Today I am going to talk about some stock market key terms that all beginning investors should know. It is important to know these terms because when you begin investing you more than likely are going to be doing research on different investing methods and looking for advice from experienced traders.
Usually these experienced traders have lingo that they like to use and if you have no idea what they’re referring to you’re not going to be getting the most out of it.
If you have no idea what someone is saying when they say, “This year Apple has done much better than its sector, I’m glad I bought into their IPO,” then this article should help you out.
- Quote: Information on a stock’s latest trading price. Quotes range in price throughout the trading day. Below, $139.78 would be the quote.
2. Sector: A group of stocks that are in the same business. An example would be the “Technology” sector including companies like Apple and Microsoft.
3. Stock Symbol: Also known as a “ticker symbol”, is a one-character to three-character alphabetic root symbol that represents a publically traded company on a stock exchange. For example Snapchat’s symbol is (SNAP).
4. Volatility: Refers to the price movements of a stock or the stock market as a whole. Highly volatile stocks are ones with extreme daily up and down movements and wide intraday trading ranges. An example of a volatile stock would be Tesla. It could open at $200 and easily be up or down $20 a share on a given day.
5. 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. For beginners I would not advise doing this. If you lose all of your money and the money you borrowed, you have to pay it back. So essentially you lose it twice.
6. Index: An index is a benchmark which is used as a reference marker for traders and portfolio managers.Examples are the Dow Jones Industrial Average and Standard & Poor’s 500. It is usually hard to beat an index fund but it can be done. If you earn a return of 15% over six months and the Dow Jones earns 11%, you just beat an index.
7. Execution: When an order to buy or sell has been completed. If you put in an order to sell 100 shares, this means that all 100 shares have been sold.
8. Limit Order: When you set a price that you want to buy or sell a stock for. If you set a buy limit order on Apple at $150.49 it will only buy at that price, nothing below nothing over.
9. Averaging Down: This is when an investor buys more of a stock as the price goes down. This makes it so your average purchase price decreases. Say I buy Palo Alto Networks for $150 and it goes down to $117, if I buy the same amount of shares at $117 I will break even in the middle of those two prices.
10. Bear Market: This is trading talk for the stock market being in a down trend, or a period of falling stock prices. This is the opposite of a bull market.
11. Bull Market: This is when the stock market as a whole is in a prolonged period of increasing stock prices.
12. Blue Chip Stocks: These are the large, industry leading companies. They offer a very stable record of significant dividend payments and have a reputation of sound fiscal management.