Trading is a very broad spectrum and domain. There are many and I say, many, names associated with trading. Moreover, there are many terms that you must familiarise yourself with before investing. Thus, it is important to know what these terms are and what they mean so you can make wise trading and investing decisions.
If you want to learn more about investingand trading, here are the most important terms you MUST know before you get started; Emphasis on ‘MUST’ because they will always and in one way or the other come up.
18 Most Important Terms In Investing
An acquisition occurs when one company decides to take over another. A company can acquire, either half of the company, or the whole ownership stake. This is referred to as ‘acquisition’.
The auction market or auction is the process in which the price of shares are determined before they either open or after they close. Auctions take place in intraday volatility auctions in order to bring stability. Auctions let traders establish a place in the market or it is used to limit the orders on the exchange.
Averaging down is when you buy a stock and then watch it drop. Then you buy more shares of the same stock which results in a lower average price of the stock.
IPO is short for ‘initial public offering’. It is the very first time a company offers its stock to the public. IPO is when companies go public and when they have shared a certain segment of their shares on the stock exchange.
Moving average is the total calculation used to analyse data points by forming a series of different averages of the subsets of the total data. Additionally it is a term mostly used in analysis of financial data. It is used in cognition with financial data, stock prices etc.
Margin is a method of purchasing shares through borrowing a certain sum of money from the broker to execute the transactions.
A stock yield is a ratio of yearly dividends divided by the share price.
Therefore, a stock that pays $1 to its dividends and currently trading for $25 has a yield of 4%.
A statistical measure used to define the dispersion of returns for a particular security or market index. There are many ways to assess the market volatility or define it. Essentially it explains the sensitivities or reactions of the market. When a market is volatile, it is explosive. It can either go really high or really low.
Stock symbols are used to identify publicly traded shares of a given stock on a given stock market.
A spread chart is a comparison between a specific financial instrument plus another variable.
Each market has a given spread. A spread is defined as the difference in price between when and where a trader might buy or sell a given asset.
Spread is also sometimes referred to as an Ask Spread.
You leverage, when you borrow a given amount of a certain money to invest in something. Brokers lend money to investors in forex who want to invest in the exchange. Some exchanges offer high leverages, whereas, others provide lower measures of leverage.
Blue chip stocks
Defined as a stock of a big, financially sound and established company, a blue chip stock has a market capitalisation in billions. A company with blue-chip stocks is considered the leader in many ways. Blue-chip stocks usually belong to those companies that are considered a ‘household name’ in the industry.
Bull market is a condition where prices are rising or are going to rise. Moreover, the term bull market is mostly used in the stock market. However, it can be applied to bonds, currencies, real estate and others.
Averaging down is a term used to describe an instance where an investor keeps buying more stock to make its price go down. The strategy and term is used in the sense of drawing a general consensus about a company.
The term annual reportin trading is used by a company that wants to present a yearly report to impress its shareholders. Annual reports contain a lot of information about the company. Annual reports are necessary because you judge the company’s financial solution by it. For this reason, companies are very particular about their reports and work towards improving it all year round.
Dividends are paid as a portion of profit for a company which it chooses to give back to its share holders. Dividends are usually expressed in the form of %.
Earnings per share or (EPS) is a crucial metric in any company’s figures. It is derived from the total profit generated in a given period divided by the total number of shares of a company listed on the stock exchange or market. It is one of the most important terms to know in investing and trading.
Futures contracts are used in trading by in large, especially when we trade in commodities. Future contracts represent a given agreement between two selected parties to allow them to trade a particular asset at a definitive price on a given date in the future. Futures contracts are also referred to as ‘futures’ in trading.
For more terms on investing and to find out what other terms are used in trading, stay tuned at The Tradable for more updates.