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What is Market Sentiment?
Market sentiment is traders’ and investors’ overall mood or attitude about a market. It shows whether they’re optimistic (bullish) or pessimistic (bearish) about price movements.
This sentiment often drives market trends, making understanding how people feel about the market when planning your trades is important.
Have you ever wondered why prices in the stock or commodity markets suddenly shoot up or take a nosedive? It’s not just about numbers or technical charts—much of it concerns how people feel about the market. This feeling is called market sentiment, and it plays a huge role in trading decisions.
Account Balance
What is an account balance in trading?
A trader’s “account balance” is the total value of the account including all and any settled profit & loss, deposits, and withdrawals.
How do I check my trading account balance?
As mentioned, your account balance is the total sum of settled positions, P&L, deposits, and withdrawals. Yet this balance does not include profit or loss resulting from any open positions. If positions are indeed open, the balance might change depending on pending losses or profits until such positions are closed. As such, it is recommended to check your trading account balance regularly as new positions open and close on a regular basis.
Acquisition
What is an Acquisition?
An Acquisition is a business transaction where one company buys all, or part, of another company’s shares or assets. This can be done in an attempt to gain control of, and expand on, the target company’s market while also gaining or at least conserving resources.
There are three main forms of “pairing business together”:
– Acquisitions – When both business entities continue their operations in one form or another.
– Mergers – When only one of the entities remains while the other is taken over.
– Conglomeration / Amalgamation – When both business entities are reformed into a new one.
As part of the Acquisition process, the acquiring company purchases the target business’s shares or assets, which gives it the authority to make use of the target’s assets as if they are its own.
Why do companies make acquisitions?
Companies make acquisitions as there are several benefits to doing so, including lower entry barriers, growth and market influence. There are also some challenges and difficulties associated with this process. These include conflicts of cultures, redundancy, contradicting objectives and unmatched businesses.
What are the four types of acquisitions?
- There are four types of acquisitions that companies perform.
- A Horizontal acquisition happens when company acquires another company that is in the same business.
- A Vertical acquisition is defined as one company acquiring another which is in a different position on market or the supply chain.
- Conglomerate acquisitions happen when the company buying the target and the target company itself operate in unrelated industries or are engaged in unrelated functions.
- Congeneric acquisition occurs when an acquiring company and the acquired company market different products or services, yet sell to the same customers.
Algo-Trading
What is Algo Trading?
Automated trading, also referred to as Algo Trading (Algorithmic is abbreviated to Algo), is the use of algorithms for executing orders utilizing automated and pre-programmed trading instructions via advanced mathematical tools. Trading variables such as price, timing, and volume are factors in Algo trading.
How does algo trading work?
Algo trading works by capitalizing on fast decision-making processes as human intervention is minimized. As such, Algo Trading enables automated trading systems to take advantage of opportunities arising in the market even before human traders can even spot them. It uses process- and rules-based algorithms to employ strategies for executing trades. Algo trading is mostly used by large institutional investors and traders.
All Country World Index
ACWI stands for All Country World Index, and this ETF is designed to provide a broad reflection of the performance of equity markets around the world comprising stocks from 23 developed and 24 emerging markets. It’s owned by Morgan Stanley Capital International (MSCI).
The ETF tracks nearly 2,500 stocks, including Apple, Microsoft, Amazon, and Facebook. Stocks from five countries make up 72.6% of the ACWI, those being the USA, Japan, the UK, France, and China. The remaining 27.4% comprises stocks from the other 42 countries. The ACWI is used as a benchmark of performance by fund managers and is considered a good way to diversify a portfolio.
Why Does Market Sentiment Matter in Trading?
Imagine this: You’re at an auction, and there’s a rare painting up for sale. If everyone in the room happens to be excited and believes that the painting is worth a fortune, the bids will skyrocket. But the bids might barely rise if the crowd feels uncertain or thinks the painting is not worth the price. This is how market sentiment operates; it all comes down to the general attitude of traders and investors.
Market sentiment matters because it often drives prices, sometimes even more than the actual value of a stock, currency, or asset. Here’s how it works:
- Positive News Sparks Hope: The company’s report of unprecedented earnings inspires confidence in its prospects. This positive sentiment could attract more buyers, increasing the stock price.
- Negative News Generates Anxiety: Conversely, negative news—such as a scandal, disappointing earnings, or economic instability—can trigger panic and trigger selling, leading to a drop in prices.
- Emotions Heighten Trends: Feelings such as greed and fear often intensify market fluctuations. For instance, when prices increase rapidly, more individuals may hurry in, worried that they’ll lose their chance. This may trigger a snowball effect, pushing prices to rise further.
Grasping market sentiment gives you an edge because it allows you to forecast price changes. If you can recognize when the market is overly optimistic or fearful, you can improve your trading choices, like when to buy, sell, or maintain your position.
Amortization
What is Amortization?
Amortization is the process of charging the cost of an asset to expense over a specific timeframe. Amortization also defines the practice of spreading the repayment of a loan. This shifts the asset from the balance sheet to the income statement.
Amortization reflects the consumption of an intangible asset over what is considered a useful timeframe. It is used for the gradual write-down of the cost of those intangible assets that have a specific useful life. It is common to charge interest which is calculated based on the duration and other variables.
Amortization should not be confused with Depreciation. The difference between them is that amortization is about charging “Intangible Assets” to expense over time, while depreciation is about charging “Tangible Assets” to expense over time.
How to calculate amortization?
As we do not provide economic or trading advice, we can only include here what is considered to be a generally agreed-upon explanation. As stated, generally, an Amortization can be calculated by using a straight-line formula such as:
(book value – residual value) / useful life.
Amsterdam 25
The AEX Index, known also as the Amsterdam 25, is a free float–adjusted and market capitalization–weighted index of the 25 biggest and most actively traded companies trading in Amsterdam. It was created on January 3rd, 1983, but its base value of 538.36 is taken from January 4th, 1999, to account for conversion to the euro.
