tag:blogger.com,1999:blog-29673672820010178962007-09-29T13:28:41.117-07:00Trading LibraryThe RivermanBlogger76125tag:blogger.com,1999:blog-2967367282001017896.post-17958077791484604612007-02-20T19:01:00.001-08:002007-03-06T21:52:54.393-08:00Subject IndexThe Trading Library provides information on the following topics related to trading and investment in the currency, commodity, derivative, bond, and stock markets:
ArbitrageAsk PriceAudit TrailBack OfficeBears & Bear MarketsBid PriceBoiler RoomBondsBrokers & BrokeragesBulls & Bull MarketsCharting & ChartistsChurningCommodity Futures Trading Commission (CFTC)Cross RateCurrency SwapDay Traders & The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-77549085572582841382007-02-01T15:48:00.000-08:002007-03-20T21:53:38.045-07:00Market MakerWhat is a market maker?
A market maker is a professional securities dealer or person with trading privileges on an exchange who has an obligation to buy when there is an excess of sell orders and to sell when there is an excess of buy orders. By maintaining an offering price sufficiently higher than their buying price, these firms are compensated for the risk involved in allowing their inventoryThe Rivermantag:blogger.com,1999:blog-2967367282001017896.post-11295678263514192402007-02-01T15:45:00.001-08:002007-03-20T21:56:14.486-07:00OptionsWhat are options?
An option is a contract that gives the buyer the right, but not the obligation, to buy or sell a specified quantity of a commodity or other instrument at a specific price within a specified period of time, regardless of the market price of that instrument. (Source: CFTC)
Options are contracts giving the purchaser the right to buy or sell a security, such as stocks, at a fixed The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-87412477068576506332007-02-01T12:05:00.000-08:002007-02-01T12:15:24.339-08:00Zero Coupon BondsWhat is a zero coupon bond?
The term "zero coupon" refers to a debt instrument that does not make coupon payments, but, rather, is issued at a discount to par and redeemed at par at maturity. (Source: CFTC)
Zero coupon bonds are bonds that do not pay interest during the life of the bonds. Instead, investors buy zero coupon bonds at a deep discount from their face value, which is the amount a The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-44066780279496878452007-02-01T11:57:00.000-08:002007-03-20T22:03:51.768-07:00Yield CurveThe yield curve is a graphic representation of market yield for a fixed income security plotted against the maturity of the security. The yield curve is positive when long-term rates are higher than short-term rates. (Source: CFTC)
In finance, the yield curve is the relation between the interest rate (or cost of borrowing) and the time to maturity of the debt for a given borrower in a given The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-42894634979766997342007-02-01T11:42:00.000-08:002007-02-01T11:57:01.995-08:00Wash SalesWhat are wash sales, also known as wash trading?
Wash sales involve entering into, or purporting to enter into, transactions to give the appearance that purchases and sales have been made, without incurring market risk or changing the trader's market position. The Commodity Exchange Act prohibits wash trading. (Source: CFTC)
When you buy and sell the same security at the same time or within a The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-49209013703755693922007-02-01T11:06:00.000-08:002007-02-01T11:36:55.803-08:00VolatilityWhat is volatility?
Volatility is a statistical measurement of the rate of price change of a futures contract, security, or other instrument underlying an option.
Volatility trading consists of strategies designed to speculate on changes in the volatility of the market rather than the direction of the market. (Source: CFTC)
Volatility most frequently refers to the standard deviation of the The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-57814147471283896512007-02-01T10:56:00.000-08:002007-02-01T11:06:07.979-08:00Trends and TrendlinesWhat is a trend? What is a trendline?
A trend is the general direction, either upward or downward, in which prices have been moving. (Source: CFTC)
In investing, financial markets are commonly believed to have market trends that can be classified as primary trends, secondary trends (short-term), and secular trends (long-term). This belief is generally consistent with the non-scientific practiceThe Rivermantag:blogger.com,1999:blog-2967367282001017896.post-81495537738058211182007-01-31T13:28:00.000-08:002007-01-31T15:30:16.372-08:00Treasury SecuritiesWhat are Treasury Securities?
Treasury Bills (or T-Bills) are short-term zero coupon US government obligations, generally issued with various maturities of up to one year.
Treasury Bonds (or T-Bonds) are long-term (more than ten years) obligations of the US government that pay interest semiannually until they mature, at which time the principal and the final interest payment is paid to the The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-21069001951146887762007-01-31T11:44:00.000-08:002007-03-06T22:15:21.889-08:00Technical AnalysisWhat is technical analysis?
Technical analysis is an approach to forecasting commodity prices that examines patterns of price change, rates of change, and changes in volume of trading and open interest, without regard to underlying fundamental market factors. Technical analysis can work consistently only if the theory that price movements are a Random Walk is incorrect. (Source: CFTC)
TechnicalThe Rivermantag:blogger.com,1999:blog-2967367282001017896.post-63285193038860744692007-01-31T11:40:00.000-08:002007-01-31T11:43:25.049-08:00SwapWhat is a swap?
In general, a swap is the exchange of one asset or liability for a similar asset or liability for the purpose of lengthening or shortening maturities, or raising or lowering coupon rates, to maximize revenue or minimize financing costs. This may entail selling one securities issue and buying another in foreign currency; it may entail buying a currency on the spot market and The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-48356846840261532732007-01-31T11:35:00.000-08:002007-01-31T11:39:38.241-08:00Strike PriceWhat is the strike price?
Also known as the exercise price, this is the price specified in an option contract at which the underlying futures contract, security, or commodity will move from seller to buyer. (Source: CFTC)
The strike price, or exercise price, is a key variable in a derivatives contract between two parties. Where the contract requires delivery of the underlying instrument, the The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-81910311991784872122007-01-30T17:29:00.000-08:002007-03-06T22:13:39.501-08:00SupportWhat is support?
