50 Stock Market Vocabulary Words Traders Should Know

Stock Market Vocabulary Words Traders Should Know

Why is a sound knowledge of stock market vocabulary words so crucial? Read on to find out.

Do you know that only six percent of the thousands that venture into becoming professional traders in the stock market succeed? (Business Insider)

Yes, only a very few make it to become successful professional traders.

So, why do many fail?

Many fail because they do not take their time to thoroughly learn the basics and acquaint themselves with adequate knowledge and understanding of the industry jargon.

These jargons are referred to as stock terms related to stock trading.

Below are some stock market vocabulary words every trader show know, and their definitions.

They are a must-know if you intend to be a profitable trader

The Stock Market Vocabulary Words Traders Must Know

1. Arbitrage

Arbitrage involves the simultaneous buying and selling of an asset in two different markets so as to profit from the tiniest margin difference in the listed price of the asset.

The arbitrage practice usually has no holding period for the asset. This is because both buying and selling transactions occur at the same time.

Also, it takes advantage of short-lived variations of similar or identical financial securities in different markets.

2. Ask

The ask price, also known as offer price, is the price a seller is willing to receive as payment for the sale of their stock or security.

In an ask quote, the price, along with the number of shares available for sale at a price, would be included.

3. Bid

A bid is an amount or offer for the purchase of a stock, asset, or security made by a buyer, trader, investor, or dealer to complete a sale transaction.

The ask price is always higher than the bid.

4. Bull Market

The bull market is a term often used to refer to the stock market.

It is a market condition in which stocks and securities are expected to rise or already rising.

This term is not only applicable to the stock market but anything that can be traded, such as commodities, currencies, and bonds.

5. Bear Market

A bear market is a market condition where the prices or value of stocks or securities experience a persistent decline.

In this market condition, the prices of commodities fall by 20% or more. 

6. Blue Chip Stocks

Blue Chip Stocks are big companies that are well established, have an excellent reputation, are financially sound, have been in existence for many years with significant market value, and have dependable earnings. 

Usually, such companies are valued at $10 billion or more and are found in a major market index like the Nasdaq 100.

7. Cover

Cover in the stock market is the act of buying back a previously owned security sold short to close a position.

To make a profit on a cover, one will be required to buy such security at a lesser price than once sold.

8. Common Stock

Common stock, also known as capital stock, represents a share of ownership in a corporation.

The holders of this type of stock reserve the right to elect a company’s board of directors and policies.

9. Candlesticks

A candlestick is a price chart used to analyze and show the price movement of a stock when it hits high, low, open, and close for a particular period.

If the candlestick is either red or black, it means the stock closed lower; if it’s white or green, it means the stock closed higher.

10. Day Trade

Trade in the stock market occurs when a trader buys and sells security within the span of a single trading day.

A day trader focuses on short-term market moves to make profits.

11. Dividend

Dividends are the portion of a company’s profits or earnings given to shareholders of the company.

It could be in the form of money, property, or additional shares of stock.

12. ETFs

ETF is an acronym for exchange-traded funds.

It is a basket of several securities and can be traded like a stock on an exchange.

ETFs track the value of specific sets of equities and trades at prices that are influenced by the market.

13. Equity

There are several financial definitions for equity. 

However, the most acknowledged definition refers to the amount of assets shareholders are to claim when a company liquidates or pays off all debts.

In other cases, equity may refer to common stocks.

14. Earnings Report

Earning reports are financial documents published by public companies and showing in detail the financial statement and performance of public companies. 

These reports usually contain updates of the company’s profit and loss statement, expenses, assets, equity, and cash flows.

These documents give shareholders an understanding of the company’s financial health and help them make wise investment decisions.

15. Fill

Fill is a trading terminology and the primary act in a stock transaction.

It is the act of completing or executing an order to trade a stock, bond, or any type of security.

The completion of an order is known as the term ‘filled.’

16. Forex

Forex or FX trading or foreign exchange is a market involving several countries and centers on converting currencies as their assets.

It is one of the most active and largest trading exchange markets in the world.

17. Futures

Futures are financial contracts in which both the buyer and the seller agree on transacting an asset to be sold or purchased at a predetermined date and price.

This financial instrument gives investors the opportunity to speculate on market security such as stock, notwithstanding the volatility of such asset’s price.

