Betfair Official Blog

Financial Terminology

What they all mean!

130-30 Strategy

A leveraged strategy whereby the investor shorts stock (that he thinks will under- perform) up to 30% of the value of his portfolio and uses the proceeds of the sale to buy stocks that he thinks will outperform. The ratio of longs to shorts is thus 130-30.

Adding to a loser (doubling up)

Increasing a position in a stock that is moving against you. This is a very risky strategy because if the stock keeps moving in that direction, your losses will increase dramatically.

Dead cat bounce

A temporary recovery after a prolonged decline in price. The market shows signs of life but this is short lived and soon starts falling again (hence dead cat)

Falling knife

Phrase used to describe a share or industry that has suffered significant price declines. Buying these stocks could be very profitable if the industry/stock rebound but it is very dangerous (like trying to catch a falling knife) as they could also lose all their value, such as in the case of bankruptcy.

Fill or kill

An order to execute a transaction immediately and completely or not at all

Position Trader

A type of trader who holds his position for the medium/long term. These traders are not concerned with short term price fluctuations (market noise) as they believer that these will be smoothed out over the long term.

Scalpers

Scalpers are traders that hold positions for very short periods of time trying to make small amounts of profit regularly. A scalper will often try to make money by buying something at the bid price and selling it at the offer price, thus making a single tick.

J - Lo

A slang technical term referring to a rounding bottom (for which J-Lo is often criticized/admired) in a stock's price pattern

Paris Hilton Stock Index

A stock index consisting of companies associated with Paris Hilton. Some consider her influence on consumer spending as material enough to give companies associated with her an edge in the market. The idea is that consumers buy her product lines and the products that she endorses and thus these companies experience increased sales and profits. Companies in this index include Parlux fragrances (manufactures her perfume range), News Corp, Time Warner and Amazon.

Bo Derek

A perfect stock or investment. She played the "perfect woman" in the 1979 hit movie "10"

Skirt length theory

According to this theory, skirt lengths are a predictor of stock market direction. Shorter skirts mean markets are going up. Short skirts appear in times when people are happy and confident and this usually corresponds with bullish markets. I times of fear and uncertainty, skirts tend to be longer, indicating that things are bearish

Leading lipstick indicator

Term coined by Leonard Lauder (Chairman of Estee Lauder). He found that in tough economic times his lipstick sales went up. Idea is that in hard times, consumers turn to less expensive indulgences such as lipstick. Strange as it sounds, it has been quite a reliable indicator of consumer sentiment. In the months following September 11, lipstick sales doubled

Presidential election cycle theory

Theory states that the stock markets are weakest in the year following the election of a new US President. The market then improves until the next election when the cycle starts over again. Theory played out well until the mid 90's but has since been disproved FD Roosevelt, Truman and Eisenhower's terms all started with down years but Clinton and George W Bush's first years were both up years in the market.

Recession

Two or more quarters of negative economic growth measured by GDP. This is visible as a significant decline in economic activity across the entire economy affecting employment, real income, production and retail trade.