Stock Market Glossary - 78 Essential Terms

Master the language of the stock market with our comprehensive glossary. Understanding these terms is essential for any investor or trader.

A

Ask Price: The lowest price at which a seller is willing to sell a security, representing supply in the market at that moment.
Asset: Any resource with economic value that an individual or entity owns or controls, expected to provide future financial benefit.
Averaging Down: Buying more shares of a stock as its price falls to reduce the average cost per share of your total position.

B

Balance Sheet: A financial statement showing a company's assets, liabilities, and shareholder equity at a specific point in time.
Bear Market: A market condition marked by falling prices, pessimism, and widespread selling, typically defined as a 20% decline from recent highs.
Bid Price: The highest price a buyer is willing to pay for a security, representing demand in the market at that moment.
Bid-Ask Spread: The difference between the highest bid price and lowest ask price, representing a transaction cost for investors.
Black Swan: An unpredictable event with severe consequences that is beyond normal expectations and difficult to predict.
Blue-Chip Stock: Shares in large, well-established companies with a history of reliable performance, generally considered lower-risk investments.
Bond: A fixed-income debt instrument representing a loan made to a borrower, which pays periodic interest and returns principal at maturity.
Book Value: A company's net asset value calculated from its balance sheet - total assets minus total liabilities.
Broker: An intermediary that facilitates trades between buyers and sellers of securities, typically charging commissions or fees for their services.
Bull Market: A market condition characterized by rising prices, investor optimism, and expectations of continued growth.

C

Capital: Financial assets or resources that can be used to generate wealth, including cash, investments, equipment, and intellectual property.
Commodity: Basic goods that are interchangeable with other goods of the same type, including agricultural products, metals, and energy resources.
Correction: A decline of 10% or more from a security or market's recent high, considered normal market behavior.

D

Day Order: An order that expires at the end of the trading day if not executed, the default order type on most platforms.
Day Trading: A trading style where positions are opened and closed within the same day, attempting to profit from short-term movements.
Dead Cat Bounce: A brief, temporary recovery in a declining stock's price before the downward trend continues, often trapping buyers.
Diversification: Spreading investments across different assets to reduce risk - the principle of not putting all eggs in one basket.
Dividend: A portion of a company's earnings distributed to shareholders, typically on a regular schedule, representing income from stock ownership.
Dollar-Cost Averaging: Investing fixed amounts at regular intervals regardless of price, reducing the impact of volatility on purchases.

E

ETF: Exchange-Traded Fund - an investment fund that trades on stock exchanges like regular shares, holding collections of assets.
Earnings Per Share: A company's net profit divided by its outstanding shares, a key metric for evaluating profitability.

F

Fading: A contrarian trading strategy that involves taking positions opposite to the prevailing market trend.
Forex: Foreign Exchange market - a global decentralized marketplace for trading national currencies, the largest financial market worldwide.
Futures: Derivative contracts obligating parties to buy or sell an asset at a predetermined price on a specific future date.

G

Going Long: An investment strategy based on buying securities with the expectation that their price will rise, allowing for profit when sold later.
Good Till Canceled: An order that remains active until executed or manually canceled, with no automatic expiration date.
Growth Investing: An investment approach targeting companies expected to grow earnings faster than the market average.

H

Hedge Fund: A private investment partnership using sophisticated strategies for wealthy investors, often with high fees and minimum investments.
Holding Company: A parent corporation that owns controlling stakes in other companies but doesn't produce goods or services itself.
Holdings: The specific assets contained within an investment portfolio, representing everything an investor currently owns.

I

IPO: Initial Public Offering - the first time a private company sells shares to public investors, transforming it into a publicly traded company.
IRA: Individual Retirement Account - a tax-advantaged savings account designed for long-term retirement savings with specific contribution rules.
Index: A statistical measure tracking the performance of a group of assets, like the S&P 500 which tracks 500 large U.S. companies.
Index Fund: A fund designed to track the performance of a specific market index, offering broad exposure with low costs.
Inflation: The rate at which general prices rise, reducing the purchasing power of money over time as each dollar buys less.
Interest: The cost of borrowing money or the reward for lending it, expressed as a percentage of the principal amount.
Intrinsic Value: The calculated true worth of an asset based on fundamental analysis, independent of its current market price.