The index recorded an all-time high in September 2000 of 701.56. It is the most widely used bellwether of the Dutch stock market’s performance.
The biggest sector in the index is Oil & Gas, which accounts for 17% of the total weighting. Personal & Household Goods, and Technology, are the second and third biggest sectors in the index, respectively, each making up around 14% of the AEX.
Amsterdam 25 futures allow you to speculate on, or hedge against, changes in the price of stocks in the Netherlands market. The instrument is priced in euros and rolled over on the second Friday of every month.
Arbitrage in Trading
What is Arbitrage in Trading?
Arbitrage is trading that makes use of small differences in price between identical assets in two or more markets. An asset will most likely be sold in different markets, forms, or via different financial products.
Arbitrage is one alternative trading strategy that can prove exceptionally profitable when leveraged by sophisticated traders. It also carries risks that need to be considered prior and during an arbitrage.
Arbitrage as a trading strategy is when an asset is simultaneously bought and sold in different markets, thus taking advantage of a price difference and generating a potential profit. Arbitrage is commonly leveraged by hedge funds and other sophisticated investors.
What is an example of arbitrage?
Without going into actual trading advice, here are several examples of Arbitrage in Trading:
– Exchange rates
– Offshore operations
And perhaps the most obvious and common form of arbitrage is acting as a go-between or affiliate, earning commission on price differences between the seller and the buyer.
Types of arbitrage traders use:
- – Pure arbitrage – Traders simultaneously buying and selling assets in different markets to take advantage of price differences.
- – Merger arbitrage – When two publicly traded companies merge. If the target is a publicly traded company, the acquiring company must purchase its outstanding shares.
- – Convertible Arbitrage – It is related to convertible bonds, also called convertible notes or convertible debt.
ARK Space Exploration & Innovation ETF
The ARK Space Exploration & Innovation ETF’s (ARKX) investment objective is long-term growth of capital. ARKX is an actively-managed exchange-traded fund (“ETF”) that will invest under normal circumstances primarily (at least 80% of its assets) in domestic and foreign equity securities of companies that are engaged in the Fund’s investment theme of Space Exploration and Innovation.
The Adviser defines “Space Exploration” as leading, enabling, or benefiting from technologically enabled products and/or services that occur beyond the surface of the Earth.
Expiry (Expiration) Date
What is Expiry Date in trading?
Expiry date, also known as expiration date or maturity date, is the date on which a financial contract, such as a futures contract or option, will expire and can no longer be traded. At the expiry date, the terms of the contract, such as the price and quantity, will be settled or exercised. For options, if the holder of the option chooses to exercise it, they will buy or sell the underlying asset at the strike price. For futures contracts, the holder will have to buy or sell the underlying asset at the agreed-upon price.
How does an expiry date work?
One key takeaway about Expiration Dates is that the further away they are the better. In this aspect, the potential value of an option can benefit from a longer time an option prior to expiring. I.e., the said option is more likely to hit its strike price and actually become valuable the longer it is on the market.
Are Expiry dates good for day trading?
Expiry dates can be an important factor to consider for day trading options and futures contracts as they determine when the contract must be settled or exercised. Day traders should take into account the expiration date when planning their trades and adjust their strategy accordingly. It’s important to remember that expiry dates are just one of many factors that can influence the price of financial instruments, and traders should always consider multiple factors when making trades.
Earnings Per Share (EPS)
What are Earnings Per Share?
Earnings Per Share (EPS) is a financial metric that measures the amount of profit a company makes for each outstanding share of its common stock. It’s calculated by dividing net income by the number of shares outstanding. Investors use EPS to measure how profitable a company is and to compare different companies in the same sector.
What is a good earnings per share? Is it better to have a high or low earnings per share?
There is no definitive answer to what constitutes a “good” earnings per share (EPS) as it can vary depending on the industry, the size of the company, and the expectations of the market. Generally, a higher EPS is considered better, as it indicates that a company is generating more profit per share of stock.
What is earnings per share vs dividend?
A dividend is a payment made by a company to its shareholders out of its profits or reserves, whereas EPS is an indicator of a company’s profitability.
Economic Calendar
What is an Economic Calendar?
An economic calendar is a schedule of dates when significant news releases or events are expected, which may affect the global or local financial markets volatility as well as currency exchange rates. Traders and all functions involved in the markets and financial issues make use of the economic calendar to follow up and prepare on what is going to happen, where, and when.
Due to the impact of financial events and announcements on exchange rates, the forex market is highly affected by monetary and fiscal policy announcements. As such, traders make use of the economic calendar to plan ahead on their positions and trades and to be aware of any issues that may affect them.
What is Financial Market Volatility?
Financial Market volatility is the degree of variation of a trading price series over time. Many traders will consider the historic volatility of a stock. This is the fluctuations of price in a given time frame. Historic volatility creates forward-looking implied volatility. This allows us to predict price variation in the future.
Energy Select Sector Fund
Tracks US energy companies within the S&P 500. This asset uses the Energy Select Sector Index as its tracking benchmark. The ETF offers concentrated exposure to oil and gas industry giants, as the S&P 500 favors large-caps. Nevertheless, it is fairly representative of the whole energy market.
Just a few holdings make up a big part of the portfolio, and there are only 31 holdings in total. Top holdings for the benchmark index include Exxon Mobil Corp, Chevron Corp, and ConocoPhillips.
EOS
EOS supports the EOS.IO blockchain protocol. The protocol’s architecture has the potential to eliminate user fees while processing millions of transactions per second. On our platform, EOS is priced in USD using the EOS/USD spot rate.
Equity in Trading
What is equity in trading?
Equity is the value of a trader’s account, representing the total assets minus any margin used to open trades. It reflects their financial position and potential financial outcomes from any trading activities as they currently stand. Traders can use equity to decide when to enter or exit positions and what size positions to take.
