Financial Market Terms
Learn essential financial market terms with simple definitions and practical examples covering trading, stocks, forex, cryptocurrencies, commodities, and economic indicators.
Financial Glossary
300 resultsSecondary Market
Quick Definition
The secondary market is where investors buy and sell securities that have already been issued.
Full Definition
Most day-to-day stock and bond trading happens in the secondary market. The money usually passes between the buying and selling investors rather than going to the original issuer.
Example
Buying an existing company's shares from another investor on an exchange is a secondary-market trade.
Also Known As
Security
Quick Definition
A security is a financial instrument that represents an ownership interest, a debt claim, or another investment right.
Full Definition
Stocks and bonds are common securities, while other contracts may also qualify depending on the law and their economic features. Securities can be issued, owned, transferred, and traded subject to the rules of the relevant market and regulator.
Example
A common share is an equity security, while a corporate bond is a debt security.
Also Known As
Seed Phrase
Quick Definition
A seed phrase is an ordered list of words used to restore a wallet and regenerate its keys.
Full Definition
It is often provided when a self-custody wallet is created and may control many accounts derived from the same secret. Anyone who sees the phrase can usually restore the wallet and take its assets. It should be backed up offline, kept in the correct order, and never shared with support staff or websites.
Example
After losing the phone, the owner restored the wallet on a new device with the seed phrase.
Also Known As
Settlement Cycle
T+1Quick Definition
The settlement cycle is the time between a trade and the final exchange of securities and payment.
Full Definition
In the United States, most stock, bond, and ETF trades currently settle one business day after the trade date, known as T+1. Settlement is when the buyer's payment and the seller's securities are formally delivered through the market's clearing system.
Example
A typical U.S. stock trade made on Monday settles on Tuesday if Tuesday is a business day.
Also Known As
Shares Outstanding
Quick Definition
Shares outstanding are the company's issued shares currently held by investors, including insiders and the public.
Full Definition
They generally exclude shares the company holds as treasury stock and can change through new issuance, repurchases, employee awards, conversions, or splits. Market capitalization uses shares outstanding, while earnings per share normally uses a weighted-average count for the reporting period.
Example
A company with 50 million issued shares and 5 million treasury shares has 45 million shares outstanding.
Also Known As
Sharpe Ratio
Quick Definition
The Sharpe ratio compares an investment's return above a reference risk-free rate with the volatility of that excess return.
Full Definition
It is commonly calculated by subtracting a risk-free rate from portfolio return and dividing by the standard deviation of returns. A higher ratio indicates more historical excess return per unit of measured volatility, but the result depends on the period, data frequency, benchmark rate, and assumption that volatility is a useful risk measure.
Example
Two funds with the same return can have different Sharpe ratios if one experienced much larger price swings.
Also Known As
Short Interest
Quick Definition
Short interest is the number of shares that have been sold short and remain open at a reporting date.
Full Definition
It may be shown as a share count or as a percentage of shares outstanding or public float. High short interest shows substantial bearish positioning or hedging, but it does not by itself predict whether the price will rise or fall.
Example
Five million open short shares against a 50 million-share float equals short interest of 10% of float.
Also Known As
Short Position
Quick Definition
A short position is an open market exposure that generally gains when the referenced asset falls and loses when it rises.
Full Definition
In stocks, it is commonly created by borrowing and selling shares that must later be bought back and returned. A short position can face borrowing costs, forced closure, and theoretically unlimited loss because the share price can keep rising.
Example
Selling 100 borrowed shares creates a short position of 100 shares until they are bought back.
Also Known As
Short Selling
Quick Definition
Short selling means selling borrowed shares with the aim of buying them back later at a lower price.
Full Definition
A short seller borrows shares, sells them, and must later return an equal number of shares to the lender. If the price rises instead of falls, losses can grow significantly because a stock's price has no fixed upper limit, and borrowing costs may also apply.
Example
A trader shorts a share at $50 and buys it back at $40, producing a $10 gross gain before fees.
Also Known As
Short Squeeze
Quick Definition
A short squeeze is a rapid price rise intensified when short sellers buy shares to close losing positions.
Full Definition
The initial rise can create margin pressure or risk-limit breaches that force more short covering, adding demand and accelerating the move. Squeezes can be highly volatile and can reverse quickly when forced buying ends.
Example
Unexpected good news sends a heavily shorted stock higher, and short sellers rush to buy shares back, pushing it up further.
