Financial Dictionary

The abandoned baby is a rare three candle reversal pattern in which a doji gaps away from the candles on either side. A bullish version appears after a decline and a bearish one after a rise.

Absolute return is the total gain or loss on a position or portfolio over a period, without comparing it to a benchmark. A strategy that aims for absolute returns tries to make money whether markets rise or fall.

The Accelerator Oscillator, created by Bill Williams, measures whether momentum is speeding up or slowing down. It subtracts a 5 period average of the Awesome Oscillator from the Awesome Oscillator itself.

Accommodative monetary policy is when a central bank keeps interest rates low or adds money to the financial system to support growth. It tends to weaken the currency and support stocks.

An account balance is the cash in a trading account after closed trades, deposits, withdrawals and charges. It does not include profit or loss on open positions, which is reflected in equity instead.

The account currency is the currency in which a trading account holds funds and reports profit, loss and charges. Trades in other currencies are converted, so exchange rates affect the final result.

Accounts payable is the money a company owes its suppliers for goods or services already received. It appears on the balance sheet as a short term liability.

Accounts receivable is the money customers owe a company for goods or services already delivered. A sharp rise compared with sales can be a sign that customers are paying more slowly.

An accretive acquisition is a takeover that raises the buyer's earnings per share. One that lowers earnings per share is called dilutive.

Accrual accounting records revenue when it is earned and costs when they are incurred, regardless of when cash changes hands. Listed companies report this way, which is why profit and cash flow can differ.

Accrued interest is the interest a bond has earned since its last coupon payment. When a bond changes hands between coupon dates, the buyer pays this amount to the seller on top of the bond's price.

The accumulation phase is a period when larger buyers gradually build positions after a decline, often while price moves sideways. In Wyckoff analysis it comes before a markup, or uptrend.

The accumulation/distribution line is a running total of volume, weighted by where each period closes within its high to low range. A rising line suggests buying pressure, and a gap between the line and price can warn of a reversal.

The acid test ratio, or quick ratio, measures whether a company can pay its short term debts from its most liquid assets, leaving out inventory. A ratio above 1 suggests it can meet those obligations without selling stock.

An acquisition is one company buying control of another. The target's share price usually rises towards the offer price, while the buyer's shares may fall if the deal looks expensive.

Active trading means opening and closing positions frequently to profit from short term price moves, rather than holding for the long term. It demands time, discipline and close attention to trading costs.

An activist shareholder buys a significant stake in a company to push for changes such as a new strategy, asset sales or board changes. News of an activist stake can lift a share price.

Adjusted earnings per share is a company's profit per share after removing items it treats as one off, such as restructuring costs. Companies choose what to exclude, so traders compare it with the standard reported figure.

ADP Employment Change is a monthly estimate of US private sector job growth based on payroll data from ADP. It usually comes out two days before the official non farm payrolls report, so traders treat it as an early read on the jobs market.

The advance GDP estimate is the first official reading of US economic growth for a quarter, published about a month after the quarter ends. It is revised later as more data arrives, but the first release usually moves markets most.

The advance/decline line is a running total of the number of rising stocks minus falling stocks on an exchange. It shows whether a market move is broad or driven by a few large companies.

The AEX is the main stock index of Euronext Amsterdam, tracking the largest Dutch listed companies. Technology and consumer names carry heavy weights in it.

After hours trading is buying and selling shares once the main exchange session has closed. Volume is thinner and spreads are often wider, so prices can move sharply on earnings or news.

Aggregate demand is the total spending on goods and services in an economy, from households, businesses, government and overseas buyers. Interest rates and government spending both influence it.

Aggregate supply is the total output of goods and services that producers in an economy are able and willing to supply at a given price level. Shocks to supply, such as an energy crisis, can raise prices and slow growth at the same time.

Agricultural commodities are farm products traded as futures, such as wheat, corn, soybeans, sugar, coffee, cocoa and cotton. Weather, harvest reports and trade policy drive their prices.

An airdrop is a free distribution of crypto tokens to wallet holders, usually to promote a new project. Prices of newly airdropped tokens are often very volatile as recipients sell.

Algorithmic trading uses computer programs to place orders automatically when set conditions are met, such as a price level, time or indicator signal. Algorithms can act faster than people, but a coding error or sudden market change can cause rapid losses.

An all or none order is an instruction to fill the whole order at once or not at all. It prevents partial fills but may not execute if there is not enough volume available.

