Stock: A security that represents ownership in a corporation.
Share: A unit of ownership in a company. Shareholders may receive dividends and have voting rights.
Bull Market: A market condition where stock prices are rising or expected to rise.
Bear Market: A market where stock prices have declined 20% or more from recent highs.
Bid: The highest price a buyer is willing to pay for a stock.
Ask: The lowest price a seller is willing to accept for a stock.
Spread: The difference between the bid and ask prices.
Market Price: The current trading price of a stock.
Blue-Chip Stock: Shares of large, well-established companies with a history of stable earnings.
Volume: The number of shares traded during a specific period.
Market Order: An order to buy or sell a stock immediately at the best available current price.
Limit Order: An order to buy or sell a stock at a specific price or better.
Stop Order (Stop-Loss Order): An order to buy or sell a stock once it reaches a specified price, designed to limit an investor’s loss.
Trading Concepts
Day Trading: Buying and selling stocks within the same trading day.
Short Selling: Borrowing shares to sell, hoping to repurchase at a lower price later.
Diversification: Spreading investments across different assets to reduce risk.
Asset Allocation: The strategy of dividing investments among different asset classes.
Averaging Down: Buying more shares of a stock after its price has fallen to lower the average purchase price.
Margin: Borrowing money from a broker to purchase stock, using the stock as collateral.
Leverage: Using borrowed funds to increase the potential return of an investment.
Swing Trading: Holding a stock for several days or weeks to profit from expected price changes.
Position Trading: Holding a stock for a longer period, from months to years, based on long-term trends.
Market Analysis
Beta: A measure of a stock’s volatility compared to the overall market.
Market Capitalization: The total value of a company’s outstanding shares.
Dividend: A portion of a company’s earnings paid to shareholders.
Earnings Per Share (EPS): A company’s profit divided by its number of outstanding shares.
Price-to-Earnings (P/E) Ratio: The ratio of a company’s stock price to its earnings per share.
Technical Analysis: Analyzing historical price and volume data to predict future price movements.
Fundamental Analysis: Evaluating a company’s financial statements, management, and market position to determine its intrinsic value.
Moving Average: A stock’s average price over a specific period, used to identify trends.
Relative Strength Index (RSI): A momentum oscillator that measures the speed and change of price movements.
Support Level: A price level where a stock tends to find buying interest and not fall below.
Resistance Level: A price level where a stock tends to find selling interest and not rise above.
Investment Vehicles
Mutual Fund: A professionally managed investment fund that pools money from many investors.
Exchange-Traded Fund (ETF): A type of security that tracks an index, sector, commodity, or other asset, but can be traded like a stock.Bond: A fixed-income investment representing a loan made by an investor to a borrower.
Index Fund: A type of mutual fund or ETF designed to replicate the performance of a specific index.
Hedge Fund: A private investment fund that employs various strategies to earn active returns for its investors.
Real Estate Investment Trust (REIT): A company that owns, operates, or finances income-producing real estate.
Regulatory Bodies
Securities and Exchange Commission (SEC): The U.S. government agency responsible for regulating the securities markets and protecting investors.
Financial Industry Regulatory Authority (FINRA): A self-regulatory organization that oversees brokerage firms and exchange markets.
Commodity Futures Trading Commission (CFTC): The U.S. government agency that regulates the futures and options markets.
Other Important Terms
Initial Public Offering (IPO): The first sale of a company’s stock to the public.
Secondary Offering: The sale of new or closely held shares by a company that has already made an initial public offering.
Insider Trading: The illegal practice of trading on the stock exchange to one’s own advantage through having access to confidential information.
Liquidity: The ease with which an asset can be converted into cash without affecting its market price.
Volatility: The degree of variation of a trading price series over time, usually measured by the standard deviation of returns.
Yield: The income return on an investment, such as the interest or dividends received from holding a particular security.
This expanded glossary should provide a more comprehensive understanding of stock trading and the financial markets.
AssetGuru