Glossary

Abgeltungsteuer

The German flat tax on investment income, 25 percent plus a solidarity surcharge.

The deduction settles the tax liability in full, hence the name. For domestic accounts, the bank withholds it automatically.

Accumulating

A fund that automatically reinvests its earnings instead of paying them out.

Advance lump-sum tax

In Germany, an annual tax on a notional minimum return of accumulating funds.

If there's no gain in value, none is due. Whatever's already been taxed is deducted at the time of sale.

Altcoin

A catch-all term for every cryptocurrency other than Bitcoin.

Annual report

A company's yearly account of its performance.

What matters is the management discussion, risk report, cash flow statement, notes, and audit opinion, not the photos at the front.

Arbitrage

Exploiting a price difference for the same asset in different places.

Genuine arbitrage opportunities vanish within seconds, since automated systems exploit them instantly.

Asset class

A group of assets with similar characteristics, such as stocks, bonds, real estate, or commodities.

Audit opinion

An auditor's formal judgment on a company's annual financial statements.

It also names the key audit matters, meaning the areas with the greatest risk of material error.

Backtesting

Testing a strategy against historical data.

Almost every backtest looks too good, because costs get underestimated and rules get quietly adjusted after the fact.

Balance sheet

A statement of what a company owns and how it's financed.

Assets equal liabilities plus equity. Both sides are always exactly equal.

Base rate (advance lump sum)

In Germany, the interest rate set each year to calculate the advance lump-sum tax.

It's published annually by the Federal Ministry of Finance.

Bear market

An extended period of falling prices, usually defined as a drop of twenty percent or more from the last high.

Bitcoin

The first and largest cryptocurrency, launched in 2009.

Blockchain

A jointly maintained ledger where nothing can be altered later without it being noticed.

Every block carries the fingerprint of the one before it. It guarantees consistency, not truth.

Blue chip

A large, established company with a high market capitalization.

Bollinger Bands

Two lines around a moving average, spaced according to recent volatility.

Bond

A loan you make to a government or company, in exchange for interest and repayment at maturity.

When general interest rates rise, the price of existing bonds falls, since new ones now offer more.

Broker

A provider through which you buy and sell securities.

Brokerage account

The account where your securities are held.

Securities are segregated assets and remain yours even if the broker becomes insolvent.

Bubble

A period where prices have drifted far from any reasonable basis.

Bubbles almost always start with something real, and usually burst mechanically, through forced selling of leveraged positions.

Bull market

An extended period of rising prices.

Business cycle

The overall economy's rise and fall over time.

Capital increase

A company issuing new shares to raise money.

Existing shares get diluted unless you participate in the increase yourself.

Cash flow

The actual movement of cash through a company, as opposed to its reported profit.

A profit that's consistently higher than operating cash flow is a well-established red flag.

Cash flow statement

A statement of a company's actual cash movements.

It leaves less room for manipulation than the income statement, which makes it more revealing.

Central securities depository

The institution that holds securities centrally and processes transfers.

Centralized exchange

A trading platform for crypto assets run by a company.

Holdings sitting there are often just a claim against that company, not ownership.

CFD

A contract on the price difference of an asset, usually leveraged and without owning the underlying.

Providers must disclose what share of their retail clients lose money. Those figures regularly sit between 70 and 90 percent.

Chart pattern

Recurring shapes in a price chart, such as head-and-shoulders or triangles.

They're hard to define precisely. Viewers spot the same patterns in random price series as in real ones.

Cold wallet

A wallet with no network connection, such as a separate device or a paper backup.

Collective custody

The joint custody of identical securities at a central securities depository.

You acquire co-ownership of the pooled holding, which grants a right to have it carved out in an insolvency.

Compound interest

Returns that themselves go on to earn returns.

Seventy-two divided by the return roughly gives the number of years to double your money.

Confirmation bias

The tendency to notice only information that supports what you already believe.

It shapes which sources you seek out, how you weigh evidence, and what you remember, all at once.

Contango

When later futures contracts trade at a higher price than earlier ones.

The normal state for storable commodities. Rolling the position forward then costs money each time.

Copy trading

Automatically mirroring another user's trades.

Leaderboards are skewed by selection bias, and simultaneous execution worsens your own price.

