Glossary of Investment and Technical Analysis Terms
The glossary contains brief explanations of the most common terms used in investing and technical analysis. Click on the letter that begins the term you wish to know about to be taken to a list of the terms available starting with that letter.
If you are looking for a description of an investment or technical analysis term that does not seem to be in the Glossary, please email me and I will explain it for you and add it to the Glossary.
Acronym for Australian Real Estate Investment Trust.
Used to describe a base pattern on a chart where strong long-term holders buy under-valued securities to hold for a subsequent mark up phase. Strong holders are mainly professionals and weak holders are generally the public.
- Accumulation Index
See Total Return Index.
- Acid Test Ratio
See Quick Ratio
A general increase in prices. Also a day in which the price closes higher than it closed yesterday.
- Advance-Decline Line
An indicator constructed by plotting a cumulative total of the net of advances and declines. It is a measure of what the broad majority of stocks are doing, compared to the narrower sample of stocks in a market average or index.
Acronym for Annual General Meeting
- Algorithmic Trading
Algorithmic Trading is activity aimed at breaking up large, often institutional, orders in smallparcels of shares in order to disguise the presence of large orders that, if known, could distort the market to their disadvantage. Thus, most algorithmic trading is conducted by traditional institutional or professional investors.
- All Ordinaries index
A capitalisation-weighted index that measures movements in the value of 500 of the largest stocks. It may be a purely price index or an accumulation index.
Alpha refers to returns in excess of the returns of benchmark market indices, after adjusting for risk.
One of the two guidelines for wave development in Elliott Wave Theory, the other being channelling. It stipulates that elements in a wave pattern tend to be different to the previous similar pattern.
The height of a price cycle from crest to axis (sometimes peak to trough).
A process of examining the detailed composition of a situation in order to identify the condition of the market.
- Angle Line
Used in Gann analysis
- Annual General Meeting
The annual meeting of shareholders required by the Coprorations Act. Business includes electionof directors and approval of the remuneration report. Ordinary shareholders may vote in person or by proxy. In a show of hands there is one vote per shareholder. In a poll there is one vote per share.
- Asset allocation
This is an industry jargon term for one's investment strategy. It means that your investment capital is spit up and invested across a number of different types of financial securities or real property (known as asset classes). The idea is to tailor the allocation of your investment assets to meet you investment objectives, including the balance of risk that you are willing to accept.
- Asset class
There are a number of different types or classes of assets that our investment capital can be invested in. The major classes of asset are stocks, bonds (fixed interest), cash, property and derivatives of those asset classes.
Acronym for Australian Securities Exchange. It used to be the acronym for Australian Stock Exchange.
- ASX Code
The three-letter code allocated by the Australian Securities Exchange to each company. Also known as its ticker.
- Average Annual Price Earnings Ratio
The average annual price earnings ratio is calculated by averaging the monthly closing prices of a share and dividing it by the earnings per share for that year. Provides a benchmark for comparing the company's current P/E ratio. Companies selling for much more than their average annual P/E could be overvalued and if selling for much less than their average annual P/E ratio may be undervalued.
- Average Directional Movement (ADX)
A component of the Directional Movement System. ADX is the average of the Directional Movement Index over a time period.
- Backdoor Listing
A backdoor listing is when owners of a business buy a controlling stake in an inactive listed company and sell their business into the inactive company. This may be a cheaper method of listing a business than floating a new company on the stock exchange.
- Bar Chart
A chart in which the trading for a period of time is represented by a vertical bar between the high and low prices for that period. The opening prices are often marked with a tick on the left side of the bar and the closing or last price with a tick on the right side of the bar.
- Basis Point
A basis point is 1/100th of 1 per cent or 0.01 per cent, so 100 basis points (bps) is equal to 1 percentage point. The term is used in money and securities markets to define differences in interest or yield. If an interest rate were to increase from 1 per cent to 2 per cent, it is said to have risen by 100 basis points (bps) or one percentage point.
A market participant who believes prices are likely to fall and is looking to sell financial instruments. Is interchangeable with seller.
- Bear Distribution
A Steidlmayer distribution where the majority of the trading has occurred below the midpoint of the distribution.
- Bear market
A term used in connection with a market that is trending downward.
A pessimistic outlook for prices held by bears/sellers.
The beta of a stock indicates whether the stock is more or less volatile than the market. A market index is given a beta of 1. Stocks that are more volatile than the market index will have a beta of greater than 1. Stocks that are less volatile than the market index have a beta of less than 1.
- Black Candle
A candle for a period which closes lower than it opens.
A blockchain is a secure database managed by thousands of computers that continuously maintain records of the payment history of every bitcoin in circulation, providing proof of who owns how much of the crypto-currency at a point in time. In theory, any asset could be transferred using a blockchain, which means it has potential beyond crypto-currency.
- Blue chip
A term used to denote a large and long-established company that is listed on a stock market.
- Bollinger Bands
Lines drawn so many standard deviations either side of a moving average. See also Percentage Bands.
A process of generating, capturing, and recording investor demand for shares during a capital raising, in order to set a price that reflects demand. Usually, the issuing company appoints a major mercant bank to run the bookbuild. Usually restricted to institutional investors and sometimes sophisticated investors. The ASX also has a bookbuild facility that is open to private investor sthrough their brokers with certain restrictions.
The number of price units a market has to move from the last plotted price to cause a plot on a point and figure chart.
When price moves above the high of a trading range or pattern. Also when price moves below the low of a trading range or pattern.
A market participant who believes prices are likely to rise and is looking to buy financial instruments. Is interchangeable with buyer.
- Bull Distribution
A Steidlmayer distribution where the majority of the trading has occurred above the midpoint of the distribution.
- Bull market
A term used in connection with a market that is trending upward.
An optimistic outlook for prices held by bulls/buyers.
- Buy side
The buy side are the fund mangaers and institutional analysts who invest money on behalf of their clients.
When companies purchase existing shares to reduce the number of shares on issue. Generally has the effect of increasing the earnings per share. Often funded by debt,
A market participant who is seeking to purchase a financial instrument. Their motivation will be to profit from an appreciation in the price, take profits on a short trade or to cut loses on a short trade.
The candlestick line for one period.
- Candlestick Chart
A chart form that originated in Japan and is often called a Japanese Candlestick. It uses the same data as a western bar chart, except that a candlestick chart emphasises the relationship between the opening and the closing prices for a period. It is most often drawn for daily periods, but weekly and monthly candles are also used, as are intra day charts.
- Capital gain
The increase in value of a share whose price has risen since it was purchased.
- Capital growth
The increase in value of a share whose price has risen since it was purchased.
- Capital loss
The decrease in value of a share whose price has fallen since it was purchased.
See Market Capitalisation.
Cash is the year end holding of cash shown on the Balance Sheet of a company, also known as the Statement of Financial Position. It is found under Current Assets. It will be cash physically held by the company plus all at call deposits with deposit taking institutions.
One of two guidelines used in Elliott Wave Theory, the other being alternation. It assists in forecasting how far a move will carry.
The graphical representation of market action.
The analysis of movements and patterns in price and volume of traded financial securities. Now seen as a part of Technical Analysis.
One who studies charts. Now generally replaced by Technical Analyst.
ASX's Clearing House Electronic Sub-Register System which is the The ASX's settlement system and central register for electronic transfer of share ownership and associated cash payments.
- CHESS Sub-Register
The part of an Issuer's register for a class of Approved Financial Products that is administered by the ASX Settlement and records legal title to Financial Products through uncertificated holdings in that class. Note: The register may be of shares, options, managed investments or other financial products that are Approved Financial Products under the ASX Settlement Operating Rules.
The last price at which a market trades in a period. In a futures market, the settlement price is often used in place of the actual last trade. The close represents the price at which professionals are prepared to hold positions over a break in trading.
- Closing Price Reversal
A short term reversal signal found on daily bar charts. In an uptrend, it is a trending bar, which opens near the high and closes near the low and below yesterday
Two or more chart signals with the same implication.
