Trading Tools and Strategies

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  • Dogs Of The Dow

    What Is "Dogs Of The Dow"? The Dogs of the Dow is an investment strategy that involves buying the 10 stocks in the Dow Jones Industrial Average (DJIA) with the highest dividend ratios relative to their price. The term "dogs" derives from a similar strategy that calls for investing in the 10 worst performing stocks in the Dow from the previous year. Generally, though, the stocks in both lists are…

  • Collar Strategy

    A collar strategy is a defensive equity play in which an investor seeks to limit the downside in a stock in exchange for forgoing some of the upside potential. This strategy is also known as a hedge wrapper. The investor buys a long position in a stock, in which he will benefit if the price goes up, although the strategy can also be accomplished without actually buying the underlying stock.…

  • What Is Price Discovery?

    Price discovery is the mechanism by which buyers and sellers on an open market determine an asset's premium. In contemporary finance, the process of price discovery is carried out electronically in the markets of equities, futures, options and currencies.

  • What Is Contango?

    In the standardised trade of futures, participants buy and sell contracts in an attempt to secure marketshare. The phenomenon of contango is a prime example of how the process of price discovery works and how the expectations of market participants influence asset value. Contango Defined Pricing derivative products, such as futures and options, is dependent on three factors: asset class, quantity and time. In the case of futures, a contract's…

  • Order Book

    An order book is a real-time and continuously updated list of buy and sell orders on an exchange. It is used for specific financial assets, such as a stock or currency, and can be used to determine the price support for the asset in question.

  • Strategy Evaluation using the Sharpe and Sortino Ratios

    Successful traders approach trading with a clearly defined and thoroughly tested strategy. Most traders evaluate the hypothetical future performance of their strategy by measuring the profit or loss of the strategy run on historical data. But is measuring historical profitability enough? Historical profitability provides only a small piece of information about a trading strategy, while another factor that may be important to a trader is the riskiness of their strategy. The…

  • What Is Bond Convexity?

    Bond convexity is similar to duration but takes the concept further by measuring how a bond's price will react to certain market conditions. Learn more about how bond convexity works at FXCM Insights.

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