Correction

A price decline, typically between ten and twenty percent.

Correlation

A measure of how closely two investments move together.

It isn't stable. It rises in crises, which is exactly when diversification helps the least.

Counterparty risk

The risk that the other party to a deal defaults.

Cryptocurrency

An entry in a jointly maintained ledger with no central authority.

Unlike a stock, there's no company behind it generating profits.

Currency risk

The risk from exchange-rate swings on foreign investments.

An ETF's listing currency tells you nothing about this. What matters is the business of the companies inside it.

Decentralized exchange

A trading venue for crypto assets that runs on programs instead of a company.

Deemed-distribution income

In Austria, the income of accumulating funds that must be taxed annually even though no cash flows to the investor.

DeFi

Financial services run through programs on a blockchain, with no bank in between.

For any promised yield, the question is always who is actually generating that return.

Deflation

A generally falling price level, the opposite of inflation.

Delta

For an option, how much its price responds to a move in the underlying.

Deposit insurance

The legal protection of bank deposits, up to €100,000 per customer per institution in the EU.

It covers cash deposits, not securities. Several brands can belong to the same underlying institution.

Derivative

A financial product whose value is derived from another asset.

Dilution

The reduction of your ownership share caused by the issuance of new shares.

Disposition effect

The tendency to hold losing positions and sell winning ones too soon.

Distributing

A fund that regularly pays out its earnings instead of reinvesting them.

Diversification

Spreading money across many different investments so that no single failure is decisive.

It only works if the components don't move together. Ten tech stocks barely counts as diversification.

Dividend

The portion of profit a company pays out to its shareholders.

Dividend yield

The dividend relative to the share price, expressed as a percentage.

Double taxation treaty

An agreement between two countries governing who may tax which income.

It limits how much foreign withholding tax can be credited against domestic tax.

Drawdown

The decline from the highest point reached so far to the lowest point after it.

Maximum drawdown is the most informative risk measure for retail investors, since it describes what you actually had to live through.

Duration

A measure of how strongly a bond's price reacts to changes in interest rates.

A modified duration of seven means roughly a seven percent price loss per percentage-point rise in yield.

EBIT

Earnings before interest and taxes, essentially operating profit.

EBITDA

Earnings before interest, taxes, depreciation, and amortization.

Emergency fund

Three to six months of expenses held in an account you can access any time.

It isn't an investment, it's the precondition that makes an investment sustainable.

Equity allocation

The share of your wealth held in stocks.

Equity ratio

The share of a company's total assets financed by equity.

A high ratio means the firm can survive hard times without depending on lenders.

ETF

An exchange-traded fund that tracks an entire market instead of picking individual holdings.

It removes the risk of any single company, not the risk of the overall market.

Exemption order

An instruction to your German bank to apply your annual tax-free allowance.

Without it, tax is withheld upfront despite the allowance, and you only get it back by filing a tax return.

Expected value

What a trade returns on average if repeated many, many times.

Win rate times average gain, minus loss rate times average loss, each figure after costs.

Factor premium

A systematic excess return for certain groups of stocks, based on traits like size or valuation.

Fees

Every cost that reduces your return, visible and hidden alike.

Ongoing costs act on your entire, growing balance, which is why they bite hardest over long time periods.

FIFO

First in, first out. When you sell, the shares bought first are treated as the ones sold first.

This method determines which purchase price is used for tax purposes.

Fixed-term deposit

A savings product with a fixed interest rate and fixed term, with no early access.

FOMO

Fear of missing out. The most common reason people buy at the worst possible moment.

By the time a move has drawn attention, it's usually already happened.

Forced sale

A sale you're compelled to make, for instance from a need for cash or a margin call.

It turns a temporary paper loss into a permanent one.

Front-end load

A one-time fee charged when buying fund shares, often up to five percent.

ETFs don't charge one. It has to be earned back before any return exists at all.

FUD

Fear, uncertainty, doubt. Usually thrown at critics as an accusation.

The term is often used to dismiss legitimate objections as bad faith.

Fund

A shared pool that many investors pay into, which then invests in securities.

Actively managed funds try to beat the market and charge noticeably higher fees than ETFs for the attempt.

Fundamental analysis

Valuing a company based on its financial figures.

