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ask (and bid) When a stock price is quoted, the ask price is the lowest price anyone is willing to sell the stock. The ask price is usually used in conjunction with bid, as in bid and ask.
bear (bearish) A term used to describe negative sentiment, or the belief that the market or stocks will decline. The term is in contrast to bull or bullish, and it is believed to derive from the notion that a bear attacks by pulling things down, while a bull lifts them up.
beta A technical term used to describe a stock's volatility, or the average amount it swings in price.
bid (and ask) When a stock price is quoted, the bid price is the highest price anyone is willing to buy the stock. The bid price is usually used in conjunction with ask, as in bid and ask.
bonds Essentially, bonds are promissory notes issued by corporations or governments. Although the term is often used along with stocks (as in stocks and bonds), a bond is not the same thing as stock.
broker A middleman between you and the stock exchange. A broker is usually needed to place buy and sell orders on the exchange. For this service, the broker gets a fee for each transaction.
bull A term used to describe positive sentiment, or the belief that the market or stocks will rise. The term is in contrast to bear or bearish, and it is believed to derive from the notion that a bull attacks by lifting things up, while a bear attacks by pulling things down.
call option A contract that gives you the right, but not the obligation, to buy someone's stock for a specific price before a specific expiration date. Options are viewed by some as a way to trade huge amounts of "stock" for pennies to the dollar, but such transactions are extremely volatile and prone to quick losses.
cap (capitalization) Cap is an abbreviation for capitalization. The term is used to describe the "value" of a company based on the total number of outstanding shares. For instance, if a company has issued 10,000,000 shares, if the stock is currently trading at $5, then the company's capitalization is $50,000,000.
cap, large Used to describe a relatively large company, usually in billions of dollars. See cap.
cap, mid Used to describe a relatively medium size company. See cap.
cap, small Used to describe a relatively small size company. See cap.
channel(s) A semi technical term used to describe a trading range for a stock or an index. For instance, if a stock tends to trade between $20 and $30, you might say it trades in this $10 channel. Various systems use channels to determine the probable support and resistance levels of a stock.
channeling A trading system based on a stock's channel. Usually, channeling involves buying a stock when it is at the bottom of its channel, and selling it when it reaches the top. See channel.
chart A graph that shows the recent price and volume performance of a stock. Charts can show performance as long as many years or as short as a few minutes during the day.
chart analysis See technical analysis.
commission The fee that a broker takes when you make a trade. Some brokers charge a flat rate per trade, others charge a percentage of the trade amount or a price per share.
Contrarian A term that describes a phenomenon where the market goes contrary to what the majority think will happen. Usually, a Contrarian point of view is to be bullish when everyone else is bearish, or visa versa.
cover (buy to) The act of closing out a short position. When one goes short, shares were borrowed and sold to someone else. The short seller has to eventually buy the shares to cover the loan. See short selling.
DMGD An abbreviation for Dumb Money Gap Down, which is a trading strategy taught in this course that exploits the weakness of inexperienced traders dumping a stock immediately after the opening bell.
Donchian Channel A technical chart pattern that shows the approximate channel where a stock is trading. Donchian was a technician who developed a formula, computing the channel line for each horizontal point of a chart, going back a certain number of days to obtain the highest high and lowest low. See channel, channeling.
Dow (Dow Jones) Short for the Dow Jones Industrial Average, a group of 30 stocks that trade in major exchanges that are intended to represent various industry groups. The Dow is reorganized every few years to reflect changes in these industries.
exchange, stock A place where public stock is traded. The two major exchanges in the United States are the New York Stock Exchange and the NASDAQ.
fund Usually, a portfolio of stocks, bonds and/or commodities that is managed by a person or a brokerage. See mutual fund, hedge fund.
fundamental analysis The study and analysis of company fundamentals such as cash flow, earnings, management, etc. Fundamental analysis differs from technical analysis (the study of stock charts). See also technical analysis.
fundamental(s) The elements of a company that measure its value, such as its earnings, earnings growth and cash flow. Many investors consider fundamentals to determine what the value of a stock ought to be.
