STOCK MARKET TERMS
A COMPLETE LIST OF STOCK MARKET TERMS FOR INVESTORS, SWING TRADERS AND DAY
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As a new trader, you’re going to come across these key stock market terms often and it will be helpful to your learning if you understood them. To assist you in becoming a better trader; I have complied a very thorough list of stock market terms that are used by investors and traders across the world every day. But before we get into that let’s get a few things out the way.
There are many different ways in which you can approach the stock market. You can invest, position trade, swing trade, day trade and scalp. The most common approaches to trading the stock market is via investing, day trading and our go to method, swing trading. Find below a brief explanation for each approach and why we prefer some more than others.
STOCK MARKET TERMS
WHAT IS INVESTING?
Investing in the stock market is the act of using money to buy stock, options, bonds, etc
with the expectation of gaining a profit. Investing in the stock market is synonymous with holding an asset for the longer term (think five years or more).
WHAT IS DAY TRADING?
Day trade or Day trading refers to the buying and selling of stocks within the same day. A day trader will enter and exit his/her position in a security within that day. The objective of day trading (outside of making money) is to ensure that all positions are liquidated by the end of the day, thus, not assuming any potential overnight risks. In order to engage in day trading, individuals must have at least $25,000 in their stock trading account or a non-margin account. Click HERE to see what the SEC has to say about day trading.
WHAT IS SWING TRADING?
Swing Trading is a style of trading that looks to capitalize off of a securities short-term price movement. Your typical swing trader will hold a stock for a few days, up to a few weeks--no longer than a few months. The objective of swing trading is to capture "the meat" of a stock's move in a short period of time.
Overall, swing traders look to long stocks in an advancing or bull market- -conversely, they seek to mainly short stocks in a bear or declining market.
Click HERE to find out why we prefer swing trading.
A COMPLETE LIST OF STOCK MARKET TERMS
Analyst : A stock market analyst is an individual who analyzes a stock or commodity (via fundamental or technical analysis) and makes projections about the company’s future outlook.
Ask: The ask is a specific price in which a trader/investor is willing to sell their financial instrument (stock, FOREX, options, commodities, etc.) for.
Bear Market: A bear market is one where stocks have declined 20% or more from their previous highs. During this time, overall market sentiment tends to be very bearish. Find out more about Bear Markets HERE.
Bid/offer: The bid refers to a specific price a trader is willing to purchase shares of a company.
Breakout: A term often used among technicians to describe when the price of a security surpasses a previous resistance level. Swing traders and day traders typically go long a stock after it breaks through resistance. Find out more about trading breakouts HERE
Broker: A broker is an individual who buys and sells assets (stocks, FOREX, futures, commodities, options, etc) on your behalf. There is generally a fee associated with the transaction(s).
Bull Market: A market in which the prices are generally moving up or ascending for months or years. TIP: It is often wise to be net long in an advancing or bull market.
Buy and Hold: Buy and hold is a trading strategy where an individual purchases a financial instrument (eg: stock) with the intentions of holding it for a prolonged period of time. Famed investor Warren Buffett is a proponent of the ‘buy and hold’ investment strategy. If you’re thinking about becoming a ‘buy and hold’ investor; you might want to read an investment classic, ‘The Intelligent Investor’ by Benjamin Graham. Or Peter Lynch’s ‘One Up on Wall Street’. Purchase the book(s) HERE and HERE.
Correction: A stock market correction refers to a decline in price of about 10%, lasting less than 3 months. In contrast, a Bear Market is a decline in price of 20% lasting over 3 months. Find out more about stock market corrections HERE.
Day Trade or Day Trading: Day trade or Day trading refers to the buying and selling of stocks within the same day. A day trader will enter and exit his position in a security within that day. The objective of day trading (outside of making money) is to ensure that all positions are liquidated by the end of the day, thus, not assuming any potential overnight risks. In order to engage in day trading, individuals must have at least $25,000 in their stock trading account or a non-margin account. Click HERE to see what the SEC has to say about day trading.
STOCK MARKET TERMS
Day Trader: An individual who engages in day trading.
Equity: Equity refers to how much money you have in your trading or investing account.