- Confirmation (Dow Theory)
The idea that a bull or bear market can only be said to exist when the trend of both the industrial and transport averages has changed. This seems to have been a more effective signal when railways were the major transport stocks and were very important within the Dow Jones averages than they are today.
- Congestion area
Price action over a period that is confined to a relatively narrow range. Also known as a trading range.
Companies with very low-priced shares will sometimes consolidate them. This consolidation is compulsory. For example, two old shares may become one new share. In general terms this means that the price of the shares will rise in proportion to the consolidation. In the example of a two into one consolidation, the price per share should roughly double.
- Continuation (pattern)
A configuration on a price chart that, on the balance of probabilities, leads to the resumption of the prior trend. Its classification is confirmed when price breaks out of the pattern in the direction of the prior trend.
- Contributing Shares
See Partly Paid Shares.
- Coppock Indicator
An indicator invented by Edwin Coppock. It is a sophisticated long term momentum oscillator for identifying the end of bear markets on the Dow Jones Industrial Average. It has a very good record on the average it was designed for and also for other broad market indexes.
- Core-Sattelite Strategy
An investment method, commonly in stocks, where a large part of investment funds provides exposure to index returns (beta) and is rarely changed. The balance of investment capital is actively managed to attempt to beat the index return (alpha).
One of two types of wave in Elliott Wave Theory, the other being impulsive. Corrective waves move against the direction of the overall bull or bear market.
- Cost of Capital
For investors the cost of capital is the return required to accept the risk involved in the investment. Where no debt is used in the investment, the cost of capital is also the cost of equity, which for an investor is the required return being the sum of the dividends, franking credits and price increase for the stock.
The investor, speculator or institution on the other side of a transaction in a finacial security or derivative.
- Counter-party risk
The risk that the party on the other side of a transaction in finacial securities or derivatives will not be able to meet their obligations.
- Covered bond
A debt instrument issued by banks that is secured by an interest in a pool of high-quality mortgages. They are similar to residential mortgage backed securities. The main difference is that the bondholders have recourse both to the pool assets and to the issuer.
The top of a price cycle, also called a peak.
- Crossed Trade
A crossed trade is where both the buyer and seller are unrelated, but both sides of the trade are executed by the same broker.
See Crossed Trade.
An abbreviation for Coal Seam Gas.
- Cum Dividend
A stock is deemed to be trading Cum Dividend (Cum is Latin for "with") up until the trading day before the Ex-Dividend day. An investor who owns a stock when it is trading Cum Dividend is entited to the dividend.
- Current Ratio
The current ratio looks at the solvency of a business in terms of working capital. It is calculated by dividing Total Current Assets by Total Current Liabilities.
Series of repeating patterns which are found over a number of equal, or approximately equal, intervals of time.
- Cyclical Business
A cyclical business is one whose level of activity and earnings rise and fall with the swings in the business cycle - expansions and recessions.
- Dark Cloud Cover
A bearish candlestick reversal pattern in an uptrend. A long black candle must open near its high and above the upper shadow of the white candle before it and then close significantly into the real body of the white candle.
- Dark Pools
Dark pools are markets that exist away from the public stock exchanges. They allow institutional investors to trade large parcels of stocks among themselves. They are called "dark" pools because neither the depth, price nor identity of the buyer or seller is disclosed. The existence of orders is only apparent when a transaction has taken place. Transactons are reported, but usually after a delay.
- Days Payables
A ratio that measures the efficiency of payables management. It is calculated by dividing the average payables (opening plus closing payables divided by two) by the operating revenue for the year (previously called sales) multilied by 365.
- Days Receivables
A ratio that measures the efficiency of payables management. It is calculated by dividing the average payables (opening plus closing payables divided by two) by the operating revenue for the year (previously called sales) multilied by 365.
- Days Stock Held
A ratio that measures the efficiency of inventory management. It is calculated by dividing the average inventory (opening plus closing inventory divided by two) by the operating expenses for the year (previously called the cost of sales) multilied by 365.
In general terms, Debt is an amount of money that is owed or due. In financial statement analysis it is more specifically an amount owed by a company to another entity. It will generally be money that is owed, but may be goods or services, in which case the debt will still be expressed as an amount of money in the financial statements. For the Debt to Equity and Net Debt to Equity ratios, Debt is usually Total Non Current Financial Debt. See Financial Debt. However there are no legislated definitions and analysts a free to make adjustments or adopt other definitions as they see fit for the debt to equity, net debt to equity or especially other ratios. The definition should always fit the purpose of the ratio. It is quite common for some analyst to use Total Non Current Liabilities or Total Liabilities in the Debt to Equity and Net Debt To Equity ratios, because all liabilities are techhnically money owed to other entities.
- Debt to Equity Ratio
Total debt divided by the total equity usually expressed as a percentage. Calculates how much leverage there is in the finacing of a company. The higher the ratio, the higher the level of financial risk. See Debt and Equity for definitions of the ratio components. See also Net Debt to Equity ratio.
- Debt to Free Cash Flow Ratio
A ratio that measures the level debt in a business in terms of how many years it would take to repay the debt from free cash flow. It is calculated by dividing the total non-current financial debt by the free cash flow for the last year. See Free Cash Flow.
A general fall in prices. Also a day in which the price closes lower than it did yesterday.
In Elliott Wave Theory, the name given to describe the (nine) levels of cycles of economic activity.
The aggregate of bids by buyers at a given price.
A tradeable financial instrument that derives its value from some other financial instrument. Futures, options and warrants are all derivatives. Derivative markets are usually highly leveraged.
Used to construct a momentum oscillator, by subtracting a moving average from the closing price. This eliminates from the price any cycle with a length of less than the period of the moving average.
Used in validating cycles. Refers to the transformation of data into log form.
- Diagonal Triangle
In Elliott Wave Theory, a pattern that is formed when, in a wave count, wave 4 carries beyond the end of wave 1. Corresponds to a wedge pattern in bar charting.
- Directional Movement (DM)
A component of the Directional Movement system. Directional movement is the larger part of today
- Directional Movement Index (DX)
A component of the Directional Movement System. DX is the ratio of the net directional movement to the directional true range over a time period.
- Directional Movement System
A trend following indicator developed by J Welles Wilder. See also Directional Movement, True Range, Directional Movement Index and Average Directional Movement Index.
The act of taking good or bad news, information or expectations into account when setting a price.
Used to describe a top pattern on a chart where strong long-term holders sell to weak short term holders over valued securities that they have held through the mark up phase. Strong holders are mainly professionals and weak holders are generally the public. Also the pattern formed when price seeks a new equilibrium in Steidlmayer analysis and Market Profile.
An analysis technique or signal where an oscillator makes peaks or troughs which are at odds with the peaks or troughs in price and therefore indicates a structural instability in the trend.
The process of reducing risk by spreading investments over a number of financial securities or property. Further diversification may be acheived by spreading investments over several different asset classes.
That part of the profit made by a company that is distributed to shareholders. This will usually be twice a year in Australia. Dividends are usually expressed as cents per share. In Australia, dividends may be franked or unfranked.
- Dividend Cover
This calculates the number of times the dividend is covered by earnings. It is calculated by dividing the Earnings Per Share by the Dividend Per Share. See also Payout Ratio.
- Dividend Yield
The per annum return on a stock. It is calculated as the dividends for the last year divided by the price of the stock, expressed as a percentage.
Acronym for Dow Jones Industrial Average. A share price index measuring the market prices of 30 representative industrial companies on the New York Stock Exchange.
A candle which opens and closes at the same price. Specific forms are: Long legged or Rickshaw Man, which opens and closes near the midpoint, Gravestone, which opens and closes at the low, Dragonfly, which opens and closes at the high and Four Price, which has no shadows. They always indicate indecision in a trend.
- Dominant Cycle
A cycle that is reliable and persistent in the face of strong trend or random influences.
- Double Three
In Elliott Wave Theory, the name given to a corrective wave pattern that can have a structure combining zigzags, flats and triangles. There are also triple threes.
