P1:a/b P2:c/d QC:e/f T1:g
gloss JWBK182-McDowell April 25, 2008 16:35 Printer: Yet to come
Glossary 189impulsive Elliott wave The major trend in every time frame takes the form of five
waves (impulse waves) that, once complete, are corrected by three waves (correc-
tive waves).
index fund A mutual fund that tracks a stated market index.
individual retirement account (IRA) A retirement account any employed person
(or spouse of an employed person) can open and contribute to. Assets in the ac-
count grow tax deferred and contributions may be tax deductible. Distributions
taken before age 59 are subject to penalty.
inflation Rate of increase in average product and service price levels. Different in-
dexes use different baskets of products and services to compute the average prices.
A popular index is the Consumer Price Index.
initial public offering (IPO) The first sale of equities (stocks) to the public by a
private firm. In making an IPO, a private firm has gone public.
insider trading Trading by officers, directors, major stockholders or others who
hold private inside information allowing them to benefit from buying or selling
stock. It is a misuse of inside information to profit more quickly than the average
shareholder would.
institutional investor A bank, mutual fund, pension fund, or other corporate en-
tity that trades financial instruments in large volumes.
intra-day time frame A shorter time frame from the 1-minute to the 60-minute
that day traders use in making their entry and exit decisions.
investing This is a term with several closely related meanings in business man-
agement, finance, and economics, related to saving or deferring consumption. An
asset is usually purchased, or equivalently a deposit is made in a bank, in hopes of
getting a future return or interest from it. Literally, the word means the action of
putting something into somewhere else. Think of it as using financial instruments
to invest savings for future gain; it usually is not considered a short-term endeavor.
investor Generally uses a buy-and-hold approach using weekly and monthly
charts to evaluate the market. An investor can be a trader when timing long-term in-
vestments. Investors are more likely to incorporate fundamental analysis into their
approach than a day-trader would.
in-the-money When an option’s current market price is above the strike price of
a call, or below the strike price of a put. An in-the-money option would produce a
profit, if exercised.
Kelly formula Seeoptimalfformula.
large cap Refers to the size of a firm’s market capitalization. Generally, any firms
with a market cap above $10 billion are referred to as a large cap.
left brain The human brain is divided into two hemispheres, the left and the
right, each of which is responsible for specific functions in human behavior and