Stock Trading Terms So You Can Pretend You Know What You’re Talking About

Nothing makes you seem smarter than rattling off a few finance terms amongst a group of friends. “Have you heard about the secondary offering next week? Sounds like they could run into some liquidity issues…”

At times it seems like the stock market has a language of its own. While intimidating at first, the terms really aren’t that complicated once you get to know them. Here are 40 basic terms that pretty much everyone can understand.

The basics…

To BUY means you are investing in a particular company.

To SELL means you are selling your interest in a company.

The BID is the price you’re willing to pay for the shares.

The ASK is the price you are willing to sell your shares for.

A little bit more complicated, but still pretty basic…

The BID-ASK SPREAD is the difference between the bid and the ask.

A BULL MARKET means stocks are going up.

A BEAR MARKET means stocks are going down.

A LIMIT ORDER is when you place an order to buy a stock at a certain price. The order doesn’t go through until the stock reaches that price.

A MARKET ORDER means you will pay whatever the market price is for the stock.

A GOOD TILL CANCELLED ORDER will remain active until you cancel it, or the order goes through.

A DAY ORDER means the order is cancelled at the end of the day if it is not executed.

VOLATILITY is how fast stocks move up and down. The more dramatic the moves, the higher the volatility.

LIQUIDITY is how easy it is to buy or sell your shares. This is dictated by how many active buyers and sellers there are for a particular stock.

Now for the harder stuff…

MARKET CAPITALIZATION is how much the company is worth. The number of shares multiplied by the share price.

PUBLIC FLOAT is the number of shares that are available to the public.

AUTHORIZED SHARES is the total number of shares of a company.

An IPO is the initial offering of shares of a company. This happens when a previously private company begins to trade publicly.

A SECONDARY OFFERING is when a company issues more shares. This means they are selling a portion of the company to raise more money.

BLUE CHIP STOCKS are the safest and often the largest companies.

FOREX stands for foreign exchange and involves the trading and speculation on foreign currencies.

BETA is the measurement between how much an individual stock moves versus how much the whole market moves. Higher beta stocks move around more dramatically.

A BROKER is a person who facilitates the buying and selling of shares.

DAY TRADING is the act of buying and selling shares on a short term basis.

A DIVIDEND is a cash payment an owner of a company receives.

An EXCHANGE is the place where different types of securities are traded.

MARGIN is a loan you take on to invest in stocks.

A PORTFOLIO is the collection of all of the different assets a person owns.

A QUOTE is the stock price.

A SECTOR is a categorization of different industries that individual stocks belong to.

YIELD is the amount of return you get on a particular investment from dividend payments.

Is this confusing?

There are tons of great resources online for learning more about this kind of thing. Immediate Edge is a great place to learn about stock trading.

Matt Gaedke