- Dow Jones industraial Average
Often abbreviated to DJIA or just "the Dow". A share price index measuring the market prices of 30 large industrial companies on the New York Stock Exchange.
- Dow Theory
A theory developed by Charles Dow, first editor of The Wall Street Journal, the principles of which underlie most of modern technical analysis. William Hamilton, who followed him as editor of The Wall Street Journal and finally Robert Rhea in his book The Dow Theory, further enunciated Dow
Stands for Dividend per Share. See Dividend.
- Earnings per Share (EPS)
Net profit after tax (NPAT) divided by the number of shares issued by a company, or the earnings attributable to each ordinary share. It is calculated by Net Profit After Tax (NPAT) adjusted for capital reconstructions and after preference dividend, divided by the time weighted number of ordinary shares outstanding during the year. The earnings exclude non-recurring items such as abnormals and extraordinary items. When the company has issued securities that may be convertible into shares in the future, a diluted EPS is also calculated.
- Earnings Yield
Calculated as the Earnings Per Share (EPS) divided by the share price per share expressed as a percentage. Earnings yield is most commonly used in its inverse, the Price Earnings Ratio. To convert a price earnings ratio to an earnings yield divide 100 by the Price Earnings yield.
Stands for Earnings Before Interest and Tax. Calculated by subtracting expenses other than interest and tax from operating revenue.
- EBIT Margin
See Operating Profit Margin
An abbreviation for Earnings Before Interest Tax Depreciation and Amortisation. It is calculated by taking the net profit after tax and adding back the other amounts.
An abbreviation for Earnings Before Interest Tax Depreciation Amortisation and Rent. It is calculated by taking the net profit after tax and adding back the other amounts. It is an approximate measure of operating cash flow. Rent may include Finance Lease costs and sometimes also restructuring costs.
Extraordinary General Meeting
- Electronic Holding Statement
Evidence of the ownership of securities in the form of a holding statement. All security holdings on ASX are registered electronically and electronic holding statements are called CHESS Statements.
- Elliott Wave Theory
The name given to the ideas of RN Elliott.
- Engulfing Pattern
A candlestick reversal pattern in either an up or down trend. In a downtrend it is a long white candle that has a lower open and higher close than the real body of a black candle before it. In an uptrend it is a long black candle that has a higher open and a lower close that the white candle before it.
- Enterprise Value (EV)
Enterprise Value is the notional market value of a whole business, rather than simply the market value of its shares. It is calculated by taking the market capitalisation, adding long term debt and subtracting cash.
Stands for Earnings Per Share
Equity is one of the three basic totals in the Balance Sheet, also known as the Statement of Financial Position, of a company. Total Equity is Total Assets less Total Liabilities. This is the definition generally used for the Debt to Equity ratio and the Net Debt to Equity ratio. However there are no legislated definitions and analysts a free to make adjustments (often around minority interest and preference share capital) as they see fit for the debt to equity, net debt to equity or especially other ratios. The definition should always fit the purpose of the ratio.
- Equivolume Chart
A chat form invented by Richard Arms Jr and described in his book
Stands for Exchange Traded Fund.
When a stock declares a dividend the company declares a Record Date. Shareholders on the register on that date are entitled to the dividend. Ex-dividend dates are usually set two business days prior to the record date to allow for settlement of trades. If an investor buys a stock prior to the Ex-Dividend day, the investor will receive the dividend. If an investor buys a stock on or after the Ex-Dividend day, then the seller receives the dividend. Ownership is determined by the date of the purchase, not the settlement date.
- Exchange Traded Fund
This is a listed investment fund or trust which is designed to track a specific index or asset class. Generally it will do this by holding stocks in an appropriate portfolio that tracks the index. It can also hold physical commodities (eg Gold). Some ETFs are far more risky and can be based on derivatives rather than prime investment assets.
- Executive Director
A Director who is also an employee of the company.
- Expanded or Irregular Flat
In Elliott Wave Theory, a flat corrective pattern, in contrast to a regular flat, since it has a wave B pattern that more than retraces a wave A and a wave C that extends beyond the end of a wave A.
- Extraordinary General Meeting
A meeting of shareholders to consider and vote upon special items of business that require shareholder approval.
A jargon term meaning: To take the opposite side of a trading situation.
In Elliott Wave Theory, the name given to a situation where the fifth wave does not progress past the end of wave 3.
- Fair Value
This term has a general meaning and also a specific meaning in securty analysis, which is:A measurement of value which estimates the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. Because fair value is a market-based measurement, it is measured using the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk.
A formation on a bar chart where successive trend lines are broken and a less steep trend line is formed. After this has happened several times there is a
- Fibonacci Series
A series of numbers discovered by the Italian mathematician Leonardo Fibonacci. The series starts with 1,1,2,3,5,8 and so on with each number being the sum of the two previous numbers in the series.
- Financial Debt
Financial Debt is money owed to another entity on which interest is paid.
- Financial instrument
A tradeable written undertaking which establishes ownership and payment rights between parties. Eg Shares, Warrants, Options, Futures etc.
- Financial Risk
Financial Risk is the risk of failure due to the inability to service and/or repay debts when they fall due. The higher the level of debt, the greater the financial risk. Financial risk is also higher in cyclical businesses than in non-cyclical businesses due to the variability of earnings.
- Fixed interest securities
There is a wide range of these and they come under varios names like government or corporate bonds, term deposits, secured and unsecured notes, debentures and so on. Any financial security that involves lending a principal amount in return for a fixed income stream in the form of interest and return of the capital at a designated date.
Describes a trader who has no position in the market, i.e. neither long nor short. See square. In Elliott Wave Theory, a corrective pattern that differs from a zigzag.
See Initial Public Offering.
- FPO Shares
See Fully Paid Ordinary shares.
- Franked (dividend)
A franked dividend is one that carries a franking credit or imputed tax credit. This is included in the investor's taxable income, but also allowed as a tax deduction. If the investor does not pay tax, the imputed tax credit is refunded in full by the Austarlian Tax Office.
- Franking Credit
An imputed tax credit attached to a dividend.
- Free Cash Flow
Free Cash Flow is the cash flow that is notionally available for distribution to shareholders or reinvested in the business. Free cash flow is caluated by subtracting capital expenditure from operating cash flow, both being shown on the company's Statement of Cash Flows.
The number of times cycles repeat in data of a given length. Frequency equals data length divided by period.
- FTSE 100
A share index of the 100 most highly capitalised companies listed in Great Britain on the London Stock Exchange.
David Fuller, an analyst who developed a method of using three box reversal point and figure charts for trading the markets.
- Fully Paid Ordinary Shares
Shares in a company in which the entire issue price has been paid. See also partly paid or contributing shares.
Relating to factors that determine prices.
- Fundamental analysis
The study of the factors that determine prices of financial instruments.
Fungibile refers to any financial instrument whose individual units are capable of mutual substitution. For example, any one Australian dollar coin is equivalent to any other Australian dollar coin, any ounce of gold is equivalent to any other ounce of gold and any share in a company is equivalent to any other share of the same class in the same company. However, a share in one company and a share in a different company are not fungible.
The ideas of WD Gann.
A gap occurs when the price opens above the high of the previous period and trades higher or when the price opens below the low of the previous period and trades lower. The edges of the gap are thought to represent support and resistance levels. Some analysts attach significance to the closing of gaps
Is very similar to leverage. Gearing and leverage are ways to measure the level of financial risk in the way a company is funded. The higher the debt relative to equity, the greater the gearing or leverage and therefore the level of finacial risk. Gearing is usually calculated as financial debt divided by financial debt plus equity.
- Gearing Ratio
This is the level of financial risk in a company as a result of the level of risk from borrowings. It can be calculated as a debt to equity ratio. It s also calculated as a Gearing Ratio, the most common calculation for which is Financial Debt divided by Financial Debt plus Equity.
- Gig Economy
A labour market characterized by the prevalence of short-term contracts or freelance work as opposed to permanent jobs, which often involves last minute scheduling.