In regards to stock, a future agreement contract can hold.

18. Gaps

Gaps occur when the lowest price of a stock at the close of a trading day is more than the highest price at which that same stock was traded the day earlier. 

In summary, it is a price range where shares are not traded.

19. Hedge Fund

This is a form of investment cooperation or partnership in which pooled funds are used through specific strategies to draw in active returns for their investors.

In a hedge fund, profits are expected to be made in a bearish or bullish market and are only accessible to accredited investors.

20. IPO

IPO stands for initial public offering.

It refers to the procedure of a company allowing the availability of its shares to the public in a new stock issuance.

This process is the transitioning of a company from being private to become public and thus can begin generating capital from public investors.

21. Index

A stock index report is a statistical measure of change of a specific market or set of stocks within a market. 

The index will contain information on the average price of the stocks in any case, which would be weighted according to the price of each stock.

In the United States, the most well-known indices are the S&P 500 (price-weighted), Dow Jones Industrial Average (price-weighted), and the Nasdaq (market capitalization-weighted).

22. Long Trade

A long trade is the purchase of an asset like stock with the anticipation that its market price will rise.

In the event such asset prices increase, the trader will profit.

23. Limit Order

A limit order is an order to purchase or sell a stock at a specified price or better than that price.

For a buy limit order, the order would be executed at the lower limit price, while the sell limit order will only be completed at the higher limit price.

A limit order isn’t assured or sure to be executed.

24. Liquidity

Liquidity is the ease at which security such as stock can be readily bought or sold in the market at a price that reflects its actual market value.

25. Multiple Time Frame Analysis

This is an analysis technique that is employed to analyze a stock’s trend and figure out the ideal entries into the market.

26. Market Capitalization

Market capitalization, also known as market cap, is the total market value of a company’s shares of stocks.

It is calculated by the multiplication of a company’s total number of outstanding shares by the current market price of a share of stock.

27. Moving Average

The moving average (MA) is a means to calculate or determine the trend price of a stock.

They are calculated as the average closing price over a period of time.

For instance, the 30-day moving average would be the average closing price over the past 30 days.

MA relies on past prices to determine the price trend of securities.

28. Market Makers

Market makers are typically financial institutions such as banks or brokerage companies that offer traders intending to trade tradable assets or security like stocks, bids, and ask prices.

They facilitate trading activity, all the while making profits from the difference between the bid and the ask.

29. Penny Stocks

Penny stocks are small company’s stock or low-priced stock and are usually traded for not more than $5 per share.

They are usually traded through the OTC Bulletin Board (OTCBB).

However, they sometimes can be traded on large stock exchanges like the NYSE.

30. Preferred Stocks

Preferred stocks, otherwise known as preference shares, are stocks that give shareholders certain benefits like common stocks but offer different rights.

Holders of preferred stocks hold a higher claim on dividends.

In the event, a company is liquidated, holders stand high on the priority ladder in comparison to common stock shareholders.

However, they are given limited rights, including the right to vote.

31. Pullback

A pullback occurs when a stock drops in price relatively from recent highs in a continuous upward trend. 

Pullback usually lasts only for a short period of time, and then the stock returns to its continuous upward trend.

It is a buying opportunity for traders.

However, in the event the stock drops back longer and doesn’t continue its upward trend, it becomes a consolidation.

32. Profit and Loss Statement (P&L)

The profit and loss statement, also referred to as income statement, is a financial report that tells of the revenues, costs, and expenses a company incurred within a certain period, typically a fiscal quarter or year.

This information gives an insight into a company’s finances and its ability to generate profits through increments in revenue and cost reduction.

US-based public companies publish their P&L statements every fiscal quarter or year.

33. Pre-/Post-Market

The standard or regular market hours for American exchanges such as the Nasdaq and the NYSE occur between 9:30 AM to 4:00 PM.

Whereas pre-/post market refers to all trades happening between the close of a trading day and the start of the next trading day.

34. Rally

A rally refers to the period in which the prices of stocks, bonds, or any related indexes experience sustained increases.

This substantial upside move in the prices of stocks usually lasts for a relatively short period.

35. Risk

Risk is the possibility that a trade or investment results will be contrary to what is financially expected.

