If you follow the stock market closely, you’ll quickly notice something – most analysts speak a language unique to the investment business. This language consists of unique terms for things peculiar to market trading. Becoming proficient in this trader talk is a way to build more confidence and become better prepared to tackle the markets.
To help you talk the talk and walk the walk, we have compiled a list of popular stock market terms based on inspiration from this infographic by Stockstotrade.com.
Averaging Down
Averaging down means buying additional shares of a previously initiated stock or asset after its price has fallen. This lowers the stock owner’s average purchase price and increases their position size.
Arbitrage
Arbitrage refers to buying shares of stock from one market and selling them to another to profit from the inevitable difference in their prices.
Bear Market
Refers to a market environment where a major stock market index declines 20% or more for a sustained period. Many traders are looking to sell their stocks, but fewer are willing to buy.
Bull Market
A bull market is a period in financial markets when stock prices rise by 20% or more. The prices are often expected to increase continuously.
Blue Chip Stocks
Blue chip stocks are premium quality stocks of large, industry-leading companies with a reputation for consistent shareholder returns.
Bid
A bid is the amount of money an investor is willing to pay for shares of a stock or other asset.
Bid-Asked Spread
The difference between what a buyer is willing to pay and what the seller wants per share of the stock.
Buyback
A share buyback is when a company repurchases shares to reduce its capital and return profits to its investors. The number of shares in circulation falls, and the value of the remaining shares increases.
Day Trading
Day trading means buying and selling stocks rapidly, often within the same day, to profit from short-term price movements.
Dividend
Refers to a company paying a portion of its earnings to shareholders, quarterly or annually. All companies do not offer dividends. They’re rare for penny stock companies because they rarely make consistent profits.
Close
Refers to the time the market closes. Major exchanges typically close at 4 p.m. Eastern, but trading can continue until 8 p.m.
Babysitting
Slang refers to holding a trade that has been losing out for a relatively long period in hopes that it will increase in price.
Beta
Beta is the measure of the historical volatility of a stock in the market index. A stock with a beta of 1.5, for example, typically moves 50% more than the market and is considered a riskier investment. A stock with a beta below 1 is less volatile.
Common Stock
A common stock is a share of ownership. When you own this type of stock, you’re allowed voting rights at shareholder meetings.
Execution
Execution is what it’s called when your stock trading order is fulfilled. It can be either a buy or sell order.
Liquidity
A measure of how quick and easy it is to buy and sell a stock. A stock is generally more liquid when a lot of buyers and sellers are actively trading, making it easier to enter and exit a position.
Volatility
A measure of how much and how often the value of a stock moves up or down. Stocks are considered volatile if their market value fluctuates wildly.
Limit Order
This type of stock market order provides instructions to buy or sell a stock at or below a specified price. It gives traders control over how much they pay.
Day Order
If an order to buy or sell a stock isn’t fulfilled during trading, it’s automatically canceled when the market closes.
Moving Average
A moving average is a technical analysis tool that tracks and identifies trends over a specific period based on day-to-day price fluctuations.
The Bottom Line
Breaking the language barrier is one of the vital keys to trading success. Learning stock market terms and fundamentals will help you develop your trading muscles and speak like a pro.
