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2. For more information on this subject see. The Introduction to Objectivist Epistemology. Chapter 15

1. Anthony Robbins, Personal Power.

2. Dr. Van K. Tharp, "The Psychology of Trading," from Market Wizards, by Jack D. Scwager (New York: NYIF Corp, 1989), p. 424.

3. Shakespeare, Macbeth.

4. Anthony Robbins, Unlimited Power (New York: Ballantine Books, 1987), p. 321.

5. Ibid., pp. 222-223.

Chapter 16

1. Dr. Karen Homey, Neurosis and Human Growth (New York, W W Norton & Company, Inc., 1950). Unless otherwise indicated, all quotes come from this book.

2. According to Dr. Homey, basic anxiety is a deeply rooted "feeling of being isolated and helpless in a world conceived as potentially hostile."

Glossary of Terms

advance/decline line A measure of market movements composed of the cumulative total of dif ferences between advancing issues (stocks whose prices are up on the day) and declining issues (stocks whose prices are down on the day) of securities prices.

alpha A measure of stock quality that compares the performance of an individual stock relative t the market. An Alpha value of 1 means that the stock has, on average, outperformed the market by 1 % per month, so if the market moves up 10% in six months, the stock should move up 16%.

arbitrage 1. Buying and selling, at temporarily different prices, two securities that are exchangeable for each other, as under a merger plan. 2. Buying a security or commodity in one market and simultaneously selling the same or a related instrument in another market in an attempt to profit from short -term price differentials.

ask The lowest currently stated acceptable price for a specific stock or commodity on the floor of an exchange. Also called the offer.

at-the-money An option in which the price of the underlying instrument is exactly the same as the strike price of the option. (See in-the-money, option, out-of-the-money.)

bear Anyone who takes a pessimistic view of the forthcoming long-term trend in a market; that is, one who thinks that a market is or soon will be in a long -term downtrend.

bear market A long-term downtrend (a downtrend lasting months to years) in any market, especially in the stock market, characterized by lower intermediate

lows (those established in a time frame of weeks to months) interrupted by lower intermediate highs.

beta A measure of a stocks volatility. A stock with a Beta of 2 should be up 20% when the market is up 10%, or down 20% if the market is down 10%.

bid An indication by an investor, trader, or dealer of the willingness to buy a security or a commodity at a certain price; also, the highest current such indication for a specific stock or commodity at any point in


bid and ask The current quote or quotation on the floor of any market exchange for a specific stock or commodity. The bid is the highest current price at which anyone is willing to pay at a given moment of time. The ask is the lowest current price anyone is willing to sell the security or commodity at a given moment in time. Also called the bid and offer.

block A large amount of a specific stock, generally 10,000 or more shares.

blue chip The common stock of an established industry leader, such as IBM, whose products or services are widely known and which has a solid record of performance in both good and bad economic environments.

bond yields The income available from a bond expressed as a percentage of the purchase price.

bottom The lowest price within a market movement that occurs before the trend changes and starts moving up.

book value A measure of the net worth of a share of common stock. It is calculated by subtracting the intangible assets and preferred stock from the total net worth of the company, and then dividing by the number of common shares outstanding.

break A downward price movement that goes below previous important lows and ontinues to carry downward. The term usually applies to dramatic downward movements after the market has been moving horizontally in a "line" for a sustained period.

breakout An upward price movement that goes above previous important highs and continues to carry upward. The term usually refers to dramatic upward movements occurring after the market has been moving horizontally in a "line" over a sustained period.

brokerage The same as commission the fee charged by a registered securities or commodities broker for executing a customers order.

bull Anyone who takes an optimistic view of the forthcoming long-term trend in a market; that is, one who thinks that a market is or soon will be in a long-term uptrend.

bull market A long-term (months to years) price movement in any market characterized by a series of higher intermediate highs (those established within weeks to months) interrupted by higher consecutive intermediate lows.

call An option contract giving the owner the right to buy a specifi ed amount of a stock bond, commodity, etc. at a stated price within a specified time period, capital Accumulated money or goods used to produce income, car Market slang for one contract in the commodities markets. (See contract)

commission The fee charged to a client by a registered broker for the execution of an order to buy or sell a stock, bond, commodity, option, etc.

commodity Any bulk good traded on an exchange or in the cash (spot) market, such as metals, grains, meats, and so on. Often, the term commodities is used to refer to any of the futures that may include stock index futures.

consolidation A period of trading in a security or commodity market character ized by a narrow price range over a sustained period. In technical terms, consolidation periods usually indicate periods of

extended large-scale acquisition or liquidation of a financial instrument, and therefore often precede strong price movements.

contract One unit of trading within the commodities markets; it varies in size from market t market.

correction An intermediate market price movement (one that lasts from weeks to months) that moves contrary to the long-term trend, or primary movement (the movement that lasts from months to years). Usually, corrections retrace between one-third to two-thirds of the primary movement before reversing.

day trade Any trade that is made within the same market within the same day.

delivery The change in ownership or control of the actual commodity in exchange for cash in the settlement of a futures contract.

demand The desire and willingness to pay or trade for a good or service within the market.

dividend A distribution of the eamings of a corporation, usually in the form of cash, stock, or property. The board of directors declares all dividends.

discount rate The interest rate charged to member banks that borrow directly from the nine Federal Reserve District Banks.

Dow Jones Industrial Average The most widely used indicator of market activity, composed of an

average of 30 large issues

within the industrial sector of the economy.

Dow Jones Transportation Average The most widely reported indicator of stock activity in the transportation sector of the economy, composed of an average of 20 large issues.

eamings The net income available for common stock divided by the number of shares outstanding, reported quarterly by most companies (also eamings-pershare).

efficient markets theory A view of the markets that states that a market may reflect all relevant information known about the market. Consequently, adjustment to new information is virtually instantaneous.

exchange Organized exchanges where commodities, futures, and securities transactions are carried out by member traders and brokers.

exercise To execute the rights granted in an options or warrant contract. For example, an owner of a call contract on common stock exercises a call by executing the right to buy 100 shares of the stock at the strike price stated in the contract.

expiration date The date specified in an option contract on which the option becomes worthless and the owner no longer has the rights specified in the contract.

Federal Reserve Board A seven-member group, appointed by the President, responsible for setting the monetary policy of the United States and for overseeing the operation of the Federal Reserve System.

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