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Rules FAQ's Glossary
Accrued Interest

The interest that has accumulated since the principal investment, or since the previous interest payment if there has been one already.

Active Management

Refers to a portfolio management strategy where the manager makes specific investments with the goal of outperforming a benchmark index.

After Tax Return

The return from an investment after all income taxes have been accounted for and deducted.


A mathematical measurement of the amount of return expected from an investment. For example, an alpha of 1.20 indicates that a stock is projected to rise 20% in a year when the return on the market and stock's beta are both zero. Generally, a low priced investment in relation to its alpha is considered a good choice because of its undervalued status.

American Stock Exchange

The AMEX was known until 1921 as the "Curb Exchange", and to this day is sometimes affectionately referred to as the "Curb". The stocks and bonds traded on the AMEX tend to be those of smaller to medium sized companies compared to firms listed on competing exchanges like the NYSE and NASDAQ. In recent years, the AMEX has become a leading developer and listing place for exchange-traded funds or ETFs. The AMEX is located in downtown Manhattan.

Annual Percentage Yield

The rate of return on an investment for a one-year period.

Annual Report

A publication that is issued yearly by all publicly held corporations and freely available to all shareholders.   It reveals the company's assets, liabilities, revenues, expenses, and earnings for the past year, along with other financial data. This is often accompanied by a glossy presentation of the company's achievements and philosophy, but it is the accounting information that is required by law to allow investors to gauge the financial health of the company


Increase in value of an asset such as a stock, bond, commodity or real estate.


The ask price (a shortening of asked price) is the price at which a market maker or broker offers to sell a security or commodity. The price another market maker or broker is willing to pay for that security is called the bid price, and the difference between the two prices is called the spread. Bid and ask prices are typically reported to the media for stocks.


Property and items of value owned by a person or business.

Asset Allocation

A term used to refer to how an investor distributes his or her investments among various classes of investment vehicles (e.g., stocks and bonds).
A large part of financial planning is finding an asset allocation that is appropriate for a given person in terms of their appetite for and ability to shoulder risk.


There are various statistical tools for measuring the performance of securities markets. The most common are averages such as the Dow Jones Industrial Average. The prices of 30 industrial stocks are totaled and divided by a divisor that is intended to compensate for past stock splits and dividends. As a result, point changes in the average have only the vaguest relationship to dollar price changes in stocks included in the average.

Average Directional Movement Index (ADX)

The ADX is an oscillator that fluctuates between 0 and 100. Even though the scale is from 0 to 100, readings above 60 are relatively rare. Low readings, below 20, indicate a weak trend and high readings, above 40, indicate a strong trend. The indicator does not grade the trend as bullish or bearish, but merely assesses the strength of the current trend. A reading above 40 can indicate a strong downtrend as well as a strong uptrend.

Balance Sheet

A condensed financial statement showing the nature and amount of a company's assets, liabilities and capital on a given date. In dollar amounts the balance sheet shows that the company owned, what it owed, and the ownership interest in the company of its stockholders.


A unit or group of securities.

Bear Market

A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment to be self-sustaining. As investors anticipate losses in a bear market and selling continues, pessimism only grows. Although figures can vary, for many, a downturn of 20% or more in multiple broad market indexes, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 Index (S&P 500), over at least a two-month period, is considered an entry into a bear market.


A standard index used for measuring the performance of an investment. The goal of most money managers and investors is to outperform their respective benchmark.


A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.

Bid Price

The price a buyer is willing to pay for a security. This is one part of the bid with the other being the bid size, which details the amount of shares the investor is willing to purchase at the bid price. The opposite of the bid is the ask price, which is the price a seller is looking to get for his or her shares.


Sales restricted on a particular security at the discretion of the financial institution.

Blue Chip

A term used to describe a well established, financially sound, nationally recognized company. Blue chips have a history of weathering economic downturns and maintaining stable growth.

Blue-Sky Law

Law passed by various states to protect investors against securities fraud. The law requires sellers of new stock issues or mutual funds to register their offerings and provide financial details on each issue so investors can base their judgments on relevant data.

Bollinger Bands

A band plotted two standard deviations away from a simple moving average.  Because standard deviation is a measure of volatility, Bollinger bands adjust themselves to the market conditions. When the markets become more volatile, the bands widen (move further away from the average), and during less volatile periods, the bands contract (move closer to the average). The tightening of the bands is often used by technical traders as an early indication that the volatility is about to increase sharply.
This is one of the most popular technical analysis techniques. The closer the prices move to the upper band, the more overbought the market, and the closer the prices move to the lower band, the more oversold the market

Book Value

Book value is the net asset value (NAV) of a company's stocks and bonds. Finding the NAV involves subtracting the company's short- and long-term liabilities from its assets to find net assets. Then you'd divide the net assets by the number of shares of common stock, preferred stock, or bonds to get the NAV per share or per bond.


A company or individual who buys and sells property (in the stock market, executes buy and sell orders) on behalf of clients. Brokers may charge a fee or commission for facilitating the transaction. Because most brokerage firms make transactions as both a broker (on behalf of clients) and a dealer (on its own behalf), most brokerages are referred to as broker-dealers.

Bull Market

A prolonged period when stock prices as a whole are moving upward is called a bull market, although the rate at which those gains occur can vary widely from bull market to bull market. The duration of a bull market, the severity of the falling market that follows, and the time that elapses until the next upturn are also different each time. Well-known bull markets began in 1923, 1949, 1982, and 1990.

Bulletin Board Stock

A security that is not listed and traded on an organized exchange.

Buttonwood Agreement

A 1792 trade agreement banding the original 24 brokers in New York together into an investment community. The agreement was named for a Buttonwood tree that served as their informal meeting place on Wall Street.

Capital Gain

When you sell an asset at a higher price than you paid for it, the difference is your capital gain. For example, if you buy 100 shares of stock for $20 a share and sell them for $30 a share, you realize a capital gain of $10 a share, or $1,000 in total. If you own the stock for more than a year before selling it, you have a long-term capital gain. If you hold the stock for less than a year, you have a short-term capital gain.

Capital Loss

When you sell an asset for less than you paid for it, the difference between the two prices is your capital loss. For example, if you buy 100 shares of stock at $30 a share and sell when the price has dropped to $20 a share, you will realize a capital loss of $10 a share, or $1,000.

Capital Stock

All shares representing ownership of a business, including common and preferred.


Total amount of various securities issued by a corporation. Capitalization may include bonds, debentures, preferred and common stock, and surplus.

Cash Dividend

A distribution of earnings to shareholders, prorated by class of security and paid in the form of cash.

Cash Flow

Reported net income of a corporation plus amounts charged for depreciation, depletion, amortization, extraordinary charges to reserves, which are bookkeeping deductions and not paid out in actual dollars and cents.

Casual/Competitive User

These terms are used to generally describe the intensity you wish to play with.  In a casual user league you are more likely to be a beginner who is using FaFolio to educate yourself and become more familiar with not only Fantasy Stock Broker but the stock market.  In a competitive user league you would be more likely to find advanced players who understand more than the basics of investing and have played in a fantasy league before.


The actual piece of paper that is evidence of ownership of stock in a corporation. Watermarked paper is finely engraved with delicate etchings to discourage forgery.

Circuit Breakers

An imposed pause in trading that permits buyers and sellers time to assimilate incoming information and make investment choices.  Circuit breakers promote investor confidence by giving investors time to make informed choices during periods of high market volatility

Clearing Agent

Organizations that are exchange-affiliated and facilitate the validation, delivery and settlement of securities transactions.


In securities, it is the mixing of customer-owned securities with brokerage-owned securities. In trust banking, it is the pooling of individual customer accounts into a fund, a share of which each contributing customer owns. This works similarly to a mutual fund. In real estate, it is the illegal act of a broker combining clients' funds with personal funds since, by law; a broker is required to use a separate trust or escrow fund to temporarily hold a client's funds.


Transaction fee paid to a broker for executing a securities trade. Commission amounts vary and are often dependent on the size of trade, the frequency of trades, and sometimes the size of the brokerage account. Discount brokers tend to charge lower commissions for trades versus full service brokers.

Common Stock

Securities that represent an ownership interest in a corporation. If the company has also issued preferred stock, both common and preferred have ownership rights. Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation. The terms common stock and capital stock are often used interchangeably when the company has no preferred stock

Compound Interest

Compound interest is interest that accrues on the original principal amount invested as well as the accumulated interest of the investment over time. Compound interest is calculated using the following formula: FV = PV (1 + i)n, where
FV = future value
PV = present value
i = interest rate
n = number of years


Generating earnings from previous earnings by reinvesting earnings in the original investment vehicle.

Concentrated Account

An account with a large percentage of investments in a single asset class may be considered concentrated. For example, while a diversified account may contain a strategic mix of stocks, bonds and cash investments, a concentrated account might contain a significant investment in one particular stock or bond.


A corporation that has diversified in operations usually by acquiring enterprises in widely varied industries.

