47 Must-Know Stock Trading Terms for Beginners

Must-Know Stock Market Terms: Key Takeaways

• Learn these must-know stock market terms before you make a single trade…
• It’s like learning a new language — study up!
• What is leverage and why should you be careful with it? Read this now!

What’s the best place to start for new traders? Here — your guide to trading lingo! If you want to learn how to trade, you need to know what the terms mean so you can follow along.

What does it mean when traders talk about the bid, ask, and spread? And what about brokers and leverage? Get all the answers in this article…

What Is the Stock Market?

The stock market is where people buy and sell shares of publicly traded companies. The term refers to all the major exchanges as a whole.

What Are Stock Trading Terms?

Stock trading terms are the lingo used by day traders.

Before you study any of my YouTube videos, blog posts, or watchlists, you should have your stock market vocabulary down pat. You must know the basics before you can move on to learning patterns, strategies, and executing trades. (I’ll tell you what that all means later.)

The more you know, the better prepared you can be to tackle the markets. Bookmark this page and return to it often as a handy reference. You can also use it whenever you forget the definition of a stock market term.

I’ve made over $7.4 million in career profits trading penny stocks. Learn more with my FREE penny stock trading guide.

47 Key Basic Stock Market Terms

Let’s look at some of the most important stock market terms you must know to trade stocks.

1. Annual Report

Annual reports inform shareholders about the company’s operations. It includes information about its finances like the company’s cash flow and management strategy. When you read an annual report, you’re judging the company’s solvency and financial situation.

2. Arbitrage

Arbitrage refers to buying and selling the same security on different exchanges and at different price points. If a stock trades at $10 on one exchange and $10.50 on another, you could buy shares for $10 and sell them for $10.50 on the other market. You’d pocket the difference as profits.

3. Averaging Down

Averaging down means adding to a losing position at a lower price. It increases your position size and lowers your average purchase price.

I call it adding to a loser and I don’t recommend it. If a stock goes against you, cut losses quickly!

4. Bear Market

A bear market refers to a market environment where a major index or stock falls 20% or more from its recent highs. It’s the opposite of a bull market. More on that term in a bit.

5. Beta

Beta is a measurement of a stock’s volatility compared to the overall markets.

The markets have a beta of 1. If a stock has a beta of 1.5, it means that for every 1-point move in the market, the stock moves 1.5 points. That means the stock is more volatile than the market.

6. Blue Chip Stocks

Blue chip stocks are the stocks of large, industry-leading companies. The expression came from blue gambling chips, the highest-valued chips in casinos.

7. Bourse

This stock market term is a little murky. Technically, it’s another name for the stock market. It originates from a house where wealthy men gathered to trade shares. But in today’s terms, it usually refers to the Paris stock exchange or a non-U.S. stock exchange.

You might need other currencies to trade at non-U.S. exchanges.

8. Bull Market

A bull market is the opposite of a bear market. It refers to a market in a prolonged period of increasing stock prices at least 20% above a recent low.

A single stock can be bullish or bearish too. So can a sector.

9. Broker

A firm or person who executes your buy and sell orders for stocks or other securities. A broker is a must for every trader. Learn how to choose a broker here.

10. Bid

The amount of money a buyer is willing to pay per share for a stock. It’s balanced against the ask, which is what a seller wants per share of that same stock.

11. Close

The time the market closes. The major exchanges close at 4 p.m. Eastern, with after-hours trading continuing until 8 p.m.

12. Day Trading

Day trading is the practice of buying and selling a stock or security within the same trading day. This is my go-to trading strategy.

Learn my day trading patterns and strategies in my Trading Challenge.

13. Dividend

A dividend is a portion of a company’s earnings paid to shareholders quarterly or annually. Not all companies pay dividends. They’re especially rare for penny stock companies since they rarely make consistent profits.

14. Equity

A measure of the cash value of everything a company owns, minus its debts. It’s measured by reducing the company’s assets by its liabilities, including fees and operational costs.

15. Exchange

A place where investors and traders buy and sell stocks. The most well-known exchanges in the U.S. are the New York Stock Exchange (NYSE) and Nasdaq. I also like to trade stocks that trade on the OTC markets.

16. Exchange-Traded Funds (ETFs)

ETFs are investment vehicles to trade assets like indices, real estate, commodities, bonds and other financial products.

17. Execution

Execution is what it’s called when your buy or sell order reaches completion. If you put in an order to sell 100 shares, your order executes when all 100 shares are sold.

18. Fundamental Analysis

A stock analysis method that focuses on the company’s financial situation and current market conditions.

19. Growth Stock

A stock from a company that is expected to grow significantly in the near future. They usually don’t pay dividends because they want to accelerate short-term growth.

20. Haircut

A haircut can have two meanings. It can refer to a thin spread between the market maker’s bid and ask. It can also refer to the difference between a stock’s value and the amount a bank will recognize as collateral for a loan.

21. High

A high refers to a stock or index reaching a greater price point than it had previously reached. A high can refer to a daily, weekly, or monthly high. 52-week highs and all-time highs can be bullish signals for traders.

