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Biggest market Glossary online, with 102 stock market terms you need to understand.

 
Accumulate

Broker/analyst recommendation that could mean slightly different things depending on the broker/analyst. In general, it means to increase the number of shares of a particular security over the near term, but not to liquidate other parts of the portfolio to buy a security that might skyrocket. A buy recommendation, but not an urgent buy.


Acquisition

When one company decides to take over another one, it is referred to as an acquisition. The acquiring company will do this by purchasing either the majority or entirety of the ownership stake of the company being taken over.


ADR

An American Depositary Receipt (or ADR, for short) is a way in which US investors can trade shares of non-US companies without using their local exchanges.


Aggregation

Process in corporate financial planning whereby the smaller investment proposals of each of the firm's operational units are aggregated and effectively treated as a whole.


Alerts

Alerts – also known as trading alerts – allow you to set specific criteria and be notified immediately once that criteria has been met. There are three main types: economic announcements, price alerts and indicator alerts.


Algorithmic Trading (Algo)

Refers to computerized trading using proprietary algorithms. There are two types algo trading. Algo execution trading is when an order (often a large order) is executed via an algo trade. The algo program is designed to get the best possible price. It may split the order into smaller pieces and execute at different times. The second type of algo trading is not executing a set order but looking for small trading opportunities in the market. It is estimated that 50 percent of stock trading volume in the U.S. is currently being driven by algo trading. Also known as high-frequency trading.


Alpha

Alpha is the measurement of an investment portfolio’s performance against a certain benchmark –usually a stock market index. In other words, it’s the degree to which a trader has managed to ‘beat’ the market over a period of time. The alpha can be positive or negative, depending on its proximity to the market.


Alpha-Beta Trend Channel

The Alpha-Beta Trend Channel study uses the standard deviation of price variation to establish two trend lines, one above and one below the moving average of a price field. This creates a channel (band) where the great majority of price field values will occur.


American Stock Exchange (AMEX)

Stock exchange with the third highest volume of trading in the US. Located at 86 Trinity Place in downtown Manhattan. The bulk of trading on AMEX consists of index options (computer technology index, institutional index, major market index) and shares of small to medium-sized companies are predominant.


Amortisation

Amortisation is the process of spreading the repayment of a loan, or the cost of an intangible asset, over a specific timeframe. This is usually a set number of months or years, depending on the conditions set by banks or copyright agencies. Amortisation will often incur interest payments, set at the discretion of the lender.


Annual General Meeting (AGM)

An annual general meeting (AGM) is a yearly gathering between the shareholders of a company and its board of directors. Generally, this is the only time that the directors and shareholders will meet throughout the year, so it is a chance for the directors to present the company’s annual repor


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

The simultaneous buying and selling of a security at two different prices in two different markets, resulting in profits without risk. Perfectly efficient markets present no arbitrage opportunities. Perfectly efficient markets seldom exist, but, arbitrage opportunities are often precluded because of transactions costs.


Arms Ease of Movement (EMV)

Developed by Richard W. Arms, Jr., this analysis routine expands on Mr. Arms' Equivolume charting tool by quantifying the shape aspects of the plotted boxes. The purpose of this quantifying is to determine the ease, or lack thereof, with which a particular issue is able to move in one direction or another. The ease with which an issue moves is a product of a ratio between the height (trading range) and width (volume) of the plotted box. In general, a higher ratio results from a wider box and indicates difficulty of movement. A lower ratio results from a narrower box and indicates easier movement. This ratio is then related to a comparison between today's and yesterday's trading-range midpoint values to determine the ease of movement value (EMV). A moving average is then applied to the EMV value - the moving average period can be varied in order to make the EMV flexible as a trading tool.


Ask

The ask refers to the price at which you can buy an asset or security from a seller. It can be variously referred to as ask, the ask, or asking price.


Asset

An asset is an economic resource which can be owned or controlled to return a profit, or a future benefit. In financial trading, the term asset relates to what is being exchanged on markets, such as stocks, bonds, currencies or commodities.


Asset Class

An asset class is a category of financial instrument - these can be physical assets or financial assets. The instruments are grouped into asset classes based on whether they show similar characteristics, behave in the same way on the market, or are governed by the same laws and regulations.


