Spread Betting Jargon Explained
Anything new will have a lot of jargon which may not be understood by some and spread betting isn't any different. Spread betting has a lot of words and phrases unfamiliar and new to spread bettors. The jargon can all be explained and fairly quickly investors are using these terms as an experienced spread bettor.
Going long and going short are two of the terms most frequently heard in spread betting. Going long simply means the bettor is taking the high number on a spread. The bettor believes the price will increase. Going short is the opposite. The spread bettor speculates prices will decrease so the bet is going short.
Bearish and bullish are two other terms often heard in spread betting. The market is bearish when prices are declining and bullish when prices are rising. This can easily be remembered by thinking of the two animals a bull and bear and how they fight. A bull will take his horns and flip them up towards an attacker. The horns go up, prices increase. A bear will use his paws to swipe downwards at an attacker. The downwards movement demonstrates decreasing prices. Sometimes one might hear of bettors being bearish or bullish. This simply means the bettor is betting in that direction.
A tip or pip is frequently heard when discussing price movements. Prices move in increments of a tick or pip. If a price moved from 112 to 114, it moved two pips. Offer price is another term in spread betting and this is the selling price on a spread. The buying price on a spread is the bid price.
In spread betting one often hears about the advantage of gearing or leveraging. Gearing is the ability to make large profits from small wagers. The same can be said of losses as well. Small wagers could result in large losses. There are two terms which many new traders confuse and these are a stop loss and a guaranteed stop. A stop loss is a trade order that attempts to get an investor out of a trade once a certain amount of losses has accumulated. A guaranteed stop is an order that guarantees the investor to get out of the bet at the agreed upon price.
Margin is another frequently used term in spread betting. Margin is the cash amount a broker will ask for up front before making a trade. One spread betting word is often misunderstood and that is volatility. Volatility describes the market movement of a financial instrument. If the movement is fast with big price fluctuations, it is said to be volatile.
There is a great deal of jargon in spread betting, but none of the words are too terribly difficult to understand. All these words can easily be explained through spread betting firms or through spread betting experience.
April 22nd, 2009
Known as ‘trade language’, it is an internationally recognised, semi-technical minimal language used by people who have no common language. Referred to as ‘jargon’, this type of language is common in specialised fields like trading, or computers. It is used to avoid the type of confusion caused by giving the same item many names.
Trade jargon does not stabilise, nor does it expand, and you probably wont find it in any dictionary either.
Examples
‘Going long’ tells everyone that you are either buying or holding stock whereas ‘going short’ would indicate that you are selling stock short. Selling stock short describes borrowing stock that you don’t own and then selling it the intention of buying it at a later date for less than sold it for.
‘Blue chip’ stock indicates valuable stock which has proven itself and has the potential to make a lot of money.
‘GTC’ indicates that stock is ‘good till cancelled’ while ‘bottom fishing’ indicates stocks that have declined in value. A ‘day order’ says buy or sell at a certain price. If not bought or sold on the day it is placed, this amount expires.
‘MKT’ signifies urgency and stands for ‘at the market’. It says buy now no matter how much you have to pay or how little profit you make.
‘Uptick’ and ‘downtick’.  ‘Uptick’ the next trade will be at a higher price than previous trades, while ‘downtick’ means the opposite.
‘DNR’, ‘do not reduce’ is usually assumed unless otherwise specified.
‘Overbought’ or ‘oversold’ refers to a market where people have been wildly buying or selling and shares that are considers ‘over valued’, ‘under valued’ or ‘fairly valued’ describe stock just that.
Tags: Financial Spread Trading, financial trading, online trading jargon, stock market trading, trading jargon
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April 17th, 2009
There are only two kinds of day trader. There is the institutional trader and the retail trader.
The Institutional trader, as the name suggests, works for someone in a financial institution. This can give them advantages over the other type of trader because they have access to a vast array of resources such as tools and equipment and office staff who help them with the daily nitty gritty administration stuff.
They have access to office computers with the most up to date analytical and expensive software packages and they have pools of capital availabe to them.
Institutional traders also have access to large pockets of fresh fund inflows so that they can trade the market continuously. They have dedicated and fast lines to data centres and exchanges. All of which give them an edge in a highly competitive market.
