A - G Archives - HowTheMarketWorks https://www.howthemarketworks.com/category/glossary/a-g/ Free stock market game with real-time trading and built-in lessons, curriculum, and assessments. Create a custom stock game for your class, club, or friends and learn to invest. Thu, 10 Aug 2023 20:39:30 +0000 en-US hourly 1 https://wordpress.org/?v=6.3.4 https://www.howthemarketworks.com/wp-content/uploads/2016/12/cropped-touch-icon-ipad-retina-32x32.png A - G Archives - HowTheMarketWorks https://www.howthemarketworks.com/category/glossary/a-g/ 32 32 What Is A Long Stock? https://www.howthemarketworks.com/what-is-a-long-stock/ Thu, 31 Aug 2017 14:49:17 +0000 https://www.howthemarketworks.com/?p=12004 Long Stock What is a long stock?             A long stock is an expression used when you own shares of a company. It represents a claim on the company’s assets and earnings. As you increase your holdings of a stock, your ownership stake in the company increases. Words such as “shares”, “equity” and “stock” all Read More...

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]]> The Business Cycle https://www.howthemarketworks.com/the-business-cycle/ Wed, 19 Apr 2017 18:45:48 +0000 https://www.howthemarketworks.com/?p=11776 What Is The Business Cycle? The Business Cycle is the broad, over-stretching cycle of expansion and recession in an economy. The Business Cycle is concerned with many things – unemployment, industrial expansion, inflation rates, but the most important indicator is GDP (Gross Domestic Product) growth. Below you can see a graph of the GDP growth Read More...

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]]> Credit Cards https://www.howthemarketworks.com/credit-cards/ Wed, 19 Apr 2017 18:37:25 +0000 https://www.howthemarketworks.com/?p=11772 What are Credit Cards? Credit cards is a form of unsecured credit (meaning a loan without collateral) that you can use to make everyday purchases. All credit card purchases are made using a loan – you borrow money from your credit card issuer, and later pay it back with interest. Credit Cards Vs Debit Cards Read More...

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]]> Credit – Using Borrowed Money https://www.howthemarketworks.com/credit-using-borrowed-money/ Tue, 04 Oct 2016 16:02:58 +0000 https://www.howthemarketworks.com/?p=11522 What Is Credit? “Credit” is when you have the ability to use borrowed money. This can come in many different forms, from credit cards to mortgages. There is a wide range of ways to use credit, which means that it is often a challenge for beginners to learn all the different ins and outs of Read More...

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]]> What is Economics? https://www.howthemarketworks.com/what-is-economics/ Tue, 07 Jun 2016 17:30:11 +0000 https://www.howthemarketworks.com/?p=11473 Definition “Economics” is often called the Dismal Science – it studies the trade-offs between making choices. The purpose of economics is to look at the different incentives, assets, and choices facing people, businesses, schools, and governments, and see if there is any way to improve outcomes. This is done by looking at how supply and Read More...

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]]> Contract https://www.howthemarketworks.com/contract/ Fri, 27 May 2016 18:50:35 +0000 https://www.howthemarketworks.com/?p=11460 Definition A “Contract” is a legally binding agreement between two parties (people, companies, or both). Having a contract means that if one party does not keep their word, the other can sue them in court to either force them to fulfill their side of the agreement, or pay back compensation. What Makes A Contract Binding? Read More...

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]]> Banks, Credit Unions, and Savings & Loan Institutions https://www.howthemarketworks.com/banks-credit-unions-and-savings-loan-institutions/ Sat, 16 Apr 2016 17:16:29 +0000 https://www.howthemarketworks.com/?p=11273 When talking about Banking, people generally group Banks, Credit Unions, and Savings & Loan companies all in one group. They do provide similar services, but they each have specific differences that might make them a better or worse fit for your financial needs. What They Have In Common All three of these institutions can do Read More...

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]]> What is the Federal Reserve? https://www.howthemarketworks.com/what-is-the-federal-reserve/ Thu, 14 Jan 2016 13:56:57 +0000 https://www.howthemarketworks.com/?p=10346 Definition The Federal Reserve Bank, or the “Fed”, is the central banking system of the United States. It serves as the primary regulator of the US dollar, as well as the “lender of last resort” for other banks. Regulating Currency The Federal Reserve works to maintain the interest rates that banks use to lend money to Read More...

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]]> Cottage Industry https://www.howthemarketworks.com/cottage-industry/ Wed, 13 Jan 2016 18:10:43 +0000 https://www.howthemarketworks.com/?p=10362 Definition Cottage Industry, or the “Putting Out System” is a production system of producing goods that relies on producing goods, or parts of goods, by craftsmen at home, or small workshops, instead of large factories. History “Cottage Industry” describes the methodology that was used to produce most goods throughout human history, up until the end Read More...

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]]> Forex https://www.howthemarketworks.com/forex/ Tue, 01 Sep 2015 21:43:36 +0000 http://virtual-stock-exchange.net/?p=168 Live Forex trading includes negotiating of national bills which is performed on a live basis at 24 hour, around-the-clock period. Forex is derived from the words Foreign Exchange which is known as the global market that does business in money trading.

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]]> Bond https://www.howthemarketworks.com/bond/ Mon, 24 Aug 2015 08:08:12 +0000 http://virtual-stock-exchange.net/?p=795 Promissory notes issued by a corporation or government to its lenders, usually with a specified amount of interest for a specified length of time. This is seen as a loan from the bond holder to the corporation. The value of Bonds traded are greater than the value of stocks traded.

