40 Stock Market Terms You Need for Trading {With Infographic}

Stock Market Terms: Key Takeaways

• Learn these key terms to help you better navigate the stock market and trading…
• These top 40 stock market terms will get you up to speed in no time!
• Long, short, bull, bear, float, execution — we break down essential vocab for you right here. Read on. 

Every trader must know basic stock market terms. 

StocksToTrade is here to help with a simple guide to basic terms and phrases. Our goal? To help you make sense of trading jargon. So when you hear our top mentors discussing trades or financial news, it all makes sense.

Get up to speed with 40 stock market terms every trader needs to know. Let’s dive in!

What Is the Stock Market?

The stock market is a collection of markets from around the world. It’s where traders and investors buy and sell shares of companies. In the U.S., most trading is done on the NYSE and Nasdaq.

But there are also over-the-counter (OTC) markets where day traders can find penny stocks. 

Traders and investors buy and sell stocks hoping to make a profit. There are a lot of different strategies for this. Some hold stocks for years — that’s long-term investing. 

Others open and close trades within minutes or hours. That’s what we call day trading. Learn more about market strategies here.

The stock market has its own culture, and people follow market action the same way sports fans follow their favorite teams.

And to keep up, you need to know the jargon…

Why Traders Must Learn Stock Market Terms

If you want to learn to trade, it’s important that you understand the language of the markets. So start with the most common stock market terms. Read on to learn now!

40 Common Stock Market Terms for Traders

Below are 40 of the most common stock market terms, with simple explanations.

Buy

To take a position by buying shares of a company.

As a trader, you generally buy shares when you think a stock’s price will rise.

Sell

To sell the shares you currently own.

Traders generally sell shares when they see an opportunity to take profits or they think the stock’s rise is ending.

Bid

When a trader in the market makes an offer to buy shares.

Traders will bid for a stock at a certain price.

Ask

When a trader offers their shares for sale at a certain price.

If a trader holds shares and wants to sell them at a particular price, they place an order asking buyers to purchase them.

Bid-Ask Spread

The difference between the highest price at which someone is willing to buy shares and the lowest price someone is willing to sell shares.

Bull Market

A market condition where stock prices are continually rising.

Bull markets are characterized by optimism and excitement from traders and investors.

Bear Market

A bear market is the opposite of a bull market. It’s a market in which prices continually fall.

Bear markets are times when the outlook seems bleak for a company, an industry, or the overall economy. Traders and investors are less willing to buy stocks, and many are looking to sell. This causes prices to fall.

Limit Order

A type of stock market order that provides instruction to only execute at a certain price.

For example, a trader could place a limit buy order to purchase 100 shares of a stock at $10.20. The broker will attempt to buy 100 shares at a price of $10.20 or less.

Market Order

This stock market order provides instruction to buy or sell as quickly as possible, at whatever price is currently available.

Market orders can be expensive if there’s not enough volume. If you’re going to trade penny stocks, never use market orders.

Good Till Canceled Order

This market order remains open until you complete the trade or cancel the order. Also known as a GTC order.

Day Order

With this market order, if it isn’t filled during the day, it’s automatically canceled at the market close.

Volatility

The statistical measure of how much a stock moves up or down.

Stocks that move up and down wildly are known as volatile stocks. They can provide great profit opportunities, but also come with greater risk.

Liquidity

The measure of how easy it is to buy and sell a stock.

If a lot of buyers and sellers are actively trading stock, you’ll generally find it easier to enter and exit a position. The stock is more liquid.

Trading Volume

The number of shares being traded at any time.

More trading volume means more liquidity, and traders can more easily enter and exit positions.

Going Long

When going long, you purchase stock shares hoping to profit from an increase in the stock price.

Going Short

When a trader tries to profit from a stock’s dropping price.

Short sellers borrow shares from a broker, sell them, and hope the stock price declines. Then they buy the shares back and return them to the broker.

Averaging Down

This is where a trader buys more shares of a stock as the price drops, lowering the average price paid for the position.

Averaging down can work for long-term investors, but we don’t recommend it for active traders.

Market Capitalization

Market capitalization, aka market cap, is the total value of all a company’s shares.

For example, if a company has one million shares outstanding and the stock price is $10 per share, the market cap is $10 million.

Public Float

This is the term for a company’s freely traded shares. As active traders, we often look for companies with a low float, as their prices tend to be more volatile.

Outstanding Shares

This is the total number of a company’s shares. It includes both the public float and restricted shares.

IPO

IPO stands for initial public offering. It’s when a company goes through the process of selling shares on the stock market for the first time.

Secondary Offering

A company may raise money by offering shares, even after the company’s shares are traded on a stock exchange. This is called a secondary offering.

