Trading Definitions

Leverage

The ability to control large dollar amounts of a commodity or security with a comparatively small amount of capital. Related Articles: The Arithmetic of Futures Trading and Leverage Managing Leverage

Short Selling

Selling a futures contract or other instrument with the idea of delivering on it or offsetting it at a later date.

Arbitrageur

An individual who attempts to profit from the differences in price when the same, or a similar, security, currency, or commodity is traded on two or more markets. The arbitrageur attempts to profit by simultaneously purchasing and selling to take advantage of pric

Arbitrage

Arbitrage describes the simultaneous purchase of a security in one market and the sale of it or a derivative product in another market to profit from price differentials between the two markets. Also see: Spread

Indicator

A value that is based on a securities price and/or volume and used to forecast future price movements. Indicators are divided into two groups: trend following/lagging and momentum/leading. Lagging indicators reflect what prices are doing now, or in the recent past

Repo or Repurchase Agreement

A transaction in which one party sells a security to another party while agreeing to repurchase it from the counterparty at some date in the future, at an agreed price. Repos allow traders to short-sell securities and allow the owners of securities to earn added i

Reference Asset

An asset, such as a corporate or sovereign debt instrument, that underlies a credit derivative.

ABC Agreement

A contractual agreement between an employee and a brokerage firm outlining the rights of the firm when it purchases an NYSE membership for that employee.

Recovery

An upward price movement after a decline.

Hemline Theory

Hemline Theory states that the hemlines of womens dresses are a leading indicator to the direction of stock prices. Short skirts, such as those seen in the 1920′s and 1960′s reflect bullish market sentiment, and longer skirts such as those seen in the 1930′s are a bearish indicator