Buy
To take a position by buying shares of a company.
As a trader, you generally buy shares when you think a stock’s price will rise.
Sell
To sell the shares you currently own.
Traders generally sell shares when they see an opportunity to take profits or they think the stock’s rise is ending.
Bid
When a trader in the market makes an offer to buy shares.
Traders will bid for a stock at a certain price.
Ask
When a trader offers their shares for sale at a certain price.
If a trader holds shares and wants to sell them at a particular price, they place an order asking buyers to purchase them.
Bid-Ask Spread
The difference between the highest price at which someone is willing to buy shares and the lowest price someone is willing to sell shares.
Bull Market
A market condition where stock prices are continually rising.
Bull markets are characterized by optimism and excitement from traders and investors.
Bear Market
A bear market is the opposite of a bull market. It’s a market in which prices continually fall.
Bear markets are times when the outlook seems bleak for a company, an industry, or the overall economy. Traders and investors are less willing to buy stocks, and many are looking to sell. This causes prices to fall.
Limit Order
A type of stock market order that provides instruction to only execute at a certain price.
For example, a trader could place a limit buy order to purchase 100 shares of a stock at $10.20. The broker will attempt to buy 100 shares at a price of $10.20 or less.
Market Order
This stock market order provides instruction to buy or sell as quickly as possible, at whatever price is currently available.
Market orders can be expensive if there’s not enough volume. If you’re going to trade penny stocks, never use market orders.
Good Till Canceled Order
This market order remains open until you complete the trade or cancel the order. Also known as a GTC order.
Day Order
With this market order, if it isn’t filled during the day, it’s automatically canceled at the market close.
Volatility
The statistical measure of how much a stock moves up or down.
Stocks that move up and down wildly are known as volatile stocks. They can provide great profit opportunities, but also come with greater risk.
Liquidity
The measure of how easy it is to buy and sell a stock.
If a lot of buyers and sellers are actively trading stock, you’ll generally find it easier to enter and exit a position. The stock is more liquid.
Trading Volume
The number of shares being traded at any time.
More trading volume means more liquidity, and traders can more easily enter and exit positions.
Going Long
When going long, you purchase stock shares hoping to profit from an increase in the stock price.
Going Short
When a trader tries to profit from a stock’s dropping price.
Short sellers borrow shares from a broker, sell them, and hope the stock price declines. Then they buy the shares back and return them to the broker.
Averaging Down
This is where a trader buys more shares of a stock as the price drops, lowering the average price paid for the position.
Averaging down can work for long-term investors, but we don’t recommend it for active traders.
Market Capitalization
Market capitalization, aka market cap, is the total value of all a company’s shares.
For example, if a company has one million shares outstanding and the stock price is $10 per share, the market cap is $10 million.
Public Float
This is the term for a company’s freely traded shares. As active traders, we often look for companies with a low float, as their prices tend to be more volatile.
This is the total number of a company’s shares. It includes both the public floatand restricted shares.
IPO
IPO stands for initial public offering. It’s when a company goes through the process of selling shares on the stock market for the first time.
Secondary Offering
A company may raise money by offering shares, even after the company’s shares are traded on a stock exchange. This is called a secondary offering.
Blue-Chip Stock
These are large, stable, well-known companies that are often household names.
Forex
Forex is short for foreign exchange. The term refers to the global trading of currencies in a way similar to the way stocks are traded.
Hedge Funds
A hedge fund is a type of investment fund that often uses non-standard investment and trading techniques.
Mutual Funds
Mutual funds are pools of investor capital for investing in stocks, bonds, and other financial assets.
ETFs
Short for exchange-traded fund. ETFs are similar to mutual funds — they’re pools of capital used for investment purposes. But instead of wiring your money into the fund, you can purchase shares of the ETF on a stock exchange.
ADR
Short for American depositary receipt. These certificates represent shares of overseas stocks.
ADRs allow traders to buy and sell overseas stocks on U.S. stock exchanges.
Beta
A measure of a stock’s performance compared to the broader market. Beta can help traders assess the risk of holding a stock.
Stockbroker
An agent that allows traders to buy and sell stocks. Find out more about brokers here.
Day Trading
The practice of entering and exiting stock trades within a single day.
For example, if you purchase a stock in the morning and sell it in the afternoon, you’ve day traded.
Dividend
This is when a company pays a portion of its earnings to its shareholders. Long-term investors and retirees generally focus on dividends.
Stock Charts
A visual graph of a stock’s price over time. Traders use stock charts to help them interpret a stock’s price action and pattern.
Stock Exchange
A stock exchange is an entity where stocks are bought and sold.
Execution
Execution is the fulfillment of a stock trading order.
For example, you place an order with your broker to buy 100 shares of XYZ at $10. When that trade is completed, that order is executed.
Margin
Margin is when traders borrow money to trade shares. With margin, you can make money and lose money faster. Remember, 90% of traders lose before you try margin trading. Be careful!
Moving Average
A common technical indicator traders use on stock charts to see a stock’s price trend. The moving average is an average of the stock price over a certain period.
For example, the 20-day moving average is calculated by taking the price of the stock on each of the prior 20 days, then finding the average of those 20 prices.
Stock Portfolio
A stock portfolio is an investor’s collection of stocks.
Trading Mentor
An experienced trader who can shorten your learning curve by teaching you how they trade and what they’ve found to work in the markets. The SteadyTrade Team is our mentorship community. Apply to join us!
Price Quote
A price quote is a stock’s price at a certain point in time. Traders will often want up-to-date price quotes to better analyze stocks and find decent trading set-ups.
Price Rally
A price rally is when a stock price rises at a noticeably quicker pace.
Sector
The stock market is made up of shares of companies in different industries and niches. We call those sectors.
Stock Symbol
A unique collection of letters and/or numbers that represent a stock. Amazon, for example, trades on the Nasdaq under the symbol AMZN.
Dividend Yield
This refers to the size of a company’s dividend compared with the price of its stock.
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