Definitions and Terms
An investor is an individual who commits capital with the expectation of receiving financial returns from an asset manager or directly from a financial asset.
A trader is an individual who engages in the buying and selling of financial assets in any financial market.
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Discretionary trading is decision-based trading. The trader decides which trades to make based on current market conditions.
Quantitative trading is a type of market strategy that relies on mathematical and statistical models to identify opportunities.
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Value at Risk (VaR)
Risk is a forward-looking measure, unlike drawdown which describes what did happen, in the past.The Value at Risk (VaR), is a way of measuring the risk of a portfolio. It is impossible to have a 100% probability of success when making trade predictions. Therefore, a metric, with a 95% confidence interval (20 months), assumes that the probability that the strategy loses -6.5% is around 5%.More info
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Currencies market
Forex (FX) refers to the marketplace where various currencies and currency derivatives are traded. It is the largest, most liquid market in the world by trading volume. It has no centralized location, rather the forex market is an electronic network of banks, brokers, institutions, and individual traders (trading through brokers or banks).
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The price action is a representation of the relative strength of two currencies or the underlying economies that underpins the currencies, so there is no directional bias, which means that price action operates symmetrically.
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A commodity market is a market that trades in the primary economic sector rather than manufactured products, such as cocoa, fruit, and sugar. Hard commodities are mined, such as gold and oil.
Futures contracts (futures) are the oldest way of investing in commodities. Futures are secured by physical assets.
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A commodity trader hedges the underlying commodity (physical assets) in the futures market, thus ensuring an agreed price for a certain quantity for the future, thus acting as an insurance policy.
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Farmers have used this simple form of derivative trading in the commodity market for centuries for price risk management.
A commodity investor speculates in the futures market and does not hedge any physical (asset) market, they provide additional liquidity to the market and often is prepared to accept the risk that the manufacturers or industrial consumers are trying to avoid.
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The price action is a representation of the market sentiment (e.g. Commitments of Traders (COT) Reports). Thus, the market directional bias changes from period to period (e.g. seasons)
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The Financial Times Stock Exchange 100 index (FTSE 100 index) is composed of the 100 largest companies listed on the London Stock Exchange (LSE). These are often referred to as 'blue-chip' companies, and the index is seen as a good indication of the performance of major companies listed in the UK.
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The price action of the FTSE 100 (and other similar indexes) is different from the price action of other financial instruments like FOREX because the price action is a representation of the value of all the companies in the index. The (the long term) upward slope is assisted by survivorship bias because any underperforming company is removed and replaced with a better performing company. Having said this, it is seen by some as a flawed delusion because by the time those companies are eligible to be added to the FTSE 100 they might have already reached their peak value. The index is also prone to extreme short selling as experienced with the financial crisis of 2007–2008,
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"By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals." - Warren Buffett
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The National Association of Securities Dealers Automated Quotations -100 (NASDAQ-100 (NDX) is a stock market index made up of 102 equity securities issued by 100 of the largest non-financial companies listed on the Nasdaq stock market.
The Dow Jones Industrial Average (DJIA), Dow Jones, or Dow, is a stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the U.S. Although it is one of the most commonly followed equity indices, many consider the Dow to be an inadequate representation of the overall U.S. stock market compared to broader market indices such as the S&P 500 Index because it includes only 30 large-cap companies, is not weighted by market capitalization, and does not use weighted arithmetic mean.
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Market capitalization, (market cap), is the market value of a publicly-traded company's outstanding shares. It is equal to the share price multiplied by the number of shares outstanding. Since outstanding stock is bought and sold in public markets, capitalization could be used as an indicator of public opinion of a company's net worth and is a determining factor in some forms of stock valuation.
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Market capitalization is used by the investment community in ranking the size of companies, as opposed to sales or total asset figures.
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