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]]> Asset https://www.howthemarketworks.com/asset/ Tue, 18 Aug 2015 15:43:31 +0000 https://www.howthemarketworks.com/?p=8778 Definition: An asset is anything that has monetary value and can be sold. Assets can be anything from a pencil (though it is not worth much) to a skyscraper to things like Stocks and ETFs. There can also be intangible assets such as the value of a brand name or logo. Details: Assets generally refer Read More...

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]]> GTD Good Till Day Orders https://www.howthemarketworks.com/gtd-good-till-day-orders/ Mon, 20 Jul 2015 10:21:18 +0000 https://www.howthemarketworks.com/?p=7924 Good Till Date Order Terms If you have ever placed a limit or stop order on HowTheMarketWorks, you have see the “Good Till Day” order term on the trading menu: A “Good-Till-Day” order is simply one that will cancel at the end of the trading day if it does not fill. So, for example, if Read More...

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]]> What is the Dow Jones Industrial Average https://www.howthemarketworks.com/what-is-the-dow-jones-industrial-average/ Fri, 26 Jun 2015 13:36:26 +0000 http://virtual-stock-exchange.net/?p=1003 The Dow Jones Industrial Average, also called the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is a stock market index that shows how 30 large publicly-owned companies based in the United States have traded during a standard trading session in the stock market.

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]]> Gross National Product https://www.howthemarketworks.com/gross-national-product/ Wed, 09 Oct 2013 16:35:03 +0000 https://www.howthemarketworks.com/?p=6484 Gross National Product is the value of all goods and services produced by a country’s residents.

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]]> Free Cash Flow https://www.howthemarketworks.com/free-cash-flow/ Wed, 09 Oct 2013 16:24:08 +0000 https://www.howthemarketworks.com/?p=6481 Free Cash flow is the cash available to all the capital providers of a company. There are two types of free cash flows: 1) Cash flow available to pay out to all capital providers and 2) Free Cash Flow to Equity (FCFE).

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]]> Form-8K https://www.howthemarketworks.com/form-8k/ Wed, 09 Oct 2013 01:49:03 +0000 https://www.howthemarketworks.com/?p=6475 The Form-8K is a SEC-mandated report filed by public companies to report unexpected events or transactions that are material in nature, and thus have an impact on the share prices of the company.

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]]> Fixed Income Analysis https://www.howthemarketworks.com/fixed-income-analysis/ Tue, 08 Oct 2013 14:46:59 +0000 https://www.howthemarketworks.com/?p=6471 Fixed income analysis is the process of evaluating and analyzing fixed income securities for investment purposes.

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]]> Financial Modeling https://www.howthemarketworks.com/financial-modeling-2/ Tue, 08 Oct 2013 14:37:58 +0000 https://www.howthemarketworks.com/?p=6467 In investment valuation, financial modeling refers to the procedure and methodology performed to determine the value of an asset or financial security. Fundamentally, a business or company’s current value can be viewed as being derived from its future cash flow streams. An investor deciding whether to purchase or sell a stock, therefore, will be interested in estimating such value.

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]]> Earnings Report https://www.howthemarketworks.com/earnings-report/ Thu, 03 Oct 2013 13:45:17 +0000 https://www.howthemarketworks.com/?p=6458 The earnings reports released by companies can be invaluable in providing such information. Released by public companies on a quarterly and annual basis, they can be used to assess and gauge a company’s: financial condition, strategic plans, industry and competitive position, Key performance drivers and risk factors and Future performance.

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]]> Discounted Cash Flow https://www.howthemarketworks.com/discounted-cash-flow/ Thu, 03 Oct 2013 13:37:30 +0000 https://www.howthemarketworks.com/?p=6455 Discounted Cash Flow is a valuation technique or model that discounts the future cash flows of a business, entity, or asset for the purposes of determining its value. One aspect of investment decision-making entails discovering the fair value of investments.

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]]> Debt Snowball Method https://www.howthemarketworks.com/debt-snowball-method/ Thu, 03 Oct 2013 13:30:06 +0000 https://www.howthemarketworks.com/?p=6451 The Debt-Snowball Method is a debt-management strategy aimed at reducing a borrower’s obligations. Borrowers can use this method to slowly eliminate their debt by focusing on their smallest debt balance, followed by larger ones until all obligations are paid off.

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]]> Covariance Analysis https://www.howthemarketworks.com/covariance-analysis/ Tue, 24 Sep 2013 16:46:29 +0000 https://www.howthemarketworks.com/?p=6377 Covariance is a statistical measure of the extent that 2 variables move in tandem relative to their respective mean (or average) values. In the investment world, it is important to be able to measure how different financial variables interact together.

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]]> Correlation Analysis https://www.howthemarketworks.com/correlation-analysis/ Tue, 24 Sep 2013 16:37:39 +0000 https://www.howthemarketworks.com/?p=6368 The use of correlation analysis extends to numerous important fields. For example, in finance, correlation analysis can be used to measure the degree of linear relationships between interest rates and stock returns, money supply and inflation, stock and bond returns, and exchange rates.

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]]> Comprehensive Insurance https://www.howthemarketworks.com/comprehensive-insurance/ Tue, 24 Sep 2013 16:22:24 +0000 https://www.howthemarketworks.com/?p=6364 Comprehensive insurance to a form of insurance policy which includes a broad range of coverage or protection.