Consolidated Tape

A high-speed system that continuously provides the last sale price and volume of any securities transaction in listed stocks to the public. All trades in NYSE-listed securities, regardless of the market center on which such trades occur, are reported to and disseminated on the ticker system


Describes an investor that believes and does the exact opposite of what the majority of investors are doing at any given moment. For example, contrarians might perceive value in a stock or index that is out of favor, or has performed poorly. Whereas most investors would avoid an out of favor investment, contrarians would buy it in hopes of a turn around or change in market sentiment.


A statistical measure of how two securities move in relation to one another. The correlation coefficient, or indicator of related movement, ranges from 1 to -1. A correlation coefficient of 1 indicates the securities move exactly the same way at the same time, and -1 means they move exactly opposite. A correlation coefficient of 0 indicates the securities' movement is not related at all. Extreme 1 and -1 correlation coefficients are rare.

Cost Basis

The cost basis is the original price of an asset -- usually the purchase price plus commissions. You use the cost basis to calculate capital gains and capital losses, depreciation, and return on investment.


Another name for a trade or a transaction. The matching of a buy order with an identical order to sell.

Cumulative Market

Beginning in the 1790s, a group of stockbrokers traded outdoors in the streets of the financial district. The curb brokers generally dealt in the stocks of smaller companies. By 1900, they were conducting business in Broad Street near the NYSE building. In 1921, the Curb Market moved indoors to a new building on Trinity Place and in 1953 changed its name to the American Stock Exchange.

Current Assets

Those assets of a company that are reasonably expected to be realized in cash, or sold, or consumed during one year. These include cash, U.S. Government bonds, receivables and money due usually within one year, and inventories.

Current Liabilities

Money owed and payable by a company, usually within one year.


Debt not secured by a specific asset of the corporation, but issued against the issuer’s general credit

Declaration Date

The date on which the company announces the next dividend payment; also known as the announcement date. The declaration date includes the size of the dividend, ex-dividend date, and pay date.

Default Risk

The risk that companies or individuals will be unable to pay the contractual interest or principal on their debt obligations.

Delayed Opening

The postponement of the trading of an issue on a stock exchange because of unusual market conditions. Reasons for the delay might be an influx of either buy or sell orders, an imbalance of buyers and sellers, or pending corporate news that requires time for dissemination.  


Charges against earnings to write off the cost, less salvage value, of an asset over its estimated useful life. It is a bookkeeping entry and does not represent any cash outlay nor are funds earmarked for the purpose


A severe and prolonged recession generally including high unemployment, falling prices and low economic productivity.

Derivative Security

A financial security whose value is determined in part from the value and characteristics of another security, known as the underlying security.

Direct Purchase Plan

A plan offered by a corporation allowing investors to purchase shares directly from their company rather than going through a broker.


The amount by which a preferred stock or bond may sell below its par value.


Spreading investments among different types of securities and various companies in different fields.


A distribution of earnings to a class of a corporation's shareholders. Dividends can be paid in the form of cash, stock or property.

Dividend Yield

The distribution rate of a fund calculated by dividing the amount of the dividends per share by the per share market price of the fund. For example, a fund price of $10 that pays a $2 dividend per year has a 20% dividend yield.

Dollar Cost Average

A system of buying securities at regular intervals with a fixed dollar amount. Under this system investors buy by the dollars worth rather than by the number of shares. If each investment is of the same number of dollars, payments buy more shares when the price is low and fewer when it rises. Temporary downswings in price benefit investors if they continue periodic purchases in both good times and bad and the price at which the shares are sold is more than their average cost.

Dow Jones Industrial Average

The Dow Jones Industrial Average (DJIA) is an index used to measure the performance of the U.S. financial markets. Introduced on May 26, 1896 by Charles H. Dow, it is the oldest stock price measure in continuous use. Over the past century "the Dow" has become the most widely recognized stock market indication in the U.S. and probably in the entire world. Most of the stocks included in the index are listed on the New York Stock Exchange, and are all large blue-chip companies that reflect the health of the U.S. economy. All but a handful of these have major business operations throughout the world, thus providing some insight into the economic well-being of the global economy.


Dividend Reinvestment Plan. A plan offered by a corporation allowing shareholders to reinvest their dividends by purchasing more shares in the corporation.

Dutch Auction

Auction system in which the price of an item is gradually lowered until it meets a responsive bid and is sold.

Earned Income

Income (especially wages and salaries) generated by providing goods or services. Also includes annuity income.

Earnings Per Share

The portion of a company's profit allocated to each outstanding share of common stock.   Earnings per share serves as an indicator of a company's profitability.

Calculated as:
When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period.
For example, if a company earns $50 million in a year and has 50 million outstanding shares, the earnings per share are $1. Earnings per share can also be calculated on a fully diluted basis, by adding outstanding stock options, rights, and warrants to the outstanding shares.

Earnings Report

A statement issued by a company showing its revenues and expenses over a given period. The health of a company's earnings is what most investors consider when buying stock.

Economic Indicator

A key statistic in the overall economy that experts use as a yardstick to predict the performance of the stock market.

Electronic Data Gathering, Analysis and Retrieval System (EDGAR)  

The Securities and Exchange commission's system for the electronic submission by direct transmission, magnetic tape or diskette, of most filings and related correspondence

Effective Date

Date when an offering registered with the SEC may commence, usually 20 days after filing the registration statement.

Efficient Market

A market theory that dissuades investors from using fundamental research to find undervalued or mis-priced securities. The central idea is that market prices already reflect the full knowledge of investors, which makes it impossible to outperform the market.

Emerging Market

Refers to the financial market or economy of a developing nation, which is often new or has a short history.


Ownership in a company, whereas bonds represent debt, stocks represent equity, or the total market value of a cash account.


The date in which a stock no longer trades with the dividend, distribution or dividend rights. On the ex-date, the stock trades ex-dividend.
In order to receive a dividend from a paying company, you must buy the stock prior to the ex-date. You may sell the stock any time on or after the ex-date and still receive the dividend, since you would be selling the stock without the dividend rights. The ex-date is the second business day before the date of record.


The period in which the stock is considered to be trading without dividend. Commonly the interval between the ex-date and the declaration date of the next dividend announcement.

An investor who buys shares during that interval is not entitled to the dividend. Typically, a stock's price moves up by the dollar amount of the dividend as the ex-dividend date approaches, then falls by the amount of the dividend after that date.


A marketplace, physical or electronic, in which securities, commodities, derivatives and other financial instruments are traded. Exchanges ensure the fair and orderly exchange of financial products.

Exchange-Traded Fund

ETFs are an emerging class of low-cost index funds that trade like stocks. Inexpensive, tax-efficient, and flexible, they offer investors instantaneous exposure to local or global indexes via a single trade. Sometimes referred to as "tracking stocks."

Exponential Moving Average

The Exponential Moving Average (EMA) is a type of moving average - a popular technical analysis tool that makes it easier to spot price trends by smoothing out price fluctuations that can occur especially in volatile markets.
All moving averages take an average of a set of a security's closing prices over a certain period of time, which can be any amount of time, but is typically a year. They differ in the way they attribute weight to the prices used in the data set. EMAs put more weight on newer prices, which makes them less of a lagging indicator than the Simple Moving Average (SMA), which gives equal weight to all prices in the data set.

Extra Dividend

A dividend in the form of stock or cash in addition to the regular or usual dividend the company has been paying

Face Value

Value of a bond, note, mortgage or other security as given on the certificate or instrument.  Face value is not an indication of market value.  May also be referred to as par value or nominal value.

Fair Market Price

A reasonable price for securities based on supply and demand.


Federal Deposit Insurance Corporation. The FDIC insures bank deposits in the United States against bank failure. It does not insure money invested in the stock market or any related products.

Federal Reserve

The central bank in the United States that seeks to control the economy by raising and lowering short-term interest rates and the money supply.

Fibonacci Arcs

In technical analysis, Fibonacci Arcs are used to illustrate potential levels of support (the lowest price data points on a price chart) and resistance (the highest price data points on a price chart). They are also used to establish price targets.
Arcs are plotted on a price chart so that the center of each arc falls on the last peak (highest point) or trough (lowest point) of a trend line to show potential levels of resistance or support. The arcs then intersect the original trend line at each of the Fibonacci levels: 38%, 50%, and 62%. Arcs are usually plotted along with Fibonacci Retracements, though they don't have to be.

Fibonacci Numbers

Fibonacci numbers are a sequence of integers (1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 ...), where the sum of each set of two consecutive numbers equals the next number in the sequence.

In addition, the result of dividing any of the numbers in the sequence by the preceding integer equals approximately 1.618 (such as 8 / 5). And, if any number is divided by the following integer the result is about 0.618 (such as 8 / 13).

There are three important Fibonacci ratios that play significant roles in technical analysis. The first is 0.618, the second is 0.5, and the third is the ratio of every alternate number, or 0.382. These ratios are usually used as percentages: 61.8%, which is usually rounded up to 62%; 50%; and 38.2%, which is usually rounded down to 38%. The Fibonacci numbers form the foundation for a variety of indicators in the study of technical analysis. These include Fibonacci Retracements, Fibonacci Arcs and Fibonacci Time Zones.

