Glossary of Stock Trading and Investment Terminology

Margin


In Forex (Foreign Exchange) trading, margin is the money you put up to trade or your deposit. Trading on a margin means using a free short-term credit from the institution and using this credit to buy currency. For example, trader John has an account with AUD 50,000 with ACM. He trades tickets of 1,000,000 AUD/USD, which is a margin ratio of 5% (5% of 1,000,000 is 50,000). You can see that trader John is trading 20 times the amount of money he has.

Contingent Order


Contingent order (also called a net order) is the placement of two share orders: one order cannot be initiated without the other. For example, customer A places a buy order and a sell limit order in the market. The buy cannot proceed unless the sell limit order is also started.

SPI


If you want to trade the overall stock market with a single trade, then Share Price Index Futures or SPI futures and options and the options contracts might be the right choice. Trading the SPI 200 is similar to trading a balanced share portfolio that tracks the S&P/ASX index. Share Price Index Futures tracks the S&P/ASX 200 index and considered most popular among the future contracts. It is to be mentioned that in case of the SPI, the transaction can be filled within seconds.

Relation between SPI 200 and S&P/ASX 200

International Shares


These days every now and then people make this statement that “the world is getting smaller” and this is very much true for the financial world too. Now you do not have to keep your focus only on your domestic stock exchange and indexes to make investments but can spread your area of investment even further in the other markets of the world by trading globally. These days trading CFDs over international shares and indices is very much possible and a lot of investors are doing it at a regular basis.

Some Drawbacks to Trading International Shares

Mezzanine Financing


Mezzanine financing is a combination of debt and equity capital that is given on loan usually to fund company development projects. It gives the lender the right to equity or ownership interest in the company if the leverage is not paid back in full by the maturity date.

Mezzanine financing is usually high priced (with returns around 20 to 30 percent) because the funds are granted without due diligence done by the lender and little or zero collateral from the borrower. Mezzanine funds are generally used in line with bank loans and the borrower's own equity to fund the expansion projects.

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

Breakout


When prices pass and stay through an area of support and resistance, breakout happens. On a chart, breakout is when stock prices exit an area pattern. In general, traders buy when the price passes above the resistance point and sell when the price passes below the resistance point. Breakouts can be due to financial unions, developments, and evolutions (announcement of company alliance or takeover, etc.).

Scaling into a Position


“Scaling into a position” is a trading approach under which a trader incrementally adds to a CFD position as the price keeps heading towards the right direction.

Margin Loans


Margin loans are loans made by brokers to investors so the investor can buy securities, stocks or bonds. The share portfolio serves as collateral. Banks and stockbroker organisations issue margin loans. Margin loans are used when a client does not have enough money to buy securities or the client wants to capitalise on a potential rise in stock price profits.

Dark Pools of Liquidity


Dark pools of liquidity (also dark pools or dark liquidity) are financial buying and selling venues or crossing networks similar to exchanges but that provide liquidity that is not displayed on order books. This is useful for financial traders who wish to transfer large numbers of shares with out revealing themselves to the open industry.

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