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]]> Collar Option Strategy https://www.howthemarketworks.com/collar-option-strategy/ Tue, 24 Sep 2013 16:14:54 +0000 https://www.howthemarketworks.com/?p=6359 The options collar strategy is designed to limit the downside risk of a held underlying security. It can be performed by holding a long position in a security, while simultaneously going long a Put and shorting a Call.

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]]> Chicago Mercantile Exchange (CME Group) https://www.howthemarketworks.com/chicago-mercantile-exchange-cme-group/ Thu, 19 Sep 2013 01:05:27 +0000 https://www.howthemarketworks.com/?p=6347 The CME Group is an order-driven exchange that facilitates the trading of forward, futures, and options contracts on numerous products within key asset classes such as agriculture, energy, metals, equities, interest rates, and exchange rates.

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]]> Chicago Board of Trade (CBOT) https://www.howthemarketworks.com/chicago-board-of-trade-cbot/ Thu, 19 Sep 2013 00:59:03 +0000 https://www.howthemarketworks.com/?p=6342 The CBOT is an exchange providing trading in derivatives contracts and clearinghouse functions. It allows traders to buy and sell contracts on several products in asset classes such as agriculture, energy, metals, equities, bonds, and exchange rates. The majority of its trades are conducted electronically.

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]]> Cash Conversion Cycle https://www.howthemarketworks.com/cash-conversion-cycle/ Thu, 19 Sep 2013 00:51:27 +0000 https://www.howthemarketworks.com/?p=6331 Measuring the cash conversion cycle is important to liquidity, working capital, and the operating cycle of a company. Good management of the CCC can also enhance a company’s cash flows, allowing it to effectively make sound investing and financing decision. Managing the CCC entails efficient inventory, receivables, and payables functions, and should be part of a company’s overall operational strategy.

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]]> Capital Funding https://www.howthemarketworks.com/capital-funding/ Wed, 18 Sep 2013 15:56:14 +0000 https://www.howthemarketworks.com/?p=6327 Capital funding is the provision of monetary resources or capital for productive uses. Capital provided by investors or other parties is used by various entities such as governments, companies, organizations, and individuals in order to fund their functions and operations. In most cases, capital provided is compensated by some form of return to the provider. Two important types of capital are equity and debt. Equity capital represents an ownership stake, while debt capital is a form of lending.

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]]> Account Receivables Management https://www.howthemarketworks.com/account-receivables-management/ Tue, 10 Sep 2013 16:21:24 +0000 https://www.howthemarketworks.com/?p=6316 Account Receivables Management refers to the set of policies, procedures, and practices employed by a company with respect to managing sales offered on credit.

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]]> Account Payables Management https://www.howthemarketworks.com/account-payables-management/ Tue, 10 Sep 2013 15:31:44 +0000 https://www.howthemarketworks.com/?p=6305 Account Payables Management refers to the set of policies, procedures, and practices employed by a company with respect to managing its trade credit purchases.

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]]> Commercial Bank https://www.howthemarketworks.com/commercial-bank/ Thu, 05 Sep 2013 18:59:35 +0000 https://www.howthemarketworks.com/?p=6270 A Commercial Bank is a type of financial institution that is responsible for catering to everyday banking needs. Commercial Banking is also sometimes referred to as Retail Banking. This is the kind of bank that individuals go to for their everyday financial needs.

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]]> Gross Domestic Product https://www.howthemarketworks.com/gross-domestic-product/ Fri, 17 May 2013 13:29:16 +0000 https://www.howthemarketworks.com/?p=6079 Gross Domestic Product, or as it is most often simply referred to as ‘GDP’ is the combined value of ALL goods and services produced within a given country in a given time period.

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]]> Fiscal policy https://www.howthemarketworks.com/fiscal-policy/ Fri, 17 May 2013 13:13:59 +0000 https://www.howthemarketworks.com/?p=6069 Fiscal policy is the use of government spending to influence the economy.

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]]> Expected Return https://www.howthemarketworks.com/expected-return/ Mon, 13 May 2013 12:27:38 +0000 https://www.howthemarketworks.com/?p=6029 The Expected Return is a weighted-average outcome used by portfolio managers and investors to calculate the value of an individual stock, or an entire stock portfolio.

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]]> Elasticity https://www.howthemarketworks.com/elasticity/ Mon, 13 May 2013 12:08:26 +0000 https://www.howthemarketworks.com/?p=6025 Elasticity is one of the most important terms in economics, and has a plethora of uses. Economists define elasticity as the ratio of the percent change in one variable to the percent change in another valuable.

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]]> Duration https://www.howthemarketworks.com/duration/ Tue, 07 May 2013 23:27:51 +0000 https://www.howthemarketworks.com/?p=5978 If you own a bond or manage a bond portfolio, chances are that will you be following daily interest rates. You know that bond prices increase when rates rise, and decrease when rates fall. But how do you measure the bond’s price sensitivity to such rate fluctuations? The answer is duration.

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]]> Dupont Analysis https://www.howthemarketworks.com/dupont-analysis-2/ Tue, 07 May 2013 21:19:57 +0000 https://www.howthemarketworks.com/?p=5973 Dupont Analysis breaks the Return on Equity into several different components in order to analyze where the returns are coming from.

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]]> Direxion Small Cap Bear 3X – Triple-Leveraged ETF (TZA) https://www.howthemarketworks.com/direxion-small-cap-bear-3x-triple-leveraged-etf-tza/ Tue, 07 May 2013 21:16:24 +0000 https://www.howthemarketworks.com/?p=5955 Direxion Small Cap Bear3X - Triple-Leveraged ETF is an index fund ETF (Exchange Traded Fund) designed to seek a daily result of 300% of the INVERSE of the performance of the Russell 2000 Small Cap Index.

