When you’re new to the world of financial markets, it’s easy to be overwhelmed with the different lingos that they use. So in this post, I’ll be discussing stock market terms and meanings to make your newbie journey be less of a headache!
When I started learning more about the stock market, this world had terms that I’ve just read for the first time?
Support? Bull Market? Blue Chip Stocks? Going Long? These were just some of the terms that got me thinking whether I was reading the right post for a newbie like me ?
I’ll be defining below the different terms that you might encounter as you learn more about the stock market!
So ready your pen and paper and let’s get right to it!
Also, don’t worry if you can’t memorize or not sure exactly how to use them. It’ll get better with practice!
55 Stock Market Terms And Meanings That You Need To Know
The terms below are industry-specific terms which mean most of the time they are only applicable in the world of the stock market.
When you hear people talking about the market, whether that’s on the news or in an article, hopefully, you’ll get to understand more what they’re saying as you learn about the terms below.
1. Ask Price
This the price that people are looking to sell their stocks. This is where the sellers are.
2. Bid Price
It’s the price that people are looking to buy some stocks. This is where buyers are.
This refers to the number of shares traded within the day. It can also mean how much shares did you purchase for a stock.
When volume is used in a daily time frame, the volume means daily average trading volume.
Volume is commonly represented by bars when looking at a stock chart.
Bid and Ask looks like this:
As you can see there are two volumes present in the image. The volume on the left and right sides of each price represents the shares on that price.
If investors and traders want to reach the stock price of 3.17, they need to take out sellers at 3.14, 3.15, and 3.16 by buying those shares.
4. Bid-Ask Spread
This is also called “spread”. A spread refers to the difference between the bid and the ask.
5. Bull Market
A bull market is a type of market condition where stock prices are going up. The term “bullish” means a stock is going up.
If the sentences go like “I’m bullish on Tesla”, this means that person is positive on Tesla that it will go up.
They used such term because when a bull attacks, it swings its horns upward!
6. Bear Market
A bear market is a market condition where stocks are going down. Which means prices are falling.
If you hear an investor say that he’s bearish on Facebook, that means that he’s on the negative side and he thinks that the price will go down.
They used the term bear because when a bear attacks, it swipes down its paws! (I didn’t make the terms, guys!)
7. Bulls Vs Bears
(let’s be honest, this is kinda cute)
When you hear someone say that the bulls and bears are fighting, know that the bulls refer to buyers and the term bear refers to the sellers.
If the bears win, the stock goes down. If the bulls win, the stock goes up.
8. Market Trend
This refers to the general movement of the market or individual stocks. There are three movements in the market, uptrend, sideways, and downtrend.
When a stock is in an uptrend, it means that its movement is going up.
When a stock is in a downtrend, it means that it’s generally moving down.
11. Sideways Trend
A sideways trend means that a stock has no clear direction. It’s neither moving up or down.
IPO or Initial Public Offering happens when a private company becomes a publicly-traded company.
Companies do this transition if they want to have more funds for their future projects. Entering the stock market also is a way for them to expand their business.
13. IPO Price
According to Forbes, the IPO price is the estimation of what bankers expect the value of a company when it’s on the market.
A portfolio means a list of investments that you own. Your portfolio can be a mixture of stocks, bonds, and ETFs.
Or it can also be strictly focused on one asset class.
15. Institutional Investors
These are the “big boys” in the market. They are the hedge funds, mutual funds, pension funds, and investment banks.
They buy and sell big amounts of shares of a company. The money that these institutions usually invest with is coming from other people.
It’s just like the money you place in your mutual fund. It’s handled by a research team and a portfolio manager.
16. Retail Investors/Traders
This refers to every person in the market who’s handling their own personal account.
Retail investors are the ones who place their money in the market either for retirement or to just have a passive income.
Basically, the retail investors are us.
17. Mutual Funds
These are funds that came from different investors. Mutual funds can be handled actively by a fund manager or are passively handled.
If you go for active mutual funds, there will be more fees that need to be paid as opposed to going for a passive mutual fund.