Fundamental Analysis: Refers to analysis that examines a company’s fundamental picture and assesses the company for financial security. Fundamental analysis includes examining a company’s revenues, earnings, future growth, return on equity, profit margins, and other metrics to determine a company's growth prospects and fiscal health.
Fundamentalist: An individual who trades or invest from a fundamental analysis perspective.
Gap: A gap or ‘gap up’ occurs when a security’s opening price is higher than the previous day’s high.
Illiquid: A market with an insufficient amount of volume or buyers to sell to.
Investing: Investing in the stock market is the act of using money to buy stock, options, bonds, etc with the expectation of gaining a profit.
IPO: An IPO is an initial public offering of a stock. When a company IPO’s it makes its shares available for purchase by the general public for the first time.
Limit Order: A specified price you’re willing to sell or buy a security at. If you’re new to stock trading, you should do your best to only place limit orders. I have been involved in the stock market for over 15 years and use limit orders 99.99% of the times.
STOCK MARKET TERMS
Liquid: A market with a sufficient amount of volume allowing for a trader to easily buy and sell a particular security. A market is said to be liquid if you can enter and exit the market with ease and speed.
Lock-up Period: A set time frame (typically 90 to 180 days) where majority of large shareholders are restricted from selling their shares. Lock-up periods are set in place to help stabilize a company’s stock price when it trades on the stock market for the first time.
Margin: When you buy or trade a stock on margin; you’re essentially buying or trading that stock with borrowed money from your stock broker. I have been involved in the stock market for over 15 years and seldom do I trade on margin. I believe traders should be involved in the stock market for, at minimum, one year before they start trading on margin.
Margin Call: A margin call occurs when your broker requires you to deposit more money into your online brokerage account to bring your account into maintenance. Failure to deposit the required funds can result in the broker liquidating or selling your securities to bring your account into compliance.
Market Order: Is an action, which tells your broker to buy or sell a particular security at its current price (whatever that may be). Typically filled immediately.
TIP: If you’re going to place a market order, ensure that the company’s daily trading volume is very high.
Moving Average: The computed average of a stock’s price over a defined period of time. (EXAMPLE: 10 days of trading prices –(10, 12, 10, 14, 16, 11, 14, 10, 12,10) / 10)
Open: The open refers to the first price a security trades at on an exchange. The New York stock exchange begins trading at 9:30am (eastern time). The price of the first trade at 9:30am is considered the ‘open price’.
Overbought: The share price of a stock has appreciated too much, too fast and generally is considered set for a pull-back. This term is relative. As a stock market veteran I have seen stocks that are considered ‘overbought’ continue to trend higher. TIP: overbought can become ‘more’ overbought.
Oversold: The opposite of overbought, if a stock is said to be oversold, it means that the stock has trended down too much, too fast and generally is considered set for a bounce or rise in share price. As with a stock being overbought, I have witnessed stocks being considered ‘oversold’ go on to make lower lows. TIP: oversold can become ‘more’ oversold.
Over-trading: Overtrading refers to the buying and selling of stocks for no reason other than the sake of being in a trade. Make sure you are careful not to fall into the trap of overtrading. Traders who tend to overtrade often find themselves in a losing position.
STOCK MARKET TERMS
Pink Sheet: Pink sheet trading or OTC (Over The Counter) trading refers to stock trading that occurs outside of a major stock exchange (eg: The New York Stock Exchange (NYSE), NASDAQ, the London Stock Exchange (LSE), the Tokyo Stock Exchange (TSE). Stocks trading on the OTC market has less stringent requirements than the ones traded on a major exchanged. They are not required to meet requirements set by the SEC. Because of this, stocks trading on Pink Sheets tend to be viewed as very risky stock investments.
Portfolio: A portfolio is a basket of financial assets such as stocks, bonds, options, currencies, mutual funds, cash, cash equivalents, crypto-currencies, etc. that is managed personally by you or a fund manager.
Quote: A stock quote refers to the current price (bid/offer) of a stock. You can access stock quotes for free on popular sites such as Yahoo! and Google. Most major brokers offer real-time stock quotes such as: TDameritrade, Robinhood and Etrade,
Rally: A rally refers to a period where there’s a run up in the price of stocks, bonds, indexes, etc.