Future

A standardized contract to buy or sell something at a later date.

Unlike options, both sides are obligated to follow through. Gains and losses are settled daily.

Gamma

For an option, the rate of change of its delta.

Gas fees

The fees charged for transactions on a blockchain.

Geometric mean

The actual annualized growth rate achieved over a period.

For a fluctuating series, it's always lower than the simple average. Only this figure describes your actual result.

Goodwill

The amount a buyer paid above the tangible net worth of an acquired company.

It sits on the balance sheet and must be regularly tested for impairment, which leaves room for judgment.

Grid bot

A program that automatically places a ladder of buy and sell orders across a price range.

Only works in sideways markets. If the price breaks sharply out of the range, the strategy fails.

Halving

For Bitcoin, the scheduled halving of the reward paid for new blocks.

Hardware wallet

A separate device that never lets the private key leave it.

Hedging

Protecting a position against unfavorable price moves.

A hedge is insurance with a premium, and permanently lowers your expected return.

HODL

Crypto slang for holding long-term, born from a typo.

Holding-period exemption

A holding period after which gains become tax-free.

For securities, it no longer exists in Germany or Austria.

Hot wallet

A wallet connected to the internet, convenient and therefore more exposed.

Impermanent loss

The value lost compared to simply holding, when you supply liquidity to a pool.

The name is misleading. The loss becomes permanent the moment prices don't return to their starting ratio.

Implied volatility

The market's expectation of future price swings, as reflected in an option's price.

It's the real tradable quantity in the options market. If it falls, an option can lose money even if you called the direction right.

Index

A figure that tracks the performance of a market or a segment of one.

Inflation

The ongoing loss of purchasing power of money.

Seventy divided by the inflation rate gives roughly the number of years until purchasing power is cut in half.

Intrinsic value

For an option, the amount you could realize immediately, regardless of time remaining.

Investment horizon

The length of time until you'll need the invested money.

It should determine the type of investment, not the other way around. Money needed within three years doesn't belong in volatile assets.

ISIN

The international twelve-character identifier for a security.

It's unique, and the most reliable way to identify a specific security.

Issuer

Whoever issues a security, such as the company or the bank behind it.

KESt

Austria's capital gains tax, 27.5 percent on investment income.

There is no allowance and no holding-period exemption.

Key Information Document

A short, legally required document with the key facts about an investment product.

It covers risk rating, costs, and scenarios, and must be available before every purchase.

Knock-out

A leveraged product that expires worthless the instant a set price threshold is touched.

Leverage

Trading with borrowed money. Gains and losses are multiplied by the same factor.

One hundred divided by the leverage gives the price move that wipes out the entire stake.

Limit order

An order with a price ceiling or floor. It guarantees the price, not execution.

Liquidation

The automatic forced closing of a leveraged position once its collateral no longer covers the risk.

It happens without asking and without a grace period, day or night.

Liquidity

How easily something can be bought and sold at a fair price.

When liquidity is thin, even a small order moves the price significantly.

Liquidity pool

A pool of two deposited assets that others can trade against.

Whoever supplies liquidity earns fees, and bears impermanent loss in exchange.

Loss aversion

Losses feel roughly twice as heavy as equally sized gains.

As a result, losing positions get held too long and winners get sold too early.

Loss offsetting

The ability to offset realized losses against gains.

The rules differ sharply between countries, for instance around carrying losses forward into future years.

MACD

An indicator showing the gap between a short-term and a long-term moving average.

Margin

The collateral you must post for a leveraged trade.

Margin call liability

The obligation to post additional collateral if losses occur.

Whether this obligation exists is the single most important trait of any leveraged product.

Market capitalization

A company's stock-market value: share price times number of shares.

Market depth

The volume available at each price level in the order book.

It's a snapshot. Orders can be pulled at any time.

Market maker

A market participant who continuously quotes buy and sell prices and earns the spread.

They have no opinion on direction, they earn on turnover.

Market order

An order for immediate execution. It guarantees execution, not the price.

Meme coin

A cryptocurrency with no intended use, whose price depends purely on attention.

MiFID

The EU's regulatory framework for investment services and investor protection.

It's the source of, among other things, the suitability assessment and the duty of best execution.

