Ultimate Stock Market Glossary: 70+ Terms Explained for Beginners

Stock represent ownership in a company. Each unit of a stock is called a share. If you own 50% of YouTube stock, you own

half of YouTube. Shareholder. Someone who owns a stock. Stock exchange. Place where investors can buy or sell stocks.

Public company. Company whose ownership is organized via shares of stock that are intended to be freely traded on a

stock exchange. Bull market. Bare market. A bull market means that prices are rising. A bare market means that

prices are falling. They are named after each animals attack style. Volatility, how fast the stock price moves up and

down. Volume, number of shares of a company traded each day. Capital, broad term that can describe anything that

gives value to its owners. It usually refers to money, but it can also describe machinery, patents, etc.

Liquidity, how easily you can get into and out of a stock. It increases with volume. Bubble. Bubbles occur when

prices for a particular item rise far above the item's real value due to too much optimism. Sooner or later, the high

prices become unsustainable and they fall dramatically until the item is valued at or even below its true worth.

IPO. Initial price offering happens when a private company becomes publicly traded in order to raise money.

Dividends portion of a company's earnings that is paid to people who own the stock. Not every company pays

dividends. Blue chip stocks. Stock that comes from a well-known established company. They have a strong history of

performance and often pay dividends. Forex foreign exchange involves trading different currencies. Portfolio.

Collection of investments owned by an investor. Holdings. Contents of a portfolio. Interests. When you get or

give a loan, the one who is lending the cash usually wants more cash than what he initially lent. The extra cash that

has to be given is called interest. Bond. When an investor gives a loan to a company or a government, the investor

earns through interest. Security. Tradable financial instruments such as stocks and bonds. Broker. Since you

can't directly go to the stock exchanges to buy stocks, someone will do it for you, usually for a fee. This is called a

broker. Nowadays, they are mostly online platforms. Going long. Betting that a company's stock's price will [music]

increase so that you can buy low and sell high. Asset resource with economic value that someone owns or controls with

the expectation that it will provide a future benefit. Commodity basic goods interchangeable between producers such

as grains, gold, beef, oil, and natural gas. It usually refers to raw materials. Yield, it's what you earned from an

investment. P ratio. The price toearnings ratio is one of the most widely used tools that investors and

analysts use to determine a stock's valuation. It's one indicator of whether a stock is overvalued or undervalued.

However, the PE ratio can mislead investors because past earnings do not guarantee future earnings will be the

same. Likewise, projected earnings may not actually happen. Index. It's a method to track the performance of a

group of assets. Indexes typically measure the performance of a basket of stocks intended to replicate a certain

area of the market. The most famous index is the SNP500, which tracks the 500 largest US companies. Futures

contracts that obligate parties to buy or sell an asset at a predetermined future date and price. The buyer must

purchase or the seller must sell the underlying asset at the set price regardless of the current market price

at the expiration date. Options. Options contracts give buyers the right but not the obligation to buy or sell depending

on the type of contract and underlying asset at an agreed upon price and date. Call options allow the holder to buy the

asset at a stated price within [music] a specific time frame. Put options, on the other hand, allow the holder to sell the

asset at a stated price within a specific time frame. ETFs, baskets of stocks that trade like regular stocks.

They can be passively or actively managed. Passively managed ETFs just try to match the underlying stocks. Actively

managed ETFs have a manager or team making decisions on what stocks to put in the basket, IRA. It stands for

individual retirement account and it's a long-term savings account that individuals with earned income can use

to save for the future while enjoying certain tax advantages. Liability, something a person or company owes.

[music] Penny stocks, shares valued at less than $5. They are usually considered highly risky. Market cap, it

refers to how much a company is worth as determined by the stock market. Leverage. It refers to using borrowed

money from a lender to invest. It's done to increase the potential return of an investment. It also greatly increases

risks. Balance sheet. Financial statement that reports a company's assets, liabilities, and shareholder

equity at a specific point in time. It provides a list of what a company owns and owes as well as the amount invested

by shareholders. Inflation, a rise in prices, which can be translated as the decline of purchasing power over time.

Basically, money becomes less valuable. Bid, the highest price at which a buyer is willing to pay. Ask, the lowest price

at which a seller is willing to sell. Bid ask spread the amount by which the ask price exceeds [music] the bid price.

It has to be resolved before the transaction can take place. Black swan. It's slang for a completely unforeseen

and unexpected event. Dead cat bounce. It's slang for a temporary short-lived recovery of a stock price from a

prolonged decline that is followed by even more decline. Wales. It's slang for investors or corporations with such

large capital that their buys and sells make waves in the market like only animals of gigantic size can. Unicorns.

Startups that have come to be valued at 1 billion or more. Named like this for their incredible rarity. To the moon.