futures Contracts made between traders that involve the future delivery of a commodity. Originally, a futures contract was an agreement between farmers and commodity buyers for delivery of corn, soy beans, cattle, etc., in which the price was agreed upon in advance. Today, futures contracts include such things as gold, oil, and even stock (stock futures are useful for determining where the market will probably open).
hedge fund A managed fund, similar to a mutual fund, but with less restrictions (hedge funds can sell short, for instance). Originally, hedge funds were created to protect large investors from market volatility; today, hedge funds are mostly offered to large investors who want to take more risk for larger gains. See also mutual fund.
hidden standard A hidden, somewhat unconscious, but usually unrealistic idea that someone is using to measure success. In trading, a hidden standard might be the idea that only trades greater than a 100% gain are a failure, which is unrealistic. A hidden standard is harmful because it causes bad decisions to be made and creates a false sense of failure.
index A group of stocks that are measured as a composite value, such as the Dow Jones Industrial Index. While not actually a stock, some indexes trade like one through certain funds provided by various exchanges and brokers.
intra-day Refers to within-the-same day. For instance, an intra-day stock chart shows what a stock did during the day, while a daily chart may show what the stock did all week or many weeks.
investor, investing In its purest form, an investor provides capital to a corporation in exchange for a share of the profits. Today, and for publicly traded stock, an investor is only a trader, with the difference in the intended time horizon to hold shares of stock. Generally, traders hold stock for a very short period of time, while an investor holds for longer periods of time. Both investors and traders are looking for gains on the shares they purchased.
IPO Initial Public Offering. When a company decides to let its stock trade publicly, it offers a certain number of its shares to the public. The purpose of an IPO is for the company to raise capital.
"knows best" A term that describes someone who assumes he or she already knows a subject, causing them to block out new ideas. Certain trading failures can be traced to a "knows best" situation where the trader cannot learn from his or her mistakes.
limit (order) A buy or sell order for stock where the person specifies the price to buy or sell. See also market order.
long (position) Opposite of short. One is said to be long when stock is purchased with the expectation that it will rise in price, as opposed to selling short, which is the expectation that the stock will fall in price.
margin Literally, a loan from your broker to buy more stock than your available cash can cover, where the purchased shares act as collateral. Brokers are allowed to lend up to 50% of the stock value, which essentially doubles one's buying power. For instance, if a margin account had $5,000 cash, the account owner could buy up to $10,000 worth of stock.
margin call A situation in which stock was purchased on margin (borrowed money from the broker), but the stock value has fallen below an allowable minimum, in which case the borrower now now has to come up with more money, or sell the stock.
market order A buy or sell order that executes at the current price a stock is trading. A market buy order executes at the ask price, while a market sell order executes at the bid price, whatever the prices may be. This differs from a limit order where the price is specified. See also bid, ask, limit order.
mutual fund(s) A mutual fund is a portfolio of stocks, bonds and/or cash accounts managed by a brokerage firm for which the public can invest. It is called a mutual fund since it has many "shareholders" that mutually benefit (or lose). Mutual funds have certain restrictions to ensure less risk, as opposed to hedge funds that are inherently aggressive and high-risk.
NASDAQ An abbreviation for National Association of Securities Dealers Automated Quotations, the NASDAQ was created in the 1970's as an alternate exchange to the NYSE (New York Stock Exchange). Unlike the NYSE, the NASDAQ is purely electronic, i.e., there is no physical trading floor that traders go to for transactions. All trades are performed through a computerized system.
NYSE An abbreviation for New York Stock Exchange, which is the largest public exchange in the country.
options Contracts issued by shareholders that grant the right to buy stock at an agreed upon price, with an expiration date. A call option grants the buyer of the contract the right, but not the obligation, to buy shares at a specific price for a specific period of time. A put option grants the contract buyers to sell the shares at a specific price for a specific period of time. Option contracts can be traded, just like stocks, but usually for a small fraction of the underlying stock value.
portfolio A group of stocks, bonds, or other commodities one currently owns. Usually, a portfolio is simply stocks that one currently owns, although it can be a collection of just about any commodity one has bought with expectation of appreciation.