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]]> Depreciation https://www.howthemarketworks.com/depreciation/ Thu, 02 May 2013 21:58:06 +0000 https://www.howthemarketworks.com/?p=5948 Depreciation refers to the gradual and permanent decrease in value of the assets of a firm, nation or individual over its lifetime.

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]]> Consumer price index https://www.howthemarketworks.com/consumer-price-index/ Wed, 24 Apr 2013 06:54:17 +0000 https://www.howthemarketworks.com/?p=5917 A consumer price index (CPI) is the relative measure of a market basket of consumer goods and services purchased by households.

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]]> Commodity https://www.howthemarketworks.com/commodity/ Tue, 23 Apr 2013 23:28:21 +0000 https://www.howthemarketworks.com/?p=5900 A basic material used in manufacturing or commerce that is interchangeable with other the same commodities coming from a different source. The quality of a specific commodity may differ slightly, but it is essentially uniform across producers. When they are traded on an exchange, commodities must also meet specified minimum standards, also known as a basis grade. Typical types of commodities are corn, gold, silver, steel, etc.

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]]> Body of a candlestick https://www.howthemarketworks.com/body-of-a-candlestick/ Mon, 22 Apr 2013 20:59:26 +0000 https://www.howthemarketworks.com/?p=5885 For a candlestick chart, the body or real body is the wide or colored part of a candle that represents the range between the opening and the closing prices over a specific time period (minute, hour, day, week or other). They are the most basic building block for candlestick charts.

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]]> Candlesticks https://www.howthemarketworks.com/candlesticks/ Mon, 22 Apr 2013 20:36:10 +0000 https://www.howthemarketworks.com/?p=5876 A point on a candle stick chart representing a specific time period (a day, an hour, a minute, etc) in which the underlying stock price has moved. Candlesticks will have a body and usually two wicks - one on each end. For a white (could also be green) candlestick, the bottom of the body represents the opening price and the top of the body represents the closing price. For red candlesticks, it is just the other way around. The top and bottom tips of each wick are the day's highest and lowest price respectively.

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]]> Fundamentals https://www.howthemarketworks.com/fundamentals/ Sat, 13 Apr 2013 19:10:14 +0000 https://www.howthemarketworks.com/?p=5825 The qualitative and quantitative information that contributes to the economic well-being and the subsequent financial valuation of a company, security or currency. Analysts and investors analyze these fundamentals to develop an estimate as to whether the underlying asset is considered a worthwhile investment. For businesses, information such as revenue, earnings, assets, liabilities and growth are considered some of the fundamentals.

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]]> Commission https://www.howthemarketworks.com/commission/ Fri, 29 Mar 2013 18:13:51 +0000 https://www.howthemarketworks.com/?p=5635 The fee charged by a broker or investment advisor in exchange for investment advice and/or handling the purchase or sale of a security. Commissions vary from brokerage to brokerage.

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]]> Brokerage Account https://www.howthemarketworks.com/brokerage-account/ Fri, 29 Mar 2013 17:58:26 +0000 https://www.howthemarketworks.com/?p=5624 When an investor takes an account with a licensed brokerage firm that allows the investor to deposit money and place investment orders through the brokerage firm. There are several different types of brokerage accounts. Full-service brokers provide investment advice and charges high fees for their services. Most online brokers provide less services at a far Read More...

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]]> Fibonacci Ratios https://www.howthemarketworks.com/fibonacci-ratios-in-finance/ Fri, 29 Mar 2013 00:23:01 +0000 https://www.howthemarketworks.com/?p=5589 Fibonacci numbers are a sequence of numbers where each is the sum of the two preceding numbers (1,1,2,3,5,8,13,21,34 and so forth). This sequence of numbers forms various ratios including the infamous "Golden Ratio" which is .618.

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]]> Earnings Report https://www.howthemarketworks.com/company-earnings-report/ Thu, 28 Mar 2013 23:55:07 +0000 https://www.howthemarketworks.com/?p=5583 Earnings report stock trends, profit and more but making sense of an earnings report can seem daunting especially in light of the catastrophic endings of Lehman Brothers, Enron and Worldcom.

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]]> Earning Estimates https://www.howthemarketworks.com/earning-estimates/ Thu, 28 Mar 2013 23:50:40 +0000 https://www.howthemarketworks.com/?p=5581 Earnings estimates provide one strong measure of potential future performance and are a mainstay of stock investing research.

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]]> Cramer Bounce https://www.howthemarketworks.com/cramer-bounce/ Thu, 28 Mar 2013 22:08:10 +0000 https://www.howthemarketworks.com/?p=5554 The Cramer bounce is a theory that the stocks that Jim Cramer recommends on his TV show will almost always increase the day after the show airs.

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]]> Certificates of Deposit (CDs) https://www.howthemarketworks.com/cd-basics-certificates-of-deposit/ Mon, 25 Mar 2013 21:45:34 +0000 https://www.howthemarketworks.com/?p=5523 A CD or Certificate of Deposit is one of the safest and liquid forms of investment available. Insured by the FDIC (Federal Deposit Insurance Corporation), CDs are a type of interest earning deposit account.

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]]> Diversify to Reduce Risk https://www.howthemarketworks.com/diversify-to-reduce-risk/ Mon, 25 Mar 2013 19:46:05 +0000 https://www.howthemarketworks.com/?p=5512 Diversification to reduce risk should seem obvious to most investors but a surprising number of people follow their instinct rather than intellect when it comes to investing.

