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Rally
A brisk rise in the general price level of the market or in an individual stock.
Rally Tops
A price level that concludes a short-term rally in an ongoing trend. A bull market will be made up of a series of rally tops.
Random Shock
The unexplained component of an equation that models a time series (forecasts errors).
Random Walk Index
This indicator is defined as the ratio of an actual price move to the expected random walk. If the move is greater than a random walk, and thus a trend is present, its index will be larger than 1.0.
Random Walk Theory
A market analysis theory that the past movement or direction of the price of a stock or market cannot be used to predict its future movement or direction.
Range
A security's low price and high price for a particular trading period, such as the close of a day's trading, the opening of a day's trading, or a day, month or year.
Range Extension
In the CBOT Market Profile, a price movement beyond the range set by the initial auction.
Rate of Change
Rate of Change is used to monitor momentum by making direct comparisons between current and past prices on a continual basis. The results can be used to determine the strength of price trends.
Note: This study is the same as the Momentum except that Momentum uses subtraction in its calculations while Rate of Change uses division. The resulting lines of these two studies operated over the same data will look exactly the same-only the scale values will differ.
Rate of Exchange
Refers to the price at which one country's currency can be converted into another country's currency. A wide range of factors influence exchange rates. For instance, the rate of exchange between the Canadian dollar and the U.S. Dollar is different than the rate of exchange between the U.S. Dollar and the British pound. Some rates of exchange are fixed by agreement and some change slightly each trading day.
Rate of Inflation
Refers to the rate of change in prices.
Rate of Return (Common Stock)
Refers to the dividend yield, which is the amount of the annual dividend divided by the purchase price; or, refers to the total return rate, which is the dividend plus capital appreciation.
Rating
An evaluation of a corporate or municipal bond's relative safety, according to the issuer's ability to repay principal and make interest payments. Bonds are rated by various organizations such as Standard & Poor's and Moody's. Ratings range from AAA or aaa (the highest) to C or D, which represents a company in default.
Rating Service
A company, such as Standard & Poor's, that rates various debt and preferred stock issues for safety of payment of principal, interest or dividends. The issuing company or municipality pays a fee for the rating.
Ratio
The relation that one quantity bears to another of the same kind, with respect to magnitude or numerical value.
Ratio Spread
A delta neutral spread where the number of long contract and short contracts do not equal.
Ratio Backspread
A delta neutral spread where an uneven amount of contracts are bought and sold with a ratio of less than 2 to 3. Optimally no net credit or net debit occurs.
Ratio Call Spread
A bearish or stable strategy in which a trader buys 2 higher strike calls and sells1 lower strike call. This strategy offers limited risk and unlimited profit potential.
Ratio Put Spread
A bullish or stable strategy in which a trader buys 1 higher strike put and sells two lower strike puts. This strategy offers limited risk and unlimited profit potential.
RBAR-Squared
The R-squared value adjusted for the number of degrees of freedom.
Reaction
A temporary price weakness in a security following a price upswing.
Real Interest Rate
The nominal rate of interest minus the percentage change in the Consumer Price Index, or the rate of inflation.
Real Rate of Return
Refers to the return on an investment adjusted for inflation.
Real-time
Data received from a quote service as the prices change.
Real Yield
The nominal yield received minus the percentage change in the Consumer Price Index (i.e., the rate of inflation).
Recession
General economic decline lasting from six to eighteen months.
Recursive
A process that is repetitive and usually dependent upon the results of the previous repetition.
Redemption Charge
The commission charged by a mutual fund when redeeming shares. For example, a 2 % redemption charge (also called a "back end load") on the sale of shares valued at $1,000 will result in payment of $980 (or 98 % of the value) to the investor. This charge may decrease or be eliminated as shares are held for longer time periods.
Red Herring
A preliminary prospectus, so-called because certain information is printed in red ink around the border of the front page. It does not contain all the information found in the final prospectus. Its purpose is to ascertain the extent of public interest in an issue while it is being reviewed by a securities commission.
Redemption
The retiring or repurchase of issued bonds prior to maturity. Corporations may redeem bonds prior to maturity in order to reduce or refinance their outstanding debt obligations. By law, redemption of mutual fund shares must occur within seven days of receiving a request for redemption from the investor.