What is the difference between equity and stock?
For traders, stock and equity are synonymous terms as stocks represent equity ownership in a company. Assets, liabilities, and shareholders’ equity are items found on the balance sheet.
What is the difference between equity and account balance?
Equity is the total account balance, including profits/losses from open positions, whereas the account balance is simply the total money deposited in an account before any trades have been made.
ESG MSCI USA Leaders ETF
The iShares ESG MSCI USA Leaders ETF (SUSL) seeks to track the investment results of an index composed of U.S. large and mid-capitalization stocks of companies with high environmental, social, and governance performance relative to their sector peers as determined by the index provider.
ETFs
What are ETFs?
Exchange Traded Funds (ETFs) are a type of security that tracks a basket of underlying assets, like stocks, bonds, or commodities. They can provide diversification and lower costs compared to other investment types. ETFs are traded on stock exchanges and offer more liquidity than traditional investments.
How do ETFs work?
In trading, Exchange-Traded Funds or ETFs, combine the features of funds and equities into one instrument. Like other investment funds, they group together various assets, such as stocks or commodities. This helps the ETF track the value of its underlying market as closely as possible.
ETFs can be useful in diversifying trading portfolios, or for active traders, they can be used to make use of price movements. ETFs are traded on an exchange like shares or stocks, and traders can also take “short” or “long” positions. CFD trading on ETFs enables traders to sell or buy an ETF they don’t actually own to make use of price movements, and not a lot of money is needed to start trading in ETFs.
How much money do you need to start trading ETFs?
The minimum amount you need to start trading ETFs depends on the brokerage you are using. The minimum amount to deposit for markets.com is the equivalent of 100 in the following currencies: USD, EUR, and GBP.
EUR/AUD
EUR/AUD is the abbreviation for the uro to Australian dollar exchange rate. The pairing accounts for 0.3% of the average daily forex trading volume across the globe, which equates to US$16 billion.
The euro is the currency of the Eurozone, which is overseen by the European Central Bank. The euro, also known as the common currency, the single currency, or the single unit, has an inverse correlation with the US Dollar. However, the impact of this upon the euro is lessened when trading against the Australian dollar because the “Aussie” also moves inversely to the US Dollar.
While not a safe-haven asset, the euro is considered more stable than the Australian dollar, meaning that the EUR/AUD pairing often strengthens in times of market pessimism and weakens when risk-demand is elevated.
The Australian economy is highly reliant upon exports of iron ore, for which Australia accounts for over 50% of the global supply. Changes in the market price can have a strong effect upon EUR/AUD.
Financial Leverage
What is financial leverage?
Financial leverage refers to the use of borrowed money to increase the potential return on an investment. It is the process of using borrowed money to increase the purchasing power of an investor by using debt to amplify the trading outcomes from an investment. This leverage can increase returns but also increases the risk of loss, as the interest and principal payments on the debt must be made regardless of the performance of the investment. In other words, it is the amount of debt used to finance a firm’s assets and is measured by debt-to-equity ratio.
What is a financial leverage ratio?
In trading, financial leverage ratio is a metric used to measure the level of leverage used by a trader or a trading firm. It is the ratio of the value of the trader’s or firm’s assets to the value of their equity capital. Leverage ratios in trading can be used to identify traders or firms that are using a high level of leverage, meaning they are using a large amount of borrowed money to invest in markets.
What affects financial leverage?
In trading, financial leverage is affected by a number of factors, including:
- – Margin requirements: The amount of money or collateral required by a broker to open a leveraged position.
- – Risk tolerance: A trader’s willingness to take on risk and their ability to handle potential losses.
- – Investment horizon: A trader’s investment time frame and goals can affect their use of leverage.
- – Market conditions: Volatility, liquidity, and other market conditions can influence a trader’s decision to use leverage.
- – Capital: The amount of capital a trader has available to invest will influence their use of leverage.
ICLN
The iShares Global Clean Energy ETF (ICLN) seeks to track the investment results of an index composed of global equities in the clean energy sector.
Index Trading
What is Index Trading?
Index Trading is a type of trading that involves trading a specific financial index such as the S&P 500. It is considered to be a passive investment strategy, where the investor seeks to match their performance with the broader market, instead of attempting to beat it.
What is an index?
An index is a measure of a portion of the stock market that reflects changes in the value of a basket of stocks within it. This can provide an overall snapshot of how a specific market is performing. For example, the US Tech 100 gives a broad overview of the US tech market performance at any given time.
What are indexes used for in finance?
Indexes are used in finance to measure the performance of portfolios and to benchmark the performance of investments against a predetermined set of criteria. They also help investors assess and analyze market trends, risks, and opportunities.
What are different types of index in the stock market?
There are different types of indices in the stock market. Some indices used in Index trading are often used as benchmarks to evaluate performance in financial markets. Some of the most important indices in the U.S. markets are the Dow Jones Industrial Average and the S&P 500.
India 50
The NIFTY 50 Index, also known as the India 50, is a free-float market capitalization computed index of 50 top companies trading on the National Stock Exchange of India.
The index was launched on April 22nd, 1996, with a base value of 1,000, calculated as of November 3rd, 1995.
Financial Services is the largest component of the index, with a weighting of 37.09%, while Energy and IT are the second and third largest sectors, accounting for 15.01% and 13.27% respectively. The index covers 12 sectors of the Indian economy: Financial Services, Energy, IT, Consumer Goods, Automobile, Construction, Metals, Pharma, Cement & Cement Products, Telecom, Media & Entertainment, Services, and Fertilisers & Pesticides.
India 50 futures allow you to speculate on, or hedge against, changes in the price of major stocks on the National Stock Exchange of India. Futures roll over on the fourth Friday of each month.