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]]> Buy and Hold Strategy https://www.howthemarketworks.com/buy-and-hold-strategy/ Sat, 23 Mar 2013 21:31:17 +0000 https://www.howthemarketworks.com/?p=5509 The buy and hold strategy is essentially just what it sounds like: Purchase stocks and then hold them for an extended period of time. The underlying assumption for the buy and hold strategy is that stocks tend to go up in price over extended periods of time.

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]]> Currency ETFs https://www.howthemarketworks.com/currency-etfs/ Sat, 23 Mar 2013 17:32:08 +0000 https://www.howthemarketworks.com/?p=5478 The U.S. Dollar has lost more than 30 percent of its value relative to other world currencies. Shorting the U.S. dollar and buying other world currencies is one way to make money from this trend.

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]]> Debtor Nation https://www.howthemarketworks.com/debtor-nation/ Tue, 12 Mar 2013 21:19:41 +0000 https://www.howthemarketworks.com/?p=5286 A national government that owes money to international financial institutions such as the World Bank, foreign governments, or to foreign lenders.

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]]> Arms Index https://www.howthemarketworks.com/arms-index/ Fri, 08 Mar 2013 07:25:28 +0000 https://www.howthemarketworks.com/?p=5250 A technical analysis indicator that compares advancing and declining stock issues and trading volume as an indicator of overall market sentiment. The Arms Index, or TRIN (Traders Index), is used as a predictor of future price movements in the market primarily on an intraday basis.

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]]> Absolute Breadth Index https://www.howthemarketworks.com/absolute-breadth-index/ Fri, 08 Mar 2013 07:23:25 +0000 https://www.howthemarketworks.com/?p=5248 A market indicator used to determine volatility levels in the market without factoring in price direction. It is calculated by taking the absolute value of the difference between the number of advancing issues and the number of declining issues. Typically, large numbers suggest volatility is increasing, which is likely to cause significant changes in stock prices in the coming weeks.

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]]> Advance/Decline Index (AD Line) https://www.howthemarketworks.com/advancedecline-index/ Fri, 08 Mar 2013 07:12:50 +0000 https://www.howthemarketworks.com/?p=5244 A technical analysis tool that represents the total difference between the number of advancing and declining security prices. This index is considered one of the best indicators of market movements as a whole. Stock indexes such as the Dow Jones Industrial Average only tell us the strength of 30 stocks, whereas the advance/decline index can provide much more insight into the movements of the market.

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]]> Corporation https://www.howthemarketworks.com/corporation/ Sat, 23 Feb 2013 20:58:56 +0000 https://www.howthemarketworks.com/?p=5121 An entity that abides by specific legal requirements that sets it apart as having a legal existence, as an entity separate and distinct from its stockholders (owners).

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]]> Dividend Reinvestment Plan https://www.howthemarketworks.com/dividend-reinvestment-plan-drip/ Thu, 21 Feb 2013 15:40:44 +0000 https://www.howthemarketworks.com/?p=5098 A plan offered by a corporation that allows investors to reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date.

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]]> Chart Analysis https://www.howthemarketworks.com/chart-analysis/ Wed, 13 Feb 2013 20:21:15 +0000 https://www.howthemarketworks.com/?p=5060 Chart analysis is the same as Technical Analysis. It is mostly concerned with price and volume.

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]]> The Fed / The Federal Reserve System https://www.howthemarketworks.com/the-fed-the-federal-reserve-system/ Wed, 13 Feb 2013 19:33:14 +0000 https://www.howthemarketworks.com/?p=5053 The Fed is the US central-banking system which is made up of 12 regional central banks

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]]> Direct stock purchase plans https://www.howthemarketworks.com/direct-stock-purchase-plans/ Wed, 13 Feb 2013 02:12:02 +0000 https://www.howthemarketworks.com/?p=5034 Definition:  An investment service that allows individuals to purchase a stock directly from a company or through a transfer agent. Not all companies offer DSPPs and the plans often have restrictions on when an individual can purchase shares. Example:  The greatest benefit of using direct stock purchase plans for investors is the ability to avoid commissions by not Read More...

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]]> Falling Knife https://www.howthemarketworks.com/falling-knife/ Sat, 09 Feb 2013 01:46:03 +0000 https://www.howthemarketworks.com/?p=4910 A phrase used for a stock where the price has dropped significantly in a short period of time. A falling knife security can rebound, or it can lose all of its value where the shares become worthless.

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]]> GDP (Gross Domestic Product) https://www.howthemarketworks.com/gdp-gross-domestic-product/ Sat, 02 Feb 2013 20:25:23 +0000 https://www.howthemarketworks.com/?p=4819 The total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports.

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]]> GTC Order (Good Til Cancel) https://www.howthemarketworks.com/gtc-order-good-til-cancel/ Thu, 24 Jan 2013 18:18:30 +0000 https://www.howthemarketworks.com/?p=4659 An order to buy or sell a stock at a fixed price. This order is active until 1) the trade is executed, 2) the investor decides to cancel it or 3) a specified time period elapses.

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]]> Economies of Scale https://www.howthemarketworks.com/economies-of-scale/ Tue, 22 Jan 2013 20:25:33 +0000 https://www.howthemarketworks.com/?p=4576 Decreasing the long-run average and marginal costs that come from an increase in the size of a factory or plant.

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]]> Exchange Offer https://www.howthemarketworks.com/exchange-offer/ Thu, 17 Jan 2013 16:43:08 +0000 https://www.howthemarketworks.com/?p=4375 When a company offers to trade one security in return for another security.

