Glossary of Stock Trading and Investment Terminology

Price/Earnings Ratio

Price/Earnings ratio (also called earnings multiple) is the amount of money you pay for every dollar the company earns. The formula for the P/E ratio is market value per share divided by earnings per share (EPS). Let's say share price of company ABC is at $15 and earnings per share is $2. The P/E ratio is $7. Company XYZ, on the other hand, has a share price of $10 with an EPS of $5. P/E ratio is $2.

Limit Order

Limit order is a type of order that can be placed with a brokerage to trade a specific number of shares at a specified price or at a better price than that. Some brokerages may charge a fee for allowing the traders to place limit orders.

Advantages of Using Limit Order

Limit order is one of the most popular types of orders for the traders since it allows an investor to specify the price for the instrument at which he wants to buy or sell it. In addition to this, the limit order gives the opportunity to a trader to line up in the queue with the other traders.

Instalment Warrants

An instalment warrant is a product where a share is offered on credit. Investors initially buy half the shares and pay for the rest of the amount later. The first payment instalment entitles you dividends and franked credits, while the final instalment is a fixed amount.

An instalment warrant is comparatively expensive. Initial payment on warrant that matures in 18 months can set back a trader around $111 for every $100 of market value. Like all 'borrowed' investments, instalment warrants intensifies losses and gains.

Renounceable Rights Issue

A renounceable rights issue is when a company offers its shareholders the right to purchase more of the company’s stock, usually at a discount to market rate. Compare this right to a non renounceable rights issue. Stockholders who are offered a renounceable rights issue can either:

  1. Accept the offer
  2. Sell their rights to the market
  3. Pass on taking advantage of the rights offer


Trends or market trends refer to the tendency of the financial market to move towards a certain direction. Often you will see investors in the share market hunting for stocks that are moving in a specific direction which can be either upward or downward.

Efficient-Market Hypothesis

The theory of efficient-market hypothesis (EMH) argues that the financial markets are efficient and the price of stocks constantly reflects all the available information. EMH suggests that no particular investor has access to any information that is not available to other traders. Therefore, a trader cannot make profit at the expense of another.

Scanning Software

If you want to identify the potential trading opportunities through technical or fundamental analysis, then you can always try out the Stock Scanning Software to get the job done. In today’s world, scanning software is seen as an important tool for the technical traders.

The Basic Function of a Stock Scanning Software


Leverage refers to the borrowed funds or other type of financial instruments that is used to enhance the potential return from an investment. The debt that is used by a company to finance its assets is also known as leverage. If the company has a higher debt in comparison with equity then in such cases that company will be seen as a highly leveraged one.

Leverage for Futures

Allocated Pension

Allocated Pension
The concept of Allocated Pension is gaining popularity among retirees in Australia. Allocated pension allows a retiree to enjoy the sum of their superannuation and use it as capital for investment. With Allocated pension scheme, retirees can enjoy a regular stream of income from their superannuation funds quarterly, monthly, half yearly or yearly over a period of time that approximates to the life expectancy. The other term that closely relates to allocated pension is account based pension or annuity.

The Basic Attributes of an Allocated Pension

MACD - Moving Average Convergence-Divergence

“Moving Average Convergence/Divergence” or in short MACD is a technical indicator which is used to analyse the relationship between two moving averages of prices. MACD calculates the difference between two Exponential Moving Averages (EMA) which is considered as a trend-following momentum indicator.