Terminology – What is what?!?!
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The FX market is the global currency market for trading currencies. The FX market is the biggest market in the world in terms of total cash value traded where daily transactions reach approximately 5 Trillion USD.
Fixed income are investments where the borrower is obliged to make payments of a fixed amount on a fixed schedule. There are various fixed income products such as government bonds, corporate bonds, junk bonds etc.
Commodities markets consist of soft (wheat, sugar etc) and hard (gold, oil etc) commodities. Futures and other derivatives are used to trade commodities. Commodity ETFs have gained popularity over the past years and provide easy access for traders wishing to trade commodities.
Two concepts specific for commodities markets are contango and backwardation. Contango is a where futures price of a commodity is higher than the anticipated spot price at maturity of the futures contract. Backwardation is where the price of a commodities’ futures contract is trading below the expected spot price at contract maturity.An ”index” measures the values of a section of the stock market and is often calculated as a weighted average. It is used by investors to compare returns and describe the market.
, CBOE Volatility Index, is the most popular and widespread measure of stock market’s expectations of volatility. The VIX index is calculated by using implied volatilities of a wide range of S&P 500 index options. In media it is often referred to as the fear index. VIX is a mean reversion index since volatility is an asset that over time revert to the mean.Tthe 5 year chart of VIX index. Note the spikes in volatility and how over time this index reverts to some kind of mean value. Ass is an order placed with your broker to execute a trade at a predetermined price in order to minimise the loss. If you are long the stop loss order needs to be a sale of your shares. If you are short the stop loss order will be a buy order. Aofit order is an order where the trader is willing to take profit by closing out the existing position. Atrong> is the trader buying a security such as a stock, FX etc with the expectation that the asset will rise in value. Astrong> is a trade where the investor sells shares of borrowed (from the broker) stock in the open market, ie you need to borrow the share prior to shorting it. Your broker will provide you with a short list which shows what stocks are available for shorting and at what cost. There is a stock borrow market that handles all stock borrows. Normal stock lending is not expensive, but at times specific stock names can get rather expensive to borrow. Tt stock position expects that the price of the stock will decrease over time. At some point the investor will purchase the shares in the marketplace and return the borrowed shares to the broker. A short stock position benefits from declining prices. Dn be long/short options and other instruments where the effect on that instrument might be affected by other aspects than only the underlying stock.