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]]> Average Directional Index (ADX) https://www.howthemarketworks.com/average-directional-index-adx/ Sat, 05 Jan 2013 21:07:44 +0000 https://www.howthemarketworks.com/?p=3966 Analysis of ADX is a method of evaluating trend and can help traders to choose the strongest trends and also how to let profits run when the trend is strong.

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]]> Day Trading Rules https://www.howthemarketworks.com/day-trading-rules/ Fri, 21 Dec 2012 17:15:09 +0000 https://www.howthemarketworks.com/?p=3534 If you perform four or more day trades in a 5 day period you may get flagged by the SEC as a "Pattern Day Trader." This can cause you to lose your margin account status until you deposit enough cash to have $25,000 or more in your account. Many beginning traders have been bitten by this rule!

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]]> Bad Earnings Surprise https://www.howthemarketworks.com/bad-earnings-surprise/ Wed, 19 Dec 2012 09:50:22 +0000 https://www.howthemarketworks.com/?p=3484 An event pattern called a bad earnings surprise is where a company distributes an earnings announcement then the market defines it as worse than expected. Even in a bear market about 61% will have upward breakouts.

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]]> Dead Cat Bounce https://www.howthemarketworks.com/dead-cat-bounce/ Tue, 18 Dec 2012 22:30:32 +0000 https://www.howthemarketworks.com/?p=3467 A trading term called a dead cat bounce is used to when a stock is in a severe decline and has a sharp bounce off the lows. It occurs due to the huge amount of short interest in the market. Once the supply and demand has become unbalanced, any type of bear market rally will create a massive short covering which will lead to a swift price move up. This bounce will be short lived and followed up by heavy selling which will break the prior price low.

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]]> Charting Software https://www.howthemarketworks.com/charting-software/ Wed, 31 Oct 2012 15:41:26 +0000 http://staging.www.howthemarketworks.com/?p=2668 Charting Software is an analytical, computer-based tool used to help equity (stock) traders with trading analysis by charting the price stock price for various time periods along with various indicators. Equity charting software packages are used by many traders to determine the direction on any given stock price.

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]]> Compound Interest https://www.howthemarketworks.com/compound-interest/ Mon, 15 Oct 2012 19:02:57 +0000 http://virtual-stock-exchange.net/?p=2240 Had the American Indians sold their beads and trinkets they received from selling Manhattan Island, invested their $16 and received 8% compounded annual interest, not only would they have enough money to buy back all of Manhattan, they would still have several hundred million dollars left over. That is the power of compound interest over time.

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]]> Expiration Types https://www.howthemarketworks.com/expiration-types/ Mon, 15 Oct 2012 13:49:47 +0000 http://virtual-stock-exchange.net/?p=2199 Expirations determine when your order gets placed on the market.

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]]> Asset Turnover Ratio https://www.howthemarketworks.com/asset-turnover-ratio/ Thu, 11 Oct 2012 15:28:36 +0000 http://virtual-stock-exchange.net/?p=2005 Definition: The amount of sales generated for every dollar’s worth of assets. It is calculated by dividing sales in dollars by assets in dollars. Formula:     Also known as the Asset to Turnover Ratio. More Detail:  Asset turnover measures a firm’s efficiency at using its assets in generating sales or revenue – the higher the number Read More...

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]]> AMAX https://www.howthemarketworks.com/amax/ Thu, 11 Oct 2012 15:20:04 +0000 http://virtual-stock-exchange.net/?p=2001 The American Stock Exchange (AMEX) is the third largest Stock Exchange in the US by trading volume. It overlooks the trading of approximately 10% of all US traded securities including small-cap stocks, ETF's and Derivatives.

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]]> Day Trading https://www.howthemarketworks.com/day-trading/ Tue, 09 Oct 2012 20:25:11 +0000 http://virtual-stock-exchange.net/?p=1982 Day traders buy and sell the same stock (or other investment type) within a single trading day.

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]]> Closed-End Mutual Fund https://www.howthemarketworks.com/closed-end-mutual-fund/ Sat, 06 Oct 2012 21:19:06 +0000 http://virtual-stock-exchange.net/?p=1775 A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.

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]]> Exchange Traded Fund (ETF) https://www.howthemarketworks.com/etfs/ Fri, 05 Oct 2012 12:44:46 +0000 http://virtual-stock-exchange.net/?p=1663 A stock like security that follows an index, a commodity or a basket of assets like an indexed mutual fund. Securities like ETFs trades like a stock. ETFs prices change throughout the day, like a stock, as they are bought and sold.

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]]> Covered Calls https://www.howthemarketworks.com/covered-calls/ Thu, 04 Oct 2012 19:40:46 +0000 http://virtual-stock-exchange.net/?p=1590 An options strategy by which an investor retains a long position in an asset and writes or sells a call options on an identical in an effort to produce an increased income from the asset.

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]]> Cash Flow Statement https://www.howthemarketworks.com/cash-flow/ Wed, 03 Oct 2012 21:54:47 +0000 http://virtual-stock-exchange.net/?p=1558 A revenue or expense stream that changes a cash account over a given period. Cash inflows usually arise from one of three activities - financing, operations or investing - although this also occurs as a result of donations or gifts in the case of personal finance. Cash outflows result from expenses or investments. This holds true for both business and personal finance.

