Bulls, bears, IPO’s, liquidity...when it comes to stocks, there’s a secret language that’s used to explain certain movements, purchases, and types of trading. Because the stock market is a game of information, knowing the stock market trading terms used by the experts is important to be successful. This guide covers the most common stock market terms for beginners, so that you can stop worrying and start investing today.
These terms are used daily, so you’ll need to know these four to get started.
Share - a unit of ownership in a company (how much of a stock you own is represented by the number of shares that you have)
Buy - to buy shares in a company
Sell - to sell shares that you’ve purchased
Bid - what you’re willing to pay for the stock
Ask - what people who are selling stocks are looking to get for their share
The type of market helps you to understand the general direction that stocks are heading in.
Bull Market - a market where stocks are expected to rise, usually in a good economy
Bear Market - a market where stocks are expected to fall, like a recession
Knowing different order types can help you plan the best strategy for your stocks!
Day Order - order only good for the day it’s placed
Good Till Cancelled Order - the order stands until it is cancelled
Market Order - executes transaction at market price
Limit Order - order executes at or under a purchase price, or at or above sale price e.g. If I place a limit order to buy 1 share in Apple for $48, it won’t execute until Apple’s shares are $48 or lower. If I place a limit order to sell 1 share of Apple at $100, it won’t execute until the Apple share is worth $100 or higher.
Other Terms You Need To Know
When you’re comfortable with the terms above, here’s more important stock lingo
Rally - a large increase in the general price level of the market or a specific stock
IPO - short for Initial Price Offering, when a private company becomes a publicly traded company that people can invest in
Liquidity - how easily can you get out of a stock (can you quickly convert it’s value to cash)
Volatility - how fast a stock moves up or down (in price)
Broker - a professional trader who buys and sells shares on behalf of clients
Portfolio - the investments owned by a person
These terms will have you navigating through stock news with ease, and leave you better prepared to invest in the long run. Learning these words will pay off, and hopefully put an extra zero in your bank account.