Also Known As
Sidechain
Quick Definition
A sidechain is an independent blockchain connected to another blockchain through a bridge or two-way asset mechanism.
Full Definition
It can use different consensus rules, block times, fees, and features from the main chain. Assets may move between the networks through locking, minting, or another bridging design. A sidechain generally has its own security model and does not automatically inherit the full security of the connected chain.
Example
The game used a sidechain for low-cost transactions while bridging selected assets to Ethereum.
Also Known As
Sideways Market
Quick Definition
A sideways market is a period when price moves within a range without a clear upward or downward trend.
Full Definition
Buyers tend to appear near the lower boundary and sellers near the upper boundary, keeping price contained for a time. The range can end with a breakout in either direction, and many trend-following indicators give weaker signals while it lasts.
Example
A stock trading between $48 and $52 for several weeks is moving sideways.
Also Known As
Slippage
Quick Definition
Slippage is the difference between an expected trade price and the price at which the order actually executes.
Full Definition
Slippage can occur because prices change after an order is submitted or because insufficient quantity is available at the displayed price. It may be favorable or unfavorable, although traders often use the term for a worse fill. Market orders and triggered stop orders are especially exposed during gaps, news, and fast markets.
Example
A stop expected to sell near 50 fills at 49.60, creating 0.40 of unfavorable slippage per unit.
Also Known As
Smart Contract
Quick Definition
A smart contract is code deployed on a blockchain that runs according to predefined rules.
Full Definition
Users and other contracts can call it to transfer tokens, record data, or perform application logic. Its execution is replicated and verified by the network, so results do not depend on one application server. The name does not mean the code is legally binding, intelligent, safe, or free of bugs.
Example
The lending smart contract automatically calculated interest and checked the borrower's collateral.
Also Known As
Smart Contract Audit
Quick Definition
A smart contract audit is an independent review of contract code and design for security flaws and incorrect behavior.
Full Definition
Auditors examine a defined code version and scope using manual review, testing, and automated tools. A report normally lists findings, severity, and whether the development team addressed them. An audit reduces some risk but cannot guarantee that code is bug-free, correctly deployed, safely governed, or protected from future changes.
Example
Before launch, the team published a smart contract audit and links to the exact reviewed code commit.
Also Known As
Soft Fork
Quick Definition
A soft fork is a backward-compatible blockchain update that makes validation rules stricter.
Full Definition
Upgraded nodes reject some blocks or transactions that older nodes would still consider valid. Older nodes can usually continue following the upgraded chain if enough block producers enforce the new rules. Soft forks still require coordination and can cause temporary disruption if activation is poorly managed.
Example
The network activated a soft fork that allowed a new transaction feature under stricter rules.
Also Known As
Spot Foreign Exchange
Spot FXQuick Definition
Spot foreign exchange is an outright currency transaction arranged for near-term settlement at the current agreed rate.
Full Definition
In institutional reporting, a spot transaction generally settles within two business days, although market conventions vary for some pairs. The parties agree today on the exchange rate and the amounts of both currencies. Retail rolling spot products may be closed or rolled rather than ending in physical delivery, so their terms should be checked separately.
Example
A company buys euros against dollars at today's spot rate to make a payment due in two business days.
Also Known As
Stablecoin
Quick Definition
A stablecoin is a crypto asset designed to keep its value close to a reference asset such as the US dollar.
Full Definition
Stablecoins may use cash-like reserves, crypto collateral, algorithms, or a combination of methods to support their target price. They are often used for trading, payments, and settlement between crypto platforms. The target is not a guarantee, and a stablecoin can lose its peg if its backing or mechanism fails.
Example
A token targeting one US dollar should trade near $1, but it may temporarily depeg during market stress.
Also Known As
Stagflation
Quick Definition
Stagflation is a difficult economic combination of high inflation with weak or stagnant growth and poor labor-market conditions.
Full Definition
It creates a policy tradeoff because tightening to reduce inflation can weaken activity further, while easing to support growth can add to price pressure. Supply shocks, falling productive capacity, or unanchored inflation expectations can contribute to stagflation. There is no single official numerical threshold for declaring it.
Example
An economy with rising prices, shrinking output, and increasing unemployment may be described as stagflationary.
Also Known As
Staking
Quick Definition
Staking is committing crypto assets to support a proof-of-stake network or delegating them to a validator.