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]]> Dollar Cost Averaging https://www.howthemarketworks.com/dollar-cost-averaging/ Thu, 04 Oct 2012 00:46:41 +0000 http://virtual-stock-exchange.net/?p=1554 Dollar Cost Averaging is the method of purchasing a fixed dollar amount of one particular investment at regular period of times, regardless of the share price.

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]]> Fundamental Analysis https://www.howthemarketworks.com/fundamental-analysis/ Wed, 03 Oct 2012 21:21:54 +0000 http://virtual-stock-exchange.net/?p=1541 Fundamental analysis is the process of looking at the basic or fundamental financial level of a business, especially sales, earnings, growth potential, assets, debt, management, products, and competition.

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]]> Dogs of Dow Strategy https://www.howthemarketworks.com/dogs-of-dow-strategy/ Wed, 03 Oct 2012 21:02:32 +0000 http://virtual-stock-exchange.net/?p=1533 A stock investing tactic where you purchase the ten DJIA stocks with the highest dividend yield at the start of each year.

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]]> Capital Asset Pricing Model : CAPM https://www.howthemarketworks.com/capm-capital-asset-pricing-model/ Fri, 28 Sep 2012 12:59:59 +0000 http://virtual-stock-exchange.net/?p=1178 Capital Asset Pricing Model (CAPM) is a method used by investors to prioritize what stocks to invest in, given their limited cash.

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]]> Buy on Margin https://www.howthemarketworks.com/buy-on-margin-2/ Tue, 25 Sep 2012 22:42:40 +0000 http://virtual-stock-exchange.net/?p=960 Buying on margin is borrowing money from a broker to purchase stock.

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]]> Diversification https://www.howthemarketworks.com/diversification/ Tue, 25 Sep 2012 10:53:25 +0000 http://virtual-stock-exchange.net/?p=929 In finance, diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of its constituents.

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]]> Cash Flow Per Share https://www.howthemarketworks.com/cash-flow-per-share/ Tue, 25 Sep 2012 10:49:23 +0000 http://virtual-stock-exchange.net/?p=923 Cash flow per share shows the after-tax earnings plus depreciation, on a per share basis. Many financial analysts place more emphasis on the cash flow per share value than on earnings per share values.

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]]> Form 10-Q https://www.howthemarketworks.com/form-10-q/ Tue, 25 Sep 2012 10:42:04 +0000 http://virtual-stock-exchange.net/?p=919 Form 10-Q, is also known as a 10-Q or 10Q, is a quarterly report mandated by the United States federal Securities and Exchange Commission, to be filed by publicly traded corporations.

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]]> Form 10-K https://www.howthemarketworks.com/10-k/ Tue, 25 Sep 2012 05:35:31 +0000 http://virtual-stock-exchange.net/?p=905 Companies with more than $10 million in assets and a class of equity securities that is held by more than 500 owners must file annual and other periodic reports, regardless of whether the securities are publicly or privately traded. Up until March 16, 2009, smaller companies could use Form 10-KSB. If a shareholder requests a company’s Form 10-K, the company must provide a copy. In addition, most large companies must disclose on Form 10-K whether the company makes its periodic and current reports available, free of charge, on its website. Form 10-K, as well as other SEC filings may be searched at the EDGAR database on the SEC's website.

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]]> What is a Balance Sheet? https://www.howthemarketworks.com/balance-sheet/ Tue, 25 Sep 2012 02:33:38 +0000 http://virtual-stock-exchange.net/?p=903 A summary of the financial balances of a sole proprietorship, a business partnership, a corporation or other business organization, such as an LLC or an LLP. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year.

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]]> Ask Price https://www.howthemarketworks.com/ask-price/ Mon, 24 Sep 2012 23:14:09 +0000 http://virtual-stock-exchange.net/?p=889 The price a seller is willing to accept for a security, also known as the offer price. Along with the price, the ask quote will generally also stipulate the amount of the security willing to be sold at that price.

Sometimes called "the ask."

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]]> Bid Price https://www.howthemarketworks.com/bid-price/ Mon, 24 Sep 2012 23:12:02 +0000 http://virtual-stock-exchange.net/?p=886 When you are selling your shares of a security, the bid price is what the buyer is willing to pay for your shares. This Bid Price offers you an exact price of how much you can sell your shares for.

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]]> Dividend Yield https://www.howthemarketworks.com/dividend-yield/ Tue, 25 Sep 2012 00:40:36 +0000 http://virtual-stock-exchange.net/?p=879 A financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. The formula is Annual Dividends Per Share divided by Price Per Share.

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]]> Dividend https://www.howthemarketworks.com/dividend/ Tue, 25 Sep 2012 00:37:06 +0000 http://virtual-stock-exchange.net/?p=876 Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be distributed to shareholders. There are two ways to distribute cash to shareholders: share repurchases or dividends. Many corporations retain a portion of their earnings and pay the remainder as a dividend.

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]]> Common Stock https://www.howthemarketworks.com/common-stock/ Tue, 25 Sep 2012 00:29:59 +0000 http://virtual-stock-exchange.net/?p=870 Common stock is a form of corporate equity ownership, a type of security. The terms "voting share" or "ordinary share" are also used in other parts of the world; common stock being primarily used in the United States. It is called "common" to distinguish it from preferred stock.

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]]> Capital Stock https://www.howthemarketworks.com/capital-stock/ Mon, 24 Sep 2012 13:08:24 +0000 http://virtual-stock-exchange.net/?p=829 All shares representing ownership of a company, including preferred and common shares.