position If one has taken a long position, stock has been purchased with the expectation that it will rise in value. When one takes a short position, borrowed stock has been sold with the expectation that it will fall in value. In each case, a position means that the trader is now set up to win, lose or draw when the position is finally closed.
put option A contract that gives you the right, but not the obligation, to sell a stock to someone else at a specific price before a specific expiration date. A put option is profitable when the underlying stock declines, hence, put options are a method to profit on falling prices. Options are viewed by some as a way to trade huge amounts of "stock" for pennies to the dollar, but such transactions are extremely volatile and can result in quick losses.
quote A report on the last known price that a stock traded for. A full quote contains three prices: the bid price, ask price, and the last traded price. Quotes will sometimes include the size of the trade and the total volume traded since the market opened.
real-time Stock information for which there is no delay. For instance, real-time quotes are reports on stock prices instantaneously conveyed the moment they occur.
S&P-500 An abbreviation for Standard and Poors-500, a composite of 500 stocks, from various exchanges, that are chosen across different sectors that represent the broader market. Like the Dow, the S&P-500 is intended to gauge the state of the market, and many big investors and fund managers use it as such an indicator, or as a basis to measure their own performance.
session (trading) A trading session is the time between the opening bell, or 9:30AM-EST, to the closing bell, or 4:00PM-EST. It does not necessarily include pre-market or after-hours trading.
sentiment Essentially, the "mood" of the market. If the sentiment is negative, stocks tend to sell off, and the sentiment is said to be bearish. If stocks are rising, or there is buying in earnest, the sentiment is positive, or bullish.
screening The process of elimination for trading or investing. Since there are thousands of stocks that trade on the major exchanges, one screens them to reduce the list to a more manageable size.
short (selling) A method in which a trader can profit on a stock's decline. Essentially, a trader can borrow shares of a stock and sell them to someone else. Eventually, the shares have to be paid back, and if the stock price falls, the trader can by the shares for less than he sold them for, and pocket the difference. One way to understand this is to imagine if you had a friend who let you borrow his car for a year, and you could do whatever you wanted to with the car as long as you gave it back in tact. You sell the car for $5,000 to someone else, and after a year, the car has depreciated by $1,000. Hence, you buy the car back for $4,000, return the vehicle, and you have made $1,000 on the sale. Short selling is essentially a (bearish) bet that a stock price will fall, and it is one way that traders make profits in a declining market.
speculator(s) Anyone who engages in a transaction in hopes that it will return a profit in the future.
streamer A mechanism (usually a software program) that delivers continues stock quotes. Hence, the data streams in.
stop (stop order) An order to sell when a stock falls to a certain price that the shareholder specifies (or an order to buy that a short seller specifies). A stop order is sometimes referred to as a stop loss order, because it is used to protect against uncontrolled losses.
tape (ticker tape) Originally, this referred to the ticker tape that printed stock trades on the floor of the exchange. Today, when one refers to the "tape", that usually means the trend of the market. "Don't fight the tape" means that one should not try to buck the market's trend.
technical analysis The study of stock charts and their pattern(s). Technical analysis is used to help predict what might happen in the future. This differs from fundamental analysis which is the study of company fundamentals.
ticker A symbol, or "name" of a stock. The term comes from the old days, when stock trades were reported on ticker tape (a paper tape that punched wholes, showing stock symbols and trading prices). Today, it means the stock's "ID" that you use to make a trade. Ticker symbols of 3 or less characters belong to the New York Stock Exchange or American Exchange, while tickers of 4 or 5 characters belong to the NASDAQ.
trade, trader A trade occurs when one person sells shares to another person, hence, it trades hands. A trader is anyone who participates in this activity.
trend The overall direction of a stock or the market. An uptrend is when a stock makes progressively higher highs and higher lows; a downtrend is when a stock makes progressively lower highs and lower lows.
volatility The amount a stock moves in price, from high to low, in either direction. Volatility often refers to a single day, although it can refer to the distance of price swings from day to day as well.
volume The number of shares a stock has traded. Some stocks trade millions, or tens of millions or shares or more a day, while others might trade only a few thousand.
Wall Street Originally, Wall Street was an area which people traded commodities. While there is literally a Wall Street (road), today, it refers to the stock market in general.