Momentum

The observation that recently strong performers tend to keep outperforming over medium time frames.

The best empirically documented technical effect, though it comes with sharp reversals at turning points.

Money market fund

A fund that invests in very short-term, low-risk instruments.

Moving average

The average price over the last several periods, continuously updated.

It smooths the path but lags behind, roughly by half the period length.

NFT

A unique entry on a blockchain that points to something.

Copyright to the underlying work doesn't automatically transfer with it.

On-chain analysis

Analyzing publicly visible blockchain data.

Its limit is attribution: an address isn't a person, and an exchange address can belong to millions of customers.

Ongoing charges

A fund's annual cost burden, as a percentage of assets.

They don't tell the whole story. Actual tracking difference against the index over several years is more informative.

Option

The right to buy or sell something at a set price.

The buyer pays a premium and has limited losses; the seller carries the obligation.

Order book

The list of all pending buy and sell orders, sorted by price and time.

Overfitting

Tuning a rule until it perfectly describes the past, and not the future at all.

A result that falls apart with a tiny parameter change is very likely just noise.

Overtrading

Trading too frequently, which racks up fees and multiplies opportunities for error.

P/E ratio

Price-to-earnings ratio. Share price divided by earnings per share.

A high P/E reflects growth expectations. It doesn't value a company, it summarizes what the market expects.

Pairs trading

Trading two closely related securities once their usual price gap becomes unusually wide.

A form of statistical arbitrage. Its documented profitability has fallen sharply since the early 2000s.

Paper trading

Trading with fake money against real prices.

Useful for practicing process and rules, useless for finding out whether you can stomach real losses.

Partial exemption

In Germany, the tax-free share of a fund's income, 30 percent for equity funds.

Policy rate

The interest rate set by the central bank, which the entire market takes its cue from.

Rising rates weigh on riskier assets, because safe alternatives become more attractive.

Ponzi scheme

Earlier investors are paid out of later investors' deposits.

Collapse is mathematically inevitable the moment the inflow of new money slows.

Portfolio

The sum of all your investments.

Position size

How many shares you buy, derived from your allowed loss and the distance to your stop.

Set the risk first, then the stop, and the share count follows from that.

Price-to-book ratio

Price-to-book ratio. Share price divided by book equity per share.

Informative for asset-heavy companies, much less so for software or brand-driven businesses.

Primary market

The market where new securities are issued for the first time.

Only here does money actually flow to the company itself.

Private key

The secret key used to control crypto assets.

Whoever holds it holds the money. Whoever loses it loses access permanently.

Proof of stake

A method where posted capital, rather than computing power, secures the network.

Proof of work

A method where adding a block requires computing power.

Pump and dump

A group drives up the price of a small asset and sells to the buyers it attracted.

Real return

The return after subtracting inflation.

Only this figure tells you whether your purchasing power actually grew.

Rebalancing

Restoring a portfolio to its original target allocation.

It serves risk control, not higher returns.

Recession

A period of shrinking economic output.

Replication

How an ETF tracks its index: physically, by buying the holdings, or synthetically, via a swap contract.

Reporting fund

In Austria, a fund that reports its tax data to the control bank.

For non-reporting funds, the tax treatment becomes considerably more complicated.

Resistance

A price zone where an upward move has stalled more than once.

Return

The income from an investment, as a percentage of capital invested per year.

A return figure with no time frame, no costs, and no reference to inflation isn't really information.

Risk capacity

How much loss you can actually afford financially, regardless of how you feel about it.

What always applies is the lower of your capacity and your tolerance.

Risk premium

The extra return that compensates for risk taken.

Only risk that can't be diversified away gets compensated. Individual-stock risk is unpaid risk.

Risk tolerance

How much volatility you can handle emotionally.

It's systematically overestimated during good market phases.

Risk-reward ratio

The potential gain of a trade relative to its potential loss.

The win rate needed to break even is one divided by one plus the ratio.

Roll yield

The gain or loss that arises from rolling an expiring futures contract into a new one.

RSI

An indicator that weighs upward against downward moves, scaled from 0 to 100.

In strong trends it sits at an extreme for a long time and fails as a reversal signal there.

Rug pull

A crypto project's creators pull out the funds and disappear.