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]]> Capital Gains Distribution https://www.howthemarketworks.com/capital-gains-distribution/ Mon, 24 Sep 2012 08:13:59 +0000 http://virtual-stock-exchange.net/?p=801 By law, every year, mutual funds must distribute that year's net investment income (the total of dividends and interest received, less fund expenses) and net realized gain (gains less losses on securities sales) to its shareholders. These distributions are taxable income reported to the IRS on Form 1099. Investors must report the income on their tax returns. This poses a problem for some mutual fund investors who make initial purchases of mutual funds near the end of a calendar year. Because they receive a capital gains distribution, they immediately receive taxable income and face a mutual fund NAV that is reduced from the distribution.

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]]> Capital Gain or Loss https://www.howthemarketworks.com/capital-gain-or-loss/ Mon, 24 Sep 2012 11:10:16 +0000 http://virtual-stock-exchange.net/?p=799 Profit or loss resulting from the sale of certain assets classified under the federal income tax legislation as capital assets. This includes stocks and other investments such as investment property.

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]]> Call Option https://www.howthemarketworks.com/call-option/ Mon, 24 Sep 2012 08:09:18 +0000 http://virtual-stock-exchange.net/?p=797 A Call Option gives the holder the right, but not the need to purchase a fixed quantity of a particular stock at a specific price inside a particular time. Call Options are bought by investors who anticipate a price increase.

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]]> Blue Chip Stocks https://www.howthemarketworks.com/blue-chip-stocks/ Mon, 24 Sep 2012 08:06:12 +0000 http://virtual-stock-exchange.net/?p=793 Stocks of leading and nationally known companies that offer a record of continuous dividend payments and other strong investment qualities.

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]]> Block Trades https://www.howthemarketworks.com/block-trades/ Mon, 24 Sep 2012 08:05:23 +0000 http://virtual-stock-exchange.net/?p=791 Trades greater than or equal to 10,000 shares in size and greater than or equal to $100,000 in value.

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]]> Stock Beta https://www.howthemarketworks.com/stock-beta/ Mon, 24 Sep 2012 08:04:24 +0000 http://virtual-stock-exchange.net/?p=788 A measurement of the relationship between the price of a stock and the movement of the whole market. An asset has a beta of zero if it moves are not related to the benchmark's moves. A positive beta means that the asset generally follows the benchmark, in the sense that the asset tends to move up when the benchmark moves up, and the asset tends to move down when the benchmark moves down. A negative beta means that the asset typically moves in the opposite direction as the benchmark: the asset tends to move up when the benchmark moves down, and the asset tends to move down when the benchmark moves up.

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]]> Bull Market https://www.howthemarketworks.com/bull-market/ Mon, 24 Sep 2012 07:56:19 +0000 http://virtual-stock-exchange.net/?p=785 The tendency of the stock market to trend higher over time. It can be used to describe either the market as a whole or specific sectors and securities. The opposite of a Bull Market is a Bear Market when the market is moving lower over time.

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]]> Bear Market https://www.howthemarketworks.com/averaging-down/ Mon, 24 Sep 2012 07:48:07 +0000 http://virtual-stock-exchange.net/?p=779 The tendency of the stock market to trend lower over time. It can be used to describe either the market as a whole or specific sectors and securities.

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]]> at-the-money https://www.howthemarketworks.com/at-the-money/ Mon, 24 Sep 2012 07:43:27 +0000 http://virtual-stock-exchange.net/?p=776 When an option's strike price is identical to the price of the security. Both call and put options will be simultaneously "at the money." For example, if the ABC stock is trading at 75, then the ABC 75 call option is at the money and so is the ABC 75 put option. An at-the-money option has no intrinsic value, but may have time value (value if the stock goes up during the period of the option). Options trading activity tends to be most active when options are at the money.

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]]> Arbitrage https://www.howthemarketworks.com/arbitrage/ Mon, 24 Sep 2012 07:38:21 +0000 http://virtual-stock-exchange.net/?p=773 The simultaneous purchase of a security on one stock market and the sale of the same security on another stock market at prices which yield a profit.

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]]> All-or-None Order https://www.howthemarketworks.com/all-or-none-order/ Mon, 24 Sep 2012 07:35:07 +0000 http://virtual-stock-exchange.net/?p=770 When you place an order to buy stocks that must be filled completely, with the total quantity requested, or the trade should not execute at all.

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]]> EPS https://www.howthemarketworks.com/earnings-per-share-eps/ Sun, 23 Sep 2012 23:43:14 +0000 http://virtual-stock-exchange.net/?p=721 Earnings Per Share (EPS) is Total net profits divided by the number of outstanding common shares in the market.

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]]> Current Ratio https://www.howthemarketworks.com/current-ratio/ Sun, 23 Sep 2012 23:37:16 +0000 http://virtual-stock-exchange.net/?p=716 Current Ratio is the ratio of current assets divided by current liabilities. It provides A liquidity ratio that measures a company's ability to pay short-term obligations. Also known as "liquidity ratio", "cash asset ratio" and "cash ratio".

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]]> Buy Side Firms https://www.howthemarketworks.com/buy-side-firms/ Sun, 23 Sep 2012 19:30:41 +0000 http://virtual-stock-exchange.net/?p=706 Buy-side Firms are institutions that provide advice on buying securities and assets within their own organizations.

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]]> Black-Scholes https://www.howthemarketworks.com/black-scholes/ Sun, 23 Sep 2012 19:13:05 +0000 http://virtual-stock-exchange.net/?p=696 The Black-Scholes model is one of the most widely used ways to approximate the true price of a option.

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