An all time high is the highest price an asset has ever reached. Traders watch it as a psychological level, since a break above it leaves no historical resistance overhead.

An all time low is the lowest price an asset has ever traded at. Breaking below it leaves no historical support, which can speed up selling.

The Alligator indicator uses three smoothed moving averages, set at 13, 8 and 5 periods and shifted forward, to show whether a market is trending. When the lines are tangled the market is ranging, and when they fan out a trend is under way.

Alpha is the return a strategy earns above its benchmark after allowing for the risk taken. A positive alpha suggests skill or an edge, while a negative alpha means the strategy lagged the benchmark.

An altcoin is any cryptocurrency other than bitcoin. Altcoins tend to be more volatile than bitcoin and often move even more sharply when the crypto market rises or falls.

The Altman Z score combines five financial ratios into one number that estimates a company's risk of bankruptcy. A low score signals financial distress, while a high score suggests a sound balance sheet.

Aluminium is a light industrial metal used in transport, packaging and construction, and it trades mainly on the London Metal Exchange. Its price reacts to energy costs, since smelting uses large amounts of power, and to Chinese output.

An American depositary receipt is a certificate traded on a US exchange that represents shares in a company listed abroad. It lets traders buy foreign companies in US dollars during US market hours.

Amortisation spreads the cost of an intangible asset, such as a patent or licence, over its useful life. It also describes paying off a loan through regular instalments of principal and interest.

Analysis paralysis is when a trader studies so many indicators or scenarios that they fail to act. A written trading plan with clear entry and exit rules helps prevent it.

An analyst rating is a research firm's recommendation on a stock, such as buy, hold or sell, often with a price target. Upgrades and downgrades can move a share price, but ratings are opinions and are often revised.

Anchored VWAP is a volume weighted average price that starts from a point the trader chooses, such as an earnings release or a major high. It shows the average price paid by everyone who traded since that event.

Anchoring bias is the tendency to rely too heavily on one reference point, such as the price a trader paid or a recent high. It can lead traders to hold losing positions while waiting for price to return to that level.

Andrews' pitchfork is a drawing tool that uses three chosen price points to plot a central trendline and two parallel lines around it. Traders use the lines as possible support and resistance within a trend.

An annual general meeting is a yearly meeting where a company's shareholders vote on matters such as board appointments and dividends. Votes on pay or strategy can sometimes move the share price.

An annual report is the document a listed company publishes each year with its audited financial statements and a review of its business. Traders use it to check revenue, profit, debt and management's outlook.

An annualised return converts a gain or loss over any period into a yearly rate. It lets traders compare results from strategies or holdings that ran for different lengths of time.

Anti money laundering refers to the laws and checks that stop criminals from passing illegal money through the financial system. Trading providers must verify clients and monitor transactions to comply.

Antipodean currencies is a market term for the Australian dollar and the New Zealand dollar. Both tend to rise when risk appetite is strong and fall when traders seek safety.

The API crude oil stock change is a weekly estimate of US crude oil inventories from the American Petroleum Institute, released on Tuesdays. A larger than expected build can weigh on oil prices, and traders compare it with the official EIA figure a day later.

Currency appreciation is a rise in a currency's value against another currency. When the euro appreciates against the US dollar, one euro buys more dollars than before.

An appropriateness assessment is a check a provider carries out to see whether a client understands the risks of a complex product such as CFDs. It usually asks about trading knowledge and experience before an account opens.

Arabica is the higher grade of the two main coffee varieties and is traded as a futures contract in New York. Weather in Brazil and Colombia is the main driver of its price.

Arbitrage means buying and selling the same or closely related asset in different markets to profit from a price difference. The gaps are usually small and close quickly, and costs, delays and execution risk can wipe out the expected gain.

An area chart is a line chart of closing prices with the space beneath the line shaded. It gives a clean view of the overall trend but hides the high, low and opening prices.

The Arms index, or TRIN, compares the ratio of rising to falling stocks with the ratio of volume in rising to falling stocks. A reading below 1 suggests buying pressure and a reading above 1 suggests selling pressure.

The Aroon indicator measures how many periods have passed since the highest high and the lowest low within a set window, usually 25 periods. Its two lines show whether a trend is starting, strengthening or fading.

An ascending channel forms when price moves between two parallel, upward sloping trendlines. Traders often look to buy near the lower line and take profit near the upper one, until price breaks out of the channel.

