What Is the Stock Market?
The stock market is any exchange that allows people to buy and sell stocks and companies to issue stocks. A stock represents the company’s equity, and shares are pieces of the company.
When people talk about buying and selling stock, they mean that they’ve bought or sold one or more shares of a particular stock. The purpose for the trader is For instance, if I buy 2,000 shares of Apple stock at $190 and sell it six months later for $210 per share, I’ll make money. If Apple tanks (which isn’t likely), I could lose money, in which case I’d want to sell quickly to limit my losses to make money.
What Do The Stock Trading Terms Mean?
Stock market terms are industry-specific jargon for the securities industry. When experts and amateurs talk about trading stocks, they use these stock market terms to speak specifically about strategies, charts, patterns, indices, and other elements of the stock trading industry.
Learning stock market terms will allow you to accelerate the learning process. I tell my Trading Challenge students over and over again to do their research first. If you’re knowledgeable about the stock market, you stand to profit far more than if you trade based on instinct or “hot picks.”
Some stock market terms — such as bull and bear, which I’ll cover below — also apply to other investment vehicles, such as real estate. I’m only going to cover their relationship to stocks, but you might see them pop up in other conversations.Basic Stock Market Terms
Let’s look at some of the most important stock market terms you’ll encounter as you learn how to trade stocks.
1. Annual Report
An annual report is a report prepared by a company that’s intended to impress shareholders. It contains tons of information about the company, from its cash flow to its management strategy. When you read an annual report, you’re judging the company’s solvency and financial situation.
Arbitrage refers to buying and selling the same security on different markets and at different price points. For instance, if stock XYZ is trading at $10 on one market and $10.50 on another, the trader could buy X shares for $10 and sell them for $10.50 on the other market, pocketing the difference.
3. Averaging Down
When an investor buys more of a stock as the price goes down. This makes it so your average purchase price decreases. You might use this strategy if you believe that the general consensus about a company is wrong, so you expect the stock price to rebound later.
4. Bear Market
Trading talk for the stock market being in a downward trend, or a period of falling stock prices. This is the opposite of a bull market. If a stock price plummets, it’s very bearish, read more about bear market.
A measurement of the relationship between the price of a stock and the movement of the whole market. If stock XYZ has a beta of 1.5, that means that for every 1 point move in the market, stock XYZ moves 1.5 points, and vice versa.
6. Blue Chip Stocks
The stocks behind large, industry-leading companies. Blue chip stocks offer a stable record of significant dividend payments and have a reputation of sound fiscal management. The expression is thought to have been derived from blue gambling chips, which is the highest denomination of chips used in casinos.
This stock market term is a little murky. Technically, it’s just another name for the stock market and originates from a house in which wealthy men gathered to trade shares. However, when you hear it in today’s conversations about the stock market, it usually either refers to the Paris stock exchange or to a non-U.S. stock exchange.
The bid is the amount of money a trader is willing to pay per share for a given stock. It’s balanced against the ask price, which is what a seller wants per share of that same stock, and the spread is the difference between those two prices.
The NYSE and Nasdaq close at 4 p.m., with after-hours trading continuing until 8 p.m. The close simply refers to the time at which a stock exchange closes to trading.
10. Day Trading
The practice of buying and selling within the same trading day, before the close of the markets on that day, is called day trading. This is my primary trading strategy, although I have a long-term portfolio, as well. Traders who participate in day trading are often called “active traders” or “day traders.”
A portion of a company’s earnings that is paid to shareholders, or people that own that company’s stock, on a quarterly or annual basis. Not all companies pay dividends. For instance, if you trade penny stocks, you’re likely not after dividends.
When an order to buy or sell has been completed, the trader has executed the transaction. If you put in an order to sell 100 shares, this means that all 100 shares have been sold.
In its most simplest stock market terms, a haircut is an extremely thin spread between the bid and ask prices of a given stock. It can also refer to a situation in which a stock price gets reduced by a specific percentage for margin trades or other purposes.
A high refers to a market milestone in which a stock or index reaches a greater price point than previously. Record highs can signal that a stock or index has never reached the current price point, but there are also time-constrained highs, such as 30-day highs.
A benchmark that is used as a reference marker for traders and portfolio managers. A 10 percent return may sound good, but if the market index returned 12 percent, then you didn’t do very well since you could have just invested in an index fund and saved time by not trading frequently. Examples are the Dow Jones Industrial Average and Standard & Poor’s 500.
17. Initial Public Offering (IPO)
An IPO is the first sale or offering of a stock by a company to the public. It happens when a company decides to go public rather than remain solely owned by private or inside investors. The Securities Exchange Commission (SEC) has strict rules that companies must follow before issuing an IPO.
I’m not a fan of leverage, but it’s good for you to know this stock market term. When you use leverage, you borrow shares in a stock from your broker with the goal of increasing your profit. If you borrow shares and sell them all at a higher price point, you return the shares and keep the difference. It’s a dangerous game that I urge you to avoid playing.
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.
Trading on margin can be dangerous because, if you’re wrong about the direction in which the stock will go, you can lose significant cash. You must often maintain a minimum balance in a margin account.
20. Moving Average
A stock’s average price-per-share during a specific period of time is called its moving average. Some common time frames to study in terms of a stock’s moving average include 50- and 200-day moving averages.
source – https://www.timothysykes.com/blog/trading-terms-you-need-to-know/