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Finance GlossaryMorning Star Pattern
Morning Star Pattern
Definition of Morning Star Pattern
The Morning Star Pattern is a three-candle bullish formation that appears after a decline and suggests a shift in market momentum. It begins with a clear bearish move, followed by a phase of indecision, and ends with a strong bullish candle. Traders often view this pattern as an early signal of renewed buying interest.
Related Terms
Debentures
A debenture is a legal certificate that a company issues in exchange for a long-term unsecured loan. A debt instrument like a debenture is issued by companies who want to fund their business without diluting existing shares.
The components of a debenture are as follows:
The components of a debenture are as follows:
- Principal: The loan amount or the money lent by an investor
- Tenure: The duration of the loan
- Interest rate: The rate of interest
-
Repayment: Terms and conditions of the amount to be repaid
Debenetures can also be issued by small-size companies who may not be creditworthy enough to secure a loan from traditional lenders. Hence, the unsecured aspect of the loan may help achieve their objective.
Advance Payment Guarantee/Bond
An Advance Payment Guarantee or Advance Payment Guarantee Bond is a contract issued by a third party willing to take responsibility for fulling the terms of an agreement or payments owed by one party to another.
The guarantee could be:
The guarantee could be:
- Primary: Indemnity (fulling payments)
- Secondary: Guarantee (assuring that the outcome will be met)
Common Stocks
A common stock is a type of share that gives the holder the right to a part of a company’s profits, voting on key policies and decisions. Common stockholders have an advantage over preferred stockholders because they can:
- Get higher returns
- A part of the assets left after a company is liquidated (in case of default)
Backtesting
Backtesting means simulating trading strategies and models using historical data to understand whether they are effective.
In many ways, backtesting is considered to be an important part of crafting trading strategies that work.
If backtesting leads to positive results, then the trading strategy or model may be viable.
In many ways, backtesting is considered to be an important part of crafting trading strategies that work.
If backtesting leads to positive results, then the trading strategy or model may be viable.
Back Months
“Back months” is used to refer to futures contracts that have a delivery date that’s due far into the future. Back months is generally known to be a popular term in commodity trading.
Proprietary Trading
Proprietary trading is when a financial firm or commercial bank uses its own money to trade stocks, bonds, options, commodities, or other financial instruments, as opposed to client money. The purpose is to produce profits directly to the firm. This type of trading involves market-making, arbitrage, and various speculative strategies. Separated from the client's business to avoid conflicts. Involves higher risk-taking than client brokerage.
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