Glossary of Stock Trading and Investment Terminology

Iron ore


Iron ore refers to the minerals and rocks from which iron can be extracted. Iron ore is considered as one of the most important raw materials for the steel industry along with coking coal. It is to be mentioned that equal amount of coking coal and iron ore is needed to produce steel.

Iron Ore: A brief Market Overview

Average Down


Averaging down means buying shares from the same company at lower prices than previously paid. This brings the total price paid for the stock lower and allow for higher returns. The idea is to lower the average acquisition cost. The investor gets more share per dollar by averaging down. If the price of the stock increases, the investor makes a profit.

Ask


The term “Ask” is widely used throughout the trading industry which refers to the price at which a seller offers currency, futures, stocks, CFDs or options. Some other synonymous terms includes: asking price, asked price, offering price, offer and ask price.

Relation Between Ask and Bid

Leverage


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

Spreads (Forex)


Just like the equity market, Forex is also quoted by the bid and ask prices where the difference or gap between the bid and ask is termed as the “Spread”. It is important to keep in mind that Forex trading is not commission free. As far as the Forex is taken under consideration, the brokers might come up with the claim that they do not charge any typical brokerage but instead of that, the commission is added in the spread.

One Cancels Other (OCO)


One Cancels Other (also known as OCO) is a kind of trading order that is formed by some conditional parts where execution of one part of the order automatically leads to the cancellation of the other part.

In case of the One Cancels the Other (OCO) order, the execution of one order results to the cancellation of another order. It means, an investor places two orders simultaneously and runs with the order that is triggered first.

Call Option


Call option provides the right to a trader to buy an instrument (say for example stocks) at a predetermined price at or before the expiry date. However, exercising this option is not an obligation. It depends on the trader whether he will go for the call option or not.

Superannuation Work Test


In order to make personal superannuation contributions, those who are aged within the range of 65 and 74 are required to meet the work test. As far as the work test is taken under consideration, an individual is required to be employed for a minimum of 20 hours gainfully in a consecutive period of 30 days (during the financial year when the contributions are made). It is to be mentioned that self employment or employment in order to gain or reward in any sort of profession, occupation, business, trade, calling or employment is considered valid.

Defensive Company


Relatively stable revenue during market fluctuations is characteristic of a defensive company. This means that the company generates a steady flow of income regardless of economic upheavals. Companies in the energy, utilities and healthcare. sectors are examples of defensive companies. Defensive companies issue what is called defensive shares.

Margin Call


When the balance of a margin loan surpasses the loan limit by more than the buffer, this is when the margin call gets triggered. Say for example, a trader has invested about $200,000 in the ASX where $50,000 was self-financed and rest of the money was borrowed. In that case LVR is going to be 75%.

Download our FREE App


Signup for Free
Don't miss out on your free share trading articles.


Free Risk Money Management Calculator for those who sign up!