A set of objective rules designating the conditions that must be met for trade entries and exits to occur. A trading strategy includes specifications for trade entries, including trade filters and triggers, as well as rules for trade exits, money management, timeframes, order types, etc. A trading strategy, if based on quantifiable specifications, can be analyzed on historical data to project the future performance of the strategy. A trading strategy outlines the specifications for making trades, and includes rules for trade entries, exits and money management. When properly researched and executed, a trading strategy can provide a mathematical expectation for the specified rules, and help traders and investors determine if a trading idea is potentially profitable.
Funds raised by issuing shares in return for cash or other considerations. The amount of share capital a company has can change over time because each time a business sells new shares to the public in exchange for cash, the amount of share capital will increase. Share capital can be composed of both common and preferred shares. Also known as "equity financing". Taobiz explains Share Capital The amount of share capital a company reports on its balance sheet only accounts for the initial amount for which the original shareholders purchased the shares from the issuing company. Any price differences arising from price appreciation/depreciation as a result of transactions in the secondary market are not included. For example, suppose ABC Inc. raised $2 billion from its initial public offering. Over the next year, the total value of its shares increases to $5 billion. In this case, the value of the share capital is still only $2 billion because ABC Inc. had received only $2 billion from the sale of its securities to the investing public.
A game-theory mechanism which is subject to a payoff matrix similar to that of a prisoner’s dilemma. Tit for tat was introduced by Robert Axelrod, who developed a strategy where each participant in an iterated prisoner’s dilemma will follow a course of action which is consistent with their opponent’s previous turn. For example, if provoked, a player will subsequently respond with retaliation, but if they are not provoked, the player will subsequently cooperate. Tit-for-tat strategies are based on the concepts of retaliation and altruism. When faced with a prisoner’s dilemma-like scenario, an individual will cooperate when the other member has an immediate history of cooperating and will default when the counterparty previously defaulted. This concept is often applied to economics and biology.
The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities Regulatory Commission (CSRC). Stocks, funds and bonds are all traded on the exchange, which has listing requirements including that a company must be in business and be earning a profit for at least three years before joining the exchange. Taobiz explains Shanghai Stock Exchange Two main classes of stock for every listed company are traded on the exchange: A-shares and B-shares. B-shares are quoted in U.S. dollars, and are generally open to foreign investment. A-shares are quoted in yuan, and are only available to foreign investment through a qualified program known as QFII. The largest stock exchange for Chinese equities is actually the Hong Kong Exchange, which has been trading H-shares in Chinese companies for many years; these equities have also been open to foreign investment. Most of the total market cap of the Shanghai Stock Exchange is made up of formerly state-run companies like major commercial banks and insurance companies. Many of these companies have only been trading on the exchange since 2001.
A series of three sequentially higher horizontal lines used to identify possible areas of support and resistance for the price of an asset. The position of the center line is plotted by calculating the difference between the highest high and the lowest low for the asset price over a period of time and dividing it by 2. The top and bottom line are drawn 1/3 and 2/3 of the difference, respectively, between the same high and low that are used to calculate the center line. The use of Tirone levels is similar to that of Fibonacci retracement, and both are interpreted in the same way. They both determine the position of the lines by using a percentage of the difference between a high and a low. Both Tirone levels and Fibonacci retracement use 50% as one of the possible support/resistance levels.
An unregulated private market in which investors can purchase shares in companies that are not currently publicly traded. Shadow markets in stocks give investors an opportunity to invest in companies prior to their initial public offerings (IPO). However, the SEC requires investors to have a net worth greater than $1 million in order to participate in this nontransparent market. These people are what the SEC refers to as "accredited investors". Taobiz explains Shadow Market The main benefit of using the shadow market to purchase shares is that the accredited investor can get exposure to certain companies much earlier than most other investors. This greatly increases the potential profit for the investor if the stock goes public and demand from average investors drives the stock price up. Some of the downsides of the shadow market include lack of liquidity, lack of disclosure from the company, and a greater degree of uncertainty and risk.
A metaphor for a long-term market trend. The ocean metaphors for market trends were coined by one of the market's first technical analysts, Robert Rhea. Tides are often referred to in the context of triple screen trading. Using this system, a trader uses a longer-term chart, or market tide, as the basis for trading decisions. For instance if a trader plans to trade daily he or she would examine the weekly moving average convergence divergence (MACD) histogram, as its slope provides indication of the market tide.
The period of time between the settlement date and the transaction date that is allotted to the parties of a transaction to satisfy the transaction's obligations. The buyer must make payment within the settlement period, while the seller must deliver the purchased security within this period. Taobiz explains Settlement Period Depending on the type of security traded, the exact length of the settlement period will differ. The settlement period is often quoted as T+1, T+2 or T+3; which means the transaction date plus one, two or three days. For stocks, the settlement period is three days (T+3) after the transaction. This means that the buyer must transfer cash to the seller, and the seller must transfer ownership of the stock to the buyer within three days after the trade was made. For certificates of deposit and commercial paper, the transaction must be settled on the same day. For U.S. treasuries, it is the next day (T+1), and forex transactions are settled two days after (T+2).
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