Stock Trading Terminology

The Must Know Stock Trading Terminology for Beginners to Trade Stocks Online

Stock Trading Terminology

Understand stock trading terminology is the first step for beginners to learn stock trading. This article lists the most frequently seen and must know stock trading terminology for the beginners. Terminology for stock option will not be covered because we do not recommend option trading for beginners.

ALL-OR-NONE ORDER (AON)

An order must be filled as a whole when it is executed. For example, Partial fill of 90 shares is not allowed if the order is to buy 100 shares.

ASK

The price the seller offers to sell the stock. This is the price that the investor may buy the stock.

BEAR MARKET

Market when prices are trending down.

BID

The price the buyer is willing to purchase the stock. This is the price that the seller may sell the stock.

BROKER

A broker is an individual or a company that executes the orders submitted by the client.

BULL MARKET

Market when prices are trending higher.

BUY ON CLOSE

Buy stock at the end of the trading session.

BUY ON OPENING

Buy stock at the beginning of a trading session.  (We do not recommend buying at opening for beginners.)

BUYING POWER

The amount of the money that is available in an account to buy stocks.

BUY TO COVER

A buy to cover order is an order that uses to close a short position.

CASH ACCOUNT

A cash account is an account that all stock purchases must be paid in full. In particular, short stocks or options trading is not allowed.

CLOSING PRICE

This is the price of a stock at the last transaction of the day.

COMMISSION

This is the fee charged by a broker for the execution of a trade on behalf of the client.

COST BASIS

Cost basis includes the price paid for a stock, plus the commissions or fees paid to the broker.

CROSSED MARKET

This is a situation that the highest bid price to buy the stock is higher than the lowest ask price to sell that same stock. It is usually used when the stock’s price is moving up extremely fast and has a clear future trend.

CURRENT MARKET VALUE (CMV)

This is the current worth of the stocks in an account.

DAY ORDER

A day order is an order that is only valid for the day. It will be automatically canceled if it cannot be executed on the day it is placed.

DAY TRADING

To buy and sell the same stock in one day’s trading section. No position is held at the end of the day. Day trading is not recommended for beginners.

DOWN TICK

A trade was made at a price lower than the previous trade.  

EXCHANGE        

It refers to the location where the buying and selling stock takes place. For example, New York  Stock Exchange.

FILL OR KILL

It is the order that will be canceled unless it is executed within the time frame designated.

GOOD-TIL-CANCELLED (GTC)

This is the order that will be kept in active until it is either filled or canceled.

HANDLE

This is the whole dollar part of the bid.

HIGH (H)

This is the highest price of a trading session.

IMMEDIATE OR CANCEL (IOC)

This is the order that must be filled immediately or to be canceled.

INDEX

An index is made up from a group of stocks that represents all the stocks in a market sector. For example, S&P 500 and Dow Jones Industrial Average are two famous indices.

INITIAL PUBLIC OFFERING (IPO)

An IPO is the first sale of stock by a private company to the public.

LAST PRICE

This is the last trade price of a trading session.

LIMIT ORDER

This is the order with a limit on either the price or the time of execution. Limit orders can be used to buy a stock at a price that is lower than the current market price, or to sell a stock at a price above the current market price.

LISTED STOCK

A listed stock is a stock that is traded on a securities exchange such as New York Stock Exchange.

LONG

It means the action to buy a stock with the expectation that the price will rise in the future.

LOW (L)

It represents the lowest price of a session.

MARGIN ACCOUNT

Margin account is an account that allows the investor to borrow money from the brokerage firm to buy stock. Margin account trading is not recommended for beginners due to potential debt.

MARGIN BALANCE

This is the amount an investor borrowed in the margin account.

MARGIN CALL

This is the demand to require the margin account holder to deliver additional cash in order to maintain the minimum required level. This usually happens when the value of stocks in the margin account goes down.

MARKET ORDER

A market order is an order to buy or sell a stock immediately at the best possible price.

NET CHANGE

The net change is the price difference between today and previous day.

OPEN (O)

This is the opening price of a trading session.

OPEN ORDER

An open order is an order that will stay active until it is canceled.

OPEN POSITION

These are the stocks that are currently held in the trading account.

OVER THE COUNTER MARKET (OTC)

These are the securities that are traded on a non formal exchange and also known as ‘unlisted stock’.  Trading OTC stock is not recommended for beginners.

PARTIAL FILL

A partially executed order is called a partial fill order. This happens when the specified number of shares cannot be bought or sold at the price limit.

PLUS / UP TICK

This is used to describe the scenario when a trade is made at a price higher than the previous trade.

QUOTE

This is the bid to buy and offer to sell a stock or option at a given time.

SECURITY

A stock is a security. Securities can be stocks, bonds, etc….

SHORT

It refers to people who sell stock without owning it first. Short stock is not recommended for beginners.

SPLIT

The split is an action that the number of outstanding shares is increased, and the price per share is decreased. For example, a 2-for-1 split will make 100 shares valued at $50 per share becomes 200 shares valued at $25 per share.

STOP LIMIT ORDER

This is the order that becomes a limit order to sell or buy stock when the specified price is reached.  A stop limit buy order specifies a price that is above the current market price. A stop limit sell order specifies a price that is below current market value.

STOP / STOP LOSS ORDER

This is the order that becomes a market order when the specified price is reached.  A stop order for buying specifies a price that is above the current market price. A stop order for selling specifies a price that is below the current market value.

 

Posted by on Apr 15, 2012 in Glossary | 0 comments

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