Accounting, Tax and Operations

• Portfolio AllocationIntermediate4 min read

  Portfolio allocation is how your money is divided between assets or strategies, such as 60% shares and 40% bonds.

• RebalancingIntermediate4 min read

  Rebalancing is buying and selling to bring a portfolio back to its target allocation after price moves have shifted the weights.

• Capital Gains TaxIntermediate4 min read

  Capital gains tax is tax on the profit from selling an asset for more than its cost basis; rates, holding-period rules and reporting duties vary by country.

• Gross and Net ProfitBeginner5 min read

  Gross profit or loss is the result from the price difference alone; net profit or loss is what remains after commissions, fees, interest, financing and other costs.

• Average Entry PriceBeginner5 min read

  The average entry price is the weighted average price of all purchases in a position — buying 10 at $100 and 10 at $90 gives an average of $95.

• Cost BasisIntermediate5 min read

  Cost basis is the original value of an investment for tax purposes — usually the price paid plus costs — used to calculate the taxable gain or loss when it is sold.

• PortfolioBeginner4 min read

  A portfolio is the full collection of assets and positions you hold, viewed together for risk and performance.

• Account BalanceBeginner4 min read

  Your account balance is the cash recorded in your account from deposits, withdrawals and closed trades; the available balance is the part you can currently use or withdraw.

• Central CounterpartyAdvanced4 min read

  A central counterparty (CCP), or clearing house, sits between the two sides of a trade so each side deals with the CCP instead of each other — a step called novation. It collects margin from its members so one default does not spread through the market.

• Delivery versus PaymentAdvanced3 min read

  Delivery versus payment is a settlement method where securities are delivered only if payment is made at the same time, so neither side can be left with nothing. Payment versus payment (PvP) applies the same principle to the two legs of a currency trade.

• Deposits and WithdrawalsBeginner3 min read

  A deposit moves money into your trading account and a withdrawal moves it out; transfers between accounts or platforms may take time and carry fees.

• Exchange RateBeginner3 min read

  An exchange rate is the price of one currency in another; trading assets priced in a foreign currency adds currency conversion costs and exchange-rate risk.

• High-Water MarkIntermediate3 min read

  A high-water mark is the peak value an account or fund has ever reached. Performance fees are usually charged only on gains above that peak, so investors don't pay twice for winning back the same losses.

• Internal Rate of ReturnAdvanced4 min read

  The internal rate of return is the discount rate at which the present value of an investment’s cash flows equals zero. It is a single annual return figure for investments with irregular cash flows, such as private funds or projects.

• Legal Entity IdentifierAdvanced3 min read

  A legal entity identifier is a 20-character code that uniquely identifies a company or other legal entity in financial transactions. In some jurisdictions, such as the EU, firms need one before they can trade securities.

• Settlement PeriodIntermediate3 min read

  The settlement period is the time between a trade and the final exchange of cash and assets; in the US most stock trades settle one business day after the trade (T+1).

• Time-Weighted and Money-Weighted ReturnAdvanced4 min read

  Time-weighted return removes the effect of deposits and withdrawals, so it measures the strategy itself. Money-weighted return — the internal rate of return of your cash flows — includes their timing, so it measures your actual experience.

• Trading StatementBeginner4 min read

  A trading statement lists your account's transactions, positions, fees and balances for a period, and is the main record for checking results and for taxes.

Each term is defined in one sentence. Terms marked “Article in preparation” will get a full step-by-step article.

• CRS and CARFCRS · CARF · DAC8

  AdvancedGlossary

  Through the OECD's Common Reporting Standard, banks and brokers tell tax offices about accounts held by foreign residents, and countries swap that data. The Crypto-Asset Reporting Framework, CARF (DAC8 in the EU), brings crypto platforms into similar reporting.

  Rules differ between countries; this is general information, not tax or legal advice.

• Crypto Tax

  BeginnerArticle in preparation

  Tax authorities in most countries expect a share of crypto profits. Typically selling for money, trading one coin for another or paying with crypto realises a gain or loss, while staking, mining and airdrops may be taxed as income. Keep records of every trade.

  Rules differ between countries; this is general information, not tax or legal advice.

• GAAP and IFRSGAAP · IFRS

  IntermediateArticle in preparation

  GAAP are the accounting standards US companies must follow, set by FASB; most other countries use IFRS. Companies often add “non-GAAP” or adjusted figures, which leave out certain costs and deserve a sceptical read.

• Impairment and Write-Down

  IntermediateGlossary

  An impairment, or write-down, cuts the value of an asset on a company's balance sheet when it is worth less than recorded — for example goodwill from an acquisition that disappointed. It lowers reported profit without using cash, but signals a past mistake.

• Return of Capital

  IntermediateGlossary

  A return of capital is a payout that gives back part of your original investment rather than income. It is usually not taxed as income at once but lowers your cost basis, which raises the taxable gain when you sell.

  Rules differ between countries; this is general information, not tax or legal advice.

• Source of FundsSoF

  BeginnerGlossary

  Exchanges and banks may freeze a large deposit or withdrawal until you show where the money came from — payslips, a property sale, trade history. Keeping exports of your trades and transfers makes these checks quick.

  Rules differ between countries; this is general information, not tax or legal advice.

• Taxable Event

  BeginnerArticle in preparation

  A taxable event is the moment the tax clock starts: usually a sale, a swap or a payment made with an asset, or the receipt of income such as dividends, interest or staking rewards. Buying and simply holding usually triggers nothing.

  Rules differ between countries; this is general information, not tax or legal advice.