In technical analysis, support is a price area where new buying is likely to come in and stem any decline. (Source: CFTC)
A support level is a price point where a security’s price pivots and changes direction. They are formed when you can draw a horizontal line between two or more price pivot points.
The support level is the lowest price that a security trades at, over a The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-46530215082859904962007-01-30T17:11:00.000-08:002007-02-03T22:21:56.874-08:00Stop Loss Order / Stop OrderWhat is a stop loss order, also known as a stop order?
This is an order that becomes a market order when a particular price level is reached. A sell stop is placed below the market, a buy stop is placed above the market. (Source: CFTC)
A stop order is an order to buy or sell a stock once the price of the stock reaches a specified price, known as the stop price. When the specified price is The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-76068651453679365952007-01-30T15:05:00.000-08:002007-01-30T15:07:20.532-08:00Stop Limit OrderWhat is a stop limit order?
A stop limit order is an order that goes into force as soon as there is a trade at the specified price. The order, however, can only be filled at the stop limit price or better. (Source: CFTC)
A stop-limit order is an order to buy or sell a stock that combines the features of a stop order and a limit order. Once the stop price is reached, the stop-limit order becomesThe Rivermantag:blogger.com,1999:blog-2967367282001017896.post-38580385211285067722007-01-30T14:57:00.000-08:002007-03-06T22:11:39.132-08:00Stock SplitsWhat is a stock split?
When a company declares a stock split, the price of the stock will decrease, but the number of shares will increase proportionately. For example, if you own 100 shares of a company that trades at $100 a share and it declares a two for one stock split, you will own a total of 200 shares at $50 a share after the split. A stock split has no effect on the value of what The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-18564412254187799082007-01-30T13:25:00.000-08:002007-01-30T13:28:30.955-08:00SpreadWhat is the spread?
The "spread" is the difference between the "bid" price and the "ask" price on over-the-counter market securities. The term "bid" refers to the highest price a market maker will pay at any given time to purchase a specified number of shares of a stock. The term "ask" refers to the lowest price at which a market maker will sell the stock.
The ask price (also known as the "The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-81451360069535375622007-01-30T12:58:00.000-08:002007-01-30T13:24:40.185-08:00Speculative BubbleWhat is a speculative bubble?
A speculative bubble, also known as an economic bubble, is a rapid run-up in prices caused by excessive buying that is unrelated to any of the basic, underlying factors affecting the supply or demand for a commodity or other asset. Speculative bubbles are usually associated with a "bandwagon" effect in which speculators rush to buy the commodity (in the case of The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-36916842156518848862007-01-30T12:25:00.000-08:002007-01-30T12:29:20.573-08:00Short SellingWhat is short selling?
A short sale involves selling a futures contract or other instrument with the idea of delivering on it or offsetting it at a later date. (Source: CFTC)
A short sale is generally the sale of a stock you do not own. Investors who sell short believe the price of the stock will fall. If the price drops, you can buy the stock at the lower price and make a profit. If the price The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-16763094030492612412007-01-30T10:33:00.000-08:002007-01-30T11:25:36.013-08:00SecurityWhat is a security?
A security is generally a transferable instrument representing an ownership interest in a corporation (equity security or stock) or the debt of a corporation, municipality, or sovereign. Other forms of debt such as mortgages can be converted into securities. Certain derivatives on securities (e.g., options on equity securities) are also considered securities for the purposes The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-59090629143528739912007-01-29T01:37:00.000-08:002007-01-29T01:48:16.047-08:00Scalpers and ScalpingWhat is a scalper? What is scalping?
A scalper is a speculator on the trading floor of an exchange who buys and sells rapidly, with small profits or losses, holding his positions for only a short time during a trading session. Typically, a scalper will stand ready to buy at a fraction below the last transaction price and to sell at a fraction above, e.g., to buy at the bid and sell at the offer The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-64398299415781005652007-01-29T01:33:00.000-08:002007-03-06T22:10:02.630-08:00Reverse Stock SplitWhat is a reverse stock split?
A reverse stock split reduces the number of shares and increases the share price proportionately. For example, if you own 10,000 shares of a company and it declares a one for ten reverse split, you will own a total of 1,000 shares after the split. A reverse stock split has no affect on the value of what shareholders own. Companies often split their stock when they The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-53457998011478350352007-01-29T01:30:00.000-08:002007-01-29T01:33:22.775-08:00RetracementWhat is retracement?
A retracement is a reversal within a major price trend. (Source: CFTC)
In finance, a percent measure, indicating deviation of the current stock price from the maximum value. The price movement in the opposite direction of the previous trend. A zero retracement indicates a strong bullish movement. (Source: Wikipedia)The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-88272347647584646932007-01-28T13:54:00.000-08:002007-03-06T22:08:29.149-08:00ResistanceWhat is resistance?
In technical analysis, resistance is a price area where new selling will emerge to dampen a continued rise. (Source: CFTC)
A resistance level is a price point where a security’s price pivots and changes direction. They are formed when you can draw a horizontal line between two or more pivot price points.
The resistance level is the highest price that a security trades at The Rivermantag:blogger.com,1999:blog-2967367282001017896.post-41852606069135645112007-01-28T13:18:00.000-08:002007-01-28T13:26:32.929-08:00Random Walk TheoryWhat is Random Walk Theory and what are its implications for financial markets?
"Random Walk" is an economic theory that market price movements move randomly. This assumes an efficient market. The theory also assumes that new information comes to the market randomly. Together, the two assumptions imply that market prices move randomly as new information is incorporated into market prices. The The Riverman