Industrial Select Sector Fund
Industrial Select Sector SPDR Fund (XLI) tracks US industrial companies within the S&P 500. This asset uses the Industrial Select Sector Index as its tracking benchmark. The ETF provides concentrated exposure to large-cap US industrial companies, with limited small and midcap companies.
The index comprises just 70 holdings from the industrial sector. Top holdings for the benchmark index include Boeing Co, 3M Co, Union Pacific Corp, and Honeywell International Inc.
Innovation ETF
Innovation ETF (ARKK) is based on “disruptive innovation,” focusing on technologies or services that have the potential to change the world.
Companies within ARKK cover those that rely on or benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of DNA technologies, industrial innovation in energy, automation and manufacturing, the increased use of shared technology, infrastructure and services, and technologies that make financial services more efficient.
Interest Rate
What is an Interest Rate?
An interest rate is the percentage of a loan or deposit that a lender charges a borrower for the use of their money, or the percentage paid on a deposit account. It is used as a way to compensate the lender for the opportunity cost of not using their money elsewhere. The interest rate can be fixed or variable, and it is typically expressed as an annual percentage. The interest rate is used to calculate the amount of interest due on a loan or deposit over a certain period of time.
What are the 3 types of interest?
The three main types of interest are:
- – Simple interest: Interest calculated only on the original principal amount of a loan or deposit.
- – Compound interest: Interest calculated not only on the original principal but also on accumulated interest from previous periods.
- – Nominal interest: Interest rate stated on a loan or deposit, does not take into account the effect of compounding.
However, there are a few other types of interest as well.
How do I calculate interest rate?
Interest rate is calculated as the cost of debt for the borrower and the rate of return for the lender. This makes the total sum to be repaid to be more than the borrowed amount since lenders require compensation for the loss of use of the money during the loan period. Although many make use of the various online “interest calculators”.
Internet ETF
Companies in the Internet ETF (ARKW) are those that focus on or benefit from cloud computing technologies enabling mobile, new and local services, such as companies that rely on or benefit from the increased use of shared technology, infrastructure and services, internet-based products and services, new payment methods, big data, the internet of things, and social distribution and media.
Sectors covered include cloud computing & cyber security, eCommerce, Big Data & AI, mobile technology & Internet of Things, social platforms, and blockchain & P2P.
IPO (Initial Public Offering)
What is an IPO?
An IPO (initial public offering) is when a company makes its shares available to the public. This means the stock can be bought and sold by both retail and institutional investors. An IPO is usually underwritten by investment banks, who set up the sale of the shares on exchanges.
What is the difference between an IPO and a Stock?
An IPO is the process of a privately held company being transformed into a public one. The difference between stock and an IPO is that an IPO refers to public shares of a stock and not shares offered after that.
Initial public offerings can be used to raise new equity capital for a company. It monetizes the investments of private shareholders such as company founders or private equity investors. This enables easy trading of existing holdings or future capital raising. The disadvantages of IPO are the same trade-offs between equity and debt financing.
iShares MSCI South Korea
iShares MSCI South Korea (EWT) ETF tracks the investment result of an index composed of South Korean equities. It provides traders with exposure to large and mid-sized South Korean companies and is a way to access the South Korean Stock Market. EWT follows 114 of the top companies listed in the South Korean Stock Exchange and reflects the market well.
With Samsung as one of the major companies represented in the portfolio, it is unsurprising that Information Technology companies comprise a large part of this ETF. Almost 30% of the portfolio is IT, the next largest sector is Finance with 14.06%. Hyundai, LG, and Kia also feature in this ETF.
MACD
What is MACD (moving average convergence/divergence) or X indicator?
Moving Average Convergence/Divergence, also known as MACD, is an analytical trading indicator. Its function is to show changes in the strength, direction, momentum, and duration of a trend in a share’s price. The MACD indicator is comprised of three time series charts based on historical price data, for example, closing price.
How can you tell if MACD is bullish?
If the MACD line (the blue line) is above the signal line (the red line), it is considered to be bullish and suggests that the security’s price is likely to rise. This is because the MACD line is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA, and when the 12-day EMA is above the 26-day EMA, it indicates that short-term momentum is bullish and the stock is likely to rise.
Is MACD a good indicator?
MACD is a widely used technical indicator that can be a useful tool for identifying trends and potential buy or sell signals in the market. However, like any indicator, it has its limitations and should be used in conjunction with other technical analysis tools and fundamental analysis to make informed trading decisions.
Which is better, MACD or RSI?
Both the Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI) are popular technical indicators used in trading. They are both useful tools for identifying trends and potential buy or sell signals, but they are based on different calculations and are used for different purposes.
- – The MACD is a momentum indicator that is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. It is used to identify bullish or bearish trends and potential changes in momentum.
- – The RSI, on the other hand, is a momentum oscillator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset.
Both indicators can be useful, but they can also give different signals. So once again, it’s important to use them in conjunction with other indicators and analysis techniques to make informed trading decisions.
Maintenance Margin
What is a Maintenance Margin (also known as variation margin)?
Maintenance Margin, or “variation margin,” is considered as the minimum amount of equity (i.e., funds) which needs to be maintained in a trader’s margin account before a margin call is issued due to the account value being below a minimum threshold and not being able to support open margin trade positions. Margin accounts are what leveraged trades use to trade, where they can purchase securities such as stocks, bonds, or options with funds borrowed from the brokerage.
How do you avoid maintenance margin?
To avoid maintenance margin issues, traders should monitor their account closely and adjust their leverage if needed. If your maintenance margin is not maintained, it will result in a margin call, which may indicate that the trader should reconsider the risk exposure of their portfolio.
Why are maintenance margins important?
Maintenance margins are important to protect against losses due to fluctuations in the market. They ensure that traders maintain adequate capital reserves and can cover any potential losses.
Maker
Maker DAO describes itself as “a utility token, governance token, and recapitalization resource of the Maker system.” The purpose of the Maker system is to generate another token, using the Ethereum protocol, called Dai, that seeks to trade on exchanges at a value of exactly US$1.00. Maker is available on our platform in USD and is tradeable using the MKR/USD symbol.
