Master the language of trading with our comprehensive glossary
Ask (Offer) / Bid
Ask: The lowest price at which a seller is willing to part with a security. Bid: The highest price a buyer is willing to pay. The bid-ask spread reflects liquidity and trading costs.
Share / Stock
A unit of ownership in a corporation. Shareholders are entitled to a portion of assets or profits.
Market Order / Limit Order
Market: Executes immediately at current market price. Limit: Sets maximum buy or minimum sell price; execution only if matched.
Market Capitalization
Total value of a company's equity, calculated as current share price × total outstanding shares.
Bull / Bear Market
Bull: Prolonged upward trend in equity prices. Bear: Period of sustained price decline, often -20%+ from peak.
IPO (Initial Public Offering)
First-time issuance of company stock to public investors.
Dividend / Dividend Yield
Dividend: Earnings distributed to shareholders, typically quarterly. Yield: Annual dividend per share ÷ current price; expresses income return.
EPS (Earnings per Share)
Net income allocated to each outstanding share. Indicates profitability.
Beta
Measures stock volatility relative to the market; β >1 = more volatile, β <1 = less volatile.
P/E Ratio (Price-to-Earnings)
Share price divided by earnings per share. Helps assess valuation.
Book Value / Equity Value
A company's net assets (assets − liabilities). Equity value per share = book value ÷ outstanding shares.
Volume / Average Daily Trading Volume (ADTV)
Total quantity of shares traded; high volume = strong market interest.
Support / Resistance
Support: Price level where buying interest prevents further decline. Resistance: Level where selling caps upward movement.
Chart Patterns
Price formations like double top, head and shoulders, ascending triangle, etc., used to predict reversals or continuations.
Technical Indicators
Oscillators and trend tools like Bollinger Bands, RSI, MACD, VWAP, ATR used to evaluate trends, momentum, and volatility.
Candlestick Patterns
Single-bar formations (e.g., Doji, hammer, engulfing) that signal short-term reversals.
All-or-None (AON)
Order must be fully executed or canceled entirely.
Fill-or-Kill (FOK)
Must be filled immediately in full; otherwise, canceled.
Immediate or Cancel (IOC)
Filled immediately for available portion; unfilled portion canceled.
After-Hours Trading
Transactions executed outside official exchange hours through ECNs.
ETFs / Mutual Funds
ETF: Funds traded intraday like stocks. Mutual Fund: Priced end-of-day, traded at NAV.
ADR (American Depository Receipt)
Certificates representing shares of foreign firms, tradeable in the US.
Options (Call / Put)
Call: Right to buy at a set price. Put: Right to sell. Includes strategies like spreads, covered calls, and puts.
Short Selling / Short Interest
Selling borrowed shares expecting a price drop; short interest tracks total borrowed shares.
Diversification
Spreading risk across various assets and asset classes.
Leverage / Margin
Borrowing capital to enhance exposure. Magnifies returns and losses.
Stop-Loss / Trailing Stop
Automatic sell orders designed to limit losses or protect profits.
Alpha / Beta
Alpha: Return relative to benchmark (excess return). Beta: Volatility measure.
VaR (Value at Risk)
Estimate of potential loss under normal market conditions over a defined period.
Sharpe Ratio
Risk-adjusted return: (Portfolio return − risk-free rate) ÷ standard deviation.
Earnings Report
Quarterly disclosure of company performance (EPS, revenue).
Federal Reserve, Discount Rate, QE
Central Bank terms setting interest rates and conducting asset purchases to influence economic conditions. QE increases liquidity.
Yield Curve
Graph of bond yields across maturities; shape signals economic expectations.
Behavioral Biases
Confirmation bias, herd behavior, loss aversion - common trader psychological biases that must be recognized and mitigated.
Trade Journal
Logs detailing rationale, execution, performance, and lessons learned—crucial for continuous improvement.