Saturday, July 01, 2006

Know The Language : Trading Room Jargon

investments & trading

Know thelanguage: Trading room jargon  by J. Foley
So you are considering taking the big plunge in to the trading market? You have done a lot of research on how to be successful in the market; what are the necessary hardware items and software platforms you have to have; what are the risks you are taking as you embark on the new profession. That's all good, but you can definitely do with a bit of knowledge about the regular trading room jargon that you will soon come across pretty regularly. And if you can't make sense of what you are hearing there is little chance you will go much further. So following is a list of terms that are regularly used in trading rooms which will help you to get at least initiated in the language. 
Blue-chip stock
a reference to the blue chips used in the game of poker, such stocks are of established companies which have performed well regularly over a considerable period of time. Stocks of companies like IBM, GE are considered to be blue chip stocks. 
Bottom fishing
to fish or buy stocks that have suffered significant decline in their prices or are continuing to do so. 
going long
to buy and hold a stock for some length of time. 
Going short
To sell stocks short, i.e., to borrow and sell stock which you do not want to own for the moment but intend to do so later on for a comparatively lesser price. 
Uptick
Uptick means the next trade is at a price higher than the previous trade. However for certain transactions to be executed you have to do it on an uptick. 
Downtick
Downtick means exactly the opposite of an uptick, i.e, the next trade is at a price lower than the previous trade. 
Elves index
a much trusted index, Louis Rukeyser makes an  index of the opinions on the general stock market for the coming 6 months. He polls 10 respected analysts every week (they are the same ones every week), to know what they assume the general trend will be, either bullish (+1), neutral (0), or bearish (-1). Obviously, the index range is -10 to +10. 
Call money rate
Also known as the broker loan rate, this is the interest rate that banks lay on brokers to finance margin loans to investors. The broker in his turn charges the investor the call money rate plus a service charge. Investors who are willing to buy on margin will pay this rate. 
Hope the above guide helps you in your future dealings with the stock market. It is always advisable to learn the language of the trade. The more comfortable you are the more easily would you be able to communicate, grasp and analyze what actually is going on in the market.  
The above guide is only a sample and space here is too short to provide you with an extensive glossary. However there are other websites which are exclusively dealing on this matter which you can have a look at. But we would suggest you to keep a business dictionary near for ready reference as however much you know you can always come up against a new term which would make little sense to you.

investments & trading
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