Fibonacci Retracements

In technical analysis, a retracement occurs when a security's price is trending upward or downward and then retraces, or moves in the opposite direction, before continuing along the same trend line.

For example, if a stock's price moves from $5 to $10 and experiences a 50% retracement, its price would fall to $7.50 before continuing to rise in value. When drawn on a price chart, the Fibonacci levels (38%, 50% and 62%) tend to act as levels of support (the lowest price data points on a price chart) and resistance (the highest price data points on a price chart). Significant price events are also expected to occur at these levels.

Fibonacci Time Zones

In technical analysis, Fibonacci Time Zones are used to predict price reversals and trend changes. Lines are plotted on a price chart at levels that correspond to the Fibonacci number series (1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144 ...) within a particular range of time. Significant trend changes are expected to occur around these intervals. Fibonacci Time Zones are also known as Fibonacci Time Series.

Financial Industry Regulatory Authority

Non-profit organization formed under the joint sponsorship of the Investment Banker's Conference and the SEC to comply with the Maloney Act.

The FINRA's basic purposes are to 1) standardize practices in the field, 2) establish high moral and ethical standards in securities trading, 3) provide a representative body to consult with the government and investors on matters of common interest, 4) establish and enforce fair and equitable rules of securities trading and 5) establish a disciplinary body capable of enforcing the above provisions.

First In, First Out (FIFO)

A method of accounting in which the first acquired shares are sold first.

Fiscal Year

Any consecutive 12-month period of financial accountability for a corporation or government. For example, because of the Christmas rush many department stores find it easier to wind up their yearly accounting on January 31 instead of December 31. Fiscal year is often abbreviated FY with a date. For example, FY May 31 means that the company's fiscal year goes from June 1 to May 31 of the following year.

Fixed Charges

A company's fixed expenses, such as bond interest, which it has agreed to pay whether or not earned, and which are deducted from income before earnings in equity capital are computed.

Free and Open Market

A market in which supply and demand are freely expressed in terms of price. Contrasts with a controlled market in which supply, demand and price may all be regulated.

Fundamental Analysis

Evaluating a security by measuring quantitative and qualitative factors including the corporation's finances and management. Fundamental analysis is considered to be the opposite of technical analysis.

Gann Angles

In technical analysis, Gann Angles, or Fans, are used to show price levels of support (the lowest price data points on a price chart) and resistance (the highest price data points on a price chart).

The most important Gann Angle, 45°, is also known as the 1x1 angle. There are eight additional angles that are thought to be significant. When prices break through either the level of support or resistance, the next largest Gann angle typically acts as a new level of support or resistance.

Going Public

When a company sells shares of itself to the public to raise capital. 

Good Delivery

Certain basic qualifications must be met before a security sold on the Exchange may be delivered. The security must be in proper form to comply with the contract of sale and to transfer title to the purchaser.

Grantor (Depositor)

The individual who establishes an account. This person is responsible for verifying his or her eligibility to make a contribution.  

Graphical User Interface (GUI)

The term used to describe a computer screen’s visual design or layout. The GUI of the Display Book has been revised for the Hybrid Market. 

Growth Stock

Shares of a company known for a history of rapid earnings growth. Most growth stocks do not pay dividends because management reinvests earnings to feed the growth.


Making an investment to reduce the risk of another investment. Hedging generally involves taking an offsetting position in a related security or selling a futures contract to sell stock at a particular price, thereby reducing the risk of adverse price movements.

Holding Company

A corporation that owns a large number of shares in other companies. Holding companies use the voting rights that come with their shares to exert influence over the companies under them. 

Income Statement

A report on a company's financial status over a period of time. It totals profits, subtracts expenses and pinpoints how much money the company can reinvest.

Income Stocks

Common stocks that pay large dividends that an investor could use as income.


A statistical measure used to track the aggregate performance of stock, bond, and commodities markets. Widely followed indexes include those developed and managed by Standard & Poor's, Russell, and Dow Jones.


Investment strategy that seeks to match the exact performance of a specific market or benchmark index.


Mathematical calculations used to measure current conditions and security performance and to forecast future trends. Technical analysis indicators include moving averages and Fibonacci studies, while fundamental analysis indicators include unemployment rates and the Consumer Price Index (CPI).

Individual Retirement Account

Personal, tax-deferred, retirement account that an employed person can set up with an annual deposit limit.

The rate at which the general level of prices for goods and services rises. Increasing prices lead to decreasing buying power.

Inflation Rate

An important economic indicator. The rate at which prices are rising.

Inflation Risk

Chance that the value of assets or of income will be eroded as inflation shrinks the value of a country's currency.

Initial Public Offering

Corporation's first offering of stock to the public. IPOs are almost invariably an opportunity for the existing investors and participating venture capitalists to make big profits, since for the first time their shares will be given a market value reflecting expectations for the company's future growth.

Institutional Investors

Organizations whose primary purpose is to invest their own assets or those entrusted to them by others. The most common are employee pension funds, insurance companies, mutual funds, university endowments, and banks.


Cost of using money, expressed as a rate per period of time, usually one year.

Interest Rate

Rate of interest charged for the use of money, usually expressed at an annual rate. The rate is derived by dividing the amount of interest by the amount of principal borrowed.

Interest Rate Risk

Risk that changes in interest rates will adversely affect the value of an investor's securities portfolio.

Internal Revenue Service (IRS)

U.S. agency charged with collecting nearly all federal taxes, including personal and corporate income taxes, Social Security taxes, and excise and gift taxes.


Unlike block facilitation trades, where a broker-dealer commits capital to accommodate a large trade for an institutional investor, internalization involves creating a proprietary trading revenue which keeps retail orders within the firm ("internalized") with the broker-dealer buying from its sell orders and selling to its buy orders, generally at the published best bid/offer or a penny better. The result is that a firm with a large amount of retail orders has a trading opportunity to make a "dealer spread" (buying at the bid and selling at the offer) without interference and will layoff any unwanted position in the primary market. The NYSE believes this practice reduces transparency, impairs price discovery and harms investors.

Internet Account

An account established where trades and account information are available online through a login process to a secure site.

Intrinsic Value

The difference between the strike price and the stock price.


The use of money for the purpose of making more money, to gain income or increase capital, or both.

Investment Bank

Also known as underwriters, investment banks serve as middlemen between corporations issuing new securities and the buying public. Normally one or more investment banks buy the new issue of securities from the issuing company for a negotiated price. The company walks away with this new supply of capital, while the investment banks form a syndicate and resell the issue to their customer base and the investing public. Investment banks perform a variety of other financial services, such as merger and acquisition advice and market analysis.

Investment Banker

One whose principal business consists of acting as investment adviser and rendering investment supervisory services.

Investment Club Account

An account established for a group of people who pool their assets in order to make joint investment decisions.

Investment Company

A company or trust that uses its capital to invest in other companies. There are two principal types: the closed end and the open end, also known as a mutual fund. Shares of closed-end investment companies, most of which are listed on the NYSE, are readily transferable in the open market and are bought and sold like shares of stock. Capitalization of these companies remains the same unless action is taken to change, which is rare. Open-end funds sell their own new shares to investors, stand ready to buy back their old shares, and are not listed. Open-end funds are so called because their capitalization is not fixed; they issue more shares as people want them.

Investment Company Act of 1940

This Act regulates the organization of companies, including mutual funds, that engage primarily in investing, reinvesting, and trading in securities, and whose own securities are offered to the investing public.

The regulation is designed to minimize conflicts of interest that arise in these complex operations. The Act requires these companies to disclose their financial condition and investment policies to investors when stock is initially sold and, subsequently, on a regular basis. The focus of this Act is on disclosure to the investing public of information about the fund and its investment objectives, as well as on investment company structure and operations.

Investment Company Institute (ICI)

The Investment Company Institute (ICI) is the national association of the U.S. investment company industry. Founded in 1940, its membership includes approximately 8,664 mutual funds, 601 closed-end funds, 106 exchange-traded funds, and six sponsors of unit investment trusts.

Investment Counsel

One whose principal business consists of acting as investment adviser and rendering investment supervisory services.

Investment Expenses

Investment expenses are expenses connected with the production of investment income, such as amounts paid for management of securities. Investment expenses do not include investment interest expense, or any expenses associated with a passive activity.

Investment Portfolio

A variety of securities owned by an individual or an institution.

Investment Style

Indicates the approach of an investment manager in selecting securities. For example, a certain manager may be value oriented, whereas another may emphasize growth.


Any of a company's securities, or the act of distributing such securities.

Large Cap

Refers to companies with a market capitalization over $5 billion.

Last In, First Out (LIFO)

A method of accounting in which the shares acquired most recently are sold first.


Using borrowed capital, such as margin, to increase the potential return of an investment while also increasing the potential risk. In real estate terms, leverage is the amount of debt used to finance assets and operations. A company with greater debt than equity is known as being "highly leveraged".


