Common stock trading terms for investors that want to enter the world of trading or learn more about the stock market
There are a number of stock trading terms that one often hears, but if a person is not a trader, these terms might sound a bit like alien language. Whether you're planning to enter the magical world of stock trading or you simply want to increase your knowledge (or appear knowledgeable), the list below was designed to offer help. Or so we hope.
1) trader - a person who transfers financial instruments in financial markets for themselves or in behalf of someone else. a) commercial trader - traders who primarily use the futures market b) pattern day trader - traders who trade securities four or more times a day over a five-day period and according to the rules specified by the United States
Securities and Exchange Commission for pattern day trading
c) head trader - the head of a trading business who supervises all traders in his or her trading firm d) investors - the main difference between these guys and traders is that investors hold on to their assets longer, while traders buy and sell at shorter periods of time to take advantage of market trends
2) volatility - arguably the most-heard-of term in the market in the last few weeks; and no, it has got nothing to do with a person's temper. This refers to the movement of securities and is arrived at by calculating the annualized standard deviation of daily price changes
3) stock - it means equity or a security that entails ownership in a company or firm
4) capital gain/capital loss - nothing to do with making decisions on whether to use big or small letters. These are serious terms, particularly for investors and traders. CG is the amount of the selling price of an asset exceeding its initial purchase price, while CL is the loss resulting from the sale of an asset
5) current market value - this is the worth of a stock at current market prices
6) short selling - no, this doesn't mean you sell shorts or you need to wear shorts while selling wares. In stock trading, this means borrowing a security from a broker and selling it. The stock should be bought back later on and given back to the broker
7) ticker symbol - letters that represent a stock or mutual fund, the number of letters will depend on where the stock is being traded (e.g. NASDAQ stocks require four letters)
8) tender offer - nothing romantic about this one. It is the act of a company offering to buy shares of another company from the latter's stockholders
9) rally/reaction - you're probably imagining street demonstrations. Nope! But they can still create lots of activities, particularly at the trading floor. Rally pertains to a rise in stock prices, while reaction is a decline in prices following a rise
10) Securities and Exchange Commission - the administrative agency in the United States that governs and regulates the financial markets
Stock trading terms might give people who are not stock market savvy a different idea when they hear these words. There are a lot of more of these, but the 10 given above are some of the more common.
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