The difference between the price a business pays to buy and asset and its book value. Goodwill commonly arises in takeovers and acquisitions of other businesses.
The practice of buying into companies and demanding to be bought out at a profit.
This is a jargon term used in the Australian stock market. It is also used in the US market and maybe elsewhere. The mechanism is used rarely in Australia but is far more common in the US.
A greenshoe is probably best described as legal market manipulation. In Australian its use requires clearance by the Australian Securities and Investments Commission (ASIC). It is used to assist in the management of large floatations of companies (also known as Initial Public Offerings or IPOs).
The greenshoe mechanisim involves the float managers being permitted to sell as much as 15% more shares in a float than are being issued. This means that the float managers will be short immediately after the new issue begins trading on the secondary market (stock exchange). Therefore, the float managers need to buy shares in the stock being floated after it begins trading.
Float managers are not premitted under the mechanism and the corporations law to manipulate the share price after the stock begins trading at a price that is higher than the IPO price. This means that they must buy at or below the float price. The greenshoe mechanism provides a means to enable investors wishing to sell at the float price after being allotted shares in the IPO. If more are bought than the lead managers were short in the float, this mechanism may also be used to provide liquidity for large institutional investors who wish to buy more shares in the stock than were allocated to them in the IPO.
There is usually a 30-day time limit on a greenshoe.
- Gross Profit Margin
See Operating Profit Margin.
- Gross Total Return Index
Gross Total Return indices reinvest as much as possible of a company’s dividend distributions. The reinvested amount is equal to the total dividend amount distributed to persons residing in the country of the dividend-paying company. Gross total return indices do not, however, include any tax (franking) credits. Most ASX/S&P Total Return indices are Gross Total Return indices. See also Net Total Return index.
In the Corporations legislation this is a public company and its associated corporate entities. These associated entities may be companies, but are commonly trusts in the case of stapled securities.
- Growth Stock
This is a term used to describe a fast growing company. The most common measure will be growth in earnings per share.
A candlestick reversal pattern in a downtrend. Is a paper umbrella of either colour.
- Hanging Man
A candlestick reversal pattern in an uptrend. Is a paper umbrella of either colour.
In cycle theory, it is the tendency for the next cycle in length to be related by some orderly factor.
- Head and Shoulders
In bar and point and figure charting, a reversal pattern in an uptrend that is a basic trend reversal.
The highest price at which a security traded during a time period or the highest value for an index for a time period. The high represents the maximum power of buyers in a trading period.
- High Frequency Trading
High Frequency Trading is activity aimed at bombarding the market with high volumes of small orders in order to profit from small, often fleeting, price discrepancies in the prices quoted for single stocks (perhaps on multiple stock exchanges) or between pairs or groups of stocks. Indices may also be traded as derivatives. Some high frequency trading may also be aimed at detecting and profiting from the presence of large institutional orders whether they are undisclosed or disguised in algorithmic strategies. High frequency traders tend to be private proprietary traders, which has raised regulatory issues around monitoring and supervision.
- Hook Reversal
A short-term reversal signal that is found on daily bar charts. In an uptrend, it is an inside day that has opened near the high and closed near the low.
International Financial Reporting Standards.
In Elliott Wave theory, impulsive waves move price in the direction of the overall bull or bear market. The opposite to corrective waves.
- Impulsive Move (IPM)
Price driving away from an equilibrium in Steidlmayer distribution analysis.
- Imputation Credit
See Imputed Credit.
- Imputed Credit
An imputed credit or franking credit is the notional amount of tax paid by the company on profits, from which dividends are paid over time.
A numerical measure of the way the prices of a weighted or unweighted basket of financial instruments has changed over some base period.
- Indicative Price
Data are not necessarily observed but calculated from reference points. For a financial asset or product, an ‘indicative’ price may not necessarily correspond to the price at which dealers in that market would execute transactions.
- Initial Public Offering
An initial public offering is the sale of shares in a public company which is to be listed on the stock market where investors may buy and sell. They are usually abreviated to the acronym IPO. The traditional and less technical desription is a float, which derives from the expression that a company is being "floated" on the market.
- Inside day
A period in which the range of the latest period is entirely within the range of the previous period.
- Intangible Asset
This term is used to describe assets which have no physical existance and no fixed value. Examples are goodwill, trademarks and intellectual property.
- Interest Cover
This is calculated by taking the earnings of a company before tax and dividing it by the net interest payments made. It shows the number of times interest is covered by earnings. The higher the number the more likely a company is to meet its interest payment obligations.
Where used in relation to charting prices it means that the time period is less than a day. Common intra-day time intervals are five minutes and hourly. Where used in relation to trading it refers to traders who open and close trades within the one day, not generally holding positions overnight.
- Intrinsic value
An estimate of the objective current value of a financial instrument, determined by fundamental analysis.
- Inverse Head and Shoulders
In bar and point and figure charting it is a normal trend reversal in a down trend.
The exchanging of money for a financial instrument in the expectation of an income stream and/or a capital gain. Essentially identical to trading, except the emphasis will tend to be on a longer time frame and the income stream will tend to be the prime component of total return.
- Investment Plan
A preferably written document that sets out the investor's objectives, strategies and tactics in detail.
See Initial Public Offering
- Island Cluster Reversal
A short-term reversal signal found on daily bar charts. In an uptrend it is formed when price gaps upward, trades for several days above the gap and then gaps downward again leaving a group of bars above the trend looking like an island.
- Island Reversal
A short-term reversal signal found on daily bar charts. In an uptrend it is formed when price gaps upward and then the following day gaps downward, leaving one bar above the trend looking like an island.
- Juglar Cycle
Named after Clement Juglar, who first postulated a general economic cycle that occurred every nine years.
- Key Reversal
A short-term reversal signal that occurs on bar charts. In an uptrend it is formed when price opens higher and makes a new high, before closing below the previous low.
- Kitchen Cycle
Named after Joseph Kitchin, who established the existence of a 40 month or loosely four year cycle.
- Kondratieff Cycle
An economic cycle lasting approximately 50 years. Identified by the Russian economist after whom it is named.
The relationship between the trader
The extent to which a purchase is fundes from borrowings. Also known as gearing. It is calculated in several ways in the industry. A common way is a loan to valuation ratio.
London Inter Bank Offered Rate
Stands for listed investment company.
- LIC Discount Capital Gain
Qualifying LIC Discount Capital Gains made by Listed Investment Companies may be passed through to underlying shareholdersas a fully franked LIC Discount Dividend so that individual shareholders become entitled to the usual 50% capital gain tax discount applicable to that gain. Superannuation fund shareholders would be entitled to their usual 33% capital gain tax discount on such a gain.Capital gains made by the LIC which are not qualifying LIC discount capital gains are subject to tax in the normal way at company tax rates.
- Limit (day)
In some futures market, there are limits placed on how far price can rise or fall in a given day. This means that trading can completely cease on that day if there are neither buyers nor sellers within the limit range.
- Line (Dow Theory)
A period when the market average trades sideways in a shallow trading range. It is said to be an alternative to a normal secondary correction of a major trend.
- Line Chart
A chart constructed by drawing a line through the closing prices for a market. It may be constructed for any time period, but daily, weekly and monthly are most common.
The ability to shift significant quantities of assets in a short period without large price movements.
- Listed Investment Company (LIC)
There is no precise definition in Australia. Essentially, it is a listed security backed by a closed-end fund or portfolio, usually stocks. There are some special taxation regulations for LICs. There are also specific stock market requirements to disclose Net Asset Backing of the portfolio each month.
An abbreviation for Liquified Natural Gas.
To buy a financial instrument with a view to selling it later at a higher price.
- Long Candle
One where the range between the opening and closing prices is significantly larger than the immediately preceding candles. Indicates strong buyer or seller commitment.
- Long Term Incentive (LTI)
An incentive scheme used by companies to reward senior executives for the achievement of the long term objectives of the shareholders. Long Term Incentives are usually paid in equity inthe firm, which continues to align executive's interests to those of the shareholders.