All claims against the assets of a corporation. Liabilities can include accounts, wages and salaries payable; dividends declared; accrued taxes; and fixed or long-term debt such as bonds and bank loans.

Limit Order

This is an order to buy or sell a set number of shares at a specified price or better. A limit order guarantees price, but not an execution. These types of orders also may be placed with special instructions, like AON (all or none) and GTC (good til cancelled).

Buy limit orders will execute only if the market reaches the specified price or lower. Sell limit orders will execute only if the market reaches the specified price or higher.

Linear Regression Line

In technical analysis, Linear Regression Lines are used to determine the direction of a trend. The line runs through a set of price data points so that the smallest amount of space exists between the price points and the Linear Regression Line. During a trend, the Linear Regression Line prices are expected to fall on or around the line.

Linear Regression Channel Lines, which run parallel and equidistant from the central trend line, may also be used. Channel lines are plotted based on the highest and lowest closing points from the Linear Regression Line. Channel lines are used to show the range within which you can expect prices to move. The top channel line serves as a resistance level, or the highest price data points on a price chart, and the bottom channel line acts as a support level, or the lowest price data points on a price chart.

Liquid Assets

Refers to cash or items easily convertible to cash. Some examples: stocks, money-market fund shares, U.S. Treasury bills, bank deposits.

Converting investment securities to cash.


Ability to rapidly buy or sell an asset without substantially affecting the asset's price.  Liquidity also refers to the relative ease with which an asset can be converted into cash.

Liquidity Risk

The ability to easily convert securities to cash and is determined by how active the secondary market is for a particular security.

Listed Companies

Companies whose shares of stock trade on a securities market.

Listed Stocks

The stock of a company that is traded on a securities exchange. The various stock exchanges have different standards for listing. Some of the guides used by the New York Stock Exchange for an original listing are national interest in the company and a minimum of 1.1 million shares publicly held among not less than 2,000 round-lot stockholders. The publicly held common shares should have a minimum aggregate market value of $18 million. The company should have net income in the latest year of over $2.5 million before federal income tax and $2 million in each of the preceding two years.

Locked In

Investors are said to be "locked in" when a security they own is trading at a higher price than they paid for, but they choose not to sell in order to avoid having their profit become subject to the capital gains tax.


Signifies ownership of securities. "I am long 100 U.S. Steel" means the speaker owns 100 shares.

Long-Term Capital Gain (or Loss)

When you sell a capital asset that you have owned for more than a year at a higher price than you paid to buy it, any profit on the sale is considered a long-term capital gain. If you sell for less than you paid to purchase the asset, you have a long-term capital loss.

Unlike short-term gains, which are taxed at your income tax rate, most long-term gains on most investments, including real estate and securities, are taxed at rates lower than the rates on ordinary income. Currently, those rates are 15% if you're in the 25% tax bracket or higher and 5% if you are in the 10% or 15% bracket.

You can deduct your long-term losses from your long-term gains, and your short-term losses from your short-term gains, to reduce the amount on which potential tax may be due. You may also be able to deduct up to $3,000 in accumulated long-term losses from your ordinary income and carry forward losses you can't use in one tax year to deduct in the next tax year.


An illegal operation. Buying or selling a security for the purpose of creating false or misleading appearance of active trading or for the purpose of raising or depressing the price to induce purchase or sale by others.

Mark to Market

When an investment is marked to the market, its value is adjusted to reflect the current market price.

With mutual funds, for example, marking to the market means that a fund's net asset value (NAV) is recalculated each day based on the closing prices of the fund's underlying investments.

With a margin account to buy futures contracts, the value of the contracts in the account is recalculated at least once a day to determine whether it meets the firm's margin requirements. If that value falls below the minimum specified, you get a margin call and must add assets to your account to return it to the required level.

Market Capitalization

Market capitalization is calculated by taking the total shares outstanding multiplied by the current market price of one share. This value is used when designing a portfolio strategy as a basis for risk/return and asset allocation parameters.

Market Data System (MDS)

Captures and displays, worldwide, trade and volume information continuously generated by trading floor activity. MDS is the core of the NYSE international communications network.

