A Guide to Share Trading Terminology

Learning trading terminology is essential to understanding the stock market and making sound trading decisions. In this article, we will take a deeper dive into some key terms related to trading stocks, shares and equity.

A company’s stock is its ownership share in that company and represented by an index symbol on the stock exchange.

Stocks

Stock, also referred to as share or equity, is a security that represents ownership in an publicly-traded corporation. Companies issue shares to raise capital to expand their businesses; stocks can then be bought and sold on the stock market.

Understanding these terms will enable you to better interpret market conditions and make informed trading decisions.

Brokers are individuals or firms who buy and sell stocks on your behalf for a fee, providing traders with an avenue to trade assets such as stocks, commodities, currencies and indices. Furthermore, brokers provide market analysis as well as recommendation regarding investments.

Exchanges

A trader is defined as an individual who buys and sells shares in the market through either online trading platforms, physical exchanges such as the New York Stock Exchange, or various types of dealer markets such as open outcry markets and electronic platforms.

Learn the language of trading is crucial for beginners navigating the complexities of stocks. Understanding its terminology enables them to communicate more efficiently with other traders, understand market reports and news stories, and make more informed trading decisions.

Traders’ slang often takes on animalistic qualities. Unicorn refers to startups with valuations exceeding $1 billion, vultures and whales are large investors and the phrase ‘to the moon’ refers to stocks or assets rising quickly while tanking refers to rapid drops in value.

Bull markets

Investors commonly refer to stock markets’ general trends as either bull markets or bear markets, and it’s essential that investors understand these terms in order to make informed investments. A bull market indicates a healthy economy where investors feel secure; when confidence rises quickly among them more shares may be purchased and sold quickly compared with when confidence drops quickly.

However, there is no set definition of what constitutes a bull market – some sources suggest 20% market index increases while others don’t specify an exact threshold. What matters most is that bull runs usually last longer than bear markets and can help boost your portfolio over time; bear markets can cause prices to plummet suddenly which could damage investments severely and thus traders usually diversify to reduce risk.

Bear markets

Bear markets occur when investment prices plunge over an extended period, testing your tenacity as an investor and demanding greater prudence and patience from you. On average, bear markets last several months and may cause losses of 20% or more.

Bull markets can be defined as periods when prices increase in tandem with positive investor sentiment and an economy experiencing weakness, or both. They typically last anywhere from months to years and often coincide with recessions, pandemics, wars or government interventions.

Investors should diversify their portfolio during bear markets to withstand stormy conditions and reap potential profits when markets rebound. An excellent way to do this is through your employer’s 401(k). By keeping track of long-term goals and investing within it, diversifying can help investors weather any stormy times ahead.

Margin accounts

Margin accounts are brokerage accounts that allow investors to borrow funds in order to buy securities on margin. Investors contribute part of the purchase price themselves while their brokerage firm lends them the remainder. Leveraging increases profits and losses; therefore it is important to understand all associated risks before opening one.

When the value of an account falls below initial and maintenance margin requirements, brokers may sell some or all of an investor’s shares to meet initial and maintenance margin requirements. When this occurs, an investor will receive a margin call, giving them time to deposit additional funds; additionally, brokerage firms often charge interest on borrowed money as well. Some firms allow customers to lend out their shares; in such cases voting rights are lost and dividend payments won’t apply on those shares lent out.