To know more about mutual funds and its fees, check out this article here!
18. Hedge Funds
These funds have the same concept as mutual funds but this is not offered publicly.
Hedge funds are more prone to risk because they aim to beat the index so they settle for aggressive strategies.
19. Limit Order
This is a type of order to buy or sell a stock at the indicated price. This is where your order gets done at a specific price.
20. Market Order
It’s a type of order which buys or sells a stock immediately at the current price.
Investors who use this order are concerned about the transaction getting done immediately.
To know more about these type of orders, take a look at TD Ameritrade’s video on this:
This refers to how fast a stock is moving up and down. When you read that a stock is volatile, it means that the stock price can go up and down within seconds. It has an erratic behavior.
A market or stock’s liquidity refers to how easily you can buy and sell shares. If the market is liquid, that means there are many participants because you can dispose or acquire shares with no problem.
23. Stock Market Index
This measures the movements of a group of stocks in the market.
An example of this would be the S&P 500. This stock market index measures the movement of the top 500 companies listed in the stock exchange.
Also called as Exchange Traded Fund. An ETF is a mutual fund that can be traded in the stock market. ETFs usually mimics the movement of the index that it follows.
25. Market Capitalization
Refers to the total market value of a company’s outstanding shares of stock. A market cap shows investors what a company is truly worth.
As stated in this Nerdwallet post, market cap allows investors to size up a company based on how valuable the public sees it.
The higher the value of the market cap, the bigger the company is.
Companies in the stock market are often categorized based on their market capitalization.
26. Blue Chip Stocks
These are the most popular stocks for investors. They are popular because they’ve already established their business.
These are large companies that dominate their sectors.
27. Large Cap Stocks
Also known as big caps, these are companies that have a market capitalization of $10 billion or more.
The companies that belong to this category tend to have low volatility.
According to TradingView, these are some of the stocks that belong in this category:
- Apple Inc (APPL)
- Amazon (AMZN)
- Microsoft (MSFT)
- Facebook (FB)
- Mastercard Inc (MA)
- JPMorgan Chase (JPM)
- Tesla (TSLA)
I bet that all of these companies are familiar to you. In fact, you probably even use some of their products. Good and established companies belong to the big cap category.
28. Mid Cap Stocks
These are stocks that have a market capitalization of $2 billion to $10 billion. They are called as such because they are in the “middle” of large caps and small caps.
29. Small Cap Stocks
Stocks that belong in this category have a market cap of $300 million to $2billion.
I wouldn’t bother listing the stocks below this because you’ve probably never heard of them anyway.
30. Micro Cap Stocks
These stocks have a market cap of $50 million to $300 million.
Stocks that belong to this group have the most volatility. it rapidly goes up and down within a single trading day.
If you’re an investor who doesn’t like risk and volatility on his portfolio, these stocks are not for you!
A sector is a group of companies that share the same product or service with one another.
Below are the 11 stock market sectors:
- Materials – The companies here are involved with raw materials and natural resources. Your chemical companies, mining, and logging companies are found here.
- Industrials – The businesses here are involved with the production of capital goods like electrical equipment, aircraft, and machinery.
- Financials – This is where banks fall into.
- Energy – The companies here provide services and equipment that allows other businesses to extract sources of energy from the earth. Businesses that are related to oil, natural gas, and coal fall on this sector
- Consumer Discretionary – This is where apparels, hotels, restaurants, luxury goods belong.
- Information Technology – Software, hardware, and semiconductors businesses belong here.
- Communication Service – Companies that provide communication services through fixed-line, cellular, or wireless.
- Real Estate – Real estate development and management companies fall on this group.
- Health Care – The medical device manufacturers and medical services are found in this sector.
- Consumer Staples – Food manufacturers and distributors belong here.
- Utilities – Businesses that provide services like water, gas, and electricity to others.
When a company shares a percentage of its profit to investors, that’s called dividends.
Dividends may be paid out as cash or in the form of additional stocks.