Market Day
8 to 9:15 a.m. ET Pre-Market Hours
9:30 a.m. to 4 p.m. ET Regular Market Hours
4:15 to 8 p.m. ET After-Hours Trading
Market Maker
A broker-dealer who is prepared to buy or sell a specific security -- such as a bond or at least one round lot of a stock -- at a publicly quoted price, is called a market maker in that security.
Other brokers buy or sell specific securities through market makers, who may maintain inventories of those securities. There is often more than one market maker in a particular security, and they bid against each other, helping to keep the marketplace liquid.
The NASDAQ Stock Market and the corporate and municipal bond markets are market maker markets. In contrast, on the floor of the New York Stock Exchange (NYSE) there's a single specialist to handle transactions in each security.
Market Order
A market order is an order to buy or sell a stock immediately at the best available current price; no price can be specified in this order. This order guarantees execution, but does not guarantee execution price.
Be wary of using market orders on stocks with a low average daily volume: in such market conditions the ask price can be a lot higher than the current market price (resulting in a large spread). In other words, you may end up paying a whole lot more than you originally anticipated.
Buy market orders are executed generally at the ask price. Sell market orders are executed generally at the bid price.
Market orders cannot contain special instructions such as all or none (AON) or good til cancelled (GTC). Again, there is no guarantee of the execution price and it can be several points higher or lower than the quoted bid/ask, especially during fast markets.
Market Price
The last reported price at which the stock or bond sold, or the current quote.
Market Risk
Also known as systematic risk; risk that is common to all securities of the same general class and thus cannot be eliminated by diversification. A measure of this is the Beta Coefficient.
Market Value
The current resale value of a security. The market value of an issue is easily computed as the closing price multiplied by the shares outstanding.
When two or more companies consolidate by exchanging common stock, and the resulting single company replaces the old companies, the consolidation is described as a merger. The shareholders of the old companies receive prorated shares in the new company.
A merger is typically a tax-free transaction, meaning that shareholders owe no capital gains or lost taxes on the stock that is being exchanged. A merger is different from an acquisition, in which one company purchases, or takes over, the assets of another. The acquiring company continues to function and the acquired company ceases to exist. Shareholders of the acquired company receive shares in the new company in exchange for their old shares.
Despite their differences, mergers and acquisitions are invariably linked, often simply described as M&As.
Mid Cap
Refers to companies with a market capitalization between $1 billion and $5 billion.
Modified Adjusted Gross Income
Adjusted gross income (AGI) represents your total income reduced by certain deductions known as "adjustments," but before you take your itemized deduction or standard deduction, and before you take the deduction for your exemptions.
In technical analysis, the Momentum indicator is used to measure the rate of change of a security's closing prices. This helps point out trends and their strength.
It's a centered oscillator, which means it fluctuates above and below a center, or zero, line. High and low readings may indicate that up- or downtrends may be occurring. And, for some analysts, moves above the zero line could signal an opportunity to buy, and moves below the zero line could indicate a time to sell. This is because prices are expected to rise when Momentum crosses the zero line from below, and they are expected to decline when it crosses the zero line from above.
Momentum may also be used to show whether a security is overbought or oversold. Momentum is the same as the Price ROC indicator except that Price ROC is expressed as a percent and Momentum is expressed as a ratio.
Money Flow Index
In technical analysis, the Money Flow Index (MFI) is a technical indicator used to predict trend reversals. MFI oscillates between the values of 0 and 100. Readings below 20 usually signal a security is oversold and readings above 80 indicate a security may be overbought. MFI can also confirm whether or not a trend is occurring and help predict future price movements.
Moody's Investors Service, Inc.
Moody's is a financial services company best known for rating investments. Moody's rates bonds, common stock, commercial paper, municipal short-term bonds, preferred stocks, and annuity contracts. Its bond rating system, which assigns a grade from Aaa through C3 based on the financial condition of the issuer, has become a world standard.
Moving Average Convergence/Divergence
In technical analysis, Moving Average Convergence/Divergence (MACD) is used to predict price trends and their strength. The indicator is a centered oscillator, which means its values fluctuates above and below a center, or zero, line.
When the MACD passes above the zero line, technical analysts typically interpret it as a sign that an upward trend will continue. When the MACD crosses below the zero line, it's usually taken as an indication of a continuing downtrend in prices. The MACD can also create bullish and bearish signals, show when there is positive or negative momentum in a security, and when a security may be overbought and oversold.
National Association of Securities Dealers Automated Quotations is a computerized system that quotes securities traded over the counter and on other exchanges.
National Association of Investors Corporation (NAIC)
An organization dedicated to teaching individuals how to become successful strategic long-term investors.
National Association of Securities Dealers (NASD)
National Association of Securities Dealers, currently FINRA, is a nonprofit organization that operates under the careful watch of the SEC. One of its key purposes is to establish and enforce fair rules of securities trading.
National Security Traders Association (NSTA)
Professional trade organization whose purpose is to improve the ethics, business standards and working environment of its members, who are engaged in the buying, selling and trading of securities.
National Stock Exchange (NSE)
Founded in 1885, the exchange changed its name on November 7, 2003 to the National Stock Exchange from the Cincinnati Stock Exchange.
Net Asset Value
Usually used in connection with investment companies to mean net asset value per share.  An investment company computes its assets daily, or even twice daily, by totaling the market value of all securities owned. All liabilities are deducted, and the balance divided by the number of shares outstanding. The resulting figure is the net asset value per share.
Net Change
The difference between the closing price of a stock, bond, or mutual fund, or the last price of a commodity contract, and the closing price on the previous day is reported as net change. It may also simply be referred to as change.
When a stock has gained in value, the positive net change is expressed with a plus sign and a number, such as +0.50, meaning that the price was up 50 cents from the previous trading day. On days that a stock falls, the negative net change is expressed with a minus sign and a number, such as -1, meaning that the price was a dollar lower.
Net Earnings
Net earnings, also known as retained earnings, are a corporation's profits after paying all of its expenses. This money is available to pay dividends on common stock, make acquisitions or expand operations without incurring debt or issuing additional stock, or buy back outstanding shares.
New Issue
A stock or bond sold by a corporation for the first time. Proceeds may be used to retire outstanding securities of the company, for new plants or equipment, for additional working capital, or to acquire a public ownership interest in the company for private owners.
Net Worth
Amount by which assets exceed liabilities.
New York Stock Exchange
The oldest and largest stock exchange in the U.S.  An unincorporated association governed by a board of directors, which is headed by a full-time chairman and is composed of 24 individuals representing the public and the exchange membership in about equal portion. Trading hours occur between 9:30 a.m. and 4 p.m. ET, Monday through Friday, excluding market holidays.
Non-Cumulative Stock
A type of preferred stock on which unpaid dividends do not accrue. Omitted dividends are, as a rule, gone forever.
NYSE Composite Index
The NYSE Composite Index is designed to measure the performance of all common stocks listed on the NYSE, including ADRs, REITs and tracking stocks. Under its methodology, all closed-end funds, ETFs, limited partnerships and derivatives are excluded from the index.  It is a measure of the changes in aggregate market value of all NYSE-listed common stocks, adjusted to eliminate the effects of capitalization changes, new listings and de-listings. The index is weighted using free-float market capitalization and calculated on both price and total return basis.
Odd Lots
Stock transactions that involve less than 100 shares.
The price at which a person is willing to sell a security.
Offering Date
The offering date is the first day on which a stock or bond is publicly available for purchase. For example, the first trading day of an initial public offering (IPO) is it’s offering date.
Offering Price
A security's offering price is the price at which it is taken to market at the time of issue. It may also be called the public offering price.
For example, when a stock goes public in an initial public offering (IPO), the underwriter sets a price per share known as the offering price. Subsequent share offerings are also introduced at a specific price. When the stock begins to trade, its market price may be higher or lower than the offering price.
Optional Dividend
Optional dividends allow shareholders to choose between cash or stock for their dividend payment. If the shareholder does not specify a preference, Fafolio will pay the dividend based on the issuing company's default payment selection.
Please note the amount of stock or cash the company is going to issue as part of the dividend may have limitations. Because of this clients may not receive the entire dividend as they had instructed. Clients should review the material issued by the issuing company or visit the issuing company Web site for complete details of the dividend.
Ordinary Dividend
Ordinary (taxable) dividends are the most common type of distribution from a corporation. They are paid out of the earnings and profits of a corporation and are considered ordinary income. This means they are not capital gains. You can assume that any dividend you receive on common or preferred stock is an ordinary dividend.
Refers to a stock that has risen sharply in price or to the market as a whole after a period of vigorous buying which, it is sometimes said, has left prices "too high.”
The reverse of over-bought. A single security or a market which, it is believed, has declined to an unreasonable level.
Over-the-Counter (OTC)
Securities that are not listed on an organized stock exchange, such as the New York Stock Exchange (NYSE) or the NASDAQ.  Common stocks, corporate, government, and municipal bonds (munis), money market instruments, and other products, such as forward contracts and certain options, may trade OTC.
OTC Bulletin Board
During the trading day, the electronic OTC bulletin board (OTCBB) provides continuously updated real-time bid and ask prices, volume information and last-sale prices. The OTCBB lists this information for unlisted U.S. and overseas stocks, warrants, unit investment trusts (UITs), and American Depositary Receipts (ADRs). It also lists Direct Participation Programs (DPPs) that are not listed on an organized market but are being traded over-the-counter (OTC).
Approximately 3,600 companies are tracked on the OTCBB. To qualify for inclusion, they must report their financial information to the Securities and Exchange Commission (SEC) or appropriate regulatory agency.
Paper Profit (Loss)
An unrealized profit or loss on a security still held. Paper profits and losses become realized only when the security is sold.
Par Value
Par value is the face value, or named value, of a stock or bond. With stocks, the par value, which is frequently set at $1, is used as an accounting device but has no relationship to the actual market value of the stock.
Participating Preferred
A preferred stock that is entitled to its stated dividend and also to additional dividends on a specific basis upon payment of dividends on the common stock.
Passed Dividend
The omission by a company's board of a regular or scheduled dividend payment.
Passive Management
A market strategy that involves selecting a benchmark index to assure investment performance is the same as the underlying index. Passive investing assures that an investor will not under perform (or outperform) a market index. Passive management is opposite of active management.
Payable Date
Date on which a declared stock dividend or a bond interest payment is scheduled to be paid.
Penny Stock
