Basis point
One hundredth of one percentage point. Basis points describe an absolute change in a rate or spread.
Example A rise from 4.00% to 4.25% is 25 basis points, or 0.25 percentage points.
Read the related guide →Market terms, in plain English
40 definitions across charts, trading, investing, macro data and company accounts. Examples are hypothetical.
40 of 40 terms
Bid–ask spread
The difference between quoted buying and selling prices. The available quantity and execution conditions also matter.
Example Bid £24.95 and ask £25.05 have a £0.10 quoted spread.
Read the related guide →Bond yield
A return measure based on a bond’s price and payments. Running yield and yield to maturity use different calculations and assumptions.
Example A fixed coupon percentage need not equal the yield available at today’s market price.
Read the related guide →Candle body
The part of a candlestick between its open and close. Its absolute height is the open-to-close price distance.
Example Open £102 and close £99 give a £3 body.
Read the related guide →Correlation
A measure of how series move together in a selected sample. The result depends on the data and period and can change.
Example Low past correlation does not promise that two assets will offset each other in a future sell-off.
Read the related guide →Credit spread
The yield difference between credit exposure and a chosen reference. Match maturity, currency and methodology when comparing figures.
Example An option-adjusted spread adjusts for embedded options; it is not simply the coupon difference.
Read the related guide →Diversification
Spreading exposure across different holdings and risk drivers. More tickers do not necessarily mean less overlap, and broad market losses remain possible.
Example Two funds can both hold large weights in the same companies.
Read the related guide →Doji
A candle whose open and close are equal or nearly equal relative to its range. It does not by itself establish the next direction.
Example A £102 open and £102.10 close can sit inside a much wider range.
Read the related guide →Drawdown
A decline from a previous peak to a later trough over a defined measurement period. The largest such decline is the maximum drawdown for that period.
Example A fall from £10,000 to £8,000 is a 20% drawdown from that peak.
Read the related guide →Duration
A measure of a bond’s sensitivity to yield changes. Modified duration provides a local price-change approximation, with other factors held constant.
Example Modified duration of six suggests roughly −6% for a one percentage-point rise in yield; larger moves need more care.
Read the related guide →Engulfing body
A two-candle description in which the second real body contains the first real body’s price interval. Context and definitions matter.
Example A £99–£104 body contains a preceding £100–£103 body.
Read the related guide →ETF
An exchange-traded fund: a pooled investment whose shares trade on an exchange. It may use an index or an active strategy.
Example The share price can differ from the value of the underlying portfolio.
Read the related guide →Expense ratio
A fund’s stated annual operating expenses relative to its assets. It is one part of the total cost of owning and trading a holding.
Example On an unchanged £10,000 balance, 0.2% is £20 a year before other costs.
Read the related guide →Free cash flow
Often operating cash flow less capital expenditure. Companies can use different definitions and adjustments, so check the reconciliation.
Example Operating cash flow of £120 less capital expenditure of £40 gives £80 under this simple definition.
Read the related guide →Hammer
A candle with a small body near the top of its range and a relatively long lower wick, usually discussed after a decline.
Example A recovery within one bar is observable; a later trend reversal remains unconfirmed.
Read the related guide →Historical percentile
A position relative to a chosen historical distribution. Reference periods, missing data, ties and calculation methods affect the result.
Example A reading near the 90th percentile is high relative to that selected history, not a 90% probability of a future event.
Read the related guide →Index fund
A fund designed to track a specified index. Its holdings and risk depend on the index methodology, implementation and costs.
Example An index may be broad, sector-specific or concentrated; the label alone does not establish diversification.
Read the related guide →Inflation
An increase in a measured price level over a stated period. Specify the index, population and comparison period.
Example Lower positive inflation means prices are rising more slowly, not that the overall level has fallen.
Read the related guide →Limit order
An order with a maximum purchase price or minimum sale price. Its price condition can leave it partially filled or unfilled.
Example A £25 buy limit does not authorise a fill above £25.
Read the related guide →Market order
An instruction to transact at the available market price. The last displayed trade is not a guaranteed execution price.