- Long/Medium/Short Term
One of the most difficult areas of technical analysis is concerned with the analysis of time frame. The terms Long/Medium/Short term are used widely and do not have a precise meaning. In most situations, they depend upon the concept.
Types of trading and investing are often split up in this way:
Day Trading - trades are opened and closed within a day. No positions are carried over night. Short term for a day trader is seconds or minutes. Medium term is tens of minutes to maybe an hour or so. Long term is hours.
Short-Term Trading - trades last from part of a day up to several days. Short term will be a few hours to maybe one or two days. Medium term will be a few days. Long term will be several days to maybe a couple of weeks.
Position/Swing Trading - trades last from several weeks to several months and may even be held for a few years at the outside. Short term will be a week or more. Medium term will be several weeks to a month or more. Long term will be several months out to a year or more.
Long Term Investing - Investments last from a few years to many years. Short term will be a few years. Medium term will be a few years out to maybe a decade. Long term will be a decade to several decades.
The lowest price at which a security traded during a time period or the lowest value for an index for a time period. The low represents the maximum power of sellers in a trading period.
See Moving Average Convergence Divergence.
- MACD Histogram
An oscillator constructed by taking the difference between the MACD line and the signal line. Usually depicted as a histogram. Invented by Dr Alexander Elder.
- Macro Cycles
The largest cycles identified. The Kondratieff and Juglar cycles are examples.
- Margin Loan
A loan made to a shareholder on security of their shares. The shareholder is then said to be holding stock on margin. The shareholder owns the stock, but it is held by the lender as security. If the share price falls below the required loan to valuation ratio, the shareholder must put up more cash or the shares will be sold by the lender.
- Market Capitalisation
The market value of a company if all of its shares were bought at the current market price. Market capitalisation is calculated by multiplying the current market price for its shars by the number of shares issued
- Market Profile
A name that is a registered trademark of the Chicago Board of Trade for the specific depiction of price distributions identified by Peter Steidlmayer. Mainly used in short-term futures trading but applicable in other markets with some modifications.
- Market Value
The prevailing price of the shares in a company in the secondary market (usually called a stock market). See also Market Capitalisation.
- Market weight
A jargon term which means that for a stock or stocks, a fund or porfolio holds one or more securities in the same proportion that they represent in the market index.
- Marubozu (Close Cropped)
A candle which either opens on the high/low or closes on the high/low or both opens and closes at either extreme of the range. They indicate strong buyer or seller commitment.
The rate at which price is changing over time. Also the name of a specific oscillator, which is calculated by taking the difference between the price today and the price n days ago.
- Momentum Oscillator
Any indicator measuring momentum, which is constructed as an oscillator. Examples are Momentum, Rate of Change, RSI, Stochastic, Williams %R and the difference between two moving averages.
- Monetary policy
The way in which governments or central banks try to chnage interest rates, the money supply and the quantum of credit. The usual brief to central banks is to control inflation within guidelines or to affect the exchange rate of its currency.
- Monoline Insurers
Insurers who guarantee the repayment of bonds and interest when an issuer defaults.
- Moving Average
A trend following indicator which smoothes the price to show the direction of the underlying trend. May be calculated as a simple moving average, a weighted moving average or an exponential moving average.
- Moving Average Convergence Divergence (MACD)
A hybrid indicator which is an oscillator, but used primarily as a trend following tool. It is calculated by taking the difference between two exponential moving averages and then smoothing the line again to create a signal line.
- Multi-Time Frame Analysis
A very important method of analysing markets where the analyst works from a long time period down to the period in which action is to be taken. It is based on the idea that all trends are influenced by trends in longer time frames. Also that support and resistance manifests themselves over long time frames.
Refers to the NASDAQ stock exchange in the US.
- Nasdaq 100
A stock market index of 100 of the largest domestic and international non-financial companies listed on the NASDAQ stock exchange.
- NASDAQ Composite
A price index of the stocks and similar securities (approximately 3,000) listed on the NASDAQ stock exchange. It is heavily weighted to technology stocks. It includes US and international stocks.
- Net Assets
Total assets less total liabilities. Also called equity, shareholders funds or book value.
- Net Debt to Equity Ratio
Total debt, less cash held divided by the total equity, usually expressed as a percentage. Calculates how much leverage there is in the finacing of a company. The higher the ratio, the higher the level of financial risk. See Debt, Equity and Net Debt for definitions of the ratio components.
- Net Profit
Calculated by subtracting total business expenses from total revenue. It may be calculated as earnings before tax (EBT) or after tax (NPAT).
- Net Profit Margin
A measure of the profitability of the overall business. It is calculated by dividing the Net Profit after Tax (NPAT) by the Operating Revenue expressed as a percentage.
- Net Promoter Score
Measures whether a company is enriching the lives of its customers. Based on the single question: "How likely is it that you would recommend this company to a fiend or colleague?". Promoters score 9 or 10. Passives score 7 or 8. Detractors scored 6 or below.
- Net Total Return Index
Net Total Return indices reinvest dividends after the deduction of withholding taxes, using (for international indices) a tax rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. ETFs/index funds who invest in foreign stocks (foreign means relative to the domicile of the fund) usually track the relevant Net Total Return indices. MSCI and S&P provide Net Total Return indices for the industry, but most relevant for private investors in Australian listed stocks are the Gross Total Retrn indices, popularly known as Accumulation indices.
Where a trader holds no position. See also flat and square.
- Neutral or Normal Distribution
A Steidlmayer distribution in which the majority of trading has occurred near the midpoint of the distribution.
- Nikkei 225
A share index of 225 companies traded on the Tokyo Stock Exchange.
- No Liability Company
A No Liability company is different to a limited liability company that has issued partly paid shares in that they are not required to specify the date or dates on which calls will be made, and when a call is made shareholders may elect to either pay the call or forfeit the share.
A concept used in working with multiple cycles. Having allowed for differences and variations in the real world, there appears to be a set of harmonically related cycles. Nominality enables us to postulate shorter or longer cycles once the first cycle has been determined.
- Non-Cyclical Business
A non-cyclical business is one whose level of activity and earnings is relatively unaffected by the swings in the business cycle - expansions and recessions.
- Normalised Profit
Profit numbers are said to be normailised when abnornal items have been removed. Normalised profit is also referred to as profit before abnormal items.
Stands for Net Profit After Tax and is the operating profit after tax and interest, including any abnormal or non-recurring items. This is the bottom line profit reported by companies in their statutory accounts.
Net Promoter Score. Measures whether a company is enriching the lives of its customers. Based on the single question: "How likely is it that you would recommend this company to a fiend or colleague?". Promoters score 9 or 10. Passives score 7 or 8. Detractors scored 6 or below.
An abbreviation for Net Tangible Assets. This is simply total assets less intangible assets. See also Price to Book Ratio.
Refers to the result of measuring an aspect of price action with a view to predicting the extent of a likely price move. Same as target.
- Objective (analysis)
Those parts of analysis that can be demonstrated logically by reference to facts
- On-Balance Volume
An indicator invented by Joseph Granville. It is a cumulative net total of volume, where volume is added to the total if the price closes up for the day, subtracted from the total if the price closes down for the day or disregarded where the price closes unchanged for the day. It is said to disclose the underlying relative strength of buying or selling better than the traditional volume histogram.
- Open Interest
The number of contracts that are still in force in a derivatives market. When combined with price and volume it can provide clues to the strength of buying or selling commitment.
- Open/Close Reversal
A short-term reversal signal found on daily bar charts. In an uptrend, it is a trending day in which the open is near the high, the close near the low, but is above yesterday
- Opening Price
The price of the first trade of a time period. If a price index is being charted, it may be the value of the index at the end of the first of the regular periods for which the index is calculated. The open generally represents the emotional reaction of the public after a break in trading.
