Reference
Investing Glossary for This Reference
The vocabulary the rest of this reference assumes, defined in the sense these pages use it. Deliberately short: only terms that do real work here, not a general finance dictionary reproduced from somewhere else.
- The daily count of how many issues rose against how many fell, published per exchange. It is the raw material of every breadth measure on this site: divided, it is the advance/decline ratio; accumulated, the advance/decline line; smoothed twice, the McClellan oscillator. One vote per issue regardless of size, which is precisely what a capitalisation-weighted index cannot express.
Asset
- Anything owned that has economic value. In portfolio language an asset class is a group whose members tend to behave alike — equities, bonds, commodities, cash — which is the sense in which the word carries information, since the point of naming classes is that they do not all move together.
Bankruptcy
- A legal process for a borrower that cannot meet its obligations. For equity holders the practical meaning is subordination: claims are paid in order, and ordinary shares sit last, which is why a share price can fall to a few cents while the company continues to operate normally.
Beggar-thy-neighbor
- A policy that improves one country’s position by worsening its trading partners’, historically a competitive currency devaluation to make exports cheaper. It appears in market commentary because the response is usually retaliation, so the initial advantage is temporary and the disruption is not.
Benchmark
- The standard a portfolio is measured against, most often an index. The choice is not neutral: a fund compared with a small-cap benchmark and the same fund compared with a broad market index can look like two different products, which is why the benchmark is disclosed alongside the return.
Bid-ask spread
- The gap between the best price a buyer is offering and the lowest a seller is asking. It is a cost of trading rather than a price, it widens when a book thins, and it is one reason volume figures on illiquid instruments describe the few participants present rather than the market.
Breadth
- How many issues took part, as opposed to how far the index moved. Every breadth measure counts rather than weights, which is the whole of its value: an index can rise on a handful of its largest members while most of the list falls, and no study of the index itself will reveal it.
Capital
- The money committed to an activity, as distinct from the income it produces. In market usage capital gain means the change in an asset’s price and is separated from dividend or interest income, a distinction that matters because the two are taxed differently and behave differently.
Debit balance
- The amount owed to a broker in a margin account: the value of securities bought with borrowed money, less what has been repaid. It matters at the market level because aggregate margin debt is one of the few published measures of how much leverage is in the system.
Divergence
- When price and an indicator built from it disagree; price makes a higher high, the indicator does not. It is a description of how a move was made rather than a forecast of the next one, and divergences have persisted for many months without resolving. Treating one as a countdown is the most common error with every oscillator in this reference.
Equity
- Ownership. In a company it is what remains after liabilities are subtracted from assets; in a brokerage account it is the account value less the debit balance. Both senses appear in market writing and they are not interchangeable, which is a frequent source of confusion in discussions of margin.
Eurobond
- A bond issued in a currency other than that of the country where it is sold, the name predates the euro and has nothing to do with it. The market grew because it sat outside domestic regulation, which is also why Eurobond issues historically carried less disclosure than a comparable domestic bond.
Float
- The shares actually available to trade, excluding holdings that are locked up, founders, governments, cross-holdings. Modern index weighting is float-adjusted for this reason: without the adjustment an index would be pushed around by shares nobody can buy.
Industry
- A grouping of companies by what they do. Classification systems disagree at the edges, and the disagreement shows up in sector breadth data: two providers can report different sector leadership for the same session because they assigned the same company differently.
Instruments
- A general term for tradable contracts, shares, bonds, futures, options. It is used when a statement applies regardless of type, which is common in this reference because most indicator arithmetic does not care what it is applied to, while the interpretation frequently does.
Interest
- The cost of borrowed money, expressed as a rate. Its relevance to equity analysis is indirect but strong: the rate at which future earnings are discounted changes what those earnings are worth today, which is why rate news moves stock indices that have no direct exposure to borrowing.
Investments
- Assets held with the expectation of return. The word is doing categorical work rather than describing anything precise, and in market data it usually signals a balance-sheet line item rather than an activity.
Liquidation
- Selling to convert holdings into cash. The distinction worth keeping is voluntary against forced: forced liquidation (a margin call, a fund meeting redemptions) sells regardless of price or merit, which is why it produces the indiscriminate breadth readings that cluster at market lows.
Liquidity
- How much can be traded without moving the price. It is not the same as volume: an instrument can print a large share count while a modest order still moves it several per cent, and the gap between those two facts is what transaction-cost analysis measures. Every claim on this site about volume revealing intent depends on liquidity being finite.
Market maker
- A firm that quotes both a bid and an ask and stands ready to trade either side, earning the spread rather than taking a view. Its executions are frequently marked short because it sells stock it does not hold and flattens within seconds, which is why roughly half of all consolidated volume is short-marked and why that figure says nothing about sentiment.
