Alternative Market Glossary
The Devil's Dictionary
by Norgate Investor Services - www.premiumdata.net
The Devil's Dictionary, was originally published by Ambrose Bierce.
Think of him as the forgotten brother of Mark Twain. Both had remarkably
similar lives, were good friends, and lived in San Francisco around
the same time. Bierce, however, followed a different path than Twain.
While both had similar humour, and were equals in their genius, Bierce
clearly was the better when it came to wit. Public figures quaked
in fear of his satirical pen, and newspapers sales soared when he
was published. Over the years, many of his jabs at the establishment
appeared in local newspapers and were later collected into The Devil's
Dictionary, one of the greatest works of satire of the 19th century.
We present you with Norgate's version of the Devils Dictionary for
Analyst recommendations: –
Strong Buy – Buy
Buy - Hold
Hold – Sell
Sell – It’s too late.
Arbitrageurs: – large traders who feed on plankton.
Averaging down: - lowering the average price of entry by
adding to a losing position.
Averaging down should only be attempted when you are really
angry at a market.
Back–testing: – the art of adjusting trading
system parameters so as to ensure maximum profit in the past and
zero profit in the future.
Black-box system: – a trading system that is available
for sale, but is so good that its rules can’t be disclosed.
Black-box systems are generally only available for sale because
the vendors have a sense of philanthropy.
Cancel-if-close: - a limit order that is cancelled if it
appears likely to be hit. Some brokers do not accept cancel-if-close
Carbon credits: - A scheme developed by brokers requiring traders to purchase millions of dollars of carbon credits at the end of each financial year to offset the printing of their contract notes.
Charting: - “join-the-dots” for adults.
Central Banks: - big market players, with no stop-losses.
The Bank of Thailand once bet 40% of its foreign reserves in a day.
Computerised system testing: - torturing the data until
it confesses. See: back-testing
Contrary opinion: - the idea that when the market dumps
a security, you should look to buy it. The trick appears to be to
make sure that the market has finished doing the dumping, and is
not just waiting for you to buy so that it can really start dumping.
See: Institutional investor.
Cycle analysis: - a method of analysis that allows losing
trades to be organised into regular patterns.
Derivatives: – securities that are identified by acronyms
- CHIPS, COBRAS, LEAPS, PERQS, STEERS, TRIPS, ZEPOS – all
of these things are derivatives. Unfortunately, little else is known
Daytrading: - an activity that takes place in between meaningful
periods of employment.
Dot.com bubble: - tulip-mania for the X-generation.
Dow Jones Industrial Average: – a widely reported
stock index that was designed in the late 11th century and has stood
the test of time.
Drawdown: - A figure that immediately grows when a trading system transitions from paper trading to real trading.
Eurodollars: - U.S. Dollars, of course.
False Break: – an actual break of a trendline that
triggers a losing trade. False breaks confirm the usefulness of
trendline analysis. Only those breaks that are false cause problems,
and those breaks don’t count, because they are false.
Fast market: - an official market condition, during which
floor brokers may scalp you with impunity. At other times, they
have to be careful about it. See: slippage
Figures: - market-sensitive measures of economic activity,
such as “Non-Farm Payrolls” and “Durable Goods
Orders”, that are published every day in the U.S., much to
the annoyance of players on the other side of the world, who can’t
get to sleep.
Float (initial public offering): - stock that is offered
to you because other people have turned it down. The guiding principle
in relation to floats is as follows: “never participate in
a float that you are able to participate in.”
Forex market: - a private casino, which is run by large
international banks, mainly so that they can have some fun.
Fundmental analysis: – a method of analysis that provides
compelling reasons for why a stock shouldn’t fall in price
when it does.
“Fundamentally sound”: - the condition in which
an economy finds itself immediately after a stock market collapse.
Gold carry trade: - in the gold carry trade, institutions
called gold banks borrow gold from the central bank at the gold
lease rate, which may be 1%. They can then sell this gold and invest
the proceeds in Treasury Bills, which may yield 4%. The central
bank keeps the gold on its books, figuring that it can trust a gold
bank. Of course, the gold bank is “short” the gold until
it pays it back, and it must take care that the gold price doesn’t
get away from it. This may, or may not, explain a lot about the
gold market of the 1990s.
Greeks, the: - Delta, Gamma, Rho, Theta and Vega. In option
pricing models, the Greeks are partial derivatives that express
local sensitivities. Just remember the names of about three of them,
and then slip them into the conversation occasionally. No one will
pick you up on it.