- Operating Profit Margin
A measure of the profitability of the operating activities of a business. It is calculated by dividing the Earnings Before Interest and Tax (EBIT) by the Operating Revenue expressed as a percentage. It is also sometimes calculated by dividing Cost of Goods Sold by Operating Revenue expressed as a percentage.
- Operating Revenue
An accounting term for the revenue of the company from its operating activities. Loosely called sales, a term which does not fit many modern service businesses, where fees, commissions, brokerage etc may be more appropriate. Operating Revenue covers all these revenue sources.
A security that confers on the holder the right but not the obligation to buy (call option) or sell (put option) a financial security at a specified price.
- Ordinary Shares
Ordinary shares carry no special or preferred rights. Holders of ordinary shares have the right to vote at a general meeting of the company, and participate in any dividends or any distribution of assets on winding up of the company on the same basis as other ordinary shareholders. See also Preference Shares and Partly Paid Shares.
- Outside day
A period in which the range of the latest period is entirely outside the range of the previous period.
A level of price coinciding with extreme levels of a momentum oscillator above the centre line.
A level of price coinciding with extreme levels of a momentum oscillator below the centre line.
A jargon term which means that for a stock or stocks, a fund or porfolio holds one or more securities in a greater proportion than they represent in the market index.
- Paper Umbrella
A candle with a small real body, no upper shadow and a relatively long lower shadow. It implies uncertainty in a trend.
- Parabolic (SAR)
The Parabolic Time/Price System is a trading system invented by J Welles Wilder, based on the assumption of trading a trend and the expectation of price to move
- Partly Paid Shares
Also known as contributing shares. Partly-paid shares are issued without the company requiring payment of the full issue price at the time of the initial public offering. The company is entitled to call for all or part of the outstanding issue price at a specified date or dates. The shareholder at the time the call is due (who is not necessarily the original subscribing shareholder) is legally obliged to pay the call. Because of the greater risk involved, investors are required to sign a broker document acknowledging that they understand the risks involved before trading in this class of share.Holders of partly paid shares have the same rights as an ordinary shareholder to vote, to dividends and on winding up of the company, except their rights will be proportional to the paid up amount.The one exception is where a vote is by a show of hands, in which situation partly paid shareholders have one vote, like ordinary shareholders. See also No Liability Company.
A term used generally in all areas of technical analysis to describe any configuration on a price chart from one period to many periods. See also continuation pattern and reversal pattern.
- Payout Ratio
This is the proportion of the earnings of a company that is paid out as dividends. It is calculated by dividing the dividend Per Share by the Earnings Per Share. See also Dividend Cover.
- Percentage Bands
An analysis technique, where two lines are created a certain percentage either side of a moving average line such than most price action is contained within them. The bands represent extremes of buyer or seller enthusiasm and are likely levels for price reversals. See also Bollinger Bands.
A length of time over which prices are recorded and used for analysis. Common periods are a day, a week or a month. In cycle theory, the duration of a cycle from trough to trough.
The difference in time between the troughs of two cycles. Phase can also be measured in degrees.
- Piercing Pattern
A candlestick reversal pattern that is the exact opposite of Dark Cloud Cover, except for the additional requirement that it must close above the midpoint of the preceding candle.
- Pivot Point Reversal
A short-term reversal signal found on daily bar charts. In an uptrend, it is completed when we have a day with a high that is higher than the bars either side of it and then a close below the low of the high day.
A placement is when a company sells new shares to existing or new shareholders. The shareholders who it offers the shares to must be what are defined in the Corporations law as sophisticated investors. They are deemed to be large enough and experienced enough to be capable of deciding to buy shares without a formal prospectus. However, there is usually a formal document called an information memorandum given to them and which contains key facts.
- Point and Figure (P&F) Chart
The oldest western charting method in which only price movement is plotted in boxes using
- Position Sizing
A money management technique for calculating the number of securities to be bought or sold short in relation to the risk determined as the current price less the sell/buy-stop price.
Is the value of a business after an investment or capital raising has been made. A post-money valuation will be the pre-money valuation plus the new money added to the business.
Pre-money is a valuation term from the private equity or venture capital fields. It refers to the valuation of a company before an investment or capital raising.
- Preference Shares
Preference shares traditionally afford the holder a priority or 'preference' over ordinary shareholders to dividends or in the event the company is wound up. Preference shares come in many different kinds, with different rights and characteristics. Voting rights for preference shareholders tend to be restricted to certain circumstances or resolutions. Because of the wide variations possible in preference shares, great care should be taken to understand each one before buying it.
The value at which a trade takes place on a financial market. In technical analysis, it also refers to the value of any financial security, derivative, index or market average.
- Price Earnings Growth Ratio (PEG)
This is the Price Earnings Ratio divided by the annual per share growth. Some analysts prefer it over the naked Price earnings ratio because it accounts for growth. The lower the PEG ratio the better value. A PEG ratio of 1 is often considered fair value. In theory, the higher the PEG ratio the more expensive the current price of the stock.
- Price Earnings Ratio PE or PER
PE and PER stand for Price Earnings Ratio. The price earnings ratio is calculated by dividing the current price of a company's shares by its earnings per share. It measures the number of years for company earnings to notionally repay the investment cost in buying a share. It is expressed as the number of times price is of the earnings.
A historical, or trailing, price earnings ratio is the current share price divided by the last year's EPS. The last year will be the last full year, or the last two half years depending on when the calculation is made in the reporting cycle. In the US this is known as PE TTM, where TTM stands for Trailing Twelve Months and the EPS used will be for the last four quarterly periods.
Historical price earnings ratios are to be distinguished from a prospective, or forecast, price earnings ratio which is the current share price divided by the forecast earnings for the next year.
- Price index
A index of the changes in price of a basket of stocks or other securities. It does not take account of dividends. It may be capitalisation weighted. This term is also loosely used to describe a market average, such as the Dow Jones Industrial Average.
- Price to Book Ratio
This is the ratio of the share price of a copmpany to the current per share book value. Book value is total assets minus total liabilities and intangibel assets. The ratio compares the current share price to the quantum of assets each share is notionally entitled to. Book is also known as Net Tangibel Assets (NTA).
- Primary Cycles
Also called intermediate cycles that run from nine weeks up to six months. They are evident in many markets and are manifested in financial markets probably due to the regular release of news and statistics and also treasury activity cycles.
- Pro-rata Issue
An offer for all existing shareholders to purchase further shares on a pro-rata basis. See als Rights Issue.
- Professional investor (Australia)
To qualify as a professional investor under the Corporations Act you must be either an AFS licensee, An APRA regulated entity, A trustee of a super fund, ADF, PST or PSS scheme with assets of at least $10 million, a listed entity or A body covering a business of investment in a financial product, interests in land or other investments where funds are received as a consequence of an offer or invitation to the public.
In cycle theory, the tendency for amplitudes to expand as the period of the cycle expands.
Pyramiding is a method of increasing a position size by using unrealized profits from successful trades to increase margin.
- Quantitative easing (QE)
A method for a central bank to increase the supply of money in an economy. This is done by buying back bonds or other government securities. This increases the money in the economy through the banking system and makes possible easier supply of credit.
- Quick Ratio
The quick ratio (also called the Acid Test Ratio) is a stronger measure of solvency of a business than the current ratio. It is calculated by subtracting Inventories from Total Current Assets and dividing that by Total Current Liabilities less Bank Overdraft.
- Rate of Change (ROC)
A momentum oscillator calculated by dividing the price today by the price n days ago.
- Real Body
The range between the open and close of a candle.
- Real Estate Investment Trust
This is a listed security which is generally one or more real estate (property) investment trusts stapled to a share in a real estate development and management company. A REIT will provide exposure to rental income, property value changes and development profits or losses.
- Record Date
The date used to determine who is entitled to a dividend. Shareholders on the register on the record date are eligible for the dividend. Ex-dividend dates are usually set two business days prior to the record date to allow for settlement of trades. Record dates are also used to determine who is entitled to other corporate actions.
In bar charting, a trading range that forms between reasonably clearly formed support and resistance levels. A small rectangle tends to be a continuation pattern, while a large rectangle tends to be a reversal pattern.
