Alpha: A measure of an investment's performance relative to a market index. Positive alpha indicates outperformance.
Ask Price: The price at which a seller is willing to sell a security.
Asset Allocation: The process of dividing investments among different asset classes, such as stocks, bonds, and cash.
Average Down: A strategy where an investor buys more of a stock as its price falls, reducing the average cost per share.
B
Bear Market: A market condition where prices are falling or expected to fall, typically by 20% or more from recent highs.
Beta: A measure of a stock's volatility relative to the overall market.
Blue Chip Stocks: Stocks of large, well-established companies with a history of stable earnings and dividend payments.
Bollinger Bands: A technical analysis tool consisting of a middle band (SMA) and upper/lower bands that are standard deviations away from the middle band.
Breakout: A price movement outside a defined support or resistance level.
C
Call Option: A financial contract that gives the buyer the right, but not the obligation, to buy a stock at a specified price within a specific time period.
Capital Gain: The profit realized when a security is sold at a higher price than it was purchased.
Circuit Breaker: A temporary halt in trading to prevent panic selling or buying.
Commission: A fee charged by a broker for executing a trade.
Confirmation: A technical signal that confirms a trend or pattern.
Correction: A temporary reversal in the price of a stock or market, typically a decline of 10% or more from a recent high.
CryptoCurrency: A digital or virtual currency that uses cryptography for security.
Currency Pair: In forex trading, the quotation of two different currencies.
D
Day Trading: The practice of buying and selling securities within the same trading day.
Dead Cat Bounce: A temporary recovery in a stock's price after a significant decline.
Default: Failure to repay a loan or meet other financial obligations.
Derivative: A financial instrument whose value is derived from an underlying asset, such as stocks, bonds, commodities, or currencies.
Diversification: Spreading investments across different assets to reduce risk.
Dividend: A payment made by a corporation to its shareholders, usually as a distribution of profits.
Dividend Yield: A financial ratio that shows how much a company pays out in dividends each year relative to its stock price.
Double Bottom: A bullish reversal pattern in technical analysis where the price reaches two similar lows.
Double Top: A bearish reversal pattern in technical analysis where the price reaches two similar highs.
E
Earnings Per Share (EPS): A company's profit divided by its number of outstanding shares.
ETF (Exchange-Traded Fund): A type of investment fund and exchange-traded product that tracks an index, sector, commodity, or other asset.
Equity: The value of an asset minus the value of all liabilities on that asset.
Entry Point: The price at which a trader enters a trade.
Exit Point: The price at which a trader exits a trade.
F
Fundamental Analysis: A method of evaluating securities by analyzing fundamental factors such as financial statements, industry conditions, and economic trends.
Futures: A financial contract to buy or sell an asset at a predetermined price at a specified time in the future.
FX (Foreign Exchange): The global market for trading currencies.
G
Gapping: When a stock's price opens significantly higher or lower than its previous close.
Going Long: Buying a security with the expectation that its price will rise.
Going Short: Selling a security that you don't own with the expectation that its price will fall.
Gross Profit: Revenue minus cost of goods sold.
Growth Stock: A stock of a company that is expected to grow at an above-average rate compared to other companies in the market.
H
High: The highest price at which a security traded during a given period.
Histogram: A graphical representation of data using bars of different heights.
Holder: An investor who owns securities.
Hypothecation: The practice of pledging assets as collateral for a loan.
I
Index: A statistical measure of the changes in a portfolio of stocks representing a portion of the overall market.
Initial Public Offering (IPO): The first sale of stock by a company to the public.
Institutional Investor: An organization that invests on behalf of others, such as pension funds, mutual funds, and insurance companies.
Intrinsic Value: The perceived or calculated value of a company, including tangible and intangible factors, as opposed to its market value.
Inventory: The goods and materials that a business holds for the ultimate goal of resale.
J
Junk Bond: A high-yield, high-risk bond issued by companies with lower credit ratings.
K
Kondratieff Wave: A long-term economic cycle believed to be approximately 50-60 years in length.
Keepwell Agreement: An agreement between a parent company and a subsidiary to maintain the financial health of the subsidiary.
L
Limit Order: An order to buy or sell a security at a specific price or better.
Liquidity: The ease with which an asset can be bought or sold without affecting its price.
Long Position: A position in which an investor owns a security with the expectation that its price will rise.
Low: The lowest price at which a security traded during a given period.
M
Margin: Borrowed money used to purchase securities.
Margin Call: A demand by a broker for an investor to deposit additional funds or securities to bring a margin account up to the minimum maintenance requirement.
Market Capitalization: The total value of a company's outstanding shares of stock.
Market Order: An order to buy or sell a security at the best available current price.
Moving Average: A technical analysis tool that smooths out price data by creating a constantly updated average price.
