After-Hours Trading: As the name implies, this pertains to stock trading activities when the major Stock Exchanges are closed. 

 

AMEX: American Stock Exchange. Another US Exchange typically consisting of small to medium cap companies. See AMEX in our US Exchanges section for more information 

 

Annual Report: As the name indicates, it is a yearly report of the company's financial results for the past fiscal year. The annual report is a Securities and Exchange Commission (SEC) requirement and it goes to the shareholders. 

 

Arbitrage: Refers to the act of taking advantage of a Security’s price difference in two of the markets where it is being traded. For example, if X Company were trading at $50 on the Hong Kong Stock Exchange (HKSE) and $48.50 on the AMEX, the arbitrageur would buy shares on the AMEX and sell them on the HKSE. 

 

Ask Price: This term refers to the price that the buyer is asked to pay when purchasing a stock. 

 

At the Close: The price of the last trade of a stock when the market closes for the day. This price is important in the sense that where a stock closes in its range gives people an idea about the direction and momentum of the stock. (Also see Closing Price) 

 

At-The-Open: Refers to a stock’s trading price when a stock begins trading for the day. It may gap up, gap down, or open where it closed the last time. Where a stock opens can prove deceptive, especially if the stock gaps up or down significantly from the closing price. (See Opening Price) 

 

Automatic Execution: An electronic order to buy and/or sell stocks without the presence or intervention of humans. 

 

Average Daily Share Volume: Computed as follows: Number of shares traded per day, averaged over a period of time, usually one year. 

 

Bear Trap: A deceptive signal indicating that the rising trend of a stock or index has started dropping when in fact it really hasn't. 

 

Bear Market: This refers to a market that shows long-term, significant decline in market value as shown by market indicators. Basically, in a bear market, there are more sellers than buyers. 

 

Bid Price: This refers to the price offered to you when selling a stock. 

 

Big Board: The New York Stock Exchange. It got its name for being the number one Stock Exchange in the world. 

 

Blue Chips: The big boys. These are large, stable companies that account for a huge value of a certain Index it is listed on. 

 

BSE: Acronym for the Bombay Stock Exchange. India’s oldest Stock Exchange. 

 

Bull Market: This refers to a market that shows long-term, significant growth in value in the stock market as shown by market indicators. The opposite of a bear market, this basically means that there are more buyers than sellers. 

 

Bull Trap: A deceptive signal indicating that the price of a stock or index has reversed to an upward trend, when in fact it hasn't. 

 

Calendar Effect: Refers to a theory that certain periods in time are likely to produce rises or falls in share prices. Some market analysts use this thery to predict future prices in securities. Examples are the January Effect and the Weekend Effect. 

 

Call Option: A call is an option contract that gives the owner the right to buy a specified amount of security at a fixed price on or before a given date. Call options generally rise in price if the underlying shares fall in price and vice-versa. (Also known as a Call). 

 

Fill-or-Kill Order: An order that has to be executed for the full size of the order when voiced or else cancelled. 

 

Capital Gain: This is any asset that is sold for a profit and is subject to tax. This is divided into two (2) parts, namely, Short-term and Long-term capital gain, respectively. 

 

Closing Price: Also known as At The Close. Basically refers to the price of the last trade of stock when trading stops, or market closes for the day. 

 

Commission: The amount of money paid to a broker for executing a trade based on the dollar amount of the trade or the number of shares traded. 

 

Common Stock: A security that allows equity ownership in a company. Owners of common stocks are allowed to vote on matters like the election of directors. Moreover, they are also given dividend payments of a company's profits. 

 

Convertible Bond: Refers to a bond or bonds that can be exchanged for shares of stock. 

 

Crash: A sudden, unexpected decline in a particular stock class. Crashes are, more often than not, the end result of sudden price inflation. (Also known as Asset Price Crash) 

 

Day Trade: This is done when you place a buy order and a sell order on the same stock within the very same day. 

 

Daytrader: Someone who engages in daytrading. A daytrader buys and sells securities frequently during the day, ideally ending with no securities in hand at the end of the trading day. 

 

Delayed Opening: Refers to the intentional delay in the start of trading in a stock until the large disparity in buy and sell orders is normalized. 

 

Dividends: Term used for the money or earnings that a company gives back to its share holders. 

 

Dividend Reinvestment Plan (DRIP): A plan which a corporation may implement, allowing investors to collect dividends in shares of stock (usually fractions of shares) instead of cash. 