22. Index

An index is a benchmark used as a reference marker for traders and investors. The Dow Jones Industrial Average (the Dow) and S&P 500 are examples of indexes (also spelled ‘indices’).

23. Initial Public Offering (IPO)

An IPO is the first sale or offering of a stock by a corporation to the public. The Securities Exchange Commission (SEC) and the government have strict rules for companies issuing an IPO.

IPOs are usually used to give companies more capital to pursue growth. Traders buy IPO stocks because they think their market price will grow.

24. Interest

A fee that a bank or financial institution charges to borrowers. Interest rates are usually calculated in percentages. Interest rates can also affect the economy — high interest rates usually cause stock prices to fall.

25. Leverage

When you use leverage, you borrow capital from your broker with the goal of increasing profits (and your capital gains taxes)

It’s one way to potentially increase gains — but it also increases losses. Don’t take leverage lightly.

26. Low

Low is the opposite of high. It represents a lower price point for a stock or index.

27. Market Capitalization

A measure of how much a company’s outstanding shares are worth. Often shortened to market cap.

28. Margin

A margin account lets a trader borrow money from a broker — a.k.a., use leverage — to purchase a stock or asset. Margin is the difference between the loan amount and the securities price.

Margin trading is risky. If the trade goes south, you can lose significant cash. Read up on margin trading here.

29. Moving Average

A moving average is an indicator that shows a stock’s average price per share during a specific period. 50- and 200-day moving averages are commonly used time frames.

30. Open

The start of the trading day. In the U.S., the stock market opens at 9:30 a.m. Eastern. Premarket trading begins at 4:30 a.m. Eastern. Note that there’s less volume in premarket and after-hours sessions.

31. Options

A contract that gives a trader the right (but not the obligation) to buy a certain asset at a predetermined time and price. This strategy becomes profitable when the asset price exceeds the price specified in the options contract.

Options trading rewards traders who can accurately predict market conditions and the direction of price movements.

32. Order

A trader’s action to buy or sell a certain amount of stock. Stock order types include market orders, limit orders, and stop orders. Brush up on order types here.

33. OTC Stocks

OTC stocks trade over the counter. They’re traded electronically but transactions are less transparent than the major exchanges. Companies listed on the OTC markets are small companies that don’t meet the major exchanges’ listing requirements. They can also be foreign companies.

34. Pink Sheet Stocks

Pink sheet stocks are the lowest tier of OTC stocks. They’re the sketchiest companies and they typically trade under $5 per share.

35. Portfolio

A collection of assets that makes up a trader or investor’s portfolio. You can have as few as one stock in a portfolio or an infinite amount of stocks or other securities.

36. Quote

A quote is a stock’s latest trading price. Stock quotes on free websites are usually delayed information. You may have to pay extra for real-time data.

37. Rally

A rally is a rapid increase in the general price level of the market or of the price of a stock. Depending on the overall environment, it can either be a bull rally or a bear rally. In a bear market, upward trends of as little as 10% can qualify as a rally.

38. Sector

A group of stocks in the same industry belong to the same sector. An example is the tech sector, which includes companies like Apple and Microsoft. Some traders prefer to trade in specific sectors, especially when sector momentum is hot.

39. Share Market

Any market where buyers and sellers trade a company’s shares. The stock market is an example of a share market.

40. Short Selling

Short-selling a stock is the opposite of going long. It’s a lot to cover in this post — read more about short selling here. In short (sorry, couldn’t resist), you take a trade where you believe the stock’s price will drop.

I used to short sell. These days it’s an overcrowded and risky strategy.

41. Spread

The spread is the difference between a stock’s bid and ask price. Say a trader’s willing to sell a stock for $10 and a buyer is willing to pay $9 for it. The spread is $1.

42. Stock Symbol

A stock symbol is an alphabetic symbol of one to four characters, otherwise known as a ‘TICKER.’ It represents a publicly-traded company on a stock exchange.

Example: Apple Inc.’s stock symbol is AAPL.

43. Technical Analysis

A stock analysis method that emphasizes past stock performance. It involves looking at previous price and volume swings to spot patterns in the chart.

44. Trading Platform

Software that allows you to buy and sell stocks and other assets. The good ones come with charting tools and other advanced technology.

45. Volatility

The price movements of a stock or the stock market as a whole. Highly volatile stocks make extreme movements and make wide intraday price swings.

See why I love trading high-volatility stocks here. And learn my #1 rule for staying safe here.

46. Volume

The number of shares of stock traded during a period. It’s usually measured in average daily trading volume.

47. Yield

Often refers to the measure of the return on investments, such as a dividend payment. It’s determined by dividing the annual dividend amount by the price paid for the stock.

Yield is usually measured by earnings per share (EPS) or dividends per share (DPS).

Stock Market Terms: The Bottom Line

Study this glossary of stock market terms and become familiar with them. Knowing them can shorten your learning curve. Education is the key to trading success.

Are you dedicated and ready to learn how to trade penny stocks? I teach students everything I’ve learned from 20+ years of trading experience in my Trading Challenge.

I have over 30 millionaire students, and I’m always on the hunt for more success stories. If you want to be next…

Apply to my Trading Challenge today!

Are there any trading terms I left off my list? Drop them in the comments!