Stock Trading Terms Explained

Acceleration refers to how quickly a stock's price rises or falls within a given timeframe.

Activity Level measures the volume of shares traded for a particular stock or market.

Advances & Declines counts the number of stocks that have risen or fallen in price over a specified period.

After-hours trading involves buying and selling securities outside regular trading hours.

Alpha quantifies the excess return of an investment relative to a benchmark index, reflecting the impact of portfolio manager decisions.

Analyst ratings provide investor guidance on whether to buy, hold, or sell a stock, based on institutional investor opinions.

Annual Report is a detailed yearly publication by publicly traded companies, covering financial performance, operations, and future plans.

Arbitrage is the strategy of profiting from price differences by buying and selling securities in different markets.

Ascending Tops is a chart pattern indicating a stock's upward price trend in technical analysis.

Asset refers to a resource with economic value owned or controlled by individuals, companies, or organizations for future benefits.

Averaging Down involves buying more shares of a declining stock to lower the average cost per share.

Bankruptcy is a legal process when an individual or entity cannot repay debts and seeks creditor relief.

Bear / Bull Trap occurs when a security breaks a support or resistance level briefly before reversing, trapping traders who acted on the signal.

Balance Sheet is a financial statement showing a company's assets, liabilities, and equity at a specific time.

Bear Market describes a market with declining stock prices and negative investor sentiment.

Bar Chart is a technical analysis tool used to illustrate price movements of an asset over a specified period.

Base is a level of support in the market that often precedes a rally or breakout.

Beta measures a stock's volatility compared to the overall market.

Blue-Chip Stocks are leading companies with a long history of stable earnings, consistent dividends, and a strong reputation.

Bollinger Bands consist of upper and lower bands set around a simple moving average, used to identify support and resistance levels.

Bond is a fixed-income security representing a loan made by an investor to a borrower, typically a company or government.

Bourse is another term for a stock exchange, sometimes specifically referring to European exchanges.

Breakout is a significant event where the price of an asset moves through a support or resistance level, signaling a change in market sentiment.

Bull Market is a market characterized by rising stock prices and positive investor sentiment.

Broker is a licensed professional or firm that executes trades on behalf of clients for a commission.

Bid is the highest price a buyer is willing to pay for a stock or security.

Buyback refers to a company purchasing its own shares from the market to reduce the number available to the public.

Call option grants the holder the right, but not the obligation, to buy an asset at a predetermined price by a specified date.

Candlestick Charts are graphical representations of price movements, widely used by traders to analyze trends and patterns.

Capitalization (or market cap) measures a company's total market value based on its outstanding shares and current share price.

Capital gains are profits from the sale of assets, subject to taxation and potentially offset by losses.

Carry Trade is a strategy where investors borrow in a low-interest-rate currency to invest in higher-yielding assets.

Cash Flow Statement details a company's cash movements over a period, categorized into operating, investing, and financing activities.

Charting is the analysis of historical price patterns to predict future movements, aiding traders and investors in decision-making.

Close is the final price of a stock or security at the end of a regular trading session.

Congestion refers to a period of sideways trading within a range defined by support and resistance levels, where the price of an asset remains unable to break out.

Commodities are raw materials or primary agricultural products traded on commodity markets, typically used for manufacturing or consumption.

Correction is a significant decline, usually defined as a 10% or greater drop, in the overall value of a stock market index or individual stocks over a short timeframe.

Covered call is an options strategy where an investor holds a long position on an asset and sells a call option on the same asset.

Credit spread refers to the difference in interest rates or yields between two financial instruments, often bonds, used to gauge issuer credit risk.

Currency futures specify the price at which a currency can be bought or sold at a future date.

Day Trading involves buying and selling securities within the same trading day to profit from short-term price movements, without holding positions overnight.

Deflation is a sustained decrease in the general price level of goods and services in an economy over time.

Derivatives are financial instruments whose value is based on an underlying asset or security.

Divergence occurs when the price of an asset moves opposite to a technical indicator, like volume, often indicating potential market reversals.

Dividend is a distribution of a company's earnings to its shareholders.

Earnings are profits generated by a company over a specific period of time.

ETFs are investment funds tracking a basket of assets, offering investors a cost-effective way to diversify portfolios.

Exchange is a marketplace where securities, commodities, and financial instruments are traded.

Execution is the process of completing a trade, where a broker buys or sells securities for a client at the best available price.

FDIC insurance protects depositors' funds up to a specified amount in case of bank failure.

Fibonacci ratios are mathematical ratios used by technical analysts to predict price levels for retracements and extensions in trends.

Fundamental analysis assesses asset intrinsic value and factors influencing future prices.

Futures contract is a pact to exchange an asset at a set price on a future date.

Gold bullion investing involves acquiring physical gold to hedge against economic uncertainty and diversify investments.