Resistance: A price point that serves as a "wall". When reached; profit takers begin to unload their position or sellers step in and short sell the stock. These two actions generally lead to a decline in the stock price. Find out more about short selling HERE.
SEC: The SEC (Security and Exchange Commissions) is the governing body of the United States stock exchange. Find out more about the SEC HERE.
Sector: A subset or groups of different markets (eg: Technology or Pharmaceutical sector). The S&P has 11 different sectors. Find them below:
Communication Services (XLC)
Consumer Discretionary (XLY)
Consumer Staples (XLP)
Health Care (XLV)
Real Estate (XLRE)
Sell-off :A steadfast decline in share price. If you’re interested in learning how to make money when stocks decline, sign-up HERE. We are now accepting enrollment in our stock market course: Go Short: Making Money when Stocks Decline.
Short: When you short sell a stock you’re essentially, selling a stock you do not own; in hopes of repurchasing it at a lower price point. If you’re interested in short selling stocks (aka making money when stocks decline); you can enroll in our short course HERE. Find out more about short selling HERE.
STOCK MARKET TERMS
Spread: The spread refers to the difference between the Bid and Ask.
Stock: When you own a company’s stock, you now have partial ownership in that company.
Stock Split: A stock split refers to an action decided by a company’s board to issue new shares. This action generally lowers the cost of the stock’s share price, all the while, increasing the number of shares you own.
Stock Exchange : A stock exchange is a regulated marketplace where securities are bought and sold.
Major Stock Exchanges around the world:
1.The New York Stock Exchange
3.Hong Kong Stock Exchange
4.London Stock Exchange
6.National Stock Exchange of India
9.SIX Swiss Exchange
11.Bombay Stock Exchange
12.Shenzhen Stock Exchange
14.Shanghai Stock Exchange
Stock Symbol: A stock symbol or ticker is a unique set of letters (usually 1-5 letters) assigned to each company being traded on the stock exchanges. For example, Apple, Inc. is traded under the symbol, “AAPL”. Facebook, Inc. is trader under the symbol/ticker, “FB”.
Stop-Loss: A specified price you’re willing to sell your security at to limit losses. Trading in the stock market without a stop-loss can be akin to gambling, it’s considered to be a very risky move. In our swing trading course: The ULTIMATE Swing Trader, we discuss the importance of stop-losses and how it fits into our methodology.
Support: A price point that serves as "support". When reached, buyers generally step-in and start buying up shares. This move essentially ‘holds up’ the price of the stock and establishes a floor.
Technical Analysis : Technical analysis refers to the utilization of charts to determine where a stock price will be in the future.
Technician: A Technician refers to someone who specializes in using technical analysis to determine where a stock price might be headed in the future.
Trading System: A trading system or methodology refers to a set of rules that an investor or trader utilizes consistently to trade the stock market. Trading systems incorporate principles such as, entry and exit signals, money management or risk management, stop-loss, fundamental analysis, technical analysis, probability trades, etc. All successful traders have a system or methodology in which they utilize to trade the stock market consistently. Our trading system has a high success rate and we teach our system to students in our trading course: The ULTIMATE Swing Trader.
If you’re interested in learning how to trade the stock market, we are now accepting enrollment in our swing trading course; go HERE to begin trading our profitable and easy to learn system.
Volatility: Volatility in the stock market refers to the price changes (eg: fluctuations or swings) a stock experiences with a specified period of time. Volatility in the stock market has also become synonymous with risk. The more volatile the stock or the larger the swings; the more volatile the stock is said to be and vice versa.
Volume: Volume in the stock market, refers to the number of shares bought and sold on a stock exchange during a trading day.
STOCK MARKET TERMS
This concludes our list of stock market terms. I hope you found this list useful and I encourage you to come back to this page weekly to begin familiarizing yourself with them. This will help you tremendously in your day to day conversations with other traders. And knowing these stock market terms will assist you in understanding the material I blog, and talk about on
If you’re a new, intermediate, or seasoned trader that’s experiencing little to no success trading the stock market then you need to enroll in our trading course: The ULTIMATE Swing Trader (find out more about it HERE).
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