Stocks that trade for less than $1 a share are often described as penny stocks. Penny stocks change hands over-the-counter (OTC) and tend to be extremely volatile. Their prices may spike up one day and drop dramatically the next.
Performance Drag
A reduction of portfolio performance due to various factors. An example of performance drag occurs when gains within a portfolio are offset by various expenses, such as management fees, transaction costs, research costs, etc. These expenses create a drag or negative effect on the portfolio's performance.
Pink Sheet
An OTC Bulletin Board stock that is not quoted in the daily newspaper listings of the NASDAQ. "Pink Sheets" is a daily publication of the National Quotation Bureau that details the bid and ask prices of these stocks.
Pivot Point
In technical analysis, a pivot point is the level at which prices break through a prior resistance level, or the highest price data points on a price chart. Pivot Points may also be used to signal price reversals.
If a current close is lower than the low on the day with the highest high during an uptrend, it could be a sign that prices will begin to decline. If the current close is higher than the high on the day with the lowest low during a downtrend, it might mean prices will begin to rise. Pivot points are typically useful only during strong trends as they may trigger ineffective signals during weak trends.
In the case of shares of stock, a point equals $1. If ABC shares rise 3 points, each share has risen $3 in price. In the case of bonds, a point equals $10 because bonds are quoted as a percentage of $1,000. An advance from 87 to 90 would mean a rise in value of $30 from $870 to $900.
The collection of different investment instruments owned by one individual or institution. A portfolio can consist of any combination of stocks, bonds, derivatives and such.
Preferred Stock
Class of capital stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock usually does not carry voting rights.
For bonds and preferred stock, the premium is the amount by which the price exceeds the face, or par, value. For options markets, the premium is synonymous with the option's price.
Price/Earnings Ratio
The price/earnings ratio (P/E) is the relationship between a company's earnings and its share price, and is calculated by dividing the current price per share by the earnings per share.
A stock's P/E, also known as its multiple, gives you a sense of what you are paying for a stock in relation to its earning power. For example, a stock with a P/E of 30 is trading at a price 30 times higher than its earnings, while one with a P/E of 15 is trading at 15 times its earnings. If earnings falter, there is usually a sell-off, which drives the price down. But if the company is successful, the share price and the P/E can climb even higher.
Similarly, a low P/E can be the sign of an undervalued company whose price hasn't caught up with its earnings potential. Conversely, a low P/E can be a clue that the market considers the company a poor investment risk.
Stocks with higher P/Es are typical of companies that are expected to grow rapidly in value. They're often more volatile than stocks with lower P/Es because it can be more difficult for the company's earnings to satisfy investor expectations.
The P/E can be calculated two ways. A trailing P/E, the figure reported in newspaper stock tables, uses earnings for the last four quarters. A forward P/E generally uses earnings for the past two quarters and an analyst's projection for the coming two.
Price Improvement
When a buy order is executed at a price lower than the current quoted offer, or when a sell order is executed at a price higher than the current quoted bid. In addition to quoting the best prices more than 90 percent of the time, the NYSE continuous auction market typically improves upon these quoted prices, allowing investors to get a better price for their shares.
Price Rate-of-Change
In technical analysis, the Price Rate-of-Change (Price ROC) is used to measure the rate of change of a security's closing prices. This helps point out trends and their strength. It's a centered oscillator, which means it fluctuates above and below a center, or zero, line.
High and low readings may indicate that up- or down-trends may be occurring. And, for some analysts, moves above the zero line could signal an opportunity to buy, and moves below the zero line could indicate a time to sell. This is because prices are expected to rise when Price ROC crosses the zero line from below, and they are expected to decline when it crosses the zero line from above.
Price ROC may also be used to show whether a security is overbought or oversold. Price ROC is the same as the Momentum indicator except that Price ROC is expressed as a percent and Momentum is expressed as a ratio.
Primary Distribution
The sale of a new issue of securities by a company. Initial public offerings (IPOs) are primary distributions by companies that were not publicly traded prior to the offering.
Primary Market
The process by which a corporation's stock is issued for the first time. It is then sold to the public on the secondary market.
Basic amount invested, exclusive of earnings.  Also, any person who buys or sells a security for his or her own account. Also refers to an executive of a firm that actively engages in that firm's trading business
The issuer must provide according to SEC regulations, the official documents to potential purchasers of a new securities issue. It highlights the much longer registration statement filed with the Commission that gives information on the financial well being of the issuer and the specifics of the issue itself. Potential investors can consult this information before buying.
Proxy Voting Notification
Proxy Voting Notification is a selection made by you as to how you prefer to receive proxy information sent to you. You may choose either U.S. mail or e-mail. The notification method may be changed at any time, but you must allow up to 45 days for a change to take effect.
Public Offering Price
The price at which a security can be purchased. The asked or offering price includes the current net asset value plus any sales charge.
Purchasing Power
Amount of credit available to a client in a brokerage account for the purchase of additional securities. Purchasing power is determined by the dollar amount of securities that can be margined.
Qualified Dividend
For dividends to be considered qualified, they have to be absent from the IRS unqualified dividend list, and the underlying stock that pays the dividend must be held for a holding period specified by the IRS. That holding period is defined as "more than 60 days during the 120-day period beginning 60 days before the ex-dividend date". For preferred stock, the holding period is "90 days during the 180-day period beginning 90 days before the stock's ex-dividend date".
A brisk rise following a decline in the general price level of the market, or in an individual stock.
Rate of Return
In stocks and bonds, the amount of money returned to investors on their investments.  Also known as yield.
Realized Gain
When you sell an investment for more than you paid, you have a realized gain. For example, if you buy a stock for $10 a share and sell it for $35 a share, you have a realized gain of $25 a share.
In contrast, if the price of the stock increases, and you don't sell, your gain is unrealized, or a paper profit. Realizing your gains means you lock in any increase in value, which could potentially disappear if you continued to hold the investment. But it also means you may owe tax on that profit when you sell unless the investment is tax exempt or you hold it in a tax-deferred or tax-free account.
In a tax-deferred account, you can postpone paying the tax until you begin withdrawing from the account. However, if taxes are due and you have owned the investment for more than a year when you sell, you pay tax at the long-term capital gains rate, which, for most types of investments, is lower than the rate at which you pay federal income tax on ordinary income.
A significant decline in economic activity affecting multiple sectors of the economy over a period longer than a few months. A recession is generally declared after two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP).
Record Date
The date on which you must be registered as a shareholder of a company in order to receive a declared dividend or, among other things, to vote on company affairs.
Redemption Price
Applies to the price the company must pay to call in certain types of preferred stock.
Same as refunding.  A company sells new securities and the money is used to retire existing securities. Object may be to save interest costs, extend the maturity of the loan, or both.
Before a public offering may be made of new securities by a company, the securities must be registered under the Securities Act of 1933. A registration statement is filed with the SEC by the issuer. It must disclose pertinent information relating to the company's operations, securities, management and purpose of the public offering. Before a security may be admitted to dealings on a national security exchange, it must be registered under the Securities Exchange Act of 1934. The application for registration must be filed with the exchange and the SEC by the company issuing the securities.
Usually a trust company or bank charged with the responsibility of keeping a record of the owners of a corporation's securities and preventing the issuance of more than the authorized amount.
Regular Way Delivery
Unless otherwise specified, securities sold on the New York Stock Exchange are to be delivered to the buying broker by the selling broker and payment made to the selling broker by the buying broker on the third business day after the transaction. Regular delivery for bonds is the following business day.
Regulatory Pyramid
A network of safeguards that surrounds the securities industry - from individual brokerages all the way up to the U.S. Congress.
Relative Strength Index
In technical analysis, the Relative Strength Index (RSI) is a momentum oscillator, which means its value ranges from 0 to 100. RSI compares a security's average gain to its average loss over a given period of time.
When the average gain is greater than the average loss, RSI rises. This means that when prices rise, RSI rises, and when prices fall, RSI falls.
RSI can also be used to indicate when a security is overbought or oversold. Typically, a reading of 70 or higher may indicate the security is overbought and that prices may soon fall, and a reading of 30 or below may signify the security is oversold and that prices may begin to rise.
RSI is sometimes used to anticipate future price movements. If prices are falling, for example, but the RSI is consistently rising, this positive divergence could be a sign of a trend reversal and that prices will soon begin to rise. On the other hand, if prices are rising, but the RSI is simultaneously falling, this negative divergence could be a sign that prices may soon begin to fall.
In addition, readings above 50 may indicate a bullish trend, while readings below 50 may signify a bearish trend. And, when RSI rises above 30, it could signify the beginning of an uptrend, while a move below 70 could indicate the start of a downtrend.
Retained Earnings
Profits a company keeps for its operations, after paying taxes and dividends.
Return on Capital
Payments back to "capital owners" (shareholders, partners, unitholders) that exceed the growth (net income/taxable income) of a business.
Return on Investment (ROI)
A way to measure the performance of an investment. The formula for calculating ROI is (Gain from Investment - Cost of Investment) / Cost of Investment. The result is expressed as a percentage or ratio. The higher the ROI, the better the performance of the investment.
Reverse Stock Split
If a company's stock is trading at a low price, the company may decide to reduce the number of existing shares and increase their price by consolidating the shares.
For example, a 1-for-2 reverse stock split halves the number of existing shares and doubles the price. In that case, if you hold 100 shares of a stock selling at $5 a share, for a combined value of $500, in a 1-for-2 reverse stock split, you would own 50 shares valued at $10 a share, which would still give you a combined value of $500.
Stocks may be reverse split 1-for-5, or 5-for-10, or in any ratio the company chooses.
Reverse splits are generally used to ensure that a stock will continue to meet listing requirements on the market where it is traded or to encourage purchases by institutional investors, who may not buy stocks priced below a specific point.
When a company wants to raise more funds by issuing additional securities, it may give its stockholders the opportunity, ahead of others, to buy the new securities in proportion to the number of shares each owns. The piece of paper evidencing this privilege is called a right. Because the additional stock is usually offered to stockholders below the current market price, rights ordinarily have a market value of their own and are actively traded. In most cases they must be exercised within a relatively short period. Failure to exercise or sell rights may result in monetary loss to the holder
Rights of Accumulation
Discount on future purchases once a break point is reached.
Rights Offering
