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Wealth Dictionary
Buy Order Limit
A buy order limit is an instruction to purchase a security at a specified maximum price, ensuring that the investor does not pay more than a predetermined amount per share.
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Related Terms
One Sided Market
A one-sided market refers to a trading environment where there is a lack of liquidity or competitive pricing due to an imbalance between buyers and sellers in a particular financial instrument or asset class. In a one-sided market, either buyers or sellers dominate the trading activity, leading to limited trading opportunities, wider bid-ask spreads, and increased price volatility. One-sided markets can occur for various reasons, such as market sentiment, news events, regulatory changes, or structural factors affecting supply and demand dynamics. In a one-sided bull market, buyers outnumber sellers, driving prices higher, while in a one-sided bear market, sellers outnumber buyers, causing prices to decline. One-sided markets pose challenges for traders and investors, as they may experience difficulty executing trades at desired prices, face increased transaction costs, and encounter heightened risk of price slippage or adverse market movements. Market participants need to adapt their trading strategies, risk management techniques, and order execution tactics to navigate one-sided markets effectively and capitalize on trading opportunities while mitigating potential losses or market disruptions.
Letter of Credit
A letter of credit (LC) is a financial instrument issued by a bank or financial institution on behalf of a buyer (importer) to guarantee payment to a seller (exporter) for goods or services provided under a trade transaction. Letters of credit serve as a payment mechanism that mitigates credit risk, facilitates international trade, and provides assurance to both parties in the transaction. The issuing bank undertakes to pay the seller a specified amount upon presentation of compliant documents verifying the shipment and delivery of goods or performance of services according to the terms and conditions outlined in the LC. Letters of credit are commonly used in cross-border trade, where the parties may lack trust or have concerns about payment security, currency exchange, or political risks. By acting as an intermediary, the bank assumes credit risk and ensures that the seller receives payment upon fulfillment of contractual obligations, promoting confidence, efficiency, and trust in international trade transactions.