Margin
What is a margin?
What is a margin in finance?
A margin in finance is the amount of money an investor borrows to purchase or trade securities. It is the difference between the total value of the borrowed funds and the market value of the collateral provided as security for the loan. Margin trading allows investors to buy more securities than they would otherwise be able to purchase with just their own capital.
What is margin vs profit?
Margin and profit are related but different concepts in finance and trading.
- Margin refers to the amount of money or collateral that is required to open a leveraged position, such as a margin account, which allows traders to buy securities by borrowing money from a broker.
- Profit, on the other hand, refers to the amount of money that is gained from a trade or investment, after all costs and expenses have been subtracted. Profit is the result of a successful trade, which is the difference between the buying and selling price.
How do I calculate margin?
There are a few different ways to calculate margin, depending on the context and the type of trade or investment.
One of the most common ways to calculate margin is to use the following formula:
Margin = (Value of Trade / Leverage) x 100%
Margin Call
What is a Margin Call?
A margin call is a demand from a broker to a trader that additional funds must be added to the trader’s account in order to maintain their current positions.
What would trigger a margin call?
A margin call occurs when an investor using margin (borrowed money) to trade in securities or other financial instruments does not have enough money or equity in their account to meet the minimum margin requirement set by their broker. This can happen when the value of the securities in the account falls below a certain level, resulting in a negative balance in the margin account. A margin call can be a warning sign that the investor is taking on too much risk, and it can be a good opportunity to re-evaluate their investment strategy.
What happens if you get a margin call?
When a margin call happens, the broker will contact the investor and ask them to deposit additional funds into their account or sell some of their profiting securities to bring the account equity back above the minimum margin requirement. If the investor is unable to meet the margin call, the broker may take action to liquidate the investor’s securities in order to bring the account back to a positive balance.
Do you lose money on a margin call?
A margin call itself does not necessarily mean that you will lose money, but it does indicate that you are at risk of losing money if you do not take action to meet the call. When a margin call occurs, it is a warning that your account balance has dropped below the minimum margin requirement set by your broker, and if you do not take action to bring it back above that level, your broker may take action to liquidate your securities in order to bring the account back to a positive balance.
Margin Trading
What is Margin Trading?
Margin trading refers to the practice of borrowing money from a broker to purchase securities. It allows traders to buy more securities than they could afford to buy with cash alone, by leveraging the securities they already own as collateral. This increases the potential returns but also increases the potential risks, as the trader is responsible for paying interest on the borrowed money and must also cover any losses. Margin trading is considered to be a high-risk strategy and is only suitable for experienced traders with a good understanding of the risks involved.
How much money do you need for margin?
The amount of money required for margin trading depends on the minimum deposit requirement set by the broker. For markets.com, this is 100 of your local currency, with the exception of South Africa where it is 1000 rand.
What level of margin is safe?
The level of margin that is considered safe depends on the trader’s risk tolerance and investment goals. A lower margin level is generally considered to be safer, as it reduces the potential for large losses.
Market Cap
What is Market Capitalization?
Market capitalization, commonly referred to as market cap, is a measure of a company’s size and is calculated by multiplying the total number of its shares outstanding by the current market price of each share. Market cap can be used to help assess how much a company is worth in the eyes of investors.
Is high market cap good?
A high market capitalization (market cap) generally indicates that a company is well-established, has a strong financial performance, and is considered to be a reliable investment by the market. High market cap companies are often considered to be blue-chip stocks and are more stable and less risky than lower market cap companies.
However, a high market cap does not guarantee that a company will perform well in the future; it just reflects the current market’s perception of the company, the stock price, and the number of shares outstanding. The company may still be facing internal or external challenges, and the stock may be overvalued. Therefore, it’s always important to do your own research and analysis before investing in any stock regardless of its market capitalization.
What is a good market capitalization?
A good market capitalization for an investment depends on the investor’s individual preferences and goals. Generally, companies with a high market capitalization are considered to be well-established and financially stable, making them a more reliable investment. However, it is important to note that high market capitalization does not always guarantee future performance.
Is it better to have a small or large market cap?
Small-cap companies tend to be more risky but have higher growth potential. Large-cap companies are considered to be more stable but have lower growth potential. At the end of the day, it will all depend on the investor’s preference for risk and tolerance for profit/loss.
Market Makers
What are Market Makers?
Market Makers are financial institutions or investors that provide liquidity to the markets by placing buy and sell orders at specific prices. They are incentivized to do this in order to make profits from the bid-ask spread.
What is the difference between dealer and market maker?
A dealer and a market maker are both intermediaries in the securities market that provide liquidity and help facilitate trades. However, they have some key differences:
- – Dealer: A person or entity that buys and sells securities for their own account and risk. They hold inventory of securities and make a profit by buying at a lower price and selling at a higher price.
- – Market Maker: A firm or individual that provides liquidity to the market by continuously buying and selling a security at publicly quoted prices. They are also called liquidity providers, and they make money by charging a bid-ask spread, the difference between the prices they are willing to buy and sell a security. They do not hold inventory of securities like dealers do.
Do market makers manipulate price?
Market makers are allowed to buy and sell securities at their own discretion, and they may adjust the prices they are willing to buy and sell a security in order to make a profit. However, they are also subject to regulatory oversight, and they must act in a fair and transparent manner. They are not allowed to manipulate prices, and any illegal activities such as insider trading, wash trading, or any other form of market manipulation are strictly prohibited.
Market Order
What is a Market Order?
A market order is a type of stock order that allows an investor to purchase or sell securities at the current market price. It is one of the most common types of orders and is executed as soon as it is placed, meaning the investor will get whatever price is currently available on the exchange.
Is it good to use market order?
