Understand investment products, market mechanics, indicators and research terminology. Each entry includes an explanation, example, cautions and related learning.
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Margin is the collateral a trader must deposit with a broker or clearing house to open and maintain a leveraged position, such as a futures contract, a margin loan or a short sale. It is a performance deposit against potential losses, not a fee and not the maximum amount that can be lost.
Market capitalization is the total market value of a company's issued shares, found by multiplying the share price by the number of shares outstanding. It measures the size of a company's equity as priced by the market, not its assets or revenue.
A market order instructs a broker to buy or sell immediately at the best prices currently available. It prioritizes speed of execution over price certainty, so the execution price is not confirmed in advance.
A moving average is the average price over the most recent N periods, recalculated as each new period arrives so that the line smooths short-term noise. The simple moving average (SMA) weights every period equally, while the exponential moving average (EMA) weights recent prices more heavily.
MACD is a trend and momentum indicator, created by Gerald Appel, that subtracts a longer exponential moving average from a shorter one and compares the result with its own smoothed signal line. Its default form uses 12-, 26- and 9-period settings.
A mutual fund pools money from many investors to buy a diversified portfolio of securities run by a professional manager, with each investor owning units in proportion to the amount invested. Depending on the jurisdiction, such funds may be set up as unit trusts or investment companies.