Trading and Finance

TERMS AND COMMON EXPRESSIONS USED IN TRADING

Account:

The bookkeeping records of a customer's transactions and credits or debits.The record usually includes confirmation of the transactions and openpositions, cash and cash equivalents and beginning and ending liquidityvalue.

Account Balance:

The amount of money or debit in an account.

Account Executive:

The broker or clerk who is assigned to work with the client on behalf of the

financial institution.

Ask:

An indication by a trader or dealer that he/she is willing to sell a market at a

given price. The price at which someone is willing to accept for a tradable.

Available Balance:

The balance at the disposal of the account owner at the close of a statement

Period.

Base Currency:

Currency in which general ledger and P/L account is maintained.

Bid:

An indication by a trader of his/her willingness to buy a currency. The price at

which a trader can sell.

Breakaway Gap:

When a security exits a range by trading at a level that leaves a price area.

Breakout:

The point when the market price moves out of the price range.

Bottom Fishing:

Buying markets whose price appears to have bottomed out or fallen to low

levels.

Trading For Beginners

Broker:

An individual or firm that facilitates the exchange of tradables between buyer

and seller. They can sometime charges a fee or commission for executing buy

and sell orders placed by other individuals or firms.

Channel:

In charting, a price channel contains prices throughout a trend.

Central Bank:

The government bank that coordinates the nation's banks and flow of

payments between different banks. Can also be the central regulatory

authority in a country for banks.

Client:

A client, also called a party, is a person or corporate body involved in any

transaction with a financial institution.

Closing Price:

The price at which transactions took place just before the close on a given

day.

Commissions:

A fee charged by a broker to a customer for performance of a specific duty,

such as buying or selling a currency.

Correction:

Price reaction within the market leading to an adjustment.

Currency:

A medium of exchange that circulates in an economy. Also referred to as a

country’s official unit of exchange. The currency may be represented by a

currency code.

Daily Range:

The difference between the high and low price on a given day.

Dead Cat Bounce:

Rebound in the market that sees price recover and come back up somewhat.

Dip:

A slight decline in the market followed by a rise.

Entry:

Point at which a trader gets into the market.

Exit:

Point at which a trader closed out of the market.

Exponential Average

A mathematical formula where more weight is given to the most recent price.

Fill:

An executed order. Sometimes the term refers to the price at which an order

is executed.

Limit Order:

An order to buy or sell when a price is fixed.

Market Order:

Instruction to a broker to immediately sell or buy at the best available bid or

offer.

Moving Average:

Mathematical procedure to smooth data fluctuations and to assist in

determining when to buy and sell.

Open Trades:

Current trades still held open in customer's account.

Overbought:

Market price that has risen too steeply or too sharply.

Overshoot:

To pass beyond or over a specific target range.

Oversold:

Market price that has declined too steeply or too fast.

Rally Tops:

Price level that concludes a short-term rally in an ongoing trend.

Retracement:

In technical analysis, price movement in the opposite direction of the

prevailing trend.

Skew:

The measure of lopsidedness:

Slippage:

The difference estimated and actual transaction cost.

Stop Loss:

Risk management technique in which the trade is liquidated to halt any further

decline in value.

Tick:

Minimum fluctuation of a tradable.

Trailing Stop:

Stop loss order, which follows the price in a prevailing trend.

Trend:

The tendency of statistical data.

Trend Channel:

Parallel probable price range centred around a price line.

Trend Line:

A line that connects a series of highs or lows in a trend.

Whipsaw:

Price moves back and forth in a tight range without finding direction.

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https://youtube.com/shorts/VDsM57OnYVM?si=7UfXD23w36iN9xlc

THE FINANCIAL RATIO ANALYSIS

To ensure consistent success in market place, monopoly granted either by Govt. or otherwise does not help. The following financial ratio analysis helps. Producing a quality product at the lowest possible cost, distributing it as widely as possible, building a strong brand name and selling it at the lowest possible price ensures consistent success in the market place. The rules are simple enough. There is no short-cut for long term success. The only sure way is through sweat, toil, and blood; by fighting for survival, market share and profits.

The Financial Ratio Analysis:

A) The ROI Ratios:

1. Return on Assets= (Net Profit after tax/Total Assets) X100.

2. Return on Total Capital Employed=100X (Net Profit before tax+ interest)/ (Total Capital Employed).

3. Return on Shareholders’ Net Worth= (Net Profit after Tax/Net Worth) X100.

B) Activity Ratios:

1. Inventory Turnover Ratio= (Cost of goods sold)/ (Inventory).

2. Average Collection Period= (Debtors)/ (Average Daily Sales).

3. Capital Employed Turnover Ratio= (Sales)/ (Capital Employed).

4. Fixed Assets Turnover Ratio= (Sales)/ (Net Fixed Assets).

C) Liquidity Ratios:

1. Current Ratio= (Current Assets)/ (Current Liabilities).

2. Quick Ratio=(Quick Assets)/ (Current Liabilities).

D) Profitability Ratios:

1. Gross Profit Margin= 100X (Sales-Cost of Goods Sold)/ (Sales).

2. Operating Expenses Ratio=100X (All Operating Expenses)/ (Sales).

3. Net Profit Margin= 100X (Net Profit After Tax)/(Sales).

E) Leverage Ratios:

1. Debt-Equity Ratio= (Long-term Debt)/ (Net Worth).

2. Total Debt to Total Capital Employed Ratio= (Total Debt)/ (Total Capital Employed).

F) Coverage Ratios:

1. Interest Cover= (Net Profit before Interest and Taxes)/ (Interest Charges).

2. Dividend Cover= (Net Profit after Tax)/ (Equity Dividend).

G) Equity Investors’ Ratios:

1. Earnings per Share (EPS) = (Net Profit after Tax)/ (No. of Equity Shares).

2. Dividend per Share (DPS) = (Equity Dividend)/ (No. of Equity Shares).

3. Dividend Pay-out Ratio= (Dividend per Share)/ Earnings per Share).

4. Dividend Yield= 100X (Dividend per Share)/ (Market Price per Share).

5. Earnings Yield=100X (Earnings per Share)/ (Market price per Share).

6. Price-Earnings Ratio (P/E Ratio) = (Market price per Share)/ (Earnings per Share).

7. Book Value per Share= (Net Worth)/ (No. of Equity Shares).

Book Value to Market Price= 100X (Book Value per Share)/ (Market Price per Share)