shares by combining them, increasing the stock price proportionally, while maintaining the overall market capitalization. Companies typically execute a reverse stock split to meet stock exchange listing requirements, improve perceived value, or attract institutional investors by raising the stock price.

The degree of variability in investment returns that an investor is willing to withstand in their investment portfolio, reflecting their ability and willingness to endure potential losses.

Individual Retirement Account - A type of individual retirement account that allows individuals to contribute after-tax income, enabling tax-free withdrawals in retirement, provided certain conditions are met.

A nine-digit code used in the United States to identify a specific financial institution for processing transactions such as checks and electronic transfers.

A simple formula used to estimate the number of years required to double an investment at a fixed annual rate of return by dividing 72 by the expected annual rate of return.

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Standard & Poor's - A financial services company known for its stock market indices, most notably the S&P 500, which tracks the stock performance of 500 large publicly traded companies in the U.S.

A stock market index that tracks the performance of 500 large, publicly traded companies in the United States, often used as a benchmark for the overall U.S. stock market and a gauge of economic health.

Securities and Exchange Commission - A U.S. government agency responsible for regulating the securities industry, enforcing federal securities laws, and protecting investors by ensuring fair and efficient markets.

Simplified Employee Pension Individual Retirement Arrangement - A type of retirement plan that allows employers to make tax-deductible contributions to their employees' retirement savings, providing a simple and cost-effective way to save for retirement.

Stop Loss - An order placed to sell (or cover) a security when it reaches a specific price, designed to limit an investor's loss on a position.

Simple Moving Average - A type of moving average that calculates the average price of a security over a specific number of periods, giving equal weight to each price in the calculation.

SPDR S&P 500 ETF Trust - An exchange-traded fund that aims to track the performance of the S&P 500 Index, allowing investors to gain exposure to a diversified portfolio of 500 of the largest publicly traded companies in the U.S.

Sell Side Imbalance – An area on the chart where aggressive selling left behind inefficiency in price, often used as a retracement target.

Sell Side Liquidity – Liquidity resting below recent lows, where stop-loss orders from longs and breakout sell stops accumulate.

Short Term - A term used to describe investments or financial strategies that are intended to be held for a brief period, typically less than one year, often focusing on quick profits or liquidity.

Stochastic Oscillator - A momentum indicator used in technical analysis to compare a security's closing price to its price range over a specific period, helping traders identify overbought or oversold conditions.

A standardized international bank code used to identify specific banks and financial institutions worldwide, facilitating secure and efficient cross-border transactions.

A deposit account held at a financial institution that allows individuals to earn interest on their balance while providing easy access to funds for withdrawal or transfer.

The percentage of disposable income that individuals save rather than spend, often used as an indicator of financial health and economic stability.

A trading strategy that involves making numerous short-term trades to profit from small price changes, often executed within minutes or seconds.

The financial market where previously issued securities are traded among investors, such as on major stock exchanges like the NYSE (New York Stock Exchange) and Nasdaq, without direct involvement from the issuing company.

An investment strategy that involves moving investments among different sectors of the economy to capitalize on economic cycles and market trends, aiming to maximize returns and minimize risk.

The initial funding used to start a business, typically provided by the founders, friends, family, or early investors to cover startup expenses before the company generates revenue.

Placing a sell order at the current ask price, usually indicating a desire to exit a position quickly by matching the price that buyers are currently willing to pay. This can be a sign of urgency or liquidity in selling, but it’s less common than selling at the bid.

Placing a sell order at the current bid price, which is the highest price a buyer is willing to pay. This approach is considered bearish, as it indicates urgency to sell and a willingness to accept a lower price to exit the position quickly, often contributing to downward pressure on the asset's price.

A company's repurchase of its own shares from the marketplace, often to reduce the number of outstanding shares, increase shareholder value, or improve financial ratios.

A trading position where a trader sells an asset they do not own, borrowing it with the expectation that its price will decline, allowing them to buy it back at a lower price for a profit.

The total number of shares of a security that have been sold short but not yet covered or closed, indicating investor sentiment about future price movements.

A rapid increase in the price of a stock or asset caused by short sellers rushing to buy shares to cover their positions, often triggered when the price unexpectedly rises, leading to significant upward momentum.

A method of calculating interest where the interest is earned only on the principal amount, without compounding, calculated using the formula: Interest = Principal × Rate × Time.

The difference between the expected price of a trade and the actual price at which the trade is executed, often occurring in fast-moving or illiquid markets.

Refers to companies with a market capitalization typically under $2 billion, often characterized by higher growth potential but also higher risk and volatility compared to larger companies.

A speculative trading strategy where traders bet on the price movement of an asset without actually owning it, profiting or losing based on the accuracy of their predictions relative to the spread set by the bookmaker.

A trading strategy that involves simultaneously buying and selling related financial instruments, such as futures contracts or options, to profit from the price difference (spread) between them.

A type of security that represents ownership in a corporation, giving shareholders a claim on part of the company’s assets and earnings. Stocks are also known as shares or equity and can provide returns through dividends and capital appreciation.

A corporate action that increases the number of a company’s outstanding shares by dividing each share, reducing its price proportionally while maintaining the overall market capitalization. Companies often split their stock to make shares more affordable for investors, increase liquidity, and broaden their shareholder base.

A deliberate market move designed to trigger stop-loss orders placed by traders at predictable levels, often resulting in increased volatility and a temporary price reversal.

An order to buy or sell a security once it reaches a specified price, known as the stop price, which triggers the order to become a market order.

A combination of a stop order and a limit order, where a specified stop price triggers a limit order to buy or sell a security at a designated limit price or better.

An options trading strategy that involves buying both a call option and a put option with the same strike price and expiration date, allowing the trader to profit from significant price movement in either direction.

An options trading strategy that involves buying a call option and a put option with different strike prices but the same expiration date, allowing the trader to profit from significant price movements in either direction while potentially lowering the cost compared to a straddle.

The total quantity of a financial asset available for sale at a given price, representing the level at which sellers are willing to sell, often influencing price movements when matched with demand.

A price level at which an asset tends to stop falling and may reverse direction, as buying interest increases, creating a "floor" where demand is strong enough to halt a decline.

A peak point on a price chart where the price reaches a high before reversing direction, indicating potential resistance in an upward trend.

A trading strategy that aims to capture short- to medium-term price movements by holding positions for several days to weeks, typically based on technical analysis of price trends and patterns.

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Technical Analysis - A method of evaluating securities by analyzing statistical trends from trading activity, such as price movements and volume, to predict future price behavior and identify trading opportunities.