Redemption Charge
The charge or fee an investor pays when withdrawing money from an investment. Most commonly occurring with mutual funds and annuities, the redemption charge is designed to discourage withdrawals. Typically, redemption charges decline for each year a shareholder remains in a fund.
Reference Points
Points back in history that helps determine a future price.
Registered Competitive Market Maker
1. Dealer - Refers to a U.S. securities dealer registered with the National Association of Securities Dealers (NASD) as a market maker in a particular over the counter stock. This type of dealer stands by to maintain firm bid and offer prices in the stock by standing ready to buy or sell round lots. Quotes are announced through NASDQ which requires two market makers in each stock listed in the system. Bid and asked quotes are compared to ensure the quote is a representative spread.
2. Trader - A registered competitive trader on the New York Stock Exchange. These traders are sometimes called market makers because in addition to trading their own accounts they are expected to correct an imbalance of orders.
Registered Representative
A person employed by, and soliciting business for, a commission house or Futures Commission Merchant.
Registered Security
A security recorded on the books of a company in the name of the owner. It can only be transferred when the securities certificate is endorsed in that name and the certificate is forwarded to the transfer agent. Registered debt securities may be registered as to principal only or fully registered. In the case of fully registered debt securities, interest is paid by check rather than by coupons.
Regression (Simple)
A mathematical way of stating the statistical linear relationship between one independent and one dependent variable.
Regular Delivery
Refers to the stipulation that, unless otherwise stipulated, sellers of stock must deliver that stock on or before the third business day after the sale.
Regulation G
The Federal Reserve Board regulation that governs the extension of credit for securities transactions by commercial lenders and non-financial corporations.
Regulation T
The Federal Reserve Board regulation that governs customer cash accounts and the amount of credit that brokerage firms and dealers may extend to customers for the purchase of securities. Regulation T currently sets the loan value of marginable securities at 50% and the payment deadline at two days beyond regular way settlement.
Regulation U
The Federal Reserve Board regulation that governs loans by banks for the purchase of securities. Call loans are exempt from Regulation U.
Reinvestment
Using dividends, interest and capital gains earned in a mutual fund investment to purchase additional shares, rather than receiving the distributions in cash.
Relative Strength
A stock's price movement over the past year as compared to a market index (the S&P 500). Value below 1.0 means the stock shows relative weakness in price movement (under performed the market); a value above 1.0 means the stock shows relative strength over the 1-year period.
Relative Strength Equation
[current stock price/year-ago stock price] [current S&P 500/year-ago S&P 500]
Relative Strength Index (RSI)
This indicator was developed by Welles Wilder Jr. Relative strength is often used to identify price tops and bottoms by keying on specific levels (usually "30" and "70") on the RSI chart , which is scaled from 0-100. The study is also useful to detect the following:
1. Movement that might not be as readily apparent on the bar chart
2. Failure swings above 70 or below 30 which can warn of coming reversals
3. Support and resistance levels
4. Divergence between the RSI and price which is often a useful reversal indicator
5. The Relative Strength Index requires a certain amount of lead-up time in order to operate successfully
Renko Chart
The Renko charting method probably got its name from "renga," which is the Japanese word for bricks. Introduced by Steve Nison, a well-known authority on the Candlestick charting method, Renko charts are similar to Three Line Break charts except that in a Renko chart, a line is drawn in the direction of the prior move only if a fixed amount (i.e., the box size) has been exceeded. The bricks are always equal in size.
Reporting Issuer
A corporation that has issued and outstanding securities held by the public and is subject to the continuous disclosure requirements of securities administrators.
Repurchase Agreement
A sale of securities with an attendant agreement to repurchase them at a higher price on an agreed-upon future date; the difference between the sale price and the repurchase price represents the interest earned by the investor. Repos are considered money-market instruments, and are used to raise short-term capital and as instruments of monetary policy.
Residual Value
The standard deviation of the unexplained portion of the monthly return.
Resistance
A level at which the market has a hard time breaking through to the upside (as exhibited by price action) and either moved sideways or reversed. Used in technical analysis to describe a price level that a security has difficulty reaching.
Response
The change in value of the average in response to the impulse.