Par
- The face value of a security, most usefully for bonds, where it is the amount repaid at maturity. A bond trading above par yields less than its coupon and below par yields more; the relationship is arithmetic, not sentiment.
Profit
- Revenue less costs. Which costs are subtracted decides which profit is meant (gross, operating, or net), and comparisons between companies quoting different levels are meaningless. In index construction it matters because some providers require profitability for inclusion and others do not.
Reserve
- An amount set aside against a future obligation or loss. In banking, reserve requirements are a regulatory minimum; in company accounts, reserves are an accounting entry rather than cash in a vault, and reading one as the other overstates available liquidity.
Sector
- The broadest layer of industry classification, technology, financials, energy and so on. Sectors matter to breadth because participation is often concentrated in one or two of them: an index can rise on a single sector while most others decline, which the index alone cannot show.
Security selection
- Choosing individual holdings, as opposed to deciding how much to hold of each asset class. Performance attribution separates the two because they are different skills, and a portfolio can be right about the asset class and wrong about every name inside it.
Short interest
- The stock of open short positions, reported twice monthly. It is not short volume, which counts executions marked short during a session and includes positions opened and closed the same day. A symbol can show heavy short volume every day while its short interest barely moves; confusing the two is the commonest error in reading published short-sale data.
Short-term
- A horizon, and one with no fixed length. In tax it has a statutory definition; in trading it means whatever the speaker’s holding period is. Any claim about what works short-term should state the period, because the same method can be profitable over days and useless over minutes.
Transactions costs
- Everything paid to trade beyond the price itself: commission, the bid-ask spread, and the market impact of the order. The last is the largest for size and is the reason large positions cannot be built quietly, which is the premise the whole of this site rests on.
Volume
- The number of shares or contracts traded in a period. It is a count of activity, not of buyers or of sellers (every share traded had one of each), so any directional reading of volume comes from an attribution rule laid on top of it, such as assigning a session’s whole volume to the direction of its close.
Volume-weighted average price (VWAP)
- The average price of every trade in a period, weighted by the volume at each price rather than by recency. It is a benchmark before it is an indicator: institutions are measured against it, so a great deal of executed flow is arranged to track it, which gives the line real behaviour independent of anything it forecasts.
Frequently asked questions
Why is this glossary short?
Because it only contains terms this reference actually uses. A general finance glossary of the kind that appears verbatim on hundreds of sites would add pages without adding anything a reader could not get from a dictionary. What is here is the vocabulary the indicator and breadth pages assume, defined in the sense those pages use it.
Where a term has two meanings, which one is given?
Both, when both appear in market writing, with the difference stated. Equity is the clearest case: it means ownership in a company and it means account value less borrowings, and the confusion between them makes discussions of margin debt hard to follow. A glossary that silently picks one meaning is more misleading than no glossary.
Why define liquidity separately from depth?
Because they answer different questions and the words are used interchangeably in most writing. Depth is what sits on the book at a given moment: how much can be filled right now, at what distance from the touch. Liquidity is the broader property: how much could be absorbed over some horizon without moving the price materially, including the flow that is not resting on the book at all. A market can be thin on depth and still liquid, because participants step in when a large order appears rather than quoting into it beforehand.
Why is it one page rather than a section of grouped pages?
Because a reader looking up a word wants one place to look and a browser search that finds everything. Splitting thirty definitions across four grouped pages would produce four thin pages, four sets of navigation, and a reader who has to guess which group a term was filed under. It also means a reader who arrives looking for one word lands on the word, rather than on a section index that leaves them searching again.
Are the definitions written for this site or taken from elsewhere?
Written here, in the sense the rest of the reference uses each word. That is the only justification for a glossary at all: a general definition of liquidity is available anywhere, whereas the reason it appears in this one is that every claim on this site about volume revealing intent depends on liquidity being finite. Where a term is used more narrowly here than in general finance, the entry says so.
What is the difference between volume and liquidity?
Volume is what traded; liquidity is how much could have traded without moving the price. They are correlated and they are not the same, and the distinction carries real weight in reading any volume figure. An instrument can print a large share count while a modest order still moves it several per cent, which is why this site compares volume against an instrument’s own history rather than across instruments.
Which terms are deliberately excluded?
Anything this reference does not use, and anything that cannot be defined correctly in a sentence or two. A term that needs a page to define does not belong in a glossary, it belongs on the page. Where an entry here would have to be either wrong or a paragraph long, the term is left out and the indicator or breadth page that uses it carries the explanation instead.
Do the terms link to the pages that use them?
Not from the entries themselves, deliberately, a definition threaded with links is harder to read than one that simply says what the word means, and the cross-links at the foot of the page cover the same ground. The indicator library is where most of this vocabulary is actually put to work, and the breadth section is where the counting terms belong.