22 Stock Market Terms that Every Beginner Needs to Know

For beginners, the stock market can be very daunting to understand. One of the ways in which they can make the process easier is by learning the meaning behind the terminology that is widely used in all the different markets.

By familiarizing yourself with these terms, you can boost your understanding and ensure that you have better success when you are just starting out.

Buy

This is a very simple term. It means you are in a position to or want to buy the shares being offered by a company.

Sell

This refers to selling the shares you previously bought. Selling can occur when you have either achieved your financial goals or you are interested in cutting your losses when shares are declining in value by selling them.

Bid

This relates to the price you will pay for certain shares. A bid is the highest price that a buyer is willing to pay for a certain share or stock.

Ask

Also known as an offer, this showcases the lowest price that the owner of shares is willing to go for. After a bid, they might make a counteroffer or ask for a better price on the market.

Bid-Ask Spread

This highlights the difference between what is being spent and what people expect to get. In short, the value for money they are getting out of the transaction. The spread has to be resolved properly before any transaction takes place.

Blue Chip Stock

Stocks and shares of well-established, large companies such as Amazon and Apple, are considered as blue-chip stocks. These also have a history of providing stable dividends and improving market value for shareholders.

Board Lot

This is a standard unit used for trading as defined by a certain exchange board. Sized for board lots might change, depending on their price per share and they are commonly available in unit sizes of 1000, 500, 100 or 50.

Bull Market

When the prices of stock in the stock market are increasing, it is known as a bull market. The bull market condition can also be applied to predict when the stock is expected to rise as well. Many buyers tend to buy up high performing stock before a bull market condition in order to capitalize on stock performance.

Bear Market

When the prices of stock in the marketplace are decreasing, it is known as a bear market. Much like the bull market condition, the bear condition can also be applied to predict when the stock will decline in performance as well.

Beta

This is used as a unit to measure the movement of the price of the stock, in comparison with the movement experienced on the rest of the marketplace. For example: If ABC stock has a beta of 1.5, this means that if the market moves 1 point, ABC stock moves 1.5 points.

Limit Order

These are used for controlled transactions to only execute an order on a price that has been specified. With the help of a limit order, sellers can put a cap on the minimum and maximum prices that the stock is available for interested buyers.

Market Order

While these can also be used for controlled transactions, market orders are largely aimed at executing orders as quickly as possible. This means that they are generally more lax and don’t always offer as much control as limit orders do.

Market Capitalization

This refers to what the market’s idea is regarding a certain stock’s value. This is largely determined by calculating the value of the outstanding shares of a current marketplace. It is used to roughly estimate the company’s wealth.

Public Float

When shares are ready to be shared with the public, a business will do a public float of their shares. The number of tradable shares is determined after shares that are owned by insiders, including company employees and early investors, are subtracted.

ETF – Exchange Traded Funds

A versatile fund, these are similar to stocks because shares can be bought and sold with ease but they make use of an index, which makes them similar to mutual funds.

GTC - Good till Cancelled Order

A GTC order gives the most control to the seller. With it, your order will stand in the marketplace, only to be executed when bought at the defined asking price, even if it takes 2 to 3 weeks. Until then, the order will stand until it is executed or canceled by the seller.

Day Order

This order means that an order posted is only good for the same day that it has been posted. The duration of the day order also needs to be paid attention to. In short, one day at the stock market is from 9:30 am to 4:30 pm and your day order will expire after it.

Volatility

This is used to define the speed at which a stock moves in the marketplace. While a certain amount of volatility can be healthy, it is generally believed that the higher the volatility, the bigger the risks involved.

Liquidity

This refers to how easily a person can get in and out of a stock. Liquidity also relates to how quickly a person is able to get their capital out of their investment. Genrally, stocks that has high liquidity is suitable for short-term investments. Long-term investments are usually harder to liquidate on short notice and not always at a profit.

Trading Volume

Trading volume refers to the overall number of shares of a company that are being traded on a daily basis. The trading volume of a company’s shares can also make a major impact on the liquidity of the stock.

Moving Average

The moving average is calculated by looking at the average price per share the stock has experienced in a certain amount of time. These time frames can vary in averages from 50 to 200 days.

Rally

When a stock price improves rapidly, it is known as a rally. This can occur either at an individual level or at a larger level by increasing the price of the market.

In general, if you are looking to make money over time, then you should just not trade on a frequent basis. Instead, just let the money sit there and grow. Most of the time, that's what it will do. Additionally, research is important. There are so many factors to be aware of besides just knowing the stock market vernacular, it is best to seek out the advice of someone you can trust who can help you along the road to potential success. With that said, if you know the vocabulary, you will feel more comfortable as you learn the ropes.

Posted On July 12, 2018