At The Money (ATM)

At the money (ATM) is a term used to describe an options contract with a strike price that is identical to the underlying market price. At the money options see a lot of trading activity, because they are so close to becoming profitable.


Auction

An auction market is an environment that facilitates competition between buyers and sellers. In an auction market, buyers indicate the maximum price that they are willing to pay for an asset, while sellers express the lowest price that they would be comfortable accepting.


Automated trading

Automated trading – also known as algorithmic trading – is the use of algorithms for making trade orders.


Averaging down

When a trader purchases an asset, the asset’s price drops, and if the trader purchases more, it is referred to as averaging down.


Base currency

In trading the term base currency has two main definitions: the first currency quoted in a forex pair, or the accounting currency used by banks and other businesses.


Base rate

A base rate is the interest rate that a central bank – such as the Bank of England or Federal Reserve – will charge commercial banks for loans. The base rate is also known as the bank rate or the base interest rate.


Basis point

A basis point is a unit of measurement used to quantify the change between two percentages – it can also be referred to as ‘bp’, which is pronounced ‘bip’ or ‘beep’. A basis point is equal to one hundredth of one percent, or 0.01%.


Bear

Bears are traders who believe that a market, asset or financial instrument is heading in a downward trajectory. In that regard, they hold an opposite view to bulls, who believe that a market is going upwards.


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.


Beta

A financial instrument’s beta is a measure of its risk or volatility when compared to the wider market.


Bid

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.


Blue Chip Stocks

The stocks behind large, industry-leading companies. They 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.


Bollinger bands

Bollinger bands are a popular form of technical price indicator. They are made up of an upper and lower band, set either side of a simple moving average (SMA). Each band is plotted two standard deviations away from the SMA of the market, and they are capable of highlighting areas of support and resistance.


Bond trading

Bond trading is one way of making profit from fluctuations in the value of corporate or government bonds. Many view it as an essential part of a diversified trading portfolio, alongside stocks and cash.


Book value

While book value reflects what a business is worth according to its financials (its books), market value is the worth of a company according to financial markets – also known as its market capitalisation. The calculation for market value is the current market price per share multiplied by the total number of outstanding shares.


Bottom line

A company’s bottom line is an important factor in share trading. Variously, it can be used to refer to the net earnings or earnings per share (EPS) of a business.


Bourse

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.


Brent crude

Brent crude – also referred to as Brent blend – is one of three major oil benchmarks used by those trading oil contracts, futures and derivatives. The other two major benchmarks are West Texas Intermediate (WTI) and Dubai/Oman, though there are many smaller oil varieties traded as well..


Broker

A person who buys or sells an investment for you in exchange for a fee (a commission).


Bull

Bulls are speculators who believe that a market, instrument, or sector is going on an upward trajectory. This belief puts them at odds with bears, who take a pessimistic view on a market’s direction.


Bull Market

When the stock market as a whole is in a prolonged period of increasing stock prices. It’s the opposite of a bear market. A single stock can be bullish or bearish too, as can a sector, which I’ll describe later on.


Buy

Buying a financial instrument means taking ownership of it from someone else, whether it is a commodity, stock or another asset.


Cable

Cable is one of a few slang terms for different currency pairs; in this case referring to British pound sterling against the US dollar. This may also be shown as GBP/USD or GBPUSD. Occasionally, people also refer to the price of the British pound as cable.


Call

A call option is a contract the gives the buyer the right but not the obligation to buy a specific an asset at a specific price, on a specific date of expiry. The value of a call option appreciates if the asset's market price increases.


Capital expenditure (CAPEX)

Capital expenditure, or CAPEX, is the term used for the money spent by businesses on physical assets. It’s an important part of understanding a company’s accounts.


Capital gains

Capital gains are the profits made from the buying and selling of assets. They are made when traders sell assets – like shares or commodities – for more than they originally paid for them. The opposite of a capital gain is a capital loss.


Capital gains tax (CGT)

Capital gains tax (or CGT), is the tax levied by the government on the profits made from financial asset sales. CGT regulations and levels vary from country to country.