Full Definition
Stakers may earn protocol rewards in exchange for helping secure the network. Depending on the design, funds may be locked, delegated, or represented by another token. Staking carries risks such as slashing, validator failure, lockup periods, smart-contract problems, and asset price changes.
Example
A holder delegated tokens to a validator and received staking rewards after fees.
Also Known As
Stock
Quick Definition
A stock is a security that represents an ownership interest in a company.
Full Definition
A company can divide its ownership into shares and sell some of those shares to investors. Stockholders may benefit if the share price rises and may receive dividends, but they can also lose money if the company performs poorly or the market price falls.
Example
If you buy 10 shares of a public company, you own a small part of that company.
Also Known As
Stock Buyback
Quick Definition
A stock buyback occurs when a company repurchases its own shares from investors.
Full Definition
Repurchased shares may be retired or held as treasury stock, which can reduce shares outstanding and change per-share measures such as EPS. A buyback returns capital to selling shareholders but is not automatically beneficial, because the result depends on the price paid, financing, business needs, and later use of the shares.
Example
A company buying back and retiring 5 million of its 100 million shares reduces the count to 95 million, absent other issuance.
Also Known As
Stock Exchange
Quick Definition
A stock exchange is an organized marketplace where listed securities are bought and sold under established rules.
Full Definition
An exchange brings together orders from buyers and sellers and provides systems for quoting and executing trades. Companies must meet the exchange's listing standards, while trading participants must follow its rules and applicable regulation.
Example
A buy order and a matching sell order for the same listed stock can meet on an exchange.
Also Known As
Stock Split
Quick Definition
A stock split changes the number of shares outstanding and adjusts the price per share proportionally.
Full Definition
In a forward split, each old share becomes multiple shares at a proportionally lower price; a reverse split does the opposite. A split by itself does not change the company's total value or an investor's proportional ownership.
Example
After a 2-for-1 split, 10 shares priced at $100 become 20 shares priced near $50, before market movement.
Also Known As
Stop Order
Quick Definition
A stop order becomes a market order when the security reaches a specified stop price.
Full Definition
Investors may use a sell stop to limit losses or protect gains, and a buy stop to enter or cover a position after price rises. The stop price is only a trigger, so the final execution price may be substantially different in a fast-moving market.
Example
A sell stop at $40 becomes a market sell order when the stock reaches the stop price.
Also Known As
Stop-Limit Order
Quick Definition
A stop-limit order becomes a limit order when a specified stop price is reached.
Full Definition
After activation, it can execute only at the limit price or better, which gives price control but does not guarantee execution. If the market moves quickly past the limit without available matching orders, the position may remain open.
Example
A sell stop-limit with a $40 stop and $39.50 limit activates near $40 but cannot sell below $39.50.
Also Known As
Stop-Loss Order
SLQuick Definition
A stop-loss order is an instruction designed to exit or reduce a position after a specified trigger price is reached.
Full Definition
A standard stop order usually becomes a market order when triggered, so the final execution price is not guaranteed. Gaps, fast markets, and thin liquidity can create a fill much worse than the stop price. Stop rules and trigger sources differ by broker, venue, and product.
Example
A trader long at 100 places a sell stop at 95, but a market gap may cause execution below 95.
Also Known As
Strike Price
Quick Definition
The strike price is the fixed price at which an option's underlying interest can be bought or sold when exercised.
Full Definition
For a call, the strike is the purchase price available to the holder; for a put, it is the sale price. The relationship between the strike and current underlying price helps determine whether an option is in, at, or out of the money. Strike price is only one part of value because time and expected volatility also matter.
Example
A call with a 50 strike lets its holder buy at 50 under the contract terms even if the market price is 55.
Also Known As
Support
Quick Definition
Support is a chart area where buying has previously been strong enough to slow or reverse a price decline.
Full Definition
Technical traders identify support from earlier lows, trading ranges, moving averages, or other chart evidence. It is an observed area rather than a guaranteed floor, and price can break below it when selling pressure becomes stronger.
Example
A stock that repeatedly rebounds near $40 may be described as having support around $40.
Also Known As
Take-Profit Order
TPQuick Definition
A take-profit order is an instruction intended to close a profitable position when a chosen target price is available.
Full Definition
It is commonly implemented as a limit order on the opposite side of an open position. The target price can control the minimum acceptable exit price, but execution is not guaranteed if available liquidity is insufficient. Broker platforms may label and link take-profit instructions differently.
Example
A trader who buys at 80 places a take-profit sell order at 88 to seek an automatic exit at 88 or better.