Hedge Fund: - a fund that pools money from rich investors,
in order to play with it. Hedge Funds are private concerns, which
means that they can play wherever they like. Mutual Funds, on the
other hand, accept money from the public, and can only play where
they are supervised.
Hedger: - a guy you can’t beat when you’re playing
him at futures. When a hedger loses a bet in the futures market,
he makes up for it in the cash market. When a speculator loses a
bet in the futures market, he really loses it.
Index Funds: – funds with no sense of fun.
In-house analyst: – an employee of a broking house
who dresses mutton up as lamb and advertises it on special.
Institutional investor: - someone who dumps a stock big-time,
a day or two after you’ve bought it, for no apparent reason.
Limit moves: - An unexpected but welcome holiday for pit traders invariably caused
by fat-finger-syndrome-suffering Japanese traders.
Live feed: - a technology that enables the instant incorporation
of bad ticks into a charting program.
Long Term Capital Management: - a large hedge fund, whose
capital only managed to last for a short time.
Lunch: – when you ring your broker on a Friday afternoon
to be told he’s still at lunch, it means he’s still
Market Depth: - a trading screen that shows orders queued
up on both sides of a market. Unfortunately, it doesn’t show
the orders belonging to people who don’t like to queue.
Market report: - a concise explanation of why a market traded
up or down. 99% of market reports are drawn from other market reports.
The remainder are whimsical.
Maximum Adverse Exeuction: - The employment status of a trader
at Société Générale in January 2008 after losing the bank €4.9 billion.
Money-management: - the art of hiding trading losses from
Non–executive Director: – a person who’s
job it is to fill a chair at a Board meeting, so that no chairs
Option Pricing Model: - a mathematical model, that can calculate
the fair price of an option. If the market price differs from the
fair price, you can bet accordingly. If the market price then moves
further away from the fair price, you can say: “Hey, that’s
Over-bought: – a market is considered to be in an
over-bought condition when everyone else appears to have bought
it, but you haven’t.
Peak oil: - The point in time at which your highly leveraged
long crude oil position enters an impossibly steep downtrend.
Personal computer: - an indispensable aid to the modern
investor. Investors who are new to computers should consider the
Always approach your P.C. in a confident manner. Computers can sense
fear and indecision. Remember – you are in charge! You can
always shut the thing down (unless you’re using Win98).
Position trade: - a short-term trade that is in deficit,
and will be closed out as soon as it breaks even, however long that
Price/Earnings Ratio: - a ratio that indicates whether the
price of a stock is attractive in relation to last year’s
earnings. A low number indicates a bargain. However a low number
can also indicate a lemon. If a company starts going down the tube,
its stock price will appear very attractive in relation to last
year’s earnings. The P/E Ratio is a versatile indicator.
Random Walk Theory: – the theory that market prices
follow a random walk, much like that of a drunken sailor. The weakness
of the theory lies in the fact that little scientific research has
been done into drunken sailors.
Rumours: - the time-honoured basis for the making of trading
decisions. Rumours about stocks tend to get thicker as they are
Seasonal analysis: - the assumption that other people who
trade Heating Oil Futures know nothing about winter.
Slippage: - the difference between the price at which you
expect a market order to be filled and the price at which it is
actually filled. See: Orange Juice Futures.
Stochastics: – a technical indicator so-named because
the name sounds technical.
Stop-loss: – the trader’s equivalent of a condom.
It’s something you know you should have used after it’s
Support: - a line drawn on a chart, the breaking of which is deemed
extremely significant, even if the only people trading the stock at the time
are two of three ladies at the tennis club.
Support/Resistance: - supposed allies that flee at the first
sign of trouble.
Tankan Index: - a closely watched figure, that measures
the extent to which the Japanese economy is tanking.
Technical analysis: – subjective analysis of the markets
dressed up in a lab coat.
Technical indicator: – a transformation of a price
series that contains less information than the series itself. Different
technical indicators throw away information in different ways.
Tech wreck: - the end of the dot.com bubble. Surprisingly
enough, many observers predicted the wreck accurately. As time goes
on, more and more of these observers come forward.
They: - the members of a powerful international conspiracy
who target small, private traders in order to make their lives miserable.
For instance, “they ran the market to my stop and then turned
Trading floor: - the traditional venue for the negotiation
of securities, now made redundant by screen trading. Trading floors
that remain open serve a valuable purpose as colorful backdrops
to market reports on television.
Trading genius: - a reckless spirit in a bull market.
Trendline analysis: – a form of analysis that works
best on a computer screen, where lines can be erased and re-drawn
Zero-sum game: – a game in which the players slug
it out and the broker wins.
Copyright (C) 1995-2008 Norgate Investor Services.