A market order is an order to buy or sell a security at the best available current price. This type of order may provide an advantage over other types of orders by executing quickly, but it could also mean that the trade may not be filled at the desired price.
Why would you use a market order?
A market order is typically used when an investor wants to execute a trade quickly and is willing to accept the current market price. This type of order is often used when an investor wants to take advantage of a price change or when they want to enter or exit a position quickly.
How long does a market order take?
A market order is generally the fastest order to execute as it simply takes the current market price. You can expect a market order to be executed usually within seconds or minutes of being placed, as long as there is sufficient liquidity in the market.
Materials Select Sector Fund
Materials Select Sector Fund
Materials Select Sector SPDR Fund (XLB) tracks US basic materials companies within the S&P 500. This asset uses the Materials Select Sector Index as its tracking benchmark. The limited spread and niche sector mean that it is heavily concentrated. Just a few holdings make up a big part of the portfolio, and there are only 24 holdings in total.
Top holdings for the benchmark index include: DowDuPont Inc, Linde Plc, Ecolab Inc, The Sherwin-Williams Co
QQQ - UltraPro Short
ProShares UltraPro Short QQQ (SQQQ) is an inverse leveraged ETF that tracks the performance of the Nasdaq 100 index. This ETF aims to deliver a daily output that is three times the inverse of the daily performance of the Nasdaq 100. That means SQQQ will deliver results that are 300% opposite to how the index has moved. They are a useful product for traders looking to go short or to hedge their other positions.
The Nasdaq 100 includes the largest companies on the Nasdaq stock market and holdings include Apple, 21st Century Fox Inc, Kraft Heinz and Facebook. This is a single-day bet and is not recommended for use for longer than periods of one day, as the results will differ. Leveraged products carry more risk.
QQQ - ProShares UltraPro
ProShares UltraPro QQQ (TQQQ) is a leveraged ETF that tracks the performance of the Nasdaq 100 index. This ETF aims to deliver a daily output that is three times the daily performance of the Nasdaq 100. That means TQQQ will deliver results that are 300% of how the index has moved.
The Nasdaq 100 includes the largest companies on the Nasdaq stock market and holdings include Apple, 21st Century Fox Inc, Kraft Heinz and Facebook. This is a single-day bet and is not recommended for use for longer than periods of one day, as the results will differ. Leveraged products carry more risk.
QQQ – ProShares Ultra
ProShares Ultra QQQ (QLD) aims to deliver daily investment results that are twice the performance of the Nasdaq 100 Index. This ETF provides leveraged exposure to a market-cap weighted index of 100 non-financial stocks listed on the NASDAQ. This is a single-day bet and traders are advised that returns can vary dramatically if they hold positions for longer than one day. All leveraged products carry more risk than unleveraged products.
The Nasdaq 100 is dominated by tech firms, so the performance of the index is closely tied to the sector. Top holdings include Apple, Amazon, Facebook and Tesla.
QQQ - ProShares UltraShort
ProShares UltraShort QQQ (QID) aims to deliver daily investment results that are twice the inverse daily performance of the Nasdaq 100 Index. This is a single-day bet and traders are advised that returns can vary dramatically if they hold positions for longer than one day. This is the sister product to QLD, which delivers two times the daily performance of the Nasdaq 100.
As with most inverse and leveraged products, this fund is designed to provide inverse exposure on a daily basis, not as a long-term inverse bet against the index. All leveraged products carry more risk. Nasdaq 100 holdings include Apple, Amazon, Facebook and Tesla.
Quoted Price
What is a Quoted Price?
A quoted price is the most recent price at which an asset was traded at. Global and local events, either of a financial nature or completely unrelated to finances continually affect the quoted prices of assets such as stocks, bonds, commodities, and derivatives changes continually throughout a trading. Additionally, it is often the price point where buyers and sellers agree on, the most up-to-date agreement between buyers and sellers, or the bid and ask prices. It is also where supply meets demand.
Is a quoted price legally binding?
In most cases, when trading in an exchange, the quoted price is binding and the trade is executed at the quoted price, with the exchange acting as a counterparty to the trade. However, when trading OTC (over-the-counter), the quoted price is not necessarily binding as the parties have more flexibility in negotiating the final price, and the counterparty risk is higher.
Rally
What is a Rally?
What is a Rally in Trading?
A rally in trading refers to a period of time when the price of an asset, such as a stock or commodity, rises significantly. A rally is often characterized by an increase in buying activity and positive investor sentiment, which drives the price upward. Rallies can be short-lived or last for an extended period, depending on the underlying factors driving the market.
How long does a stock rally last?
Rallies can be short-term or long-term depending on factors like market sentiment and the performance of underlying stocks. On average, stock rallies can last anywhere from a few days to several weeks or even months. The length of any given rally is impossible to predict and it’s up to individual investors to do their research and make their own decisions on whether they want to invest during a stock rally.
How do you identify a stock rally?
Rallies can be identified by several factors including an increase in price, strong trading volume, positive news stories, and upbeat investor sentiment. To accurately determine if there is a stock rally, look at the index chart of the overall market, specific sectors, or individual stocks. Additionally, keep an eye on economic indicators such as gross domestic product, employment data, and consumer confidence to assess if conditions are conducive for a rally. Doing research and regularly monitoring the stock market can help investors identify potential opportunities during a rally.
Range
What is a Range?
A range refers to the difference between the highest and lowest prices a stock may reach during a specific time frame. This range gives investors an indication of how volatile a particular asset might be in terms of its price movements, as well as what opportunities they might have to make money. By analyzing historical data and keeping up-to-date with market news, investors can develop strategies to capitalize on different ranges.
How do you use ranges in trading?
Range trading is a popular trading strategy in finance, particularly for traders looking to limit their risk and profit from a given market movement. When using ranges, traders identify support and resistance levels for a security or asset, and look to take profits when prices reach either level. By using a range-trading strategy, traders can limit the amount of capital they are willing to risk per trade, as well as capitalize on both long-term and short-term movements in the market.