Example A large order can fill at several prices if liquidity at one price is insufficient.
Read the related guide →Moving average
A rolling average of a chosen price series. Its lookback and weighting determine the result, and it reacts to data already observed.
Example A 20-day simple average uses the selected prices from the latest 20 trading days.
Read the related guide →OHLC
Open, high, low and close describe prices within a defined interval. They do not reveal the complete sequence of trades.
Example A bar can have open £100 and close £104 while having traded as low as £98.
Read the related guide →P/E ratio
Share price divided by earnings per share for a specified basis and period. Negative or near-zero earnings complicate interpretation.
Example A £30 share price divided by £2 annual EPS gives 15× on that basis.
Read the related guide →Planned risk
The loss in a stated exit scenario, calculated from quantity and the assumed adverse price distance. It is not a guaranteed maximum loss.
Example Fifty shares with a £1 assumed loss per share give a £50 scenario before costs.
Read the related guide →Position size
The quantity held or traded. Distinguish units, cash committed and exposure when comparing two positions.
Example Fifty shares at £25 commit £1,250 before charges.
Read the related guide →R-multiple
A result divided by the original planned monetary risk. State whether costs are included and keep the initial denominator unchanged.
Example A net £75 loss against an original £50 risk is −1.5R.
Read the related guide →Rebalancing
Adjusting holdings towards an intended allocation after returns or contributions change the weights. Costs and applicable taxes affect implementation.
Example A hypothetical 60/40 mix can drift to 72/28 without any new trades.
Read the related guide →Resistance
An area where price has previously stopped rising or met selling interest. It is not a guaranteed ceiling.
Example Nearby past highs may be grouped into a band instead of a precise price.
Read the related guide →Revenue
The amount recognised from a company’s activities under its accounting policies. Recognition and cash collection can happen at different times.
Example Revenue can rise while customers still owe the company money.
Read the related guide →Revision
A change to a previously published observation, for reasons such as added information, seasonal updates or benchmarking. The policy depends on the series.
Example Store the first published and revised values separately when reviewing what was known at a past date.
Read the related guide →RSI
The Relative Strength Index is a momentum oscillator based on recent gains and losses. Values run from 0 to 100; a high or low reading is not an automatic trade instruction.
Example A reading can remain high during a persistent advance.
Read the related guide →Seasonal adjustment
A statistical adjustment for recurring seasonal patterns. Adjusted and unadjusted series answer different comparison questions.
Example Compare monthly changes on the same adjustment basis rather than mixing two series.
Read the related guide →Slippage
The difference between a specified reference price and the actual execution price. Record the reference and direction to make the comparison meaningful.
Example A buy planned at £25.10 but filled at £25.25 costs £15 more for 100 shares.
Read the related guide →Stop order
A conventional stop becomes a market order once its trigger condition is met. The trigger does not guarantee the fill price.
Example A sell stop at £24 can fill lower after a gap.
Read the related guide →Stop-limit order
An order that becomes a limit order after a stop condition triggers. The limit may prevent execution while exposure remains.
Example A price can gap beyond both the trigger and the acceptable limit.
Read the related guide →Support
An area where price has previously stopped falling or found buying interest. It is an estimate from past observations and can break.
Example Several past lows around £100–£101 can define an area rather than an exact floor.
Read the related guide →Timeframe
The duration represented by each bar or the broader period used for analysis. State which meaning you intend.
Example Four consecutive five-minute bars can be combined into one 20-minute OHLC bar.
Read the related guide →Trend
The direction and structure of price changes over a chosen period. Labels depend on the timeframe and the rule used.
Example A series of higher daily lows may coexist with a decline on a longer chart.
Read the related guide →Wick
The thin portion extending from the body towards the interval’s high or low. A long wick describes a price excursion, not its cause.
Example A high of £105 above a £102 body top leaves a £3 upper wick.
Read the related guide →Yield curve
Yields across maturities for a defined issuer or market. A two-maturity spread describes one part of the curve, not its whole shape.
Example The 10Y minus 2Y spread subtracts the two-year yield from the ten-year yield.
Read the related guide →No terms match those filters
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