Glossary

Welcome to the Kudotrade Glossary, here you will find clear and concise definitions of key terms and concepts, which are essential for navigating the world of financial markets and trading.

Fundamental analysis

A technique to assess the price of an asset or market that concentrates on the underlying economic and organisational variables.

Gap risk

The risk of a big price fluctuation when the market reopens following a weekend or holiday.

GBP

The currency code for the pound.

Going long

Buying an instrument with the idea that it will rise over a longer period of time.

Going short

Selling a security or asset that the trader does not own, with the expectation that its price will fall, allowing the trader to buy it back at a lower price for a profit.

Government bond

A debt security issued by a government to support government spending and obligations. These bonds are considered low-risk investments due to the government’s ability to tax and print money.

Gross profit margin

The gross profit margin is the amount of money a company earns after deducting the direct costs of manufacturing or delivery. This allows firms to measure their efficiency, which reflects their ability to create revenues from their activities.

Growth rate

The percentage increase or decrease in a quantity over a specific period of time. It is commonly used to measure the change in various economic, financial, and statistical indicators.

Hammer candlestick

This is a technical analysis pattern commonly used in financial markets, especially in chart analysis for stocks, currencies, commodities, and other assets. It is considered a bullish reversal pattern and is named for its resemblance to a hammer, with a small body and a long lower wick or shadow.

Hanging man candlestick

This is a technical analysis pattern that appears on price charts, particularly in financial markets like stocks, forex, commodities, and cryptocurrencies. It is considered a bearish reversal pattern and is named for its resemblance to a hanging man, with a small real body near the top of the trading range and a long lower shadow or wick.

Harmonic price patterns

Traders use this to identify potential reversals or continuation signals in financial markets. These patterns are based on geometric price relationships and ratios derived from Fibonacci levels.

Historical pricing

A record of a product’s buying and selling prices that analysts and investors can use to assess its probable performance.

Income return

The portion of an investment’s total return that is derived from periodic income payments, such as interest or dividends, rather than from capital gains. This is an important measure for investors who are primarily interested in generating regular income from their investments rather than seeking capital appreciation.

Indices

Indices, also known as stock indices or market indices, are statistical measures that track the performance of a group of stocks or other financial instruments. These indices represent the overall market or a specific sector of the market and are used by investors, analysts, and economists to gauge market trends, compare the performance of investments, and understand the health of an economy or industry.

Inflation

This is the rate at which the general level of prices for goods and services rises, leading to a decrease in the purchasing power of a currency. It is typically measured on an annual basis and is expressed as a percentage.

Interbank market

The global network of banks and financial institutions that trade currencies, loans, and other financial instruments among themselves. It is a key component of the financial system, providing liquidity, facilitating transactions, and influencing exchange rates and interest rates.

Investment fund

A pooled investment vehicle that gathers funds from multiple investors to invest in a diversified portfolio of securities, such as stocks, bonds, money market instruments, and other assets. The fund is managed by professional money managers or investment advisors according to specified investment objectives and strategies.

January effect

This is where stock prices often rise in January. This effect is said to be generated by an increase in buying after a price decrease, which normally occurs in December when investors engage in tax-loss harvesting to offset realised capital gains, prompting a sell-off.

Japanese candlestick

A type of price chart used in technical analysis, displaying open, high, low, and close prices in a candlestick format to analyse market trends and patterns.

JPY

The currency code for Japanese Yen.

Judgmental forecasting

A method of predicting future events or trends based primarily on subjective opinions, intuition, and experience rather than on quantitative data and statistical models. This type of forecasting relies on the expertise, insights, and judgement of individuals or groups, often incorporating their knowledge of specific contexts, market conditions, and unique factors that may not be captured by formal models.

Key currency

A major currency that is commonly used as a reserve currency and for international trade.

Key interest rate

This is the interest rate set by a central bank that guides monetary policy and influences the overall economic activity within a country or economic region. This rate is a critical tool used by central banks to manage inflation, control economic growth, and stabilise the financial system.

Key reversal

A technical analysis pattern where the price reverses direction sharply after reaching a new high or low, indicating a potential change in trend.

Knock-in option

This is a type of barrier option in financial derivatives trading, which becomes active (or “knocks in”) and transforms into a standard option only if the underlying asset’s price reaches a predetermined barrier level during the option’s life. If the barrier is not reached, the option remains inactive and expires worthless.