In a rights offering, also known as a subscription right, a company offers existing shareholders the opportunity to buy additional shares of company stock in proportion to the number they already own before any new shares are offered to the public.
Such an offering is usually mandated by the corporate charter. To act on the offering, you turn over the rights you receive, typically one for each share of stock you own, and the money needed to make the purchase within the required period, often two to four weeks.
The amount of money that's required is known as the subscription price. You don't have to buy the additional shares, and you can transfer your rights to someone else if you prefer. But buying helps you maintain the same percentage of ownership you had in the company before the new shares were issued rather than having that percentage diluted.
Round Lot Orders
An order to buy or sell in multiples of 100 shares.
Russell Indexes
In 1984, Frank Russell Company created the Russell family of stock indexes as part of a more accurate and comprehensive system for evaluating the performance of investment managers. Russell now maintains 21 U.S. stock indexes and has launched similar broad-market and style indexes in Japan.
S&P 500
Standard & Poor's (S&P) is a company that rates stocks and bonds according to risk. The S&P 500 is an index of 500 stocks chosen by S&P to represent the risk and return of large cap companies overall in the market. It is widely acknowledged as a leading indicator of U.S. equities.
Secondary Market
When investors buy and sell securities through a brokerage account, the transactions occur on what's known as the secondary market.
While the secondary market isn't a place, it includes all of the exchanges, trading rooms, and electronic networks where these transactions occur. The issuer -- company or government -- that sold the security initially receives no proceeds from these trades, as it does when the securities are sold for the first time.
Sector Rotation
A strategy that uses elements of market timing to identify business sectors of the economy that are in a position to either under or outperform.
For example, if an investor owned shares in a utilities index, but felt this index was ready to underperform versus other sectors, one might consider selling this holding in favor of another one with a better outlook. In short, this particular investor would be exiting or rotating out of one sector for another.
Securities and Exchange Commission (SEC)
Federal agency created by the Securities Exchange Act of 1934 with the primary mission of protecting investors and maintaining the integrity of the securities markets. The SEC has five Commissioners who are appointed by the President of the United States with the advice and consent of the Senate. Their terms last five years and are staggered so that one Commissioner's term ends on June 5 of each year.
Securities Industry Association (SIA)
Represents the collective business interests of more than 500 brokerages and investment banking firms. Membership includes most NYSE member organizations, major firms of all U.S. and Canadian exchanges, and the OTC market.
Self Regulatory Organization
All securities and commodities exchanges in the United States are self-regulatory organizations (SROs), as is FINRA.
These bodies establish the standards under which their members conduct business, monitor the way that business is conducted, and enforce their own rules.
For example, the New York Stock Exchange (NYSE) requires that client orders delivered to the floor of the exchange be filled before orders that originate with traders on the floor, who buy and sell for their own accounts.
Settlement Date
Date by which an executed order must be settled, either by a buyer paying for the securities with cash or by a seller delivering the securities and receiving the proceeds of the sale for them.
Shares Outstanding
The total number of shares held by the public plus any restricted shares held by officers and insiders at a company. If a company repurchases a portion of its shares, these are not considered outstanding.
Shelf Registration
Term used for SEC Rule 415, which allows a corporation to comply with registration requirements up to two years prior to a public offering of securities.
Simple Interest
Interest calculation based only on the original principal amount.
Simple Moving Average
A Simple Moving Average (SMA), the most basic type of moving average, tracks the average of a set of a security's closing prices over a certain period of time, which is typically a year.
Like all moving averages, SMAs make it easier to spot trends by smoothing out price fluctuations that can occur especially in volatile markets.
The SMA gives equal weight to all prices in the data set. For example, a 5-day moving average would take the average of five days' closing prices to make the first data point. On the sixth day, the first day's value would be dropped off and a second data point would be created.
All moving averages are lagging indicators, which means they follow price movements, but SMAs lag the most.
Sinking Fund
Money accumulated on a regular basis in a separate custodial account that is used to redeem debt securities or preferred stock issues.
Securities Investor Protection Corporation. The SIPC insures the cash and securities held by clients of member brokerage firms against the firm's bankruptcy. Funds in brokerage accounts are not insured against market fluctuations. The SIPC offers brokerage customers up to $500,000 coverage for cash and securities, and coverage of cash is limited to $100,000.
Slow Market
The market becomes “slow” or converts temporarily from a Hybrid Market to an auction market so as to enable specialists, floor brokers and customers to interact with quotes and orders manually, with the objective of enhancing liquidity, reducing volatility and discovering price. Certain market conditions temporarily trigger a slow market, including gap quotes, trading halts or reaching LRPs. The slow market can be traded through.
Small Cap
Refers to companies with a market capitalization between $1 billion and $250 million.
A specialist or specialist unit is a member of a securities exchange responsible for maintaining a fair and orderly market in a specific security or securities on the exchange floor.
Specialists execute market orders given to them by other members of the exchange known as floor brokers or sent to their post through an electronic routing system.
Typically, a specialist acts both as agent and principal. As agent, the specialist handles limit orders for floor brokers in exchange for a portion of their commission. Those orders are maintained in an electronic record known as the limit order book, or specialist's book, until the stock is trading at the acceptable price. As principal, the specialist buys for his or her own account to help maintain a stable market in a security.
For example, if the spread, or difference, between the bid and ask, or the highest price offered by a buyer and the lowest price asked by a seller, gets too wide, and trading in the security hits a lull, the specialist might buy, sell, or sell short shares to narrow the spread and stimulate trading. Because of restrictions the exchange puts on trading, a specialist is not permitted to buy a security when there is an unexecuted order for the same security at the same price in the limit order book.
In a spin-off, a company sets up one of its existing subsidiaries or divisions as a separate company. Shareholders of the parent company receive stock in the new company based on an evaluation established for the new entity. In addition, they continue to hold stock in the parent company.
The motives for spin-offs vary. A company may want to refocus its core businesses, shedding those that it sees as unrelated. Or it may want to set up a company to capitalize on investor interest. In other cases, a corporation may face regulatory hurdles in expanding its business and spin off a unit to be in compliance. Sometimes, a group of employees will assume control of the new entity through a buyout, an employee stock ownership plan (ESOP), or as the result of negotiation.
The division of the outstanding shares of a corporation into either a larger or smaller number of shares, without any immediate impact in individual shareholder equity. For example, a 3-for-1 forward split by a company with 1 million shares outstanding results in 3 million shares outstanding. Each holder of 100 shares before the split would have 300 shares worth less, although the proportionate equity in the company would stay the same. A reverse split would reduce the number of shares outstanding and each share would be worth more.
Standard Deviation
Standard deviation is a statistical measurement of how far a variable quantity, such as the price of a stock, moves above or below its average value. The wider the range, which means the greater the standard deviation, the riskier an investment is considered to be.
Some analysts use standard deviation to predict how a particular investment or portfolio will perform. They calculate the range of the investment's possible future performances based on a history of past performance, and then estimate the probability of meeting each performance level within that range.
A summary for customers of the transactions that occurred over the preceding month.
Stochastic Oscillator
In technical analysis, the Stochastic Oscillator is a banded oscillator, which means its values fluctuate between 0 and 100. It's typically used to show how a security's current closing price compares with its range of high and low prices over a set period of time, usually 14 days.
Some technical analysts also use the Stochastic Oscillator to show accumulation, or buying pressure, and distribution, or selling pressure. Accumulation may occur when closing levels are consistently in the high end of the range, while distribution may happen when closing levels are regularly in the low end of the range.
Some analysts argue that readings above 80 indicate a security is overbought, and that prices may begin to decline, and readings below 20 mean a security is oversold, and that prices may begin to rise.
Stochastic RSI
In technical analysis, the Stochastic RSI applies the Stochastic Oscillator to the Relative Strength Index (RSI) to measure changes in RSI. RSI compares a security's average gains to its average losses over a given period of time.
Stochastic RSI is an oscillator whose value fluctuates between 0 and 1. When RSI reaches a record high, Stochastic RSI is 1, and when RSI experiences a record low, Stochastic RSI is 0. When Stochastic RSI is 0.30, for example, it means that RSI is 30% higher than its lowest low and 70% lower than its highest high.
Stochastic RSI may also be used to indicate future price movements by revealing when a security may be overbought or oversold. In general, readings above 0.8 may indicate a security is overbought and readings below 0.20 could imply a security is oversold.
Positive and negative divergences may be used as well. For instance, a positive divergence--which means the indicator is rising as prices are falling--followed by a move above 0.2 could signal an approaching uptrend. A negative divergence--which means the indicator is falling as prices are rising--followed by a move below 0.8 could indicate a future downtrend.
A type of security indicating partial ownership of a corporation. Owners of stock are entitled to claim a portion of the company's assets and earnings.
Stock Certificate
Evidence of ownership of a corporation showing the number of shares, name of issuer, amount of par or stated value represented or a declaration of no-par value, and rights of the shareholder. A preferred stock certificate will also list the issuer's responsibilities with respect to dividends and voting rights, if any.
Stock Dividend
A distribution of earnings to shareholders, prorated by class of security and paid in the form of stock.
Stock Exchange
An organized marketplace for securities featured by the centralization of supply and demand for the transaction of orders by member brokers for institutional and individual investors.
Stock Index
A basket of stock used to track the market. Typically, this is used for long-term evaluation. The performance of a group of stocks is averaged, and over time, that average serves as an indicator of the market's general movement.
Stock Power
Stock power provides the current owner of a registered security the power of attorney to transfer ownership to another party. Those parties may include a bank, brokerage firm, or another investor.
Stock Split
When a company increases the number of shares outstanding by splitting existing shares. A 2-for-1 split means every stockholder gets two new shares for each one they own, and a 3-for-2 split means they get three shares for every two they own. The price of an individual share falls, but stockholders do not lose money because they are being given the equivalent number of new shares.
In a reverse stock split, a company reduces the number of the shares outstanding by consolidating existing shares. A 1-for-5 reverse split for example, means that for each five shares owned one receives a single new share instead. The price of the new shares is five times higher, but only to reflect the shortened supply. If a company's stock is trading at a very low price, this process makes the company look more attractive to investors.
