A dark cloud cover pattern is a candlestick pattern used in technical analysis to identify the peak of upward price trends, but what does it look like? This pattern typically appears on a stock that has had a recent upward trend with a gap up that is sold off and closes below the previous days […]
Cost of Capital Definition: Day Trading Terminology Cost of capital is a benchmark rate of return that any project must meet or exceed to justify the internal investment in a company. The exact make-up of the cost of capital measure will vary from company to company, but is usually generated as a weighted average cost […]
Central Bank Definition: Day Trading Terminology A central bank is a modern national institution that oversees some combination of currency management, monetary policy and banking regulation. The exact role and structure of a central bank varies from country to country, but the general purpose of economic and financial management and oversight is the defining characteristic. […]
Dividend Reinvestment Plan (DRIP) Definition: Day Trading Terminology A dividend reinvestment plan, or DRIP, is a broad category of special arrangements for the reinvestment of equity dividends back into the issuing company. Most DRIPs are issued by the relevant company, and contain additional restrictions and benefits beyond owning regular shares. However, many brokers also offer […]
Hyperinflation Definition: Day Trading Terminology Hyperinflation is a loose term describing a sustained period of extremely rapid price inflation in one or more national currencies. It is the product of the mismanagement of a fiat currency and/or national finances that causes a widespread loss of faith in the national currency. The rapidly increasing prices then […]
A mortgage-backed security, or MBS, is any security whose underlying value is based on one or more property mortgage loans. The mortgage-backed security, almost always in the general structure of a bond, is a synthetic financial product that aims to to repackage real estate loans made by banks into something that can be traded more […]
A preferred stock is an ownership stake in a public company, which unlike common stock, has a higher claim on its earnings and assets. Stakeholders of preferred stock can, therefore, benefit by receiving high dividends during the good times when the corporation has made huge profits and decides to distribute the excesses to its shareholders. […]
Extrinsic value is a term from derivatives trading that measures the difference between the market price of an option and its intrinsic value. Because options are most often priced directly on mathematical models of the underlying stock’s current and historical price (the intrinsic value), the extrinsic value is a measure of the decay in value […]
Fiat currency is any government-backed legal tender that is not backed by a physical commodity. The term comes from the fact that the currency is given value based on the dictate, or ‘fiat’, of a government, and not based on some intrinsic value recognized by those who use it. Most national currencies are based on […]
Elliott Wave Theory is a technical analysis approach that is based on the belief in cycles in the mass psychology of investing. According to Elliott Wave Theory, financial markets follow a familiar pattern of successively smaller 5-3 waves, with the 5 on-trend waves being interspersed with 3 opposite-trend counter-waves. Within each wave of the larger […]