MACD (Moving Average Convergence Divergence): A technical analysis indicator used to identify trend direction and momentum.
Momentum: The rate of acceleration of a security's price or volume.
Mutual Fund: An investment vehicle made up of a pool of funds collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments, and other assets.
N
Net Income: A company's total earnings after subtracting all expenses, taxes, and costs.
Noise: Random price movements that can make it difficult to identify the underlying trend.
Non-Farm Payrolls (NFP): A monthly economic indicator that measures the change in the number of employed people in the US, excluding farm workers, government employees, private household employees, and employees of non-profit organizations.
NASDAQ: A global electronic marketplace for buying and selling securities, as well as the benchmark index for U.S. technology stocks.
New York Stock Exchange (NYSE): The largest stock exchange in the world by market capitalization of listed companies.
O
Open: The price at which a security first trades when the market opens for the day.
Option: A financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specified date.
Order: An instruction to buy or sell a security.
Overbought: A condition where a security has traded up to a level that some technical analysts believe is unsustainable, potentially leading to a price correction.
Oversold: A condition where a security has traded down to a level that some technical analysts believe is unsustainable, potentially leading to a price rebound.
P
Penny Stock: A common stock that trades for less than $5 per share.
Portfolio: A collection of investments owned by an individual or organization.
Position: The amount of a security that an investor owns or has sold short.
Price-to-Earnings (P/E) Ratio: A valuation ratio calculated by dividing a company's current share price by its earnings per share.
Profit Taking: Selling a security to realize gains after a price increase.
Put Option: A financial contract that gives the buyer the right, but not the obligation, to sell a stock at a specified price within a specific time period.
Q
Quote: The current price of a security, including the bid price and ask price.
Quarterly Report: A report that public companies must file with the SEC every three months, containing financial information and other disclosures.
R
Rally: A significant and sustained increase in the price of a security or market.
Range: The difference between the high and low prices of a security during a given period.
Rate of Return: The gain or loss on an investment over a specified period, expressed as a percentage of the initial investment.
Reversal: A change in the direction of a price trend.
Resistance: A price level where selling pressure is sufficient to stop an upward trend.
Return on Equity (ROE): A financial ratio that measures a company's profitability by showing how much profit a company generates with the money shareholders have invested.
Risk Management: The process of identifying, assessing, and controlling risks associated with trading.
Risk-Reward Ratio: A measure of the potential profit compared to the potential loss of a trade.
RSI (Relative Strength Index): A momentum indicator that measures the speed and change of price movements.
S
S&P 500: A stock market index that measures the performance of 500 large companies listed on US stock exchanges.
Scalping: A trading strategy that involves making multiple small trades to capture small price movements.
Secondary Market: A market where investors buy and sell securities they already own.
Short Selling: The practice of selling a security that the seller does not own, with the intention of buying it back later at a lower price.
Slippage: The difference between the expected price of a trade and the price at which the trade is actually executed.
Stop-Loss Order: An order placed with a broker to sell a security when it reaches a certain price, designed to limit an investor's loss on a position.
Support: A price level where buying pressure is sufficient to stop a downward trend.
Swing Trading: A trading strategy that aims to capture short- to medium-term price movements within a larger trend.
T
Technical Analysis: A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume.
Tick: The minimum price movement that a security can make.
Time Horizon: The length of time an investor expects to hold an investment.
Trailing Stop: A type of stop-loss order that automatically adjusts as the price of a security moves in the investor's favor.
Trend: The general direction in which a security or market is moving.
Trendline: A line drawn on a chart to indicate the direction of a trend.
Turnover: The total value of securities bought and sold during a given period.
U
Underlying Asset: The financial asset on which a derivative's price is based.
Unemployment Rate: The percentage of the labor force that is unemployed and actively seeking employment.
Uptrend: A series of higher highs and higher lows in a security's price.
V
Valuation: The process of determining the current worth of an asset or company.
Value Stock: A stock that is considered to be trading below its intrinsic value.
Volume: The number of shares or contracts traded in a security or market during a given period.
Volatility: A statistical measure of the dispersion of returns for a given security or market index.
W
Wedge: A technical analysis pattern characterized by converging trendlines.
Whale: A trader or investor who has a large amount of capital and can influence market prices with their trades.
Whipsaw: A condition where a security's price moves in one direction, then quickly moves in the opposite direction.
Window Dressing: The practice of portfolio managers making last-minute changes to their portfolios to improve their appearance for reporting purposes.
X
X-Dividend Date: The date on which a stock begins trading without the dividend.
Y
Yield: The income return on an investment, expressed as a percentage of the investment's cost or current market value.
Yield Curve: A line that plots the interest rates, at a set point in time, of bonds having equal credit quality but differing maturity dates.
Z
Z-Score: A statistical measurement that describes a value's relationship to the mean of a group of values.