Key Terms
The words finance is written in
One page per term: a plain definition, a worked example with hypothetical numbers, and an honest note on what the term cannot tell you. No ratings, no recommendations — the same rules as every page here.
30 terms and growing.
B
- Basis pointA small fixed fraction of a percentage point used as the standard unit for quoting changes in interest rates without the ambiguity of percentages of percentages.
- Bear marketA sustained fall in prices across a market, conventionally identified by a decline of a particular depth from a recent peak.
- Bid-ask spreadThe gap between the highest price buyers will pay and the lowest price sellers will accept; the cost of trading immediately.
- Blue-chip stockAn informal label for shares of large, long-established companies; a nickname by usage rather than any formal certification of quality.
- Bull marketA sustained period of rising prices across a market, recognised in hindsight rather than declared by any official body.
C
- Candlestick chartA price chart in which each bar records the opening, closing, highest and lowest prices for a chosen period.
- Central bankThe institution that issues a currency, sets its policy interest rate and serves as the bank that other banks bank with.
- CouponThe fixed interest a bond pays on a set schedule, established when the bond is issued and named for the paper slips once exchanged for payment.
G
L
- Limit orderAn instruction to trade only at a chosen price or better, fixing the worst acceptable price but not whether the trade ever happens.
- LiquidityHow quickly and easily an asset can be converted into cash without materially moving its price.
- Lot sizeThe standardised quantity of the underlying asset that a single trade contract represents, fixed by market convention rather than chosen freely for each trade.
M
- MarginMoney a broker requires as security when lending funds for a position, forming the deposit behind leverage and absorbing losses first.
- Market capitalisationThe total value the market places on a company, calculated by multiplying its share price by the number of shares in issue.
- Market orderAn instruction to trade immediately at whatever price the market currently offers, fixing the timing of execution but not the price received.
P
- PipThe standard smallest quoted move in a currency pair, serving as the unit in which foreign-exchange moves and spreads are measured.
- PortfolioThe complete set of an investor's holdings viewed as a single whole, and the level at which overall gains, losses and risk are ultimately measured.
- Price-to-earnings ratioA company's share price divided by its earnings per share, showing how many years of current profit the price represents.
R
S
- Short sellingSelling a borrowed asset in the hope of buying it back more cheaply, so the position profits from a fall in price.
- SlippageThe difference between the price expected when an order is placed and the price at which it actually executes.
- Stop-loss orderAn instruction that becomes a market order once the price touches a chosen trigger, intended to cap a loss at roughly that level.