L

Leverage: Using borrowed capital to increase potential investment returns, which also amplifies potential losses and investment risk.
Liability: A financial obligation or debt that an individual or company owes, settled over time through transfer of money, goods, or services.
Limit Order: An order to buy or sell a security at a specific price or better, giving traders control over execution price.
Liquidity: How quickly and easily an asset can be converted to cash without significantly affecting its price.

M

Market Bubble: An economic phenomenon where asset prices rise far beyond their fundamental value, eventually leading to a sharp price collapse.
Market Cap: Market Capitalization - the total market value of a company's outstanding shares, calculated by multiplying share price by shares outstanding.
Market Maker: A firm that continuously quotes both buy and sell prices for a security, providing liquidity to the market.
Market Order: An order to buy or sell a security immediately at the best available current price, prioritizing speed over price.
Market Sentiment: The overall attitude of investors toward a market or security, reflecting collective optimism or pessimism.
Mutual Fund: A professionally managed investment fund pooling money from many investors to purchase securities according to stated objectives.

O

Options: Contracts giving buyers the right (not obligation) to buy or sell an asset at a specified price within a set timeframe.

P

P/E Ratio: Price-to-Earnings Ratio - a valuation metric comparing a company's share price to its earnings per share, used to assess stock value.
Panic Selling: Widespread, fear-driven selling of investments triggered by declining prices or alarming news, often worsening market drops.
Penny Stock: Low-priced shares (typically under $5) of small companies, considered high-risk investments with limited liquidity and oversight.
Portfolio: The complete collection of financial investments held by an individual or institution, including stocks, bonds, and other assets.
Public Company: A corporation whose shares are traded freely on a public stock exchange, subject to regulatory requirements and public disclosure.
Pump and Dump: A fraudulent scheme involving artificial price inflation through false statements, followed by selling at the inflated price.

R

Resistance Level: A price point where selling pressure historically prevents further upward movement of a security's price.
Rug Pull: A cryptocurrency scam where developers abandon a project and take investor funds after artificially inflating the asset's value.

S

Sector: A group of companies operating in the same business area, used to categorize the stock market into distinct industries.
Security: A tradable financial instrument that holds monetary value, including stocks, bonds, options, and other investment vehicles.
Share: A single unit of stock ownership in a corporation. Owning shares gives you a proportional claim to the company's assets and profits.
Shareholder: An individual or institution that legally owns one or more shares in a corporation, also known as a stockholder.
Short Selling: An investment strategy betting on price decline by borrowing shares, selling them, then buying back at a lower price to return.
Short Squeeze: A rapid price increase forcing short sellers to buy back shares to limit losses, creating a feedback loop driving prices higher.
Stock: A financial instrument representing partial ownership in a corporation. When you purchase stock, you become a part-owner of that business.
Stock Exchange: A regulated marketplace where securities like stocks and bonds are bought and sold. Major examples include NYSE and NASDAQ.
Stop-Loss Order: An order that automatically sells a security when it reaches a certain price, designed to limit potential losses.
Support Level: A price point where buying pressure historically prevents further downward movement of a security's price.
Swing Trading: A medium-term trading approach holding positions for days to weeks, aiming to capture gains from anticipated price swings.

T

Tanking: When a stock or market experiences a sharp, significant decline in value, often rapidly and unexpectedly.
To The Moon: Slang for a stock or asset experiencing rapid, dramatic price increases, expressing enthusiasm about gains.

U

Unicorn: A privately held startup company valued at over $1 billion, named for their once-extraordinary rarity.

V

Value Investing: An investment strategy focused on finding undervalued stocks trading below their intrinsic worth.
Volatility: A statistical measure of how much a security's price fluctuates over time. High volatility means rapid, large price swings.
Volume: The total number of shares or contracts traded during a specific period, indicating the level of market interest.

W

Whale: An investor or institution with enough capital that their trades can significantly influence market prices.

Y

Yield: The income return on an investment, expressed as a percentage of the investment's cost or current market value.