Glossary

Welcome to Fineco’s Glossary! It will help you better understand the financial terminology and master your financial skills.

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Taxation

Taxation is a government’s act of collecting money in order to fund its activities. Paying taxes is mandatory, and the duty to pay has no direct relation to any service or good provided, as would be the case in a normal market transaction. Taxation applies to a range of economic activities and assets, including income, capital gains, property, sales, and inheritance. Successful traders often use strategies that take taxation into account and minimise their tax burden.

The Great Recession

The Great Recession was a prolonged period of global economic contraction from 2007 to 2009. In the United States, it lasted 18 months and was the longest economic contraction since World War II.

The event was triggered by defaults on mortgage loans in the United States, which led to bankruptcies among banks and a stock market crash. Employment shot up in many countries, the value of homes plummeted, and millions lost a significant portion of their savings. Governments responded by injecting large amounts of money into the economy to bail out banks and stimulate a return to economic growth.

Trader

In finance, a trader is someone who buys and sells goods, currencies, or securities with the aim of making a profit. A trader generally carries out trades in a short time window, while an investor makes purchases and sales with a longer duration. Because traders make more frequent transactions, they generally accrue more commissions and owe more taxes than investors.

Trading

Trading is the action of buying and selling goods, currencies, or securities in order to make money. It can take place on a regulated exchange, like the New York Stock Exchange, or over the counter through broker networks. Trading implies active involvement in a market rather than a buy-and-hold strategy, which would be more aptly termed investing.

There are many styles of trading based on factors like how quickly traders make trades and what analysis techniques they use to make decisions. For instance, scalping is a trade strategy that involves opening and closing positions in a matter of minutes, while swing trading can have timeframes of up to several months. Some traders focus on technical analysis, where they recognise patterns in past price movements to predict future behaviour, while others focus on the fundamental political, economic, and management forces affecting the asset in question.

Trading account

A trading account is an account opened with a brokerage firm for the purpose of buying and selling securities, commodities, or currencies. This type of account is typically used to actively participate in the market through an approach such as day trading. An account opened to hold assets that appreciate over a long period of time would be an investment account.

The two main types of trading accounts are margin accounts and cash accounts. A cash account must be funded with cash before trades can be made, while a margin account allows the account holder to trade using money borrowed from the brokerage. Margin accounts allow traders to reap larger profits from their trades, but they involve more risk than cash accounts.

Trading platform

A trading platform is a digital environment offered by a broker or other financial intermediary for buying and selling securities or currencies and for managing market positions. Some platforms are offered for free if a trader opens an account with a specific brokerage, while others cost money. Certain trading platforms might be tailored to specific trading niches—like options, stocks, or currencies—offering features relevant to that sector of the market. Institution such as investments banks may develop their own trading platforms, known as prop platforms, for internal use.

Trading room

A trading room is a physical space at a stock exchange, brokerage firm, investment bank, or other market-making institution where people converge to buy and sell securities, currencies, commodities, and derivatives. It is also known as a trading floor, dealing room, or front office.

Trading rooms have historically formed an iconic part of financial markets since the first one was opened by the NASDAQ in 1971 in New York City. However, the rise of the internet has led to changes in this emblematic model, and the term can now refer to online interactions as well. Some predict that physical trading rooms will at some point be completely abolished by automated trading.

Trading securities

Trading securities means buying or selling exchangeable financial instruments. These instruments can be broadly categorised as either equities (which are units of ownership in an entity, such as stocks), or debts (such as bonds, which usually entitle the owner to interest).

Publicly listed securities can be traded on an exchange, such as the New York Stock Exchange. Securities that do not qualify for listing are often traded over the counter (OTC), directly between the issuer and the investor. The activity of trading securities is regulated by the Securities and Exchange Commission in the United States.

Trading signals

Trading signals are indications of when to buy or sell a security or asset. They can be based on technical analyses, such as candlestick charts and evaluation of past market trends; on current events and projections of how such events will affect the value of an investment; or on other economic or fundamental factors.

While trading signals are usually used to determine when to buy or sell, they can also be used to trigger investment portfolio shifts between sectors or asset classes. Signals can be provided free of charge or for a fee by a software service or through a human analyst. They are often delivered via SMS or email so that traders can take action on them immediately.

Trust

A trust is a device in which rights to property or assets are held by one person on behalf of another. The three legal persons involved in a trust are the trustor (or settlor), who creates the trust, the trustee, who holds the rights, and the beneficiary, who is the person for whom the rights are held.

Trusts are created when a beneficiary might be incapable of managing its assets, to keep from getting sued by creditors, to reduce tax liabilities, and/or to provide an additional layer of protection for assets. Trusts can be revocable or irrevocable. They can also be living (when the trustor is still alive) or testamentary (specifying how assets are allocated after a person’s death).

Trustee

A trustee is a person or entity designated to hold title to property or assets in a trust and manage them on behalf of a beneficiary. They are appointed by the trustor, who is the person responsible for setting up the trust. Trustees are obligated to produce accounts, revealing to beneficiaries how they performed their duties. Trustees cannot meet their own obligations with the trust’s assets, which can only benefit the beneficiaries. Trustees may be designated in cases of bankruptcy, for charitable trusts, or for trust funds, among other reasons.