What is trend in trading?
A trend in trading is the general direction of a security’s price over a period of time. Trend analysis helps traders make predictions about future market movements, allowing them to enter and exit positions at optimal times. Trends can be either upward or downward and often take weeks, months, or even years to develop. To identify trends, technical analysis tools such as support and resistance levels, trend lines, and chart patterns are used by traders to detect buying and selling opportunities in the markets. Fundamental analysis also plays a role in recognizing potential profitable trading opportunities since underlying economic conditions may influence a security’s price.
Resistance Level
What is Resistance Level?
In trading, resistance level is a price point at which the price of a security or financial instrument tends to encounter selling pressure, making it difficult for the price to rise above that level. The resistance level is seen as a ceiling, as the price has a hard time going above it. Traders use resistance levels to identify areas where they expect the price to stall or reverse direction. This can be determined by observing the historical price movement of a security or financial instrument, looking for areas where the price has consistently failed to break above. Resistance levels are also used in combination with support levels to identify potential price ranges and trade entry or exit points.
What happens when a stock hits resistance?
If a stock hits a resistance level it can cause the stock to stall, move sideways, or even reverse direction. At resistance level, traders that have taken a long position might decide to take profits, while traders that have not yet taken a position might decide to wait for a break above the resistance before buying.
When a stock hits resistance, traders will typically observe the stock’s behavior at that level to determine if the resistance level is likely to hold or if the stock is likely to break through it. If the stock breaks through resistance, it can be considered a bullish sign, indicating that the stock is likely to continue to rise. On the other hand, if the stock fails to break through resistance, it can be considered a bearish sign, indicating that the stock is likely to stall or reverse direction.
Reversal
What is a Reversal?
A Reversal is when the direction of a financial market or asset moves in the opposite direction from its current trend. Reversals can occur over a period of time and can be either bullish (price increasing) or bearish (price decreasing). Being aware of these trends can help traders maximize their profits.
What is an example of reversal?
If the stock market has been rising for several weeks and then begins to fall, that’s considered a reversal. Reversals are an important concept for investors to understand as they can indicate a change in sentiment that could lead to further movement in the same direction.
Reverse Stock Split
What is Reverse Stock Split?
A reverse stock split, also known as a “reverse split,” is a corporate action in which a company reduces the number of outstanding shares by canceling a portion of its shares and increasing the par value of its remaining shares. This means that for every N shares that a shareholder owns, they will end up owning 1 share, where N is the reverse split ratio. For example, if a company performs a 1-for-2 reverse stock split, a shareholder who previously owned 100 shares would now own 50 shares.
Is it better to buy before or after a reverse stock split?
It is not necessarily better to buy before or after a reverse stock split, as it depends on the specific circumstances of the company and the stock. A reverse stock split does not change the underlying value of the company; it only changes the number of shares outstanding and the stock price. However, it is important to understand that in general, companies that perform reverse stock splits tend to be struggling and have a low stock price. Buying before a reverse stock split may allow you to buy shares at a lower price, but it also means you’re probably buying into a struggling company.
Is a reverse stock split good?
As with all things in the market, the answer is that it depends. The main reason for a company to perform a reverse stock split is to increase the per-share price of the stock, which can make the stock appear more attractive to investors and also bring it above a certain listing requirement in stock exchanges. Additionally, a reverse split can also help to reduce the number of shareholders and increase the liquidity of the stock, making it easier to trade. However, a reverse stock split can also be a sign of a struggling company, and it can also dilute the value of shares for the existing shareholders.
UK 100
The UK 100 is a blue-chip index of the largest 100 companies on the London Stock Exchange in terms of market capitalisation. Companies are only included if they meet relevant size and liquidity requirements.
The index was launched on 3rd January 1984, with a base date of 30th December 1983 and a base level of 1,000 points.
In terms of weighting, the three largest sectors of the UK 100 as of H2 2018 are Oil & Gas (16.56%), Banks (12.70%), and Personal & Household Goods (12.37%).
Traditionally the index has lagged its peers, such as the larger FTSE 250 and the US S&P 500. The index fluctuates in response to market risk sentiment and the strength of the pound Sterling. The UK 100 contains many international companies who report their earnings in other currencies, so a stronger pound weakens company profits.
Because of this, the UK 100 is also considered to be an unreliable indicator of the health of the UK economy because of its large international component.
Ultra Silver - ProShares
ProShares Ultra Silver, also known as AGQ, is a single-day bet, not a buy-and-hold ETF. AGQ is a leveraged ETF that aims to deliver daily investment results that equate to twice the daily price performance of silver bullion, measured by US Dollar for delivery in London.
United States Oil Fund
The United States Oil Fund (USO) is an ETF that aims to track the daily price movements of WTI Crude Oil. USO’s Benchmark is the near-month crude oil futures contract traded on the NYMEX. The Crude Oil contract is WTI light, sweet crude delivered to Cushing, Oklahoma.
This ETF is a good way to get commodity exposure without using a futures account and offers more options for traders such as intraday pricing and limit/stop orders.
US Natural Gas Fund
The United States Natural Gas Fund® LP (UNG) is an exchange-traded security that is designed to track in percentage terms the movements of natural gas prices. UNG issues shares that may be purchased and sold on the NYSE Arca.
The investment objective of UNG is for the daily changes in percentage terms of its shares’ net NAV to reflect the daily changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the daily changes in the Benchmark Futures Contract, less UNG’s expenses.
The Benchmark is the futures contract on natural gas as traded on the NYMEX. If the near-month contract is within two weeks of expiration, the Benchmark will be the next month contract to expire. The natural gas contract is natural gas delivered at the Henry Hub, Louisiana.
UNG invests primarily in listed natural gas futures contracts and other natural gas related futures contracts and may invest in forwards and swap contracts. These investments will be collateralized by cash, cash equivalents, and US government obligations with remaining maturities of two years or less.