Means Real Estate Investment Trust.
A term used to describe the way prices sometimes reach a peak or trough and then immediately recoil from that level.
- Relative price earnings ratio
The relative price earnings ratio of a company compares it to a benchmark or to the past price earnings ratio for the company. The benchmark can be a broad market index average price earnings ratio or it might be the average price earnings ratio for the industry sector to which the company belongs. It is calculated by dividing the average P/E for the year by the average P/E for the All Ordinaries Index.
- Relative Strength
A simple indicator for identifying whether a security is stronger or weaker than the overall market by dividing the price series for the security by the value of an appropriate market index. It may also be used to compare the strength of one security against another.
- Relative Strength Index (RSI)
A momentum oscillator invented by J Welles Wilder. It measures momentum of price change with reference to the ratio of average up closes and down closes for a time period.
- Renounceable Rights Issue
A rights issue where shareholders may elect to take up all or some of the rights offered, let them lapse, or sell them on the secondary market.
A level on the chart where the security has traded before and which will tend to interrupt or reverse a subsequent up trend. It is based on the persistence of memory of buyers and sellers and their desire to get out of losing positions without loss or to enter positions they did not take and now regret that decision.
The idea that swings in a trend retrace the previous swing in full or in part.
- Return on Assets
Measure how profitably the company is employing assets in the business. This is calculated by dividing the net profit after tax (NPAT) by the total assets.The higher the ratio, the better return the company is achieving on its assets.
- Return on Equity (ROE)
Measures the rate of return of shareholders in the business. This is calculated by dividing the net profit after tax (NPAT) by the total shareholders' equity.The higher the ratio, the better return the company is achieving on its shareholders' funds.
- Return on Invested Capital )ROIC)
This is calculated by dividing the Earnings before Interest and Tax (EBIT) by the total of debt plus equity.The higher the ratio, the better return the company is achieving on its capital. If the return on equity is higher than the return on invested capital then the company is employing debt effectively.
A general term to describe a change in direction of price movement. Also the number of boxes necessary before a plot is generated on a point and figure chart.
- Reversal Pattern
In bar charting, a large configuration on a price chart that, on the balance of probabilities, leads to a change in the direction of the prior trend. Its classification is confirmed when price breaks out of the pattern in the direction opposite to the prior trend.
- Reversal Signal
In bar charting, a short-term configuration on daily bars that, on the balance of probabilities, leads to a change in direction of the prior trend.
- Rights Issue
An issue of additional shares to shareholders on a pro-rata basis. Rights issues may be renounceable (shareholders may sell their rights) or non-renounceable (rights not taken up lapse and may not be sold)
- Robo Advice
Robo-advice, also known as digital advice or automated advice, is still developing in Australia. Generally, it refers to financial advice that is delivered by algorithms and technology instead of a human financial adviser. The investor enters personal details, such as age, gender, income, assets, financial goals and risk tolerance into a computer program and it generates financial advice, based on the details entered.
Stands for Return on Equity.
- S&P 500
A capitalisation weighted index of the prices of 500 large cap common stocks actively traded in the US.
- Sales Revenue
The total value of sales of products and services by a company plus other operating revenue. Sales will exclude non-operating revenue such as interest income.
The corporate action where the number of shares or rights each shareholder has applied for is reduced because the total number of shares or rights applied for by all shareholders exceeds the amount the company wishes to raise from the issue.
- Seasonal Cycles
Cycles that tend to be around one year in length (period). They are most evident in agricultural and livestock futures markets, but also in financial markets, probably related to company reporting seasons.
- Seasonally Adjusted Data
A seasonally adjusted series involves estimating and removing seasonal patterns from the original data.
A group of companies (stocks) in similar lines of business.
- Securities Lending
This is technically not a loan, but a sale agreement. The securities are transferred from the lender to the borrower in return for cash or other securites (collateral). The borrower is obliged to return the securities either on demand or at the end of an agreed term, while the lender repays the collateral.
Securities lending is used in covered short selling.
Any financial instrument.
- Self-Managed Superannuation Fund
A superannuation fund which is independently created and operated. The trustee/s of the fund make all decisions on investments and payment of pensions or lump-sums.
- Sell side
The sell side work for stockbrokers or investment banks. Their main activity is analysis of companies and/or industry sectors and publication of their research.
A market participant who looks to sell a financial instrument. Their motivation will be to profit from a fall in the price, take profits on a long position or to cut losses on a long position.
Lines above and/or below the real body of a candle that depict the range traded to the high and low of the period.
- Share Consolidation
- Share Market
See Stock Market.
- Share Purchase Plan
An offer to purchase a limited number of additional shares made to existing shareholders, without brokerage fees and may be at a discount to the market price. Attractive offers are often subject to scaleback.
- Share Split
- Shareholders Equity
This is calculated by taking total assets and substracting total liabilities.It is the surplus of assets over liabilities, which is notionally what the shareholders own if all debts were paid.
- Short Candle
One where the range between the opening and closing prices is significantly smaller than the immediately preceding candles. Indicates weak buyer or seller commitment.
- Short selling
To sell a financial instrument that is not already owned with a view to buying it back later at a lower price. This involves borrowing shares, selling them and then buying them later to return the loaned shares. Australia has custodians holding many shares who earn money lending to short sellers.
- Short Term Invective (STI)
An incentive scheme where companies reward management within the next 12 months for achievement of company-set objectives.
- Single Printing
In Steidlmayer distribution analysis, it describes a market driving up or down with strongly trending bars.
Self-Managed Superannuation Fund.
Statement of Advice
- Sophisticated investor (Australia)
To qualify as a sophisticated investor under the Corporations Act you must have net assets of at least $2.5 million or a gross income for each of the last two financial years of at least $250,000 and a certificate from a qualified accountant confirming your income and assets. Notes (1) Super funds are not permitted to qualify as sophisticated investors. (2) Sophisticated investors are not treated as being retail clients, such that they will not be given a Financial Services Guide or Statement of Advice or anything else that addresses investor protection.
- Spinning Top
A candle which has a small real body and shadows greater than the real body. They indicate indecision in a trend.
Companies will sometimes split their shares to lower their price and to improve their liquidity. Splits are compulsory. An example is a one into two split, which will result in each shareholder having twice as many shares that trade at roughly half the price of the old shares.
Share Purchase Plan.
A position where a trader is neither long nor short. i.e. not in the market. Also known as being flat or having a neutral position.
- Squaring Time and Price
In Gann analysis, a method of forecasting tops and bottoms in the markets. Central to the idea that one unit of price is equivalent to one unit of price.
- Stapled Security
This is a security traded on a stock market which is actually a share in a company plus a unit in one or more trusts. The term "stapled" simply means that the share and trust units cannot be traded separately.
A candle with a small real body and a gap between its real body and that of the preceding candle. It implies uncertainty in a trend.
- Statement of Advice
A Statement of Advice is made by a financial adviser and should communicate to the client important and relevant information about the advice, so that they can make an informed decision about whether to act on the advice. This should clearly, concisely and effectively summarise the advice and the reasoning that led to the advice being given to the client.
- Statutory Profit
Another name for Net Profit After Tax (NPAT).
- Steidlmayer Distribution Analysis
A system of charting developed by Peter Steidlmayer. Market Profile is a registered trademark of the CBOT covering one specific representation.
A momentum oscillator invented by George Lane. It measures momentum of price change with reference to how near the market closes to the high or low of the recent range.
- Stock Exchange
See Stock Market.
- Stock Market
An organised and regulated market in which shares and other listed securities are traded. It is also called a secondary market.
An order placed in a futures market to buy or sell if the market trades at a specified price. In stock markets, and any other market where stop orders are not accepted, Hence, a buy-stop or a sell-stop. These precise terms are often reduced to Stop-Loss or just Stop.
In Gann analysis, a bull or rising market above the 1x1 line.
