TradingJargon

PCE - Personal Consumption Expenditures. Also known as "consumer spending". Measures the prices paid by the American public for goods & services. The core PCE index excludes volatile energy + food prices and reveals the true underlying inflation trend. #pce #tradingjargon

Cyclical Stocks - Unlike defensive stocks (which are "non-cyclical"), cyclical stocks are closely correlated to the economy. In a strong economy, such stocks are usually also strong. In a weak economy, investors tend to dump cyclical stocks in favor of defensive stocks.

Defensive Stocks - Non-cyclical stocks that remain profitable regardless of the wider economy. Associated with products/services that consumers always need (utilities, healthcare, etc). Interestingly, big tech stocks behaved as defensive "safe haven" stocks during the pandemic.

SPAC - A "special purpose acquisition company" (aka: "blank cheque company") is a shell company formed in order to raise money through an IPO. This is done in order to purchase or merge with an existing company. #SPAC #StockMarket #tradingjargon

FAANG Stocks - Acronym referring to prominent US Tech stocks: Facebook, Amazon, Apple, Netflix & Google. More recently known as FAANG+ (to include other dominant stocks such Tesla). Interestingly, during the pandemic, FAANG+ stocks played the role of defensive stocks. #FAANG

Disposition Effect - A human tendency often discussed in the field of behavioral finance. Describes the propensity of investors to sell winners too soon and to hold losers too long. A widespread habit among traders. #dispositioneffect #TradingSuccess #StockMarket #forexstrategy

Auction Market Theory - A market is an auction. Price is "advertised" higher to see if buyers are interested. If they are, it will be advertised higher still. This continues until buyers are exhausted. The same applies to the downside. Price itself is the advertising mechanism.

Free Bar - A bar/candle that forms entirely beyond the outer Bollinger Bands, or Keltner Channels. A free bar (or cluster of free bars) often indicates a buying/selling climax. #freebar #TradingTips #StockMarket

Reverse Stock Split - The opposite of a stock split. Occurs when a company consolidates the number of existing stocks into fewer (more valuable) shares. Usually a drastic action that signals distress, as it raises the value of low-priced shares. #reversestocksplit #TradingTips

Stock Split - Occurs when a company increases the number of outstanding shares by splitting stocks into multiple shares. This lowers the price of each share without affecting the company's value. Unlike dilution, the equity % owned by existing shareholders is not reduced.

Equivolume - A method of creating a chart based entirely on price & volume. Equivolume charts are preferred by those who believe that volume is more important than time. Thus, the X-axis of these charts denotes volume traded instead of time. #equivolume #TradingTips

Dollar Milkshake Theory - A macro-economic theory that postulates that the global monetary system is tilted in favor of the US dollar. The theory suggests that all fiat currencies are destined to weaken against the $, particularly during times of economic stress. #TradingTips

Dilution - Occurs when a company issues new shares to raise capital. This results in a decrease in existing stockholder's ownership of that company. Shareholder's ownership in the company is automatically reduced ("diluted") when the new shares are issued. #dilution #StockMarket

Value Trap - An investment that initially seems to be a bargain, but then remains cheap for an uncomfortably long time. Unsuspecting investors are lured by the cheap valuation and then have to endure poor returns for a sustained period. #valuetrap #TradingTips #StockMarket

GARP - Growth at reasonable price. A strategy that seeks to combine aspects of both growth & value investing. The goal is to avoid the extremes of either style. GARP investors seek out companies showing consistent growth, while avoiding companies with high valuations. #garp

FDV - Fully diluted valuation. A metric used to estimate the value of a crypto project. FDV differs from market cap (which is simply the price multiplied by the circulating supply). FDV is calculated by multiplying the price with the total supply (including unmined coins). #fdv

WR7 - Developed by Tony Crabel in the 80's, then popularized by Linda Raschke. A WR7 occurs when the daily bar's range is the widest of the week, representing an expansion in volatility. On the day following a WR7, traders often buy/sell a test of the WR7's high/low for a scalp.

Fat Pitch - In baseball this describes an incoming ball that is easy to hit. Buffet used the term to describe investment strategy, which many misinterpret as waiting for easy plays. Buffet actually meant one should determine which strategy produces best results & focus on those.

Federal Funds Rate - The FOMC reviews/sets the fed rate 8 times per year. This is the interest rate that banks pay one another to borrow/loan collateral. This rate has significant economic consequences and affects consumer products such as credit cards, mortgages, etc. #FOMC

Dot Plot - The FOMC publishes an updated "dot plot" at quarterly intervals. This is a chart that reveals where each Fed policy maker thinks interest rates will be in the foreseeable future. Each dot represents a FOMC's member's personal view on interest rates. #dotplot #FOMC