US TBond 30
US Tech 100 is a market capitalization-weighted stock market index that includes the hundred largest non-financial domestic and international companies.
The index is constituted by sectors such as Technology, Consumer Services, Healthcare, Industrials, Consumer Goods, and Telecommunications.
The US Tech 100 index contains some of the largest companies in the world, including Apple, Amazon, Microsoft, Facebook, Google parent Alphabet, and Netflix.
The US Tech 100 index futures allow you to speculate on, or hedge against, changes in the price of some of the world’s biggest stocks. Contracts rollover on the second Friday of March, June, September, and December.
US Tech 100
US Tech 100 is a market capitalization-weighted stock market index that includes the hundred largest non-financial domestic and international companies.
The index is constituted by sectors such as Technology, Consumer Services, Healthcare, Industrials, Consumer Goods, and Telecommunications.
The US Tech 100 index contains some of the largest companies in the world, including Apple, Amazon, Microsoft, Facebook, Google parent Alphabet, and Netflix.
The US Tech 100 index futures allow you to speculate on, or hedge against, changes in the price of some of the world’s biggest stocks. Contracts rollover on the second Friday of March, June, September, and December.
US TNote 10Y
US Treasury Bonds are securities issued by the US government with maturities that vary from ten to 30 years. After the initial auction, the bonds can be sold on the secondary market. A number of things can affect the price of TBonds, as with other bonds, shares, and funds. US Treasury Bonds are primarily affected by interest rates, inflation, and economic growth, as well as their reputation as a safe haven.
Historically, the US Government Bond 10Y (ZN) reached an all-time high of 15.82% in September 1981 and a record low of 1.36% in July 2016.
US Treasury 20+ Year - UltraShort
ProShares UltraShort 20+ Year Treasury (TBT) aims to deliver daily investment results that reflect twice the inverse of the daily performance of the ICE US Treasury 20+ Year Bond Index. Traders would look to get a 200% return opposite to the movement of US Treasury Securities.
This is a leveraged product, and so carries more risk. As with many leveraged ETFs, it delivers daily results and is designed as a single-day bet. Positions that are held for longer than a day will get differing results. This ETF can be a useful tactical position or hedge against rising interest rates.
US Utilities
IDU, also known as the iShares US Utilities ETF, tracks a broad range of market-cap-weighted US utilities stock. This asset provides exposure to US electricity, gas, and water companies and has 51 holdings.
This ETF is an opportunity for traders looking for exposure to the sector or to US holdings. Stocks included in the portfolio include Nextera Energy Inc, Duke Energy Corp, Dominion Energy Inc, and Southern. It is comprised of 56.67% electric utilities, 31.10% multi-utilities, and 5.3% gas utilities. Water utilities and independent power producers or energy traders make up the remainder.
USA 2000
The USA 2000 Index, also known as the USA 2000, is a small-cap index of the US stock market. It represents the bottom 2,000 companies in the Russell 3,000 stock market index, accounting for around 8% of the Russell 3,000’s market capitalisation.
The index was created in 1984 and was the first index of small-cap stocks; it has since become the benchmark of choice, along with its variants, for around 84% of small-cap assets. The index first broke 1,000 points on May 20th, 2013, and hit a record high of 1,737.63 in August 2018.
USA 2000 index futures allow you to speculate on, or hedge against, changes in the price of thousands of small-cap US stocks. Contracts rollover on the second Friday of March, June, September, and December.
0x Token (ZRX)
The UK 100 is a blue-chip index of the largest 100 companies on the London Stock Exchange in terms of market capitalisation. Companies are only included if they meet relevant size and liquidity requirements.
The index was launched on 3rd January 1984, with a base date of 30th December 1983 and a base level of 1,000 points.
In terms of weighting, the three largest sectors of the UK 100 as of H2 2018 are Oil & Gas (16.56%), Banks (12.70%), and Personal & Household Goods (12.37%).
Traditionally the index has lagged its peers, such as the larger FTSE 250 and the US S&P 500. The index fluctuates in response to market risk sentiment and the strength of the pound Sterling. The UK 100 contains many international companies who report their earnings in other currencies, so a stronger pound weakens company profits.
Because of this, the UK 100 is also considered to be an unreliable indicator of the health of the UK economy because of its large international component.
Xtrackers MSCI U.S.A. ESG Leaders Equity ETF
ProShares Ultra Silver, also known as AGQ, is a single-day bet, not a buy-and-hold ETF. AGQ is a leveraged ETF that aims to deliver daily investment results that equate to twice the daily price performance of silver bullion, measured by US Dollar for delivery in London.
Yearn Finance
The United States Oil Fund (USO) is an ETF that aims to track the daily price movements of WTI Crude Oil. USO’s Benchmark is the near-month crude oil futures contract traded on the NYMEX. The Crude Oil contract is WTI light, sweet crude delivered to Cushing, Oklahoma.
This ETF is a good way to get commodity exposure without using a futures account and offers more options for traders such as intraday pricing and limit/stop orders.
Yield
The United States Natural Gas Fund® LP (UNG) is an exchange-traded security that is designed to track in percentage terms the movements of natural gas prices. UNG issues shares that may be purchased and sold on the NYSE Arca.
The investment objective of UNG is for the daily changes in percentage terms of its shares’ net NAV to reflect the daily changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the daily changes in the Benchmark Futures Contract, less UNG’s expenses.
The Benchmark is the futures contract on natural gas as traded on the NYMEX. If the near-month contract is within two weeks of expiration, the Benchmark will be the next month contract to expire. The natural gas contract is natural gas delivered at the Henry Hub, Louisiana.
UNG invests primarily in listed natural gas futures contracts and other natural gas related futures contracts and may invest in forwards and swap contracts. These investments will be collateralized by cash, cash equivalents, and US government obligations with remaining maturities of two years or less.