 

Dotcom bubble: A period of time in the history of the Stock Market in which a speculative bubble occurred when a lot of people started heavily investing on technology and Internet-related stocks. This led to an inflation in price, resulting in the stock market crash of 2000-2002. 

 

Downtick: the sale of a listed stock at a price that is less than its previous sale price. Also called the “minus tick” 

 

Down Trend: Also known as a downward trend. This is occurs when the price of a particular security goes down in value over a relative period of time. An down trend is typically characterized by lower "ups" and lower "lows". 

 

Dutch Auction: Occurs during an IPO wherein the buyer specifies the amount he’s willing to pay for a certain number of shares. 

 

Earnings: Refers to the company's profits at the end of the year. 

 

Fiscal Year: This refers to the accounting year for a company. A fiscal year may or may not correspond with a calendar year, depending on how the company operates. 

 

Floor Broker: A participant who handles and executes orders on the trading floor of a stock exchange. 

 

Full Service Broker: A stockbroker/brokerage who offers investment advice, and other services that aren’t usually offered by discount brokers. 

 

Great Depression, The: The longest and most severe economic depression to ever hit the western world. It was a period that began with the Stock Market Crash of 1929 and lasted until the onset of WWII. During this period, unemployment was extremely high and the economic activity was very slow. 

 

Growth Stocks: Refers to the companies with consistent annual earnings and sales growth of 15% or greater. 

 

High Yield: A stock or bond that has the ability to give the investor (you) a high percentage of the investment.

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R-Z

Record date: The last date in which a shareholder must be registered with a company in order for that person to receive a declared dividend or be allowed vote on company matters. 

 

Regular Way Delivery: Unless otherwise specified, securities sold are to be delivered to the buying broker by the selling broker and payment must be made to the selling broker on the third business day after the transaction. 

 

Reverse Stock Split: The opposite effect of a Stock Split. A reverse stock split happens when a company reduces the number of outstanding shares by decreasing the number of available shares and combining their value into the fewer shares, thus increasing the stock's par value. Example: X Company has 100 shares worth $50 each. It decreases the number of shares by half, resulting in 50 shares worth $100 each. 

 

SEC: Abbreviation for Securities and Exchange Commission. This refers to the regulatory board that supervises the stock markets and the companies being publicly traded. They make sure that everything is transparent and honest. 

 

Settlement: The conclusion of a securities or options transaction wherein the customer pays the broker for securities or options purchased, or delivers securities or options sold and receives from the broker the proceeds of the sale. 

 

Share: A share is a unit of stock. Stocks are commonly bought or sold at 100 share lots or greater. When there are less than 100 stocks, they are considered odd lots. Anything above 5000 shares are called large lots. 

 

Sheep: A slang term referring to investors who, upon observing other investors, buy or sell stocks accordingly. Generally, sheep are followers without the ability to make their own decisions. 

 

Short Interest: This is the number of shares borrowed by short sellers. See Short Selling 

 

Short Selling: This move is done in anticipation of a stock's decrease in price. In Short selling, you sell a stock you don't own by having a broker “borrow” the stock from another party. You sell the stock and when it goes down, buy it at the lower price and keep the profit to yourself. 

 

Short-term Capital Gain: If the asset is held for less than one year at the time it was sold, the profit is called short-term capital gain, and the owner is subject to ordinary income tax. 

 

Short-term Investments: Refers to liquid securities such as stocks, bonds, etc

 

Small-Cap: Refers to a company whose market capitalization is less than $1 billion. 

Specialist: A participant of the exchange who trades for their own account or that of their firm's and is responsible for maintaining a fair and orderly market in whatever issue has been allocated to them by providing bid and ask markets. In addition, specialists also responsible for orders entrusted to them for execution. 

 

Specialist: A participant of the exchange who trades for their own account or that of their firm's and is responsible for maintaining a fair and orderly market in whatever issue has been allocated to them by providing bid and ask markets. In addition, specialists also responsible for orders entrusted to them for execution. 

 

Speculative Bubble: Speculative bubbles occur when investors, seeing an upward trend in prices, enter place themselves in a position to participate in the stocks' profitability. And Just like a bubble that bursts, speculative bubbles are followed by even faster sell-offs once the prices suddenly starts going down. This effect is called a Crash.(Also known as Bubble, Market Bubble, Economic Bubble). 

 

Spread: A strategy involving the simultaneous purchase and sale of two different series of options with different strike prices or expiration months. 

 

Stock: A stock gives you ownership of a company. When you buy a stock, you can consider yourself as having a stake in a particular company. This means that your interests are in line with that of the company’s. After all, both you and the company will be happy when that company does well. Stocks can be divided into two categories, namely Common Stock and Preferred Stock. Stocks are also referred to as Shares. 