Stock Watch
The NYSE's state-of-the-art computer surveillance unit, which monitors the market in NYSE-listed stocks for aberrant price and volume activity, which may indicate illegal transactions.
Stockholder of Record
A stockholder whose name is registered on the books of the issuing corporation.
Stop Order
An order to buy or sell at the market price triggered once a security has traded at a stop price set by the customer. In the Hybrid Market, stop market order processing is automated.
Street Name
Securities held in the name of a broker instead of a customer's name are said to be carried in "street name." This occurs when the securities have been bought on margin or when the customer wishes the security to be held by the broker.
Structured Product
Investment products that are based on an underlying security such as a single equity, a basket of stocks, an index, a commodity, a debt issuance or a foreign currency.
Selling one security and buying a similar one at almost the same time to take a loss, usually for tax purposes.
Incoming marketable limit orders or market orders automatically execute to the extent possible at the best bid or offer and then sweep up (or down) automatically, executing against available liquidity at each price point in one continuous transaction. The sweep ends when the order has reached it's total cumulative quantity, it’s limit price or when it hits an intervening LRP. Posted liquidity, reserve liquidity, convert and parity (CAP) liquidity, and specialist liquidity at each price point are all available liquidity to an order during a sweep.
A group of investment bankers who together underwrite and distribute a new issue of securities or a large block of an outstanding issue.
Systematic Risk
Risk that is inherent to the market or a particular market segment. Examples of systematic risk are wars, recession and interest rates because they have a widespread effect and cannot be avoided by diversifying an individual's investments.
Tax Exempt
Free from tax liability.
Tax Loss Harvesting
This market strategy focuses on selling a portfolio's worst performing security to 1) offset realized capital gains of winning securities, and 2) to reinvest the sale proceeds into securities with a similar investment objective or correlation.
Technical Analysis
Technical analysts track price movements and trading volumes in various securities to identify patterns in the price behavior of particular stocks, mutual funds, commodities, or options in specific market sectors or in the overall financial markets.
The goal is to predict probable, often short-term, price changes in the investments that they study, which allows them to choose an appropriate trading strategy. The speed and accuracy with which the analysts create their tracking charts has been enhanced by the development of increasingly sophisticated software.
Tender Offer
A public offer to buy shares from existing stockholders of a company, usually made by another company attempting an acquisition. So-called because stockholders are asked to "tender" (surrender) their holdings for a premium above the current market price.
The tick is the direction in which the price of a stock moved on its last sale. An up-tick means the last trade was at a higher price than the one before it and a down-tick means the last sale price was lower than the one before it. A zero-plus tick means the transaction was at the same price as the one before, but still higher than the nearest preceding different price. The tick becomes especially important when large market movements trigger the implementation of certain circuit breakers meant to stabilize the market.
Ticker Tape
A telegraphic system that continuously provides the last sale prices and volume of securities transactions on exchanges.  Information is either printed or displayed on a moving tape after each trade.
Ticker Symbol
A three or four letter abbreviation used to identify a security whether on the floor, a TV screen, or a newspaper page. Ticker symbols are part of the lore of Wall Street. They were originally developed in the 1800s by telegraph operators to save bandwidth. One-letter symbols were therefore assigned to the most active stocks. Railroads were the dominant issues at the time, so they retain a majority of the one-letter designations.
Ticker symbols today are assigned on a first-come, first-served basis. Each marketplace -- the NYSE, the American Stock Exchange, and others -- allocates symbols for companies within its purview, working closely to avoid duplication. A symbol used for one company cannot be used for any other, even in a different marketplace.
Today's Change
Today's change is calculated as:
Today's Change = Market Value - Previous Day's Market Value
Previous Day's Market Value = Yesterday's Close Price x Quantity
Total Cost
Total Cost is calculated as: Total Cost = (Quantity x Purchase Price) + Commission
Trade Date
Day on which a security or a commodity future trade actually takes place.
An employee of a broker/dealer or other financial institution who specializes in handling purchases and sales of securities for the firm or its clients.
Trading Posts
The 17 horseshoe-shaped counters manned by clerks and specialists on the Trading Floor of the NYSE are like stores where individual stocks are bought and sold. Each trading post is responsible for over 100 stocks. The actual buying and selling takes place around each post.
Triangular Moving Average
The Triangular Moving Average is a type of moving average, a popular technical analysis tool that makes it easier to spot price trends by smoothing out price fluctuations that can occur especially in volatile markets.
All moving averages take an average of a set of a security's closing prices over a certain period of time, which can be any amount of time, but is typically a year. They differ in the way they attribute weight to the prices used in the data set.
Triangular Moving Averages take an average of the Simple Moving Average, which gives equal weight to all prices in the data set. This helps reduce price fluctuations in the data even further.
Relates to the frequency with which a money manager is buying and selling securities within a fund portfolio.
High turnover translates into higher trading costs, which fund investors must pay. Low portfolio turnover is better because it lessens the impact of trading and tax related costs.
Turnover Rate
The volume of shares traded in a year as a percentage of total shares listed on an Exchange, outstanding for an individual issue or held in an institutional portfolio.
Unsystematic Risk
Risk that is company or industry-specific. Examples of unsystematic risk are product failure, employee strikes and industry decline. Unsystematic risks can be reduced through investment diversification.
A term used to designate a transaction made at a price higher than the preceding transaction. Also called a plus tick. A zero plus tick is a term used for a transaction at the same price as the preceding trade but higher than the preceding different price. Conversely, a down tick, or minus tick is a term used to designate a transaction made at a price lower than the preceding trade. A plus sign or minus sign is displayed throughout the day. They are attached to the last price of each stock, and can be seen on the trading post at the floor of the New York Stock Exchange.
Variable Moving Average
The Variable Moving Average is a type of moving average, a popular technical analysis tool that makes it easier to spot price trends by smoothing out price fluctuations that can occur especially in volatile markets.
All moving averages take an average of a set of a security's closing prices over a certain period of time, which can be any amount of time, but is typically a year. They differ is how they attribute weight to the prices used in the data set.
Variable Moving Averages put more emphasis on newer prices, though the weight given fluctuates depending on the security's volatility. The more volatile the security, the greater the weight Variable Moving Averages give to current prices.
Versus Purchase
Versus purchase is an accounting method in which shares sold are matched to a specific purchase date. This is an alternate to the First-In, First-Out (FIFO) and Last-In, Last-Out (LIFO) accounting methods.
The term volatility indicates how much and how quickly the value of an investment, market, or market sector changes.
For example, because the stock prices of small, newer companies tend to rise and fall more sharply over short periods of time than stock of established, blue-chip companies, small caps are described as more volatile.
The volatility of a stock relative to the overall market is known as its beta, and the volatility triggered by internal factors, regardless of the market, is known as a stock's alpha.
Volume is the number of shares traded in a company's stock or in an entire market over a specified period, typically a day. Unusual market activity, either higher or lower than average, is typically the result of some external event.
Voting Right
The common stockholders' right to vote their stock in the affairs of a company.  Preferred stock usually has the right to vote when preferred dividends are in default for a specified period. The right to vote may be delegated by the stockholder to another person.
Wash Sales
When you purchase and then sell or sell and then repurchase the same security or a substantially similar security within 30 days, the double transaction is called a wash sale.
As an individual investor, you can't use any capital losses that the sale produces to offset capital gains from selling other securities in your portfolio. For example, if you sold 200 shares of an underperforming stock on Dec. 15 intending to use the loss on that sale to offset gains on other sales, your offset would be invalid if you repurchased the stock before the following Jan. 15. But if you repurchased on Jan. 16, the offset would be valid.
In fact, avoiding wash sales is an important part of tax planning. In a broader use of the term, purchasing and then quickly reselling a security may be described as a wash sale, whether the transaction is part of an innocent trading strategy or a pump-and-dump scheme.
Weighted Moving Average
The Weighted Moving Average (WMA) is a type of moving average, a popular technical analysis tool that makes it easier to spot price trends by smoothing out price fluctuations that can occur especially in volatile markets.
All moving averages take an average of a set of a security's closing prices over a certain period of time, which can be any amount of time, but is typically a year. They differ in the way they attribute weight to the prices used in the data set.
WMAs put more emphasis on newer prices, giving each progressive day in the data set one more unit of weight than the day before. This makes WMAs less of a lagging indicator than the Simple Moving Average (SMA), which gives equal weight to all prices in the data set.
Williams %R
In technical analysis, Williams %R is used to show when securities are overbought and oversold. It fluctuates between 0 and 100%.
Williams %R and the Stochastic Oscillator, another technical indicator, are interpreted similarly, but Williams %R is plotted upside down. Readings between 80% and 100% indicate a security is oversold and that prices may soon rise, while readings between 20% and 0% indicate the security may be overbought and that prices may soon begin to fall.
Williams %R may also be used to predict price reversals. If the indicator hits a peak or reaches a trough and then reverses direction, the security's prices typically follow in the same direction shortly after.
Window Dressing
Denotes the selling of weak performing stocks or bonds by money managers just before the end of each reporting quarter, so they don't appear as significant investment positions.
This selling activity is often accompanied with buying activity of strong performing stocks and bonds. After quarterly reports are issued, the portfolio will reveal holding positions in strong performing stocks and bonds, despite the fact that the majority of the capital gains in these were never experienced by shareholders. Window dressing is a cosmetic effect and adds little or no value.
The period beginning at the start of the calendar year up until the most current date.
Yield is the rate of return on an investment expressed as a percent. Yield is usually calculated by dividing the amount you receive annually in dividends or interest by the amount you spent to buy the investment.
In the case of stocks, yield is the dividend you receive per share divided by the stock's price per share. With bonds, it is the interest divided by the price you paid. Current yield, in contrast, is the interest or dividends divided by the current market price.
Yield Curve

A yield curve shows the relationship between the yields on short-term and long-term securities of the same investment quality.
Since long-term yields are characteristically higher than short-term yields, a yield curve that confirms that expectation is described as positive. In contrast, a negative yield curve occurs when short-term yields are higher.
A flat or level yield curve occurs when the yields are substantially the same on bonds with varying terms. A negative yield curve has generally been considered a warning sign that the economy is slowing and that a recession is likely.