TERMS YOU SHOULD KNOW
What do stock terms mean? Apparently, they mean quite a lot in the stock trading world. In order to execute trades even remotely successfully one must know and understand the terminology that is used. While there’s much to learn, knowing how to speak the language is a great start! We’ve compiled such a list of market terminology terms to help beginners clear some of the fog.
1. Annual Reports contain information about a company’s viability revealing its wealth and fiscal responsibility.
2. Arbitrage concerns stocks being bought and sold in various markets at different prices. Traders can buy at one price on one market then sell it at a higher price in another and keep the change.
3. Averaging Down is buying more stock as its price decreases making the average price go down. This method is employed when a trader scoffs at conventional wisdom believing there will be rebound.
4. Bear Market simply means a stock price is in decline.
5. Bull Market refers to prices rising. The opposite of a bear market.
6. Beta refers to stock price and market movement. If a company’s Beta is 1.4% it means that for every 1 point market move the stock moves 1.4%. This also works the other way around.
7. Blue Chips are companies that are tops in their industry with sound fiscal responsibility.
8. Bid is the price a trader is willing to purchase. Asking price is the price the seller wants. The difference between the two is the spread.
9. Close is 4:00 pm for the stock exchanges. However, after hours trading sails on up until 8:00 pm.
10. Day Trading also known as “active traders” perform trades from opening to closing bell at 4:00 pm
11. Dividend an apportionment of company earnings paid to stock holders at quarterly or yearly intervals. Penny stocks do not have this luxury.
12. Exchange is the place where trading takes place such as NYSE and NASDAQ.
13. Execution is a completed buy or sell order.
14. Haircut refers to a thin spread between the asking and buying prices.
15. High talks about the greater price a stock has achieved.
16. Index – Great examples of this are the DOW and S&P 500 which are reference points for stock traders and portfolio managers.
17. IPO (Initial Public Offering) – The first public trading of a company stock.
18. Leverage – Borrowed shares from your broker to increase profit, after which the shares are returned and you keep the change. Do not try this at home!
19. Portfolio – A collection of investments.
20. Short Sells – Borrowing shares from another with promise to return them in the future. You sell at a profit then buy them back at a lower price. The difference in price is yours to keep as profit.
The above is the shorter of a longer list of terms that will be covered in future articles and added to this list. In the meantime research and practice are wonderful teachers.