Restricted Shares
Shares that have limited voting rights or in some cases, no voting rights. These shares participate in a company's earnings and assets in liquidation as common shares do and are sometimes referred to as restricted common shares. Restricted shares may not command the same market price as voting common shares of the same company since they do not have voting rights.
Retracement
A price movement in the opposite direction of the previous trend.
Return
The income earned or a capital gain made on an investment.
Return (Mutual Fund)
The percentage gain or loss for a mutual fund in a specific time period. This number assumes that all distributions are reinvested.
Return on Assets (ROA)
Indicator of profitability. Determined by dividing net income for the past 12 months by total assets. The result is shown as a percentage.
Return on Equity (ROE)
Indicator of profitability. Determined by dividing net income for the past 12 months by common stockholders' equity (adjusted for stock splits). The result is shown as a percentage.
Return on Investment (ROI)
Calculated by dividing the corporation's net profit after taxes by total assets, or by multiplying net profit margin by total asset turnover. In the United States the division is usually made before taxes. Return on Investment (ROI) is sometimes referred to as the return on total assets.
Revenue
The total income a business firm or government receives from all sources.
Reverse Repurchase Agreement
A purchase of securities with an attendant agreement to resell them at a higher price on an agreed-upon future date; the difference between the purchase price and the resale price represents the interest earned by the investor. The purchaser initiates the deal.
Reverse Split
A reduction in the number of a corporation's shares outstanding that increases the par value of its stock or its earnings per share. The market value of the total number of shares remains the same.
Reverse Take Over
A method of listing on a stock exchange whereby a private company acquires or "takes over" the assets of a listed company; sometimes called a "back-door listing."
Reward-Risk Ratio
The mathematical relationship between the maximum potential risk and maximum potential reward of a trade.
Reward-Risk Rank
Stocks ranked in descending order by reward-risk ratio.
Reversal Gap
A chart formation where the low of the last day is completely above the previous day's range with the close above midrange and above the open.
Reversal Stop
A stop that, when hit, is a signal to reverse the current trading position, i.e., from long to short. Also known as stop and reverse.
Rich
Priced higher than expected.
Right
A security representing a stockholder's entitlement to the first opportunity to purchase new shares issued by the corporation at a predetermined price (normally less than the current market price) in proportion to the number of shares already owned. Rights are issued only for a short period of time, after which they expire.
Rights Offering
Issuance of "rights" to current shareholders allowing them to purchase additional shares, usually at a discount to market price. Shareholders who do not exercise these rights are usually diluted by the offering. Rights are often transferable, allowing the holder to sell them on the open market to others who may wish to exercise them. Rights offerings are particularly common to closed end funds, which cannot otherwise issue additional common stock.
Risk
The potential financial loss inherent in an investment.
Risk (Implied)
In which the formula produces the percentage overbought/oversold for a contract using the price, a moving average and the option's implied volatility.
Risk Graph
A graphical representation of risk and reward on a given trade as prices change.
Risk Manager
A person who manages risk of trades in a portfolio by hedging their trades.
Risk Premium
The additional expected return required to entice investors into providing funds for risky investments. It is the difference between the return on a risky asset and a no-risk asset with identical life spans.
Risk Profile
A determination of risk on a trade. This would include the profit and loss of a trade at any given point for any given time frame.
Roll
Substituting a far option for a near option on the same underlying instrument at the same strike price; also to roll forward or roll over.
Root Mean Square Percentage Error
Square root of the average sum of squared errors expressed as a percentage.
Rotation
Moving funds from one sector to another sector of the stock market as the business cycle unfolds.
Round Lot
The normal unit of trading of a security, which is generally 100 shares of stock or five bonds. (See also: Odd Lot)
Round-turn
Procedure by which a long or short position is offset by an opposite transaction or by accepting or making delivery of the actual financial instrument or physical commodity.
R-squared
The percentage of variation in the dependent variable that is explained by the regression equation. A relative measure of fit
Running Market
A market wherein prices are changing rapidly in one direction with very few or no price changes in the opposite direction.
Running Stops
Something which when quoted, floor traders use to move the market. When stops are bunched together, traders may move the market in order to activate stop orders and propel the market further.
Running Total
Each day's value is added to yesterday's total or subtracted if the value is negative.
Russell Index
This is designed to be a comprehensive representation of the U.S. small-cap equities market.
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