An ascending triangle is a chart pattern with a flat upper resistance line and a rising lower trendline. It is usually read as bullish, with a break above resistance taken as the signal, though false breakouts are common.

The Asian trading session covers market hours in Tokyo, Hong Kong, Singapore and Sydney, running from about midnight to 09:00 GMT. Volume is usually lighter than in the London session, though the yen, the Australian dollar and regional assets can move on local data.

The ask price is the lowest price a seller will accept, and the price at which a trader buys. It always sits above the bid price, and the gap between them is the spread.

An asset is anything with value that can be owned or traded, such as a share, a bond, a currency or a commodity. In trading, the asset a contract is based on is called the underlying asset.

Asset allocation is how a portfolio's money is divided between asset classes such as stocks, bonds, commodities and cash. It shapes overall risk more than the choice of any single position.

Asset backed securities are bonds backed by a pool of loans or receivables, such as car loans, credit card debt or mortgages. Holders are paid from the cash those loans generate, so their value depends on borrowers keeping up repayments.

An asset class is a group of instruments that behave in similar ways and follow the same rules, such as stocks, bonds, currencies, commodities or crypto. Traders spread risk across asset classes because each one reacts differently to economic news.

Asset purchases are when a central bank buys government bonds or other assets to lower long term interest rates and add money to the economy. Large scale asset purchases are also known as quantitative easing.

Asset turnover measures how much revenue a company generates for each unit of assets it owns. A higher ratio means the company uses its assets more efficiently.

Assets under management is the total market value of the money a fund or firm manages for clients. It is a common measure of a manager's size and drives its fee income.

The S&P/ASX 200 tracks 200 of the largest companies listed on the Australian Securities Exchange. Banks and miners make up a large share, so it is sensitive to commodity prices and interest rates.

Asymmetric risk describes a trade where the possible gain and the possible loss are of very different sizes. Traders look for setups where the potential reward clearly outweighs the risk taken.

An attached order is a stop loss or take profit placed together with the order that opens a position. It activates automatically once the main order fills.

Attitude to risk is how much loss and price swings a trader is willing and able to accept in pursuit of returns. It should guide position sizes, leverage and the choice of markets.

An auction is a period, usually at the open or close of an exchange session, when buy and sell orders are matched at a single price. Closing auction prices often set the official closing price used by funds and indices.

AUD/USD is the exchange rate between the Australian dollar and the US dollar, showing how many US dollars one Australian dollar buys. It often moves with commodity prices and with China's economic data.

Austerity is a government policy of cutting spending or raising taxes to reduce a budget deficit. It can restore confidence in public finances but may slow economic growth in the short term.

The Australian dollar is the currency of Australia, nicknamed the Aussie. Because Australia exports large volumes of iron ore and coal, the currency often moves with commodity prices and risk appetite.

An authorised firm is a company licensed by a financial regulator to provide certain services, such as dealing in CFDs. Traders can check a firm's status on the regulator's public register.

Automatic close out is when a provider closes some or all open positions because the account's margin level has fallen to a set threshold. It stops losses from exceeding the funds in the account, but it locks in the loss at that point.

Available margin is the money in a trading account that is free to open new positions or absorb losses. Many platforms call it free margin, and it equals account equity minus the margin already in use.

Average daily volume is the number of shares or contracts traded in a typical day, averaged over a set period. Higher volume usually means better liquidity and tighter spreads.

The Average Directional Index measures the strength of a trend on a scale of 0 to 100, regardless of its direction. Readings above about 25 suggest a strong trend, while low readings point to a range bound market.

The average entry price is the weighted average price of all the trades that make up a position. It changes each time a trader adds to the position and is the reference point for its profit or loss.

Average Hourly Earnings measures the change in what US workers earn per hour and is published in the monthly jobs report. Faster wage growth can push inflation up, which affects interest rate expectations and the dollar.

Average True Range measures volatility by averaging the full range of price movement over a set number of periods, usually 14, including any gaps. Traders use it to set stop loss distances and position sizes, though it shows how much price moves, not which way.

Averaging down means adding to a losing position so that the average entry price falls. It lowers the price needed to break even, but it also increases the size of a trade that is already going wrong.

The Awesome Oscillator, created by Bill Williams, measures momentum as the difference between a 5 period and a 34 period simple moving average of each bar's midpoint. It is shown as a histogram, and crosses of the zero line are read as shifts in momentum.