Capital loss

When a trader sells an asset at a lower price than they initially paid for it, they have incurred a capital loss. As such, capital loss is the opposite of capital gain: the profit made when an asset is sold for more than originally pai


Cash flow

Cash flow is the amount of money coming into and going out of a company’s accounts, as reported in earnings announcements. It can refer to a single project or the entire business.


Chargeable gain

Chargeable gain refers to a profitable change in the price of an asset – measured between the time when the assets were purchased, and the time when they are sold. When applied to the financial markets, most profits – whether they are a result of going long or going short – are subject to capital gains tax (CGT).


Chartist

A chartist is a trader who relies predominantly on charts to help them understand a financial instrument’s historical price movements, in order to better predict and to speculate on its future performance. They are also commonly known as technical analysts, or technical traders.


Close

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.


Contract

A term of reference describing a unit of trading for a financial or commodity future. Also, the actual bilateral agreement between the buyer and seller of a transaction as defined by an exchange.


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. Traders who participate in day trading are often called “active traders” or “day traders.”


Dividend

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.


Earnings per share (EPS)

A company's profit divided by its number of common outstanding shares. If a company earning $2 million in one year had 2 million common shares of stock outstanding, its EPS would be $1 per share. In calculating EPS, the company often uses a weighted average of shares outstanding over the reporting term. The one-year (historical or trailing) EPS growth rate is calculated as the percentage change in earnings per share. The prospective EPS growth rate is calculated as the percentage change in this year's earnings and the consensus forecast earnings for next year.


Exchange

A place in which different investments are traded. The most well-known exchanges in the United States are the New York Stock Exchange (NYSE) and the Nasdaq.


Execution

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.


Financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or traders. Financial intermediaries facilitate transactions between those with excess cash in relation to current requirements (suppliers of capital) and those with insufficient cash in relation to current requirements (users of capital) for mutual benefit.


Haircut

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.


High

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.


High Frequency Trading (HFT)

Refers to computerized trading using proprietary algorithms. There are two types high frequency trading. Execution trading is when an order (often a large order) is executed via a computerized algorithm. The program is designed to get the best possible price. It may split the order into smaller pieces and execute at different times. The second type of high frequency trading is not executing a set order but looking for small trading opportunities in the market. It is estimated that 50 percent of stock trading volume in the U.S. is currently being driven by computer-backed high frequency trading. Also known as algo or algortihmic trading.


Index

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.


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.


Investor

The owner of an asset.


Leverage

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.


Long

One who has bought a contract to establish a market position and who has not yet closed out this position through an offsetting sale; the opposite of short.


Long position

Owning or holding options (i.e., the number of contracts bought exceeds the number of contracts sold). For equities, a long position occurs when an individual owns securities. An owner of 1,000 shares of stock is said to be "Long the stock."


Low

Low is the opposite of high. It represents a lower price point for a stock or index.


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. 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.


Maturity

For a bond, the date on which the principal is required to be repaid. In an interest rate swap, the date that the swap stops accruing interest.


Maturity date

Usually used for bonds. Date that the bond finishes and is paid off. Date on which the principal amount of a note, draft, acceptance, bond, or other debt instrument becomes due and payable.


Mezzanine capital

In a company's capital structure, mezzanine capital is senior to common shares but junior to secured debt or senior debt. Mezzanine capital refers to subordinated debt or preferred equity and is usually more expensive for the issuer than issuing senior debt.


Mezzanine financing

The next stage of financing that follows venture capital financing.


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.


Mutual fund

Mutual funds are pools of money that are managed by an investment company. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. Many funds these days are no load and impose no sales charge. Mutual funds are investment companies regulated by the Investment Company Act of 1940.


Open

In the United States, the stock market opens at 9:30 a.m. Eastern time every day. It’s based on the trading hours of the Nasdaq and NYSE. Pre-market trading hours begin at 4:30 a.m. Eastern, but most traders don’t begin paying attention until about 8 a.m. Essentially, open refers to the time at which people can begin trading on a particular exchange.


Order

An investor’s bid to buy or sell a certain amount of stock or option contracts constitutes an order. You have to put an order in to buy or sell 100 shares of stock, for instance.


Pink Sheet Stocks

The term “pink sheets” refers most commonly to penny stocks, which are traded at $5 per share or less. They’re also called over-the-counter stocks because that’s how they are traded. You won’t find them on the Nasdaq or NYSE, or any other major exchange, and they’re often smaller companies.


