Top 40 Stock Market Terms You Must Know – The Stock market is a very good investment arena. It has a lot of potentials of creating wealth for investors. However, the secret of earning through the stock market trading is by understanding how the market works. And we are committed to helping you learn as much as you can by bringing you the Top 40 Stock Market Terms You Must Know.
So, are you interested in stock market trading? Of course you are. That is why you are reading this now. So, before you get started on trading, before you invest your first money, here are the Top 40 Stock Market Terms You Must Know. These tips will guide you and prepare you to understand the market and trade well while making your profits.
Top 40 Stock Market Terms You Must Know
There are a whole lot of terms, but we will give you Top 40 Stock Market Terms. I know you will love it.
- Asking/Offering Price: This is the price the owner of shares is willing to sell them for. When you start online share trading, you’ll see the offer or asking price of each share listed
- Averaging Down: This is when an investor buys more of a stock as the price goes down. This makes it so your average purchase price decreases.
- Bear Market: This is trading talk for the stock market being in a down trend, or a period of falling stock prices. This is the opposite of a bull market.
- Beta: A measurement of the relationship between the price of a stock and the movement of the whole market.
- Benchmark: The performance of a predetermined set of securities, used for comparison purposes. Such sets may be based on published indexes or may be customized to suit an investment strategy.
- Bid: This is the highest price a potential buyer is willing to offer for a share.
- Blue Chip Stocks: These are the large, industry leading companies. They offer a stable record of significant dividend payments and have a reputation of sound fiscal management.
- Bull Market: This is when the stock market as a whole is in a prolonged period of increasing stock prices. Opposite of a bear market.
- Broker: A person who buys or sells an investment for you in exchange for a fee (a commission). Here is Tim’s favorite broker. (LINK)
- Closing print: A report of the final prices for the day on a stock exchange.
- Day Trading: The practice of buying and selling within the same trading day, before the close of the markets on that day. This is what Tim typically does, although he does have a long-term portfolio as well. Traders that participate in day trading are often called “active traders” or “day traders.”
- Dividend: this is a portion of a company’s earnings that is paid to shareholders, or people that own hat company’s stock, on a quarterly or annual basis. Not all company’s do this.
- Exchange: An exchange is a place in which different investments are traded.
- Execution: When an order to buy or sell has been completed. If you put in an order to sell 100 shares, this means that all 100 shares have been sold.
- Earnings per share (EPS): A company’s profit divided by its number of common outstanding shares.
- Excess returns: Difference between an asset’s return and the risk-less rate.
- Fundamental Analysis: this is the process of evaluating a company by studying management and financial conditions in order to gauge the company’s true value.
- Hedge: This is used to limit your losses. You can do this by taking an offsetting position. For example, if you hold 100 shares of XYZ, you could short the stock or futures positions on the stock.
- Index: An index is a benchmark which is used as a reference marker for traders and portfolio managers. A 10% may sound good, but if the market index returned 12%, then you didn’t do very well since you could have just invested in an index fund and saved time by not trading frequently.
- Initial Public Offering (IPO): The first sale or offering of a stock by a company to the public, rather than just being owned by private or inside investors.
- Leverage: The use of debt financing, or property of rising or falling at a proportionally greater amount than comparable investments.
- Margin: A margin account lets a person borrow money (take out a loan essentially) from a broker to purchase an investment. The difference between the amount of the loan, and the price of the securities, is called the margin.
- Market capitalization: The total dollar value of all outstanding shares.
- Market prices: The amount of money that a willing buyer pays to acquire something from a willing seller, when a buyer and seller are independent and when such an exchange is motivated by only commercial consideration.
- Moving Average: A stock’s average price-per-share during a specific period of time. Some time frames are 50 and 200 day moving averages.
- Market top: the highest point of trading before the market shifts from a bull market to a bear market.
- Market trend: the tendency of financial markets to move in a particular direction over time.
- Order: An investor’s bid to buy or sell a certain amount of stock or option contracts. You have to put an order in to buy or sell 100 shares of stock.
- Portfolio: A collection of investments owned by an investor. You can have as little as one stock in a portfolio to an infinite amount of stocks.
- Penny stock: Used in the context of general equities. Stock that typically sells for less than $1 a share, although it may rise to as much as $10/share after the initial public offering, usually because of heavy promotion.
- Quote: Information on a stock’s latest trading price. This is sometimes delayed by 20 minutes unless you are using an actual broker trading platform.
- Rally: A rapid increase in the general price level of the market or of the price of a stock.
- Runoff or run-off: the period at the end of a stock market trading session originally reserved for printing end-of-trading share prices and values onto ticker tape.
- Sector: A group of stocks that are in the same business. An example would be the “Technology” sector including companies like Apple and Microsoft.
- Spread: This is the difference between the bid and the ask prices of a stock, or the amount someone is willing to buy it and someone is willing to sell it.
- Stock Symbol: A one-character to three-character, alphabetic root symbol, which represents a publically traded company on a stock exchange. Apple’s stock symbol is AAPL.
- Trade (financial instrument): the buying and selling of financial instruments.
- Volatility: This refers to the price movements of a stock or the stock market as a whole. Highly volatile stocks are ones with extreme daily up and down movements and wide intraday trading ranges.
- Volume: The number of shares of stock traded during a particular time period, normally measured in average daily trading volume.
- Yield: This usually refers to the measure of the return on an investment that is received from the payment of a dividend. This is determined by dividing the annual dividend amount by the price paid for the stock.
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