A Beginner's Guide to Stock Terms

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.

The Basics

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

 

Market Types

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

 

Order Types

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. 

Learn more about managing money in college