Portfolio

A collection of investments owned by an investor makes up his or her portfolio. You can have as few as one stock in a portfolio, but you can also own an infinite amount of stocks or other securities.


Quote

Information on a stock’s latest trading price tells you its quote. This is sometimes delayed by 20 minutes unless you’re 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 is known as a rally. Depending on the overall environment, it might be called a bull rally or a bear rally. In a bear market, upward trends of as little as 10 percent can qualify as a rally.


Sector

A group of stocks that are in the same industry belong to the same sector. An example would be the technology sector, which includes companies like Apple and Microsoft. Some traders prefer to trade in a specific sector, such as energy, because they know the industry well and can better predict stock price fluctuations.


Share Market

Any market in which shares of a particular company are bought and sold. The stock market is an example — and probably the most significant example — of a share market.


Short

One who has sold a contract to establish a market position and who has not yet closed out this position through an offsetting purchase; the opposite of a long position.


Short position

Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed, before the sale, to make "good delivery" to the buyer. Eventually, the shares must be bought back to close out the transaction. This technique is used when an investor believes the stock price will drop.


Short Selling

When you short-sell a stock, you borrow shares from someone else with the promise to return them at a point down the road. You then sell the stock for a profit. It’s a way to take advantage of a stock that you believe will decrease in price. After you sell short, you can buy back the shares at the lower price point and take the difference in price as your profit.


Spread

This is the difference between the bid and the ask prices of a stock, or the amount for which someone is willing to buy it and the amount for which someone is willing to sell it. For instance, if a trader is willing to trade XYZ stock for $10 and a buyer is willing to pay $9 for it, the spread is $1.


Stock Symbol

A stock symbol is a one- to four-character alphabetic root symbol that represents a publicly traded company on a stock exchange. Apple’s stock symbol is AAPL, while Walmart’s is WMT.


Strike

In options trading, the strike is the price at which a contract can be exercised, and the price at which the underlying asset will be bought or sold. It is also known as the strike price.


Support

A support level is the price at which an asset may find difficulty falling below as traders look to buy around that level.


Technical analysis

Technical analysis is a means of examining and predicting price movements in the financial markets, by using historical price charts and market statistics. It is based on the idea that if a trader can identify previous market patterns, they can form a fairly accurate prediction of future price trajectories.


The Public

Individual investors who trade single securities independently or invest in intermediaries such as mutual funds, as opposed to professional investors.


To be announced (TBA)

A contract for the purchase or sale of an MBS to be delivered at an agreed-upon future date but does not include a specified pool number and number of pools or precise amount to be delivered.


Trend

The general direction of the market.


VIX

VIX is short for the Chicago Board Options Exchange Volatility Index. It is a measure used to track volatility on the S&P 500 index, and is the most well-known volatility index on the markets.


Volatility

The price movements of a stock or the stock market as a whole. Highly volatile stocks are those with extreme daily up and down movements and wide intraday trading ranges. This is often common with stocks that are thinly traded or have low trading volumes.


Volume

In trading, volume is the amount of a particular asset that is being traded over a certain period of time. It is often presented alongside price information, as it offers an extra dimension when examining an asset’s price history.


VWAP

VWAP is the abbreviation for volume-weighted average price, which is a technical analysis tool that shows the ratio of an asset's price to its total trade volume. It provides traders and investors with a measure of the average price at which a stock is traded over a given period of time.


Walk away

To take and maintain a position in a stock after going to the floor to consummate a trade. Antithesis of trade me out, buy them back.


Wall Street

Generic term for the securities industry firms that buy, sell, and underwrite securities.


Weak market

A market with few buyers and many sellers and a declining trend in prices.


WTI

WTI stands for West Texas Intermediate (occasionally called Texas Light Sweet), an oil benchmark that is central to commodities trading. It is one of the three major oil benchmarks used in trading, the others being Brent crude and Dubai/Oman.


Yield

Often 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. If you bought stock XYZ for $40 per share and it pays a $1.00-per-year dividend, you have a “yield” of 2.5 percent.


Zombies

Companies that continue operation while they await merger or closure, even though they are insolvent and bankrupt.


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