Our comprehensive glossary explains many of the terms commonly used in the international markets.


A temporary upturn in the price of a share or index or other data stream which occurs during an overall bear trend. The opposite of a correction.


The relationship between two figures from the financial statements designed to show the profitability or effectiveness of the management within a company. Ratios have no absolute significance, and are only relevant for comparisons over the history of the company or between companies in the same sector.


A decline in price which retraces part of the previous price advance.

Realised Profit

A profit which is actually in the bank, as opposed to a market appreciation. If you buy shares for USD10 and they rise to USD12 then you have a market appreciation of USD2. Only if you then sell them at USD12 will you have a realised profit of USD2 less your dealing costs.


A downturn in the economy.


A continuation chart pattern where prices move sideways between two different levels for a period of time and then continue moving in the direction of the previous trend.


Shares which can be redeemed by the company either at fixed dates and prices, or on certain specified terms at the discretion of the board.

Redemption date

Date on which debentures, notes and government, municipal and statutory authority stocks are repaid.

Reduction of capital

Capital of a company can be reduced because (1) it has considerable funds in excess of requirements; or (2) has sustained substantial losses, which are unlikely to be recouped. In the case of (1) the funds are paid out to shareholders and the par value of the shares is reduced. (Mining companies approaching the end of their working lives usually reduce their capital in this way.) In the case of (2) the losses are written off by reducing the par value of the shares without any payment being made to shareholders. Such capital reduction requires the consent of the courts.

Registered owner

The party registered as the owner in the register of members. This may be the true owner, a fund, unit trust or nominee.


Entry in a company's register of the names and addresses of all beneficial shareholders who have lodged shares for this purpose. Thereafter a shareholder may receive a share certificate made out in his name and receives all circulars, reports and dividends issued by the company.

Related order

Contingent orders are the same as related trade orders. Several types are available: If Done (slave), where a slave order only becomes active if the primary order is executed. One Cancels the Other (O.C.O.), where the execution of one order cancels the other. Three-way contingent orders are also available where two orders are placed if (If Done) a primary order is executed. These orders are themselves related as O.C.O. orders, allowing both a stop loss and a profit taking order to be placed around a position.


A figure from the liabilities side of the balance sheet, which is money ploughed back into the business out of profits, arising from a revaluation of assets, or money set aside for the redemption of debentures or other long-term loans. Reserves can be either distributable or non-distributable in the form of dividends. The general rule is that a company may only distribute profits, and not its capital base. Reserves arising from profits are normally distributable, as opposed to reserves arising from, e.g., a revaluation of land.


The price level at which a rising price is expected to stall when market participants begin to sell the instrument. The opposite of resistance is support.

Resistance level

Resistance is a price level at which there is a large enough supply of a stock available to cause a halt in an upward trend and turn the trend down. Resistance levels indicate the price at which most investors feel that prices will move lower.

Retail investor

Individual investors who generally deal in smaller amounts than the professional or institutional investors.

Retained income

The entire after-tax profit of a company is seldom distributed to shareholders as a dividend. A portion is usually kept in the business to finance future growth or to act as a reserve against less profitable years. This is known as retained income and appears in both the income statement and the balance sheet.


The peaks or levels where advancing prices are halted. This represents a price level or area over the chart where selling pressure or supply overcomes buying pressure or demand As a result a price advance is halted and prices turn down again.


The return on an investment consists of any dividend, interest, rent or other income added to the increase in the value of the asset over a set period, usually expressed as an annualised percentage of the original investment.

Return on capital employed

A ratio used to measure pre-tax profitability. It may be calculated as pre-tax profit plus interest paid, divided by total shareholders' funds.

Revenue reserves

Appropriations made from profits to meet commitment expected to arise in the future. These, if not required, may be added back to profits earned (unappropriated profits) in subsequent years.

Reversal pattern

A chart pattern that occurs before an existing trend reverses direction.

Reverse take-over

Injection of assets into a company greater then its existing resources, in exchange for new shares, thus placing the control in the hands of the vendor of such assets.

Reverse yield gap

A situation where the yield on equities is lower than that on bonds. Traditionally yields on equities used to be higher than on bonds and the differential was referred to as the 'yield gap'.

Rights issue

Issue by a company of rights to existing shareholders to take up further shares at a specified price. Such rights, under the title of letter of rights, may be sold in the market during a prescribed period if the shareholder does not wish to take up his entitlement.


The probability that a share price will go down rather than up. All investments have an element of risk which is harder to quantify than their return, and therefore very often left to "gut feel". Generally, the rule is that the more risky an investment, the higher its potential return. To understand this, it is necessary to consider what you are actually doing when you buy a share or other investment. Essentially you are in the business of forecasting. You are saying that you are buying the particular share because you believe that its price will go up.

Risk management

Trying to control the outcome of a known or predictable range of gains or losses. Risk management involves several steps, beginning with a sound understanding of one's business and the exposures or risks that have to be covered to protect the value of that business. Then an assessment should be made of the types of variables that can affect the business and how best to protect it against unwelcome outcomes. Risk management may be as simple as placing stop loss orders to prevent large losses, or as complex as hedging positions with Options or diversifying the portfolio to ensure that you are not overexposed to a single industry or instrument type. Consideration must also be given to the preferred risk profile, that is, whether one is risk-averse or fairly aggressive in approach. This also involves deciding which instruments to use to manage risk, and whether a natural hedge can be used. Once undertaken, a risk-management strategy should be continually assessed for effectiveness and cost.

Risk reversal

The simultaneous purchase of an out-of-the-money call (put) and the sale of an out-of-the-money put (call), usually with no up-front premium. The Options bought and sold will have the same notional size and pre-defined maturity, and the deltas will typically be set to 25%. According to Black-Scholes, the purchase and sale of Options with similar deltas (and so out-of-the-money forward to the same extent) should be zero cost. In practice, the market favours one side over the other.In the simplest case, the implied volatility of out-of-the-money puts and calls of the same strike price and maturity date are different, and the extra cost of the favoured side is commonly known as the risk reversal spread. This spread reflects the market's perception that the relevant probability distribution is not symmetrical around the forward, but skewed in the direction of the favoured side. Another way of interpreting this is to say that implied volatility is correlated with spot, which is impossible in a Black-Scholes world.


When a Spot Forex position is held at the end of the business day prior to its Value date, it will be rolled over to a new value date on a Tom/Next basis. As part of the rollover, positions are subject to a swap charge or credit based on the relevant interest rates of the two traded currencies with an added a mark-up plus an interest component for any unrealised profit/loss on the position.

Round turn

The commission includes both the opening and the closing of the position. The alternative is a half-turn commission, which is charged per trade (that is, for both buy and sell).

Rounding bottom

Also known as a saucer bottom, it is a reversal chart pattern representing a long consolidation period that turns from a bearish bias to a bullish bias.

Ruling price

The ruling price at any time is the last recorded sales price.