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Trading glossary

Fundamentals words

65 words, each explained first as you would tell a ten-year-old.

1. adoptionHow many people start really using something, like a coin. More users can mean more people want to own it.
2. analyst estimateA guess by experts about how much money a company will report. Prices react to how the real results compare with it.
3. balance sheetA company's list of everything it owns and everything it owes, like a snapshot of its savings and its loans.
4. Bank of JapanJapan's main bank for the whole country. It sets the basic cost of borrowing money in Japan, which can move the yen and Japanese shares.
5. beatWhen a company's results come out better than the experts guessed.
6. bondA loan you give to a government or company. They pay you interest and give the money back later.
7. book valueWhat a company is worth on paper: add up everything it owns and take away everything it owes.
8. business cycleThe way a country's economy moves through good times and slow times, again and again.
9. cash flowThe money that really comes into and goes out of a company. Profit on paper is not the same as cash in the bank.
10. central bankA country's main bank. It sets the basic cost of borrowing money to keep prices steady and the economy healthy.
11. CPIA report that shows how fast everyday prices, like food and rent, are going up.
12. cyclicalA kind of business that does great when the economy is booming and badly when it slows down.
13. debtMoney a company has borrowed and must pay back, usually with an extra charge for borrowing.
14. debt-to-equity ratioA number comparing how much a company has borrowed with how much belongs to its owners. Higher means more borrowing.
15. defensiveA kind of business people need even in hard times, like electricity or food, so it usually holds up better when the economy slows.
16. dividendA share of a company's profit paid out in cash to the people who own its shares.
17. dividend yieldHow much a company pays you each year for owning its share, compared with the share's price.
18. earnings per shareA company's profit divided by how many shares it has, so you can see how much profit each share earned.
19. economic calendarA schedule of big news reports, like price or jobs numbers, so you know when markets might jump.
20. event riskThe chance that big news suddenly makes price jump much further than normal in a few moments.
21. expectationsWhat people think will happen before news comes out. Prices often move on how the news compares with it.
22. Federal ReserveThe main bank of the United States. It sets the basic cost of borrowing money there, which moves markets around the world.
23. FOMCThe group at America's main bank that meets to decide the basic cost of borrowing money.
24. free cash flowThe cash a company has left after paying for its running costs and new equipment.
25. fundamental analysisJudging what a company or market is really worth by looking at its money, like sales, profits and debts.
26. GDPA number that adds up everything a country produced, to show how fast its economy is growing.
27. growth stockA share in a company that people expect to grow fast in the future, so it can cost a lot compared with today's profits.
28. guidanceWhat a company says it expects to earn in the coming months, which can move its share price more than past results.
29. high-impact eventA big scheduled piece of news, like a decision on the cost of borrowing money, that can make prices jump suddenly.
30. in lineWhen a result comes out about the same as experts expected, so there is no big surprise.
31. inflationWhen prices of everyday things keep going up, so the same money buys less than before.
32. interest rateThe price of borrowing money, paid as extra money on top of what you borrowed.
33. interest rate differentialThe difference between the cost of borrowing in two countries, which helps move the price between their money.
34. inventory reportA regular report showing how much of something, like oil, is stored up. Surprises in it can move the price.
35. jobs reportA monthly report showing how many people have jobs, which tells how healthy a country's economy is.
36. liabilitiesEverything a company owes to others, like loans and bills it still has to pay.
37. market valueWhat the whole company is worth at today's share price: the price of one share times the number of shares.
38. missWhen a company's results come out worse than the experts guessed.
39. monetary policyHow a country's main bank controls the cost of borrowing money to keep prices steady and jobs growing.
40. net profitThe money a company keeps after paying all its costs, loans and taxes.
41. operating cash flowThe cash a company's main business really brings in, not just the profit written on paper.
42. P/E ratioA number that compares a share's price with the profit it earns. A higher number means you pay more for each bit of profit.
43. playbookA written list of what you will do before, during and after a big news event, like a team's game plan.
44. PMIA survey of businesses that shows whether they are growing or shrinking. Above 50 usually means growing.
45. policy rateThe main borrowing cost set by a country's main bank. It affects loans, savings and currencies.
46. price-to-book ratioA number comparing a share's price with what the company owns minus what it owes, for each share.
47. price-to-sales ratioA number comparing what the whole company is worth on the market with how much it sells in a year.
48. priced inWhen the news everyone expected is already part of the price, so it does not move much when the news finally arrives.
49. profit marginHow much of each rupee or dollar a company takes in that it keeps as profit.
50. rate cutWhen a country's main bank lowers the cost of borrowing money, to help the economy grow.
51. rate hikeWhen a country's main bank raises the cost of borrowing money, usually to slow down rising prices.
52. relative strengthComparing one share with its whole market to see if it is doing better or worse than the rest.
53. release timeThe exact time a big report, like a price or jobs number, comes out.
54. results dayThe day a company tells everyone how much money it made. Its share price can jump a lot that day.
55. revenueAll the money a company takes in from its customers before paying any costs.
56. scheduled eventBig news that is planned for a known date and time, like a results report or a bank meeting.
57. sectorA group of companies that do the same kind of business, like banks or technology companies.
58. shareholders' equityThe part of a company that belongs to its owners: everything it owns minus everything it owes.
59. supply and demandHow much of something there is compared with how much people want it. Less supply or more demand pushes prices up.
60. surpriseThe difference between what experts expected and what really happened. Big surprises move prices the most.
61. technical analysisStudying price charts, like candles, directions and shapes, to judge where price might go next.
62. token unlockWhen a batch of locked-up crypto coins is released so their owners can sell them, which can add a lot of supply.
63. top-down analysisLooking at the big picture first, like the economy, then narrowing down to one chart before trading.
64. unscheduled eventBig surprise news that nobody knew was coming, like a sudden announcement, which can move prices fast.
65. valuationWorking out how much a company is really worth, to judge whether its share price is cheap or expensive.