Terminology

Trading Terminology

Stock market

The stock market is where shares of publicly listed companies are traded. Investors or traders can purchase and sell shares via the stock market.

STOCK

A share of stock refers to a small stake in a public business or corporation.

DIVIDEND

This refers to the sum of money being paid by a company to its shareholders. When a company generates a profit and accumulates retained earnings, those earnings can either be reinvested into the business or paid out to shareholders.

Shares

Shares are units of ownership in a company that are usually traded on the stock market. They’re also known as stocks or equity.

Stock symbol

This refers to the sum of money being paid by a company to its shareholders. When a company generates a profit and accumulates retained earnings, those earnings can either be reinvested into the business or paid out to shareholders.

Shares

A stock symbol refers to a unique sequence of letters that represent a company listed on the exchange.

Limit order

A limit order is an order to buy or sell a stock for a specific price.

Market order

A market order is an order to buy or sell a security immediately. This type of order guarantees an order will be executed, however does not guarantee the execution price.

Going long

Going long on a stock or bond means to bet on the price of the stock increasing, so that you can buy low and sell high.

Averaging down

Averaging down means purchasing more of a stock you already own after the price has declined. This will reduce the average price at which the stock was purchased, resulting in a potential increase in profit if the market value recovers above the new average price.

Bull

A bull market is a term used when investors are expecting the prices to increase.

Bear

A bear market is a term used when investors are expecting prices to decrease.

Buy

Means to purchase shares or a position within a company.

Sell

To get rid of shares in a company when you have achieved your goal or to free up capital.

Bid

The bid price is the price a broker or market maker is willing to buy the underlying asset from the trader.

Ask-bid spread

This is the difference between the highest price that a buyer is willing to pay for an asset and the lowest price that a seller is willing to accept.

Volatility

Volatility refers to the rate at which the stock moves up or down.

Technical Indicators

These are mathematical calculations based on the price, volume, or open interest of a security/ contract and are used to analyze whether a market is moving up, down, or sideways over time.

Capitalization

This refers to the total market value of a company's outstanding shares of stock.

Exchange

This refers to the place where different types of investments are traded.

MACD

Moving Average Convergence/ Divergence (MACD) is a trading indicator designed to reveal changes in direction, strength, momentum and duration of trends within a stocks price.

RSI

The Relative Strength Index (RSI) measures the speed and change in price of stocks.

IPO

Initial public offering is the process by which a private company can go public by sale of its stocks to the general public.

PDT

A pattern day trader (PDT) is a rule for traders or investors that execute four or more day trades over the span of five business days. It is in place to protect beginner traders and the rule is as followed: If you have less than £25,000 in your bank/ trading account and are an active trader, then you will be stuck in your fourth trade place and therefore will be unable to execute any more trades until your earlier trades are cleared.

Float

Float refers to the number of shares that can be traded after deducting the shares held by insiders.

Secondary Offering

refers to the sale of new or closely held shares by a company that has already made an initial public offering. It is done in order to increase sales in stocks and to raise more money from the public.

Portfolio

This refers to a collection of your own sales.

Broker

A broker is someone who buys and/ or sells stocks on your behalf.

Moving Average

This is a simple analysis tool that smooths out price data by creating a constantly updated average price.

Gap Up

A Gap Up refers to when a stock opens at a higher level than the previous day's high.

Gap Down

A gap down refers to when the price of a financial instrument opens lower than the previous trading day.

Timeframe

This refers to the amount of time that a trend lasts in a market and can be identified and used by traders.

Chart Analysis

This studies the movement in price and the patterns within a security. Traders apply technical analysis tools to charts in order to identify entry and exit points for potential trades.

Delisting

This is a voluntary or involuntary removal of a listed security from a stock exchange. It usually occurs when a company declares bankruptcy, ceases operations, becomes private, merges with another company or fails to meet listing requirements.

Margin Account

This is a brokerage account in which the broker lends the customer money to purchase stocks or other financial products.

Sector

This refers to a group of stocks that have a lot in common with each other; usually being within the same or similar industries.

Resistance and Support

These are predetermined levels of the price of a security at which it is thought that the price will tend to stop and reverse.

Split

This is when a company's board of directors issues more shares of stock to its current shareholders without diluting the value of their stakes. A stock split increases the number of shares outstanding and lowers the individual value of each share.

Reverse Split

Also called a stock merge, a reverse split is a process by which shares of corporate stock are effectively merged to form a smaller number of proportionally more valuable shares.

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