High-risk trade or investment potentially holds more chance of becoming a loss than low-risk investment.

But it also comes with substantial financial rewards in the event it goes through.

36. Resistance Level

The resistance level is the very peak of a stock price or current trading range and is not likely to go any further.

At this point, since the increments in price have been halted, the supply exceeds the demand.

Thus, stockholders begin selling at this resistance level, and stock price begins to dwindle once again.

37. Retracement

A retracement is a term used to describe a minor or temporary price reversal in the direction of moving upward trend of a stock or financial security.

This pullback occurs for only a short period of time, and soon enough, the price will return back to within its larger trend.

38. Short Trade

A short trade is an investment technique whereby a trader, in anticipation of the price of a stock to drop, sells it off to buy back later at a lower price than they initially sold it for.

They make a profit or rather a loss depending on the difference between the price that they initially paid for such stock and the price they bought it.

39. Swing Trade

Swing trade refers to traders’ endeavor to profit from the advantage of a change in stock price or, in other words, “swings” over an extended period of time, in some cases a few days or several months.

40. Scalp

The scalp is another trading technique in which traders attempt to take advantage of the small changes in price throughout the day, thereby profiting from small price movements.

These types of traders are known as scalpers, and they tend to place between ten to hundreds of trades a day.

It is their belief that smaller movements are easier to catch than larger ones.

Thus, they can make several small profits a day which can, in turn, add up to a significant gain for the whole day.

41. Stop Order

A stop order is an order initiated by a trader to purchase or sell off stock when its price moves past a specific point.

It makes sure a higher probability of securing a predetermined entry or exit price and minimizes a trader’s loss or locking in a profit.

This trading tactic is often employed by traders who can’t watch their stock for a long time.

42. Spread

Spread refers to the difference in prices of a security, such as stock, between the bid (buyers) and the ask (sellers) in a trade.

43. Slippage

Slippage is the difference in the requested or expected price of a trade and the price that such trade was executed.

It occurs mainly when the spread of the bid/order price changes within the time the order of the trade was placed and the time it was filled.

44. Trend

A trend is the general overall direction of a stock price. 

If the direction of the price is moving upward, then it is an upward trend with higher highs and higher lows. 

They are usually measured in charts with the use of trendlines to mark the highs and lows in the prices of stocks.

45. Ticker

Securities like stock traded on an exchange are illustrated by a group of characters, mostly letters known as a ticker or ticker symbol.

The ticker depends on the market that the stock or security is being traded on.

For instance, stocks traded on the NYSE will have not more than three letters, while those traded on the Nasdaq will have four to five letters.

46. Opening Range Breakout (ORB)

As the word implies in itself, opening range breakout is precisely that; a break from the opening range, i.e., when the price of a stock, through taking the high and low price, breaks through the opening range.

It is typically calculated from the first hour of trading.

However, ORB could also occur within the first minute of trading.

47. Option

An option is a form of financial contract whereby the seller assures the buyer or option holder that they reserve the right but are not required to buy or sell a particular security such as a stock at a specific price known as the strike price on/before a specific agreed date.

The asset in the contract is known as the underlying asset.

Option permitting the buyer the right to buy at a specific price is referred to as a call, and the one permitting the right to sell is called a put.

48. Volume

Volume or stock volume is the number of shares traded during a particular period of time.

A buy and sell transaction is counted as a single transaction, and volumes are calculated by the number of trades that take place in a day.

However, a stock chart can map the volume for other frames.

49. Volume Weighted Average Price (VWAP)

Volume weighted average price is the average price that a security such as stock has traded within a distinct time frame, usually a day.

It is based on both volume and price and thus gives traders insight into the value and trend of a security so as to know when to execute a short or long trades. 

It is usually depicted in a stock chart as a line and quite similar to the moving average.

50. Yield

Yield is earnings or profits realized on a security over a particular period, such as dividends or interest.

It is calculated by the addition of the increase and price and the amount of the dividend paid and division by the price such security was purchased.

It is usually shown as a percentage.

Bottom Line on Stock Market Terminologies

Getting acquainted with stock market vocabulary terminologies will help you understand the market better and become a better trader.

It takes time and effort on your part to understand the intricacies of stock trading.

However, once you do, the trading will be fun and profitable.

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