Stock market terms are the foundation for knowing about investment strategies and market dynamics. These terms define trading actions, pricing, and financial indicator stock movements. Learning concepts like financial instruments, fundamental analysis, flat, fill, and fiscal policy influence stock valuation.
Additionally, terms include portfolio diversification and stop loss, as well as managing risk and guiding investment decisions. Moreover, these terms permit traders to analyse market news flow, make informed choices, and analyse stock performance. Below are some stock market terms to know to enhance confidence, improve financial outcomes, and reduce errors.
Financial Instrument
It is a contract that holds value and is traded between parties. In forex trading, assets such as stocks, commodities, and bonds are known as financial instruments. Plus, in trading language, currencies are also known as financial instruments. Understanding the nature and characteristics of these instruments is essential to develop effective trade strategies.
Flat
The term flat is a situation in which we are traded. You do not have any active position in the market nor have any short or long financial instrument. It occurs when traders close all their positions while waiting for clear market signals and trying to reduce exposure. Maintaining a position might be a strategic decision to avoid potential risks in the market.
Free Margin
The free margin represents the deposited funds of the traders, which are not used to open positions as a pledge. Also, the difference between the trader’s account and the margin used to open the current position is free. Sufficient free margins are crucial as they enable traders to absorb potential losses or open new positions.
Fill
Fill is a process of buying and selling an asset after completion of the order. The execution of an order means the trade has been completed.
Fiscal Policy
Fiscal policy is a type of government policy that involves spending and taxation and directly impacts the economic condition of a country. However, changes in tax rates and government spending directly lead towards inflation and influence overall economic growth and interest rates. It weakens the currency value of a country.
Fixed Exchange Rate
A fixed exchange rate is involved when a country’s currency is tied to another currency’s value. The Central Bank maintains the country’s exchange rate through direct intervention. The system is opposite to the floating exchange rate. For instance, the Hong Kong dollar is pegged to the US dollar at a fixed exchange rate.
Fundamental Analysis
Fundamental analysis built on the analysis of recent economic situation forecasting price. It includes government policies, economic indicators, and other factors that impact currency value. Also, make informed choices about market movements by understanding fundamental analysis. However, this strategy contrasts with technical analysis, focusing on price movements and statistical trends.
Flag
Flag is a chart pattern that indicates the price of a currency value goes up and then falls rapidly. Traders monitor this flag as a potential signal to continue their trades.