The retail trader on the other hand is what is known as a private day trader. These traders work for themselves or they are in small partnership with other traders.
Retail traders have to use their own capital to trade, but they can use their customers, or investors money to trade with too, however the amount they can trade has been restricted by law. In some countires retail day traders are not allowed to advertise their services as financial advisors.
Before the advantages of technology in the form of communications, the internet and personal computers, all retails traders were institutional traders. Technology has allowed online trading because of fantastic analytical tools.
Together with affordable commissions and improved regulations, retail traders are able to make a success of themselves without the back up of large, corporate institutions.
Tags: Day Trader, day trading, financial trading, Spread Trading
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March 27th, 2009
Financial spread betting can be a lucrative way of making money. Some people love the challenge for making something extra, while others make a living from this. To be able to make a profit you need to understand the options involved and how it affects your profits.
Delta movements
In spread betting the delta is the change in price of an option. It must be noted that deltas change when there is movement up and down in the value of the option. When the delta of a spread is close to zero it is called a neutral delta. When a spread is neutral delta, the value of the spread will not change with small price movements of the stock.
However, when there are large changes, the spread will have to be adjusted. This is done through selling or buying options or shares. A strategy used by option sellers to stay delta neutral and protect their exposure is called delta hedging. When there are small movements of the underlying asset, a seller matches the market response.
Option buyers are not affected as their initial premium limits their potential loss. To calculate a delta hedge, the option seller takes into account factors such how much time is left before expiry and changes there may be in the spot price.
To calculate how much hedging should be done to be delta neutral, the option writer uses a measurement called a delta variable. The amount of hedging will depend on how much in-the-money or out-of-the-money an option is to bring it to neutral delta.
Tags: Financial Spread Betting, market trading, Online Trading, share trading, Spread Betting, trading shares
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March 25th, 2009
For anyone not clued up with stock markets and financial jargon but would like to start learning and learning the game of spread betting, trading systems is the way to go.
Trading systems are software that is programmed using various parameters to predict the flow of given equities. For those new to the stock markets, trading systems can assist in the interpretation and spread betting.
For those old to the spread betting and financial jargon the advantage of trading systems is that they take out the human emotions during trading which can be advantageous. Some of the calculations and work that trading systems can do for you include that EPS and comparing EPS of companies.
EPS?
The stock price of a certain stock says only so much about the company and how well it is performing. In order to put everything into perspective for a long term investment, it is important to note the EPS.
EPS is the earnings that a company has made in a given time period. To work out EPS you have to take the total profits then divide it by the number of outstanding shares. EPS is important in comparing companies in certain industries but is not hugely significant in choosing stocks.
However, EPS does become significant in choosing stocks when it is combined with price to earning ratio(P/E). P/E shows the ratio of stock price with total earnings, which is calculated by share price divided by EPS. Taking P/E and company background into consideration, the choice of stocks should be clear.
Tags: financial markets, Financial Spread Betting, financial trading, Online Trading, share markets, spread betting system, Spread Trading, trading shares
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March 23rd, 2009
Fade or fading is something you may hear about in the world of spread betting. However, what does it really mean? What is fading a breakout?
To fade in the trade world means to go against the flow by trading against the markets. That just basically means to trade in the opposite direction of a popular or dominating sentiment or price movement.
The idea of fading in the stock market will mean buying stocks when everyone is selling or when the market is on a downstream or alternatively it could be selling stock when everyone is buying or when the market is moving up. In spread betting however, this would just mean betting against the flow or against the dominating sentiment.
The fading strategy
There can be many reasons why traders would want to go against the market. This is because there are times with the market reaches a certain position where they believe prices are overvalued they would decide to short the stock selling in advance of being acquired.
Similarly, other traders could feel the same and short their positions and all together the market and prices will start to fall. Thereafter these people will profit from the fade. The opposite could also be true in that a trader may start buying stock, as they believe that stocks are cheap and later there will be a demand for the stocks so that they can sell them at a high price and thereby earn profits.
That being said, fading is definitely risky but at the same time can be more profitable.
Tags: financial trading, market trading, market trends, Online Trading, share trading, Spread Betting, stock market trading, trading markets
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