Volume refers to the number of shares or contracts traded in a security or market during a given period, indicating the level of activity or liquidity.
Volatility refers to the degree of variation of a trading price series over time, usually measured by the standard deviation of returns.
The FCA is a regulatory body in the UK responsible for overseeing financial markets and protecting consumers, ensuring market integrity, and promoting competition.
A stock represents ownership in a company and a claim on part of its profits, whereas a bond is a loan from an investor to a borrower, typically a corporation or government, that pays interest over time.
The Price-to-Earnings (P/E) ratio measures a company's current share price relative to its per-share earnings. It’s used to analyse if a stock is over or under-valued.
The London Stock Exchange (LSE) is one of the oldest and largest stock exchanges in the world, based in London, England.
The FTSE 100 (Financial Times Stock Exchange 100) is an index of the 100 largest companies listed on the London Stock Exchange by market capitalisation. It’s often seen as a gauge of the UK economy.
The EMH suggests that stock prices fully reflect all available information and therefore are always priced accurately, making it impossible to consistently outperform the market through expert stock selection or market timing.
Technical analysis involves evaluating securities by analysing statistics generated by market activity, such as past prices and volume.
Short selling involves borrowing a security and selling it on the open market, planning to buy it back later at a lower price to make a profit.
Risk management involves identifying, assessing, and prioritising risks followed by coordinated efforts to minimise, monitor, and control the probability or impact of unfortunate events.
Quantitative easing (QE) is a monetary policy where a central bank buys government securities or other securities to increase the money supply and encourage lending and investment.
Market capitalisation (market cap) is the total value of a company's outstanding shares of stock, calculated by multiplying the share price by the number of shares.
Margin trading involves borrowing money from a broker to trade financial assets, using the assets in your brokerage account as collateral.
Liquidity refers to how easily an asset can be bought or sold in the market without affecting its price. High liquidity means an asset can be quickly converted to cash.
Insider trading involves trading a public company's stock or other securities by individuals with access to non-public information about the company.
Fundamental analysis involves evaluating a company's financial statements, health, management, and competitive advantages to estimate its intrinsic value.
Diversification is a strategy of spreading investments across various financial instruments, industries, and other categories to reduce risk.
Capital gains tax is a tax on the profit made when you sell an asset that has increased in value. In the UK, this applies to shares, property, and other investments.
Beta is a measure of a stock's volatility in relation to the market. A beta greater than 1 indicates higher volatility than the market, while a beta less than 1 indicates lower volatility.
Behavioural finance studies the psychological influences and biases that affect the financial behaviours of investors and financial practitioners.
An option is a financial derivative that gives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a specific date.
An index fund is a type of mutual fund or ETF designed to replicate the performance of a specific index, such as the FTSE 100.
An equity derivative is a financial instrument whose value is based on equity movements of an underlying asset, such as a stock or stock index.
Arbitrage is the simultaneous purchase and sale of an asset in different markets to profit from a difference in the asset’s price.
An Initial Public Offering (IPO) is the process by which a private company offers shares to the public for the first time to raise capital.
An Exchange-Traded Fund (ETF) is a type of investment fund and exchange-traded product that holds assets such as stocks, commodities, or bonds and is traded on stock exchanges.
Alpha represents the active return on an investment compared to a market index or benchmark, indicating the value that an investment manager adds to the performance of a portfolio.
A zero-coupon bond is a bond that doesn’t pay periodic interest. Instead, it is sold at a significant discount to its face value and matures at par.
A trailing stop order is a stop order that moves with the market price. It follows the asset’s price by a specified amount and only triggers a sale if the price reverses by that amount.
A trading signal is a trigger for action, either to buy or sell a security, based on technical indicators or other analysis.
A trading robot, or automated trading system, is software that automatically executes trades based on pre-set criteria and algorithms.
A trading platform is software through which investors and traders can open, close, and manage market positions through a financial intermediary.
A trading halt is a temporary suspension of trading for a particular security or market, usually due to significant news or extreme volatility.
A trading floor is the area of an exchange or brokerage where traders and brokers buy and sell securities.
A trading desk is a place where transactions for buying or selling securities are carried out on behalf of the company or clients.
A trading algorithm is a set of rules and instructions used by a computer to perform trading decisions and transactions automatically.
A ten-bagger is a stock that has increased in value by ten times its purchase price, a term popularised by investor Peter Lynch.
A synthetic position is a strategy that uses options to simulate the payoff of another position, such as replicating a long stock position using options.
Swing highs and swing lows are peaks and troughs in the price chart. A swing high is the highest point of a price fluctuation, while a swing low is the lowest point.
A stop-limit order combines the features of a stop order and a limit order. When the stop price is reached, the trade becomes a limit order that executes at the limit price or better.
A stock ticker is a unique series of letters assigned to a security or stock for trading purposes. For example, HSBC's ticker is HSBA.
A stock split is a corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares.
A sovereign bond is a debt security issued by a national government within a given country and denominated in a foreign currency.
A share buyback is when a company purchases its own shares from the marketplace, reducing the number of outstanding shares.
A sector fund is a mutual fund or ETF that invests in a specific industry or sector of the economy, such as technology or healthcare.
The secondary market is where investors buy and sell securities they already own. It contrasts with the primary market where new issues are sold.
A reverse stock split is a process in which a company reduces the number of its outstanding shares to increase the price per share.
A put option is a financial contract that gives the option buyer the right, but not the obligation, to sell a stock at a specified price before or at a certain date.
A pullback is a temporary reversal in the direction of a security's price, often seen as a buying opportunity within an ongoing trend.
A portfolio is a collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, structured to meet an investor’s risk tolerance and investment goals.