It's slang for a stock or asset rising in price stratospherically, often quickly. Tanking. The opposite of to the

moon. Stocks depreciating in value often quite significantly and quite quickly. jigged out. When a market moves into an

unfavorable position and you close out your trade only for the market to rally into a position where you would have

made a profit or at least not a loss. Pump and dump. Form of fraud that involves artificially inflating the

price of an owned stock through false and misleading positive statements. Pump. In order to sell the cheaply

purchased stock at a higher price, dump. Once the operators of the scheme dump sell their overvalued shares, the price

falls and the other investors lose their money. Rugpull. a pump and dump in new small cryptocurrencies, usually done by

their creators. Panic selling, widespread selloff of a stock, a sector, or an entire market due to fear or

overreaction rather than reasoned analysis, usually happens when prices start to decrease a lot, which makes the

price decrease even more. Stock exchanges temporarily halt trading when panic selling reaches a specified level

in an attempt to break the cycle of fear and selling. Shorting investment strategy that speculates on the decline

of a stock's price. The investor borrows shares of a stock from a lender and instantly sells them. When it's time to

give them back, the investor has to buy back the shares to reive them to the lender. If the price has gone down, he

keeps the difference between the initial price and the new price. This, however, comes with unlimited risk as the stock

price can go up infinitely and the investor is forced to buy it back. Short squeeze. When the stock's price

unexpectedly increases drastically over a short period of time, the investors who were shorting are forced to cut

losses by exiting their positions, which means buying back the stocks to regive them to the lender. This makes those

investors lose money, and it makes the stock's price increase even more since all of the short investors have to buy

it. Limit order. It's an order to buy or sell a stock at a specific price or better. Stop-loss order. Order placed to

buy or sell a specific stock once the stock reaches a certain price. Long squeeze. Basically the same thing as the

short squeeze, but those who are going long get squeezed. This is usually caused by the trigger of many stop-loss

orders and by people panic selling. Market order. It's an order to buy or sell a stock at the best available price

in the market. It typically ensures execution, but it doesn't guarantee a specified price. It's kind of like

buying a product without negotiating. Good till canceled order. It's an order to buy or sell stock that lasts until

the order is completed or cancelled. Day order. It's an order to buy or sell a stock at a specific price that expires

at the end of the trading day if not completed. Averaging down. It's a strategy that involves a stock owner

purchasing even more stocks when the price drops. As the name says, it decreases the average price at which the

investor purchases the stock. Fading. A trader who deliberately goes against market sentiment or trends. Hedge fund.

limited partnership of private investors whose money is managed by professional fund managers who use a wide range of

risky strategies to earn above average investment returns. They usually require a high minimum investment or net worth

and they often target wealthy clients. Mutual fund. They pull assets from shareholders to invest in stocks. They

are operated by professional money managers who allocate the funds assets and attempt to produce gains for the

funds investors. Mutual funds give small or individual investors access to professionally managed portfolios. Each

shareholder therefore participates proportionally in the gains or losses of the fund. Control stock refers to shares

owned by major shareholders of a company. These shareholders will have either a majority of the shares

outstanding or a portion of the shares that is significant enough to allow them to exert a controlling influence on the

decisions made by the company. Holding company. Businesses that don't produce or sell anything, but they hold the

controlling stock in other companies. The companies owned by a holding company are called subsidiaries. While it may

oversee the company's management decisions, it does not actively participate in running the day-to-day

operations of its subsidiaries. Index fund type of mutual fund or ETF with a portfolio constructed to match or track

the components of an index such as the S&P 500. Day trading. It's a fast-paced trading strategy where individuals buy

and sell stocks within the same trading day. The primary goal of day traders is to profit from short-term price

movements. Swing trading. Swing trading is a mediumpaced trading strategy with trades that last from a couple of days

to several months. The goal is to profit from an anticipated price move. Intrinsic value. Measure of what an

asset is worth. It's usually different from the current market price of that asset. Book value. It's the value of a

business according to its books. It theoretically represents what investors would get if they sold all of the

company's assets and paid all its debts. While intrinsic value takes into account estimates for the future, book value

only measures the present. Price-to-book ratio. It compares a share's market price to its book value. Value

investing. It's a trading strategy that involves picking stocks that appear to be trading for less than their intrinsic

or book value. Value investors usually believe that the market overreacts to good and bad news and buy stocks that

they think the market is underestimating. Growth investing. Growth investors typically invest in

young and small companies whose earnings are expected to increase at an above average rate compared to the market.

This can provide better returns, but it also often comes with more risk. Earnings per share. It indicates how

much money a company makes for each share of its stock by dividing its net profit by the number of common shares it

has outstanding. Technical analysis. It's a trading strategy employed to identify trading opportunities by

analyzing statistical trends. Fundamental analysis. Fundamental analysts identify trading opportunities

by analyzing the actual factors of the company such as its competitors, its management effectiveness, the state of

its industry, etc. Efficient market hypothesis. It's the hypothesis that share prices reflect all available

information making it impossible to beat the market consistently. Supply and demand. Supply refers to the quantity of

a good or service available while demand is the quantity that people want. If demand is high and supply is low, prices

tend to rise. If supply is high and demand is low, prices tend to fall. Insider trading. It's the activity of

trading in a public company's stock by using information that is not available to the public. This information is

usually gathered from employees of that company, managers, etc. This is illegal most of the time. Ticker symbol. It's

just an abbreviation used to uniquely identify publicly traded companies. Compound interest. It means earning

interest not just on your original investment but also on the interest you earned over time. This creates an

exponential curve of earnings over long periods of time. Profit margin. It's the percentage of profit a company makes

from its revenue after subtracting all of its costs. Dollar cost averaging. It's a strategy that consists of

investing a fixed amount of money at regular intervals regardless of the asset's price. This helps reduce the

impact of market volatility. Return on investment.