Anonymous founders, concentrated holdings, and sweeping admin rights are the warning signs.

Saver's allowance

In Germany, the annual tax-free amount for investment income, €1,000 per person.

Savings account

An account with daily access to your balance and a variable interest rate.

The right place for your emergency fund.

Savings plan

A fixed sum invested automatically at regular intervals.

Its value lies in removing the decision of timing entirely.

Secondary market

The market where existing securities trade between investors.

Seed phrase

Twelve or twenty-four words that can fully restore a wallet.

Paper or metal only. Any request to type it in anywhere is an attempted scam.

Segregated assets

Assets held separately from the managing company's own balance sheet.

They fall outside the bankruptcy estate if that company becomes insolvent.

Short sale

Selling borrowed securities in the expectation that the price will fall.

The potential gain is capped; the potential loss is theoretically unlimited.

Short squeeze

Rising prices force short sellers to buy back stock, which pushes the price up further.

Slippage

The gap between the expected execution price and the actual one.

Smart contract

A program running on a blockchain that automatically enforces a set of rules.

Bugs in the code are their own distinct source of loss, separate from market risk.

Spread

The gap between the buy and sell price. A fee that isn't labeled as a fee.

Stablecoin

A crypto asset designed to hold a stable price pegged to a currency.

With collateralized versions, you carry credit risk on whatever reserves back it.

Staking

Posting coins as collateral to help run a network, in exchange for a reward.

The reward mostly comes from newly created units, meaning it comes from dilution.

Standard deviation

The standard measure of how much returns fluctuate.

Stock

A share in a company. Holding a stock means owning a small piece of the business.

Shareholders are entitled to a share of profits and a vote. In bankruptcy, they're paid after every creditor.

Stop-loss

A predetermined price at which a position is automatically sold.

It limits the loss but doesn't guarantee a price. In a gap, execution can happen well below it.

Strike price

The price at which an option grants the right to buy or sell.

Support

A price zone where a downward move has stalled more than once.

Technical analysis

Judging an asset purely from its price and volume history.

Much of it doesn't hold up to rigorous testing, since its rules are hard to define precisely.

Theta

For an option, the loss in time value per day.

Time value

For an option, the part of its price that reflects the chance of future movement.

It decays to zero by expiration, and the decay accelerates toward the end.

Token

A digital unit issued on top of an existing blockchain.

Tokenomics

A token's supply, distribution, and unlock schedule.

Unlock schedules create predictable supply pressure, regardless of how the project itself is doing.

Tracking difference

A fund's actual deviation from its index over a period of time.

More informative than the raw cost ratio, since it also captures securities-lending income and tax effects.

Trading as a business

In Switzerland, a classification under which private capital gains become taxable after all.

Short holding periods, high transaction volume, derivatives, and debt financing all point in that direction.

Trading plan

Your written-down rules for investing and trading.

Its value lies in the decision being made calmly, not in the heat of the moment.

Trend

A directional price move made up of higher highs and higher lows, or the reverse.

That a trend exists is a fact about the past. That it will continue is a claim about the future.

Value premium

The historical excess return of cheaply valued stocks over expensively valued ones.

Whether it's real and persistent is debated. Part of it can be explained by profitability and investment behavior.

Volatility

A measure of how much a price fluctuates.

It treats upward and downward moves the same, and doesn't capture the danger of permanent loss.

Volume

The number of units traded over a given period.

A big move on thin volume was driven by very few participants, and is less reliable.

Wallet

Where crypto assets are held, or more precisely, where the keys to them are held.

Whale

A market participant whose holdings are so large that their transactions move the price.

Whitepaper

The document in which a crypto project describes what it does and how.

If you can't summarize what the project does in one sentence afterward, that's your answer.

Win rate

The share of trades that end in a profit.

By itself it says nothing. Only combined with the risk-reward ratio does a real picture emerge.

Withholding tax

A tax deducted directly at the source, in the country where the income originates.

Part of it is credited against domestic tax; the rest can only be reclaimed abroad by filing a claim.

Withholding tax (Switzerland)

In Switzerland, an upfront 35 percent deduction on interest and dividends.

It's refundable if the income is correctly declared.

WKN

The six-character German securities code, older and less unique than the ISIN.