Haircut is a percentage reduction in an asset's value used as collateral for a loan.

High is the peak price at which a stock or security trades during a specific trading session.

Holidays are scheduled non-trading days for US stock markets.

Income Statement displays a company's revenues and expenses over a defined period, determining its profitability.

Index is a statistical measure showing the performance of a group of stocks or the overall stock market.

Inflation measures the rate at which prices for goods and services increase over time, typically expressed as a percentage.

Individual Retirement Account (IRA) is a tax-advantaged investment account for retirement savings, with contributions made pre-tax or after-tax, and funds grow tax-free until withdrawal.

IPO (Initial Public Offering) is when a privately held company offers shares to the public for the first time.

Leverage uses borrowed funds to invest in assets, aiming to amplify potential returns.

Liabilities are a company's debts and obligations owed to creditors, including loans and accounts payable.

Liquidity measures how easily and quickly an asset can be bought or sold without affecting its price.

Low is the minimum price at which a stock or security trades during a specific trading session.

Margin allows investors to borrow money from brokers to purchase securities like stocks or bonds.

Margin call happens when an investor's account equity falls below the required minimum, prompting the broker to request additional funds or securities.

Open is the initial price at which a stock or security trades at the start of a trading session.

Option is a financial contract giving the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specified timeframe.

Order is an investor's instruction to a broker to buy or sell a specific stock or security.

OTC Stocks are traded "over the counter" outside formal stock exchanges.

P/E ratio compares a company's stock price to its earnings per share, helping investors assess its valuation.

Pink Sheet Stocks trade on the OTC market, often seen as riskier and less regulated than other stocks.

Point & Figure Charts display price changes using columns of X's and O's, focusing on significant movements rather than time and price axes.

Portfolio is a collection of stocks, bonds, and other securities held by an investor.

Pre-market is the period before regular trading hours when investors can place trades and gather information about potential price movements.

Pullback is a temporary decline or pause in an asset's trend, distinct from a reversal.

Pump and dump is a fraudulent practice inflating asset prices through misleading information, followed by selling at a profit.

Put option gives the holder the right, but not the obligation, to sell a specific asset at a predetermined price by a specific date.

Quote is the current market price at which a stock or security is traded.

Rally signifies a sustained upward movement in the stock market or the price of a specific stock or security.

Recession denotes a significant and widespread economic decline characterized by reduced Gross Domestic Product (GDP), employment, and other key economic indicators.

Regular market hours refer to the period when stock markets are open for trading, typically from 9:30 a.m. to 4:00 p.m. Eastern Time in the United States.

Relative Strength compares a particular stock's performance to a peer group or market index, helping assess whether the stock is outperforming or underperforming.

Resistance in technical analysis identifies a price level where selling pressure is anticipated to be significant, potentially halting or reversing an upward price movement.

Reversal indicates a notable change in the direction of a stock's or market's trend, signaling a shift from an uptrend to a downtrend or vice versa.

Risks refer to the potential for financial loss or negative consequences associated with an investment or business decision.

Roth IRA is a retirement savings account allowing individuals to make after-tax contributions and withdraw funds tax-free in retirement, subject to specific conditions.

Stock Sector comprises stocks operating within the same industry or business sector.

Share Market is where stocks and other securities are bought and sold.

Short Selling involves selling a stock or security not owned by the seller, expecting to repurchase it at a lower price in the future.

Silver bullion investing involves purchasing physical silver bars or coins to safeguard wealth, hedge against economic uncertainty, and diversify investment portfolios.

Spread refers to the difference between the bid and ask prices for a particular stock or security.

Stagflation describes an economic condition featuring stagnant economic growth, high unemployment, and elevated inflation simultaneously.

Support (Level) identifies a psychological, fundamental, or technical level where buying interest typically exceeds selling pressure, providing traders with a reference for potential buying opportunities and risk management.

Traditional IRA is a retirement savings account allowing individuals to make tax-deductible contributions, with funds growing tax-free until withdrawal in retirement, when they are taxed as ordinary income.

Trend reflects the overall direction of a market or stock bullish or bearish and is vital in technical analysis, with counter-trend indicating a temporary reversal against the prevailing trend.

Trendline is a technical tool connecting points on a price chart to illustrate the direction and strength of a trend, aiding traders in identifying key levels for buying or selling and assessing trend strength.

Volatility measures the degree of price fluctuation in a stock or security over time.

Volume represents the total number of shares or contracts traded in a specific stock or security over a defined period.

Witching hour in stock trading refers to the final hour of trading on the third Friday of March, June, September, and December, coinciding with the expiry of futures and options contracts, often leading to heightened volatility and trading activity.

Yield denotes the income generated by a stock or security, typically expressed as a percentage of its current price.