Stock Trading Basic Terms

If you want to learn how to trade stocks, you do need to understand the stock market, and at least some basic information about how stock trading works. Here’s a list of common stock market terminologies that you will inevitably come across in your investing journey. The goal here is not to memorize every terminology but use it as a guide to understand each vocabulary so you may take value from it.

Arbitrage

Arbitrage refers to buying and selling the same security on different markets and at different price points. For instance, if stock XYZ is trading at $10 on one market and $10.50 on another, the trader could buy X shares for $10 and sell them for $10.50 on the other market, pocketing the difference.

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.

Blue Chip Stocks

The stocks behind large, industry-leading companies. Blue chip stocks 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.

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.

Broker

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

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.

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

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. This is my primary trading strategy, although I have a long-term portfolio, as well. 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.

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.

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.

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.

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.

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.

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.

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.

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.

Others are big fan of high-volatility stocks because I can make a big profit off spikes or dips, depending on how I’m trading, in a short period of time. High volatility often makes trading more exciting, but it’s also risky if you’re inexperienced.

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.

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INVESTORS SHOPPING LIST [Amid Pandemic Crisis 2020]

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FINANCIAL MARKET TRADING

Stocks Trading

By trading stocks, you are provided with the opportunity to benefit not only from businesses that are doing well but also from failing businesses, as you can trade both with the stock and against it. There’s no better time to invest than now in the wake of crisis.

Options Trading

Options are a flexible investment tool that can help you take advantage of any market condition. Options Trading involves buying and selling options contracts on the public exchanges and, broadly speaking, it's very similar to stock trading.

Forex Trading

The Forex Market is by far the biggest and most popular financial market in the world. It is traded globally  with an  average trading volume of about $5.1 Trillion per day in 2019 . Forex trading has been in existence for many years.

Crypto Trading

This type of trading involves exchanging one cryptocurrency for another, buying and selling coins, and exchanging fiat money into crypto. It bears some similarities to foreign exchange (forex), where fiat currencies from across the globe are traded 24 hours a day.

FINANCIAL MARKET EDUCATION

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Risk Warning

Trading in the financial markets (including trading on margin) provides a wide range of opportunities and enables investors who are ready to take risks to make high profits. However, it carries a potentially high level of risk of loss at the same time. You should never invest money that you cannot afford to lose. Therefore, prior to trading you should take into careful consideration whether such operations are suitable for you in terms of your level of knowledge and financial situation. Your due diligence and education on Trading & Investments is therefore highly recommended.