Those parts of analysis that rely upon the opinion or judgement of the analyst
One of the key principles of cycle analysis. Summation represents the idea that all market prices are the result of the addition of the various cycles currently affecting the market.
The aggregate of offerings by sellers at a given price.
A level on the chart where the security has traded before and which will tend to interrupt or reverse a subsequent down trend. It is based on the persistence of memory of buyers and sellers and their desire to get out of losing positions without loss or to enter positions they did not take and now regret that decision.
A general term for a price movement in one direction
- Swing Charts
In Gann analysis, the basis for mechanical trend indicators. Swing charts record the reverse moves that run for 2 or three time intervals, typically days.
In cycle analysis, the tendency for the bottom of cycles of different lengths to coincide from time to time. Also means that cycles for similar markets and of similar length turn together.
The result of measuring an aspect of price action with a view to predicting the extent of a likely price move. Same as objective.
- Tax File Number
Tax file numbers (TFNs) are unique numbers issued by the Australian Taxation Office (ATO) to identify individuals, corporations and others who lodge income tax returns with the ATO.
While individuals cannot be required to provide their TFN, there may be consequences if they don’t. For example, if individuals do not quote their TFN to employers and financial institutions then they may have tax deducted from their income or interest payments at the highest marginal rate.
Quotation of TFNs is also a condition of receipt of most Australian Government assistance payments.
- Technical Analysis
The study of the movements and patterns formed in prices and volumes of traded financial securities. Was originally only done only with charts (Charting), but now includes a wide range of mathematical and graphic representation of price and volume data.
Measurements of market activity, principally price, volume and open interest.
The period left before the repayment of a loan or contract or the initial period of the loan. It mat be expressed in years, months or days.
This is a common abbreviation for theoretical ex-rights price. This is the price at which shares should trade after a rights issue. However other concurrent factors affecting the share concerned or the market as a whole may modify the situation.
Acronym for Tax File Number
The smallest change permitted in the price of a futures contract. However, the term is used more widely for prices recorded on any market trade by trade. This may derive from the sound made by pre-electronic quote machines (ticker tape machines, or just tickers) whenever a trade came through. On the ASX, the term means the minimum price step that may be bid or offered and depends on the current price of the stock. There is an explanation at http://www.asx.com.au/resources/education/basics/price.htm on the ASX website.
The three-letter code allocated by the Australian Securities Exchange to each company. Also known as the ASX Code.
- Time Cycles
In cycle analysis, a way to forecast the direction of prices as well as the period of time for which any trend will run.
- Time Frame
A measure of time used in analysis, e.g. one minute, hourly, daily, weekly, monthly and yearly. Can also be used more generally as in short medium or long term.
- Time Stop
A time limit on the holding of a position, after which it is intended to be closed, either automatically or by action of the trader.
- Time Weighted Average Capital
The average capital employed in a year, where the average is weighted for the proportion of the year the capital was employed. See Ask Colin for an example of the calculation method.
A basic principle of Steidlmayer distribution theory
- Total Return
Total return is the sum of capital growth and income stream from an investment or a portfolio of investments. For a stock it means the increase in share price plus the dividend per share. It is usually expressed as a percenatge return on the value of the investment at the start of the period beng measured. Also sometimes called Total Shareholder Return.
- Total Return Index
An index of stock prices that assumes the reinvestment of dividends as from the ex-dividend date for each stock, rather than the payment date. It does not assume reinvestment of franking credits. Also known as an accumulation index.
ASX/S&P Total Return indices are technically Gross Total Return Indices (see Glossary entry). See and also Net Total Return Indices.
A transaction, either buying or selling, on a financial market.
A person who buys or sells with the objective of making a capital gain.
The exchanging of money for a financial instrument in the expectation of an income stream and/or a capital gain. Essentially identical to investment, except the emphasis will tend to be on a shorter time frame and capital gain will tend to be the prime component of total return.
- Trading Plan
A preferably written document that sets out the trader's objectives, strategies and tactics in detail.
- Trading range
Price action over a period that is confined to a relatively narrow range. Also called a congestion area.
Used in cycle theory
A succession of either higher highs and higher lows (an uptrend) or lower highs and lower lows (a downtrend) in the short term and higher peaks and higher troughs (an uptrend) or lower peaks and lower troughs (a downtrend) in the longer time frames. The trend is determined by the price action.
- Trend Channel
Price sometimes trades between a trend line and a parallel line drawn through the peaks of an uptrend or the troughs of a downtrend. Breakouts through the channel lines are often the last extremes of a trend and lead to a break of the trend line as well.
- Trend Data
A trend series is a seasonally adjusted series that has been further adjusted to remove irregular effects and ‘smooth’ out the series to show the overall ‘trend’ of the data over time.
- Trend Line
A line connecting lows in an up trend or highs in a downtrend.
- Trend-Following Indicator
One of the two basic types of indicator, the other being momentum oscillators. They are used to trade trends. Examples are moving averages, Parabolic SAR, Directional Movement System and Moving Average Convergence Divergence (MACD).
In bar charting, when price forms lower highs and higher lows. Small triangles tend to be continuation patterns and may be specifically called pennants. Large triangles tend to be reversal patterns. Symmetrical triangles are the pure form and may breakout in either direction. Ascending triangles have flat tops and tend to be bullish. Descending triangles have flat bottoms and tend to be bearish.
- Triple Divergence
Two consecutive divergences. Said to be a stronger signal than a single divergence.
- True Range
A component of the Directional Movement System. True Range is the greatest of the high today less the low yesterday, the high today less the close yesterday and the close yesterday and the low today.
Stands for Time Weighted Average Capital. See that entry in the Glossary and Ask Colin for a further explanation.
- Two Strikes Rule
Corporations legislation where two consecutive votes of over 25% against a company's remuneration report triggers a vote on whether to spill the board.
A day in which the price closes at the same level as yesterday.
- Underlying Profit
An adjusted statutory profit figure calculated by management to reflect the profit from the ongoing business(es) of the company.
A jargon term which means that for a stock or stocks, a fund or porfolio holds one or more securities in a lesser proportion than they represent in the market index.
- Value Stock
This is a term that is used to describe a stock which is cheap on fundamentals. This means that its price is significantly lower than its intrinsic value. Different analysts will have different ways to determine value. The main measures that people use are price to cash flow per share, price to earnings per share (PE) ratio, dividend yield and price to net tangible assets per share.
In cycle theory, the principle that the other principles of multiple cycle analysis
- Vertical Arrangement of Data (VAD)
The way Steidlmayer distributions are charted in Market Profile and similar systems.
The degree to which the price of a financial security or class of financial securities varies over time. Academics equate greater volatility with greater risk.
The total number of financial instruments traded in a period. Sometimes proxies are used when data is unavailable. The general idea is that volume should confirm price if the buyers or sellers are committed to a price trend.
- Volume Weighted Average Price
the Volume Weighted Average Price is calculated by adding up the value of every transaction in a period (price multiplied by number of shares traded) and then dividing by the total shares traded for the period.
∑ No of shares traded x price
VWAP = ------------------------------------------
Total number of shares traded
Acronym for Volume Weighted Average Price.
A bear or falling market. In Gann terms, a market that is falling below its 1x1 line.
A pattern that forms on bar charts. Formed when price continues to make upward or downward progress, but the amplitude of the prices swings gradually deceases. Rising wedges are reversal patterns in an uptrend and continuation patterns in a downtrend. Falling wedges are reversal patterns in down trend and continuation patterns in an uptrend.
Rapid reversal of trading signals
- White Candle
A candle for a period which closes higher than it opens.
A candlestick continuation pattern. The same as a gap in Bar charting.
ASX trading code. See Crossed Trade.
Yield is the return as a percentatge of the price. It may be the initia price, or more commonly the current price. ee Dividend Yield and Earnings Yield
- Yield to Maturity
A total return measure for bonds that combines both capital gain/loss and income. It is calculated using the purchase price (not the face value) and assumes the bond is then held to maturity.
In Elliott Wave Theory, the name given to a corrective pattern that is a basic three wave move against the larger trend.