So a company either gives out cash dividends or stock dividends.
You need a broker to buy and sell shares in the stock market.
Before, people will need to call a broker to buy or sell shares for him.
In today’s world, you still need a broker but you don’t need to call them anymore. You can place your orders by yourself using your broker’s platform.
34. Stock Symbol
A one or three lettered character that represents a company in the stock market.
35. Going Long
This means that you’re buying a stock with the assumption that it’s going up in value.
36. Short Selling
This is one way to make money on stocks while it’s falling. It’s a concept where an investor borrows a stock, then sells it and buys the stock back to return it to the lender.
To make this concept a bit more clearer, take a look at Wall Street Survivor’s video on this
37. Average Down
This happens when investors still keep buying a stock he owns even though the stock is going down.
As he buys more of it as the price goes down, his average price of where he bought the stock goes down as well.
38. Average Up
It’s the process of buying additional shares as the stock price goes up. By doing this, the investor also increases his average price.
This is suggested by many investors especially if you own a strong stock.
39. Day Trading
This is where a trader buys and sells a stock within the day. He doesn’t have any positions overnight.
40. Swing Trading
A trading strategy that involves getting in a trade as long as there is momentum.
Swing traders hold a position for a few days or weeks. They just capture the mini swings in the market.
41. Position Trading
A trading strategy where one tries to enter at the beginning of a trend and sells before the trend goes the opposite way.
These traders usually hold a position for weeks to months.
An increase in the price of a stock or a market. This means that it’s going up.
I’m sure you’ve heard the sentence “the stock market has rallied to new highs”
A “high” refers to the highest trading price that the stock has encountered during a certain day or its history.
For example, in the first week of Facebook this month, it has traded in a range of 300 to 270. The highest price it reached that week was 300.
If it refers to the market in general, this means that the stock market has gone up to a level where it has never been before.
This refers to the lowest price the stock traded for that day or its history.
If the stock price of Tesla has gone 366.30, 366, 367.10 in the last three days, the lowest price of Tesla for the past three days was at 366.
When you hear the term “new low” it means that was the latest lowest price or level of a stock.
45. Technical Analysis
This is the study of price movement that can be seen in a stock chart.
Technicians use candlestick patterns to determine what’s the next possible move of the stock.
46. Fundamental Analysis
It’s the study of reading and researching about the company. This is where people look at financial reports, income statements, and earnings report.
They base their decision on whether to buy a stock on those reports above.
47. Black Swan
This refers to an unpredictable event that has severe consequences on the market.
Some examples of black swans are terrorist attacks, corruption in a company, negative news about the CEO of a company.
All of those events can negatively affect a market or stock.
48. Insider Trading
Buying or selling a stock based on information that’s not available to the public.
To some countries, trading with insider knowledge is illegal.
This is an area in the stock chart where buyers are seen.
If a down move meets a support area, usually that move stops and pauses and eventually goes up again.
This is an area in the stock chart where sellers can be seen.
When a stock price meets a resistance area, it would have a hard time moving up because the supply is heavier there than the demand.
A breakout happens when buyers overwhelm the sellers. The price “broke out” of the resistance area.
A breakdown happens when sellers overwhelm the buyers. The price “broke down” the area of support.
A term used to describe a temporary pause or decline in the price.
The term is usually used when the stock or a market has gone down a significant percentage.
This term refers to the increase of value in your investment.
If you bought a stock at $1.00 and it went up to $1.05 the next day, you have seen a 5% gain in just a day!
Why Should You Learn These Terms?
If you’re serious about getting into the stock market, it’s important to learn about these terms because they are frequently used in the financial world.
In fact, these words are even used by analysts and reporters when you tune in the financial channel on the TV. So how can you understand what they’re saying if you don’t know what those terms mean?
The number of terms listed above might overwhelm you at first but you don’t have to memorize them right here and now.
Just be familiar with them now and eventually you’ll understand those terms naturally.
Now that you’re familiar with some terms in the market, you can read some beginner articles that I’ve written before! 🙂