Friday, February 3rd 2012 - 06:12:42 pm

TradeStocksAmerica.com Glossary of Terms

Glossary of Terms
(Some abbreviations are for communication on the Trading Room)

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

Daytrader - describes a trader who buys and sells stock and have short holding periods, usually minutes or hours. See pattern daytrader.

Debt to Equity Ratio – A fundamental analysis measure of a company's financial leverage. Debt/equity ratio is equal to long-term debt divided by common shareholders' equity. The theory is that investing in companies with higher debt to equity ratio is higher risk, especially in time periods of rising interest rates, due to the additional interest that has to be paid out because of the debt.

Delist - To remove a stock from an exchange, usually due to a violation or failure to meet certain financial requirements

Derivative - A non-original financial instrument whose characteristics and value depend upon the characteristics and value of an underlying security, typically a commodity, bond, equity or currency. Examples of derivatives include futures and options. Advanced investors sometimes purchase or sell derivatives to manage the risk associated with the underlying security, to protect against fluctuations in value, or to profit from periods of inactivity or decline. These securities can be quite complicated to valuate and usually illiquid. Derivatives have contributed to failure of visible hedge funds using them.

Direct Access Broker - Direct access trading is a technology which allows stock traders to trade directly with market makers or specialists, rather than trading through stock brokers. Direct access trading systems use front-end trading software and high-speed computer links to stock exchanges such as NASDAQ, NYSE and the various Electronic Communications Networks. Direct access trading system transactions are executed in a fraction of a second and their confirmations are instantly displayed on the trader's computer screen. This is in contrast to a typical conventional online trader who requires seconds or minutes to execute a trade.

Dividend Yield – The yield a company pays out to its shareholders in the form of dividends. It is calculated by taking the amount of dividends paid per share over the course of a year and dividing by the stock's price. Dividends are often payable on a quarterly basis. For example, if a stock pays out $2 in dividends over the course of a year and trades at $40, then it has a dividend yield of 5%. Mature, well-established companies tend to have higher dividend yields, while young, growth-oriented companies tend to have lower ones, and most small growing companies don't have a dividend yield at all because they don't pay out dividends.

Dow Jones Industrial Average – DJIA. The most widely used indicator representing the price of the stock market, a price-weighted average of 30 actively traded blue chip stocks originally industrial type of companies. The 30 stocks are chosen by the editors of the Wall Street Journal (which is published by Dow Jones & Company), a practice that dates back to the beginning of the century and is changed as the companies change. The Dow was officially started by Charles Dow in 1896, at which time it consisted of only 11 stocks. The editors at WSJ add up the prices of all the stocks and then divide by the number of stocks in the index.

Dow Theory – In 1897 Charles Dow developed 2 broad market averages. The Industrial Average, known as the Dow Jones Industrial Average included 12 blue chip socks and 20 railroad stocks comprised of the rail average, known as the Dow Jones Transportation Average. These stocks change over time according to current stocks that would be appropriate to represent the general business conditions.

Downgrade - A negative change in ratings for a security; examples of a downgrade could be when an analyst lowers a rating from buy to hold or when a credit bureau's downgrades a bond or a corporation’s credit rating. Opposite of upgrade.

Downtick - is when a stock price has changed downward from the previous trade. Opposite of uptick.

Dutch Auction - Dutch auction uses a bidding process to find an optimal market price for the stock, the lowest price at which an issuing company can sell all the available shares. It is a hardly used alternative to the traditional negotiated pricing process used by underwriters to set IPO prices, it was most recently employed by Google and is used for US Treasury auctions. Named after the famous auctions of Dutch tulip bulbs in the 17th century, it is based on a pricing system devised by Nobel prize winning economist William Vickrey.

A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z