 

Stock Broker: A stock broker, acting as agent, traditionally executes orders to buy or sell stocks depending on the client's instructions. Today's Stock Brokers offer more services than just buying and selling of stocks. Click on our Stock Brokers section for more information. 

 

Stock Exchange: Not to be confused with the Stock Market. A Stock Exchange is an association with fixed rules and regulations where stockbrokers meet to buy and sell stocks, bonds, securities, and other forms of exchanges. Several Stock Exchanges may operate in a single country, but companies can only be listed and traded under one exchange. For example, The US Stock Market has many Exchanges, the top three being NYSE, NASDAQ, and AMEX, respectively. 

 

Stock Split: A Stock Split refers to the division of the shares of a company’s commons stock which results in an increase in the amount of outstanding shares by the multiple of the split. The end result is that the value of the outstanding shares will be reduced by the multiple of the split. For example, when a stock trading at $500 on the pay date with 1000 shares outstanding splits 2 for 1, the result is 2,000 shares outstanding with a $250 market value. 

 

Straddle: Refers to the simultaneous purchase or sale of both a call and a put with the same expiration month and with the same strike price. 

 

Strangle: Refers to the simultaneous purchase or sale of both a call and a put with the same expiration month and different strike prices. 

 

Strike Price: The stated price per share for which the underlying security may be purchased (in the event of a call) or sold (in the event of a put) by the option holder upon exercise of the option contract. 

 

Swing Trader: An individual who engages in swing trading. A swing trader ideally buys a huge amount of shares, but very few stocks and holds on to them for a few days until a price swing occurs that will allow him to sell his shares at a profit. 

 

Swing Trading: The act of buying and selling of securities (stocks, bonds, etc.) while taking advantage of brief swings during a trend in a particular security's price. 

 

The Dow: Dow Jones Industrial Average (DJIA). An Index composed of 30 major stocks divided by the price of each stock. See DJIA in our Popular Indices section for more information. 

 

The Market: Another term for The Stock Market. An organized trading of stocks through an exchange or over-the-counter. There is only one stock market per country. When people talk about the Stock Market, they are talking about all the publicly traded stocks in that country. A country's Stock Market is made up of the different Stock Exchanges that exist within that country. 

 

Tick: A measurement of a stock’s performance during a trading session. It basically refers to a change in the price of a security, either up or down. An up tick is symbolized by a "+", while a down tick is symbolized by a "-". 

 

Trade: When brokers engage in the buying and selling of stocks. 

 

Trend: A trend in the market is when a stock is either gaining popularity or losing it. 

 

Trending Market: This means that the price moves in a single direction, meaning no fluctuations, and it usually closes on an extreme for the day. Basically the price either consistently moves up or down. 

 

Trend Trading: A strategy employed by taking advantage of market trends, buying of securities at the start of an up-trend and selling them as soon as the trend reverses its course. 

 

Trend Trader: Someone who engages in the act of trend trading. A trend trader focuses on trends rather than brief price swings or fluctuations. Ideally, a trend trader will hold on to his shares of securities for a long period of time until he recognizes the reverse of a trend, and then start selling as soon as possible. 

 

Up Trend: Also known as an upward trend. This is occurs when the price of a particular security goes up in value over a relative long period of time. An up trend is typically characterized by higher "ups" and higher "lows". 

 

Volatile: A market or security is said to be volatile when it tends to vary often and wildly in prices. 

 

Volatility: The measurement of a security's fluctuation over a given period of time. 

 

Volume: This refers to the number of shares of stock that are traded. The direct relationship between a stock's increase decrease in price and volume is always be one of the things that in investor must watch constantly monitor. 

 

Warrant: A stock warrant usually allows a trader to purchase one share of stock at a fixed price for a certain period of time. 

 

Write: Another term used that basically means to sell an option. The person selling the option is considered to be the writer. 

 

Wilshire 5000: An Index. Designed to monitor the overall performance of the entire US Stock Market. Go to our Popular Indices section to learn more about this index. 

 

Weekend Effect: A theory on stock market growth which claims that a trader’s optimism normally fades between Friday and Monday. 

 

Y2K: Year 2000. During the years that preceded the year 2000, the Stock Market experienced panic caused by the belief that technology wasn't sophisticated enough to handle a calendar that would start again at "000". 

 

Yield: Computed as follows: Stock Price divided by the dividends per share. Basically it is the amount that a stock will pay to its investors.