Stock Market Vocabulary
Stock Market Terms
52 Week High - The highest price the stock hit in the past year
52 Week Low - The lowest price the stock hit in the past year
Ask - Current lowest price someone’s willing to sell the stock at
Bid - Current highest price someone’s willing to pay for a stock
Buy to Cover - Buying back the borrowed shares, ending your short sell trade
Buy - Purchasing a stock. Increases the demand for a stock
Buyer - Someone who wants to purchase shares of a stock, gaining ownership
Distressed Investors/Traders - Traders who buy suffering companies and turn them around.
Float - # of shares available to public to trade
Growth Investors - Invest in fast growing companies. High % growth seen in the EPS of recent quarter compared to year ago quarter.
Independent Investors/Traders - Traders like us who use personal capital/leverage to trade
Institutional Investors/Traders - Traders working for firms
Large Cap - company valued over $10 billion
Limit Order - An order placed to trade stock at a certain specified price or else order doesn’t get filled
Liquidity - Ease of getting in and out of a position, volume level of a stock
Market Order - An order placed at current market price, executes quickly usually
Market Valuation/ Market Cap - Company Value (Shares x Stock Price)
Micro Cap - company valued under $250 million (most penny stocks)
Mid Cap - company valued between $1 billion and $10 billion
Moves on High Volume - A heavily traded stock gives more proof that a price move is legit as a lot of people are trading and interested in buying or selling the stock for some reason. This should cause you to take a closer look at why.
Moves on Low Volume - When a stock is thinly traded meaning there is low volume, price movement can’t be taken as serious because little trading volume leaves people less options for prices to buy and sell to the spread is bigger usually.
Penny Stocks - Investing in stocks under $5 but usually stocks under $1
Portfolio - Holds your different shares/positions in stocks, usually set up through a broker
Position - another term for owning stock. Ex: I have a position in Jim’s Coffee Company.
Restricted Shares - shares owned by the company insiders still, not trade-able by the public. Insiders can sell these to raise more capital causing the float to increase.
Sell - Selling a stock. Increases the supply for a stock
Seller - Someone who wants to sell their shares of a stock, losing ownership
Share Volume - Number of shares being traded for a given day.
Shares Outstanding - the # of shares issued by the company.
Share - the piece of paper that signifies ownership of the company
Short Sell - Borrowing shares from broker, selling them and holding the money in your account hoping stock price falls and then you buy back the borrowed shares for a cheaper price and keep the difference
Small Cap - company valued between $250 million and $1 billion
Spread - Difference between current bid and ask price of the stock
Stock Broker - Person/Company who executes trades for you. Example: E-trade (We all have seen those baby commercials), Scottrade, Edward Jones, etc.
Stock Price/Market Price – the public price at which buyers and sellers trade shares
Stock – the capital raised by a business or corporation through the issuing of shares
Stop Loss Order - Order placed to liquidate/sell position when a specified price is reached or passed to stop any further losses.
Value Investors - Invest in stocks that have solid fundamentals
Volatility - How quickly stock prices move
Volume - Amount of shares being traded
Bull Market - When the market is at a upward trajectory
Bear Market - When the market is at a downward trajectory
Other Terms
Analysts - usually focus on higher priced stocks analyzing financials and fundamentals as well as some technicals. Write up reports that they publish as you’ll see on Yahoo Finance. Usually they are wrong so all their wasted time doesn’t make much sense.
Dow Jones Industrial Average - A price weighted index of 30 significant and actively traded blue chip stocks.
Financial Authors - published strategies claiming to work at predicting stocks
Fund of Funds - Funds that invest large sums of money in hedge funds and other funds.
Hard to borrow - Stocks that are hard to find shares to borrow. Some brokers don’t have any shares in reserve for you to borrow of particular stocks.
Hedge Funds - Huge million and billion dollar funds made up of high net worth individuals. Usually focus on high priced stocks and less risk so not anything to worry about in penny stocks.
IPO (Initial Public Offering) - Private company sells shares to public for first time to raise capital.
IPO Share Lock Up - After an IPO, insiders are restricted from trading for 6 months usually but sometimes up to a year or two. They can’t sell their shares until the lock up period ends.
Margin - using money borrowed from broker to trade stocks
Merger - two companies combine to cut costs and get rid of wasted labor and resources. More efficient.
Mutual Funds - Pooled money by many investors used on higher priced stocks usually. Mutual funds can have down years and the managers still reap huge gains unlike hedge fund managers who only do well when they perform well.
NASDAQ Small Caps - NASDAQ for penny stocks. Extremely liquid and volatile and stocks range from $1 to $10
Penny Stock Newsletters - companies or shareholders pay these newsletter services to publish content in hopes of pumping stock
Penny Stock Promoters - claims to pick stocks with huge gains and promise huge returns to make you rich. Usually pump and dumps happen with their picks so don’t hold long if you decide to enter a promoters pick. Get in get out for slight gain as these guys are full of crap
Pink Sheets - tiny companies, penny stock type companies, very volatile
Pre Borrow - Ability to reserve shares from your broker ahead of time to borrow when you short sell
S&P 500 - The 500 biggest companies by market cap
SEC (Securities Exchange Commission) - They regulate the stock market and can halt stocks and eliminate scam companies. They set the rules that we must all obey.
Secondary Offering - When insiders and executives of the company sell stock for personal gain like if they received stock as part of compensation package or bonus. Money goes to them personally and not the company.
Short Squeeze - Short seller buys to cover position when price is going up and not down like they wanted. Short squeeze results in more demand to buy stock raising the price.