Markets concepts every active trader uses
How price formation actually works: benchmarks, factors, indices, the buyback engine that has eaten ~50% of US equity returns since 2010. The vocabulary of where the money goes when you click buy.
Alpha
Excess return over a benchmark, after adjusting for risk.
Beta
Sensitivity of a security's returns to overall market movement.
Buyback
A company repurchasing its own shares from the open market.
Circuit breaker
A trading halt triggered by extreme price moves to allow markets to absorb information.
Dilution
When new share issuance reduces existing shareholders' ownership percentage.
Dividend yield
Annual dividend per share divided by current share price.
DXY
DeepThe US Dollar Index — trade-weighted USD against EUR, JPY, GBP, CAD, SEK, CHF.
Earnings surprise
Difference between actual earnings and analyst consensus.
Earnings yield
Earnings per share divided by price - the inverse of P/E.
Equity risk premium
The excess expected return of equities over the risk-free rate.
ETF
Exchange-Traded Fund - a basket of securities trading like a single stock.
FX leverage
DeepMargin-based exposure multiplier in FX, ranging 30:1 (US retail) to 500:1+ (offshore brokers).
FX spread
DeepThe bid-ask spread on an FX pair, expressed in pips — the broker's primary revenue and your primary friction cost.
FX swap rate
DeepThe interest charged or paid on rolled FX positions overnight — the price of holding a pair past the broker's daily close.
Guidance
Company-issued forecasts of future financial performance.
IPO
Initial Public Offering - a company's first public sale of stock.
Leveraged ETF
An ETF that aims to deliver 2x or 3x daily returns of an underlying index.
Meme stock
A stock whose price is driven primarily by social media-fueled speculation.
Moat
A sustainable competitive advantage that protects long-term returns on capital.
P/E Ratio
Price divided by earnings per share. The most-quoted valuation metric.
Pip
DeepPrice interest point — the smallest standard unit of price change in an FX pair.
Position sizing
Deciding how much capital to allocate to a given trade or position.
Position sizing in FX
DeepThe systematic method for determining trade size given leverage, account equity, stop distance and pair volatility.
Shiller P/E
Cyclically Adjusted P/E - price divided by 10-year average earnings, inflation-adjusted.
Short squeeze
Rapid price rise forcing short sellers to buy back, accelerating the move.
Stop-loss
An automatic order to exit a position at a predefined adverse price.