Blue-Chip Stock

These are large, stable, well-known companies that are often household names.

Forex

Forex is short for foreign exchange. The term refers to the global trading of currencies in a way similar to the way stocks are traded.

Hedge Funds

A hedge fund is a type of investment fund that often uses non-standard investment and trading techniques.

Mutual Funds

Mutual funds are pools of investor capital for investing in stocks, bonds, and other financial assets.

ETFs

Short for exchange-traded fund. ETFs are similar to mutual funds — they’re pools of capital used for investment purposes. But instead of wiring your money into the fund, you can purchase shares of the ETF on a stock exchange.

ADR

Short for American depositary receipt. These certificates represent shares of overseas stocks.

ADRs allow traders to buy and sell overseas stocks on U.S. stock exchanges.

Beta

A measure of a stock’s performance compared to the broader market. Beta can help traders assess the risk of holding a stock.

Stockbroker

An agent that allows traders to buy and sell stocks. Find out more about brokers here.

Day Trading

The practice of entering and exiting stock trades within a single day.

For example, if you purchase a stock in the morning and sell it in the afternoon, you’ve day traded.

Dividend

This is when a company pays a portion of its earnings to its shareholders. Long-term investors and retirees generally focus on dividends.

Stock Charts

A visual graph of a stock’s price over time. Traders use stock charts to help them interpret a stock’s price action and pattern.

Stock Exchange

A stock exchange is an entity where stocks are bought and sold. The most well-known stock exchanges are the New York Stock Exchange (NYSE) and the Nasdaq.

Execution

Execution is the fulfillment of a stock trading order.

For example, you place an order with your broker to buy 100 shares of XYZ at $10. When that trade is completed, that order is executed.

Margin

Margin is when traders borrow money to trade shares. With margin, you can make money and lose money faster. Remember, 90% of traders lose before you try margin trading. Be careful!

Moving Average

A common technical indicator traders use on stock charts to see a stock’s price trend. The moving average is an average of the stock price over a certain period.

For example, the 20-day moving average is calculated by taking the price of the stock on each of the prior 20 days, then finding the average of those 20 prices.

Stock Portfolio

A stock portfolio is an investor’s collection of stocks. 

Trading Mentor

An experienced trader who can shorten your learning curve by teaching you how they trade and what they’ve found to work in the markets. The SteadyTrade Team is our mentorship community. Apply to join us!

Price Quote

A price quote is a stock’s price at a certain point in time. Traders will often want up-to-date price quotes to better analyze stocks and find decent trading set-ups.

Price Rally

A price rally is when a stock price rises at a noticeably quicker pace.

Sector

The stock market is made up of shares of companies in different industries and niches. We call those sectors.

Stock Symbol

A unique collection of letters and/or numbers that represent a stock. Amazon, for example, trades on the Nasdaq under the symbol AMZN.

Dividend Yield

This refers to the size of a company’s dividend compared with the price of its stock.

Stock Market Slang: How to Learn Fast

They say the best way to learn a new language is through total immersion. That means that if you want to learn German, you should go live in Germany and speak German every day.

Applying that idea to stock market slang, I’d say the quickest way to learn is by reading everything you can and following people who speak market on social media. Check out my live Instagram sessions. Just be careful who you follow.

When you find a term you don’t understand, come back to this post or search for the definition. In no time, you’ll be up to speed.

Do I Need to Know These 40 Stock Market Terms to Start Trading Stocks?

It’s pretty simple to trade a stock. So in reality, you don’t need to know all of the above terms, but you should still make an effort to learn them…

That’s because successful trading is a marathon, not a sprint. Sure, you could trade a stock right now, and maybe make a profit. But you should focus on building your knowledge base and your trading skills.

By learning stock market terms, you’ll have the basic building blocks to help you climb the ladder of success step by step, tackling new trading concepts and techniques along the way.

What Comes After Learning Stock Market Terms?

Once you’re comfortable with stock market terms and ready for next steps, it’s time to think about your market approach.

What will your trading strategy be? What tools can help you succeed?

No doubt, we’re big fans of our StocksToTrade trading platform. It has awesome charts, scanners, news feeds, and much more. Plus, we have tons of educational features and killer add-ons like…

• Breaking News Chat
• Breakouts & Breakdowns chat room
• Small Cap Rockets chat room
• STT Advisory

No matter how you plan to build your trading strategy, we’ve got you covered. Learn more here!

The Wrap on Stock Market Terms

Learning about the stock market is easier when you learn the fundamentals first.

Once you’re up to speed with common stock market terms, you can make better sense of market news and trading action.

That’s a great first step in your trading journey.

Any stock market terms we missed that you need help with? Leave a comment with your questions and input!