A naked option occurs when an investor sells an option without holding the underlying security, exposing them to significant risk if the market moves against their position.
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities.
A moving average is a stock indicator commonly used in technical analysis that smooths out price data by creating a constantly updated average price.
Market sentiment refers to the overall attitude of investors towards a particular security or the financial market as a whole, often driven by emotions and psychological factors.
A market order is an order to buy or sell a security immediately at the current market price.
A market maker is a firm or individual that actively quotes two-sided markets in a particular security, providing bids and offers along with the market size of each.
A market correction is a short-term drop in stock prices, typically of 10% or more, that adjusts prices to more accurately reflect the underlying fundamentals.
A margin call occurs when a broker demands an investor to deposit additional funds or securities to cover potential losses on leveraged trades.
A limit order is an order to buy or sell a security at a specific price or better. It ensures that you don’t pay more (or receive less) than your desired price.
A leveraged ETF uses financial derivatives and debt to amplify the returns of an underlying index, aiming to double or triple the daily returns.
A junk bond is a high-yield, high-risk security, typically issued by a company seeking to raise capital quickly. These bonds are rated below investment grade.
High-frequency traders use powerful computers to execute a large number of orders at extremely high speeds, often taking advantage of tiny price discrepancies.
A hedge fund is an investment fund that employs various strategies to earn active returns for its investors, often including leverage, derivatives, and short-selling.
The head and shoulders pattern is a chart formation that predicts a bullish-to-bearish trend reversal. It has three peaks, with the middle peak being the highest.
A futures contract is a legal agreement to buy or sell a particular commodity or asset at a predetermined price at a specified time in the future.
A double top is a chart pattern showing two peaks at roughly the same price level, indicating potential reversal of an upward trend.
A double bottom is a chart pattern showing two troughs at roughly the same price level, indicating potential reversal of a downward trend.
A dividend is a payment made by a corporation to its shareholders, usually in the form of cash or additional shares, as a distribution of profits.
A dead cat bounce is a temporary recovery in the price of a declining stock, often considered a continuation pattern of the downtrend.
A cup and handle pattern is a bullish continuation pattern where the price initially declines, then rises back to the original level, forming a U-shape, followed by a smaller downward handle before resuming its upward trend.
A credit rating assesses the creditworthiness of a borrower, showing the likelihood they will be able to repay their debt. High ratings indicate less risk.
A covered call is a strategy where an investor holds a long position in an asset and sells call options on that same asset to generate income from the option premiums.
A corporate bond is a debt security issued by a corporation to raise capital, which pays periodic interest and returns the principal at maturity.
A call option gives the option buyer the right, but not the obligation, to buy a stock at a specified price before or at a certain date.
A bull trap occurs when a stock or market shows a false signal of rising prices after a decline, leading traders to think the downtrend is reversing when it’s not.
A bull market is a period of rising prices in the stock market, often characterised by investor optimism and increasing economic strength.
A brokerage house, or brokerage firm, is a financial institution that facilitates the buying and selling of financial securities between a buyer and a seller.
A brokerage fee is a fee charged by a broker for executing transactions or providing specialised services.
A breakout occurs when the price of a security moves above a resistance level or below a support level with increased volume.
Blue-chip stocks are shares of well-established and financially sound companies with a history of reliable performance. These are considered to be safe investments.
A black swan event is an unpredictable or unforeseen event, typically one with extreme consequences, that is beyond what is normally expected.
The bid-ask spread is the difference between the highest price a buyer is willing to pay for a security and the lowest price a seller is willing to accept.
A bear trap occurs when a stock or market shows a false signal of declining prices after a rise, leading traders to think the uptrend is reversing when it’s not.
A bear raid is an illegal practice where investors attempt to push the price of a stock down by selling large amounts or spreading negative rumours.
A bear market is a period of declining prices in the stock market, typically defined as a fall of 20% or more from recent highs.
A Real Estate Investment Trust (REIT) is a company that owns, operates, or finances income-generating real estate, providing investors with regular income streams.
Penny stocks refer to shares of small public companies that trade at low prices, typically below £1 in the UK.
Derivatives are financial contracts whose value is derived from the performance of underlying entities such as assets, indexes, or interest rates.
Candlestick charts are a type of financial chart used to describe price movements of a security, showing opening, closing, high, and low prices.
Trading usually involves short-term strategies to maximise returns on a daily, weekly, or monthly basis. Investing, on the other hand, is about buying assets to hold for the long term, often years, focusing on gradual wealth accumulation.
Trading in financial markets involves buying and selling financial instruments like shares, bonds, currencies, commodities, and derivatives to make a profit. Traders aim to capitalise on price movements.
Leverage allows traders to control a larger position with a smaller amount of money. While it can amplify profits, it also increases the risk of large losses.
A stop-loss order is an order placed with a broker to buy or sell once the share reaches a certain price. It’s used to limit an investor's loss on a security position.
A share represents a portion of the ownership of a company and constitutes a claim on part of the company's assets and earnings. Shares are also known as "equities."
A brokerage account is a type of account that allows you to buy and sell securities. Brokerages act as intermediaries between you and the stock exchanges.
Some common types include day trading, swing trading, position trading, and scalping. Each type has different time frames and strategies.
Some popular strategies include trend following, mean reversion, momentum trading, and arbitrage. Each strategy involves different methods and tools for analysing market movements.
A trading plan is crucial as it outlines your trading strategy, risk management rules, and goals. It helps maintain discipline and reduces emotional decision-making, which can negatively impact trading performance.
Begin by educating yourself about the market and different trading strategies. Open a brokerage account, start with a demo account if available, and gradually invest real money as you gain confidence and experience.
