Stock Market Terminology

1. Ask – The price that a seller is willing to take for a share of stock; how much it will cost you to buy stock
2. Bear Market – A period of declining stock value, usually accompanied by investor pessimism. The
Vanguard Group defines a bear market as a price decline of 20% or more over at least a two-month period
3. Block Trade – Buying or selling a large amount of shares; the minimum is 10,000 shares but most block
trades are much larger
4. Blue Chip – An established company with a national or international reputation for stability, profitability,
and value
5. Bull Market – A period of rising stock value, usually accompanied by investor optimism.
6. Bid – The price that a buyer is willing to pay; how much you will make when you sell
7. Close – The price of the stock at the end of the trading day
8. Dividend – A payment made out of the company’s profits to its shareholders
9. Dow Jones Industrial Average – The leading stock market index in the U.S.; averages the value of 30
component stocks (blue chip stocks)
10. Earnings Per Share (EPS) – The company’s profit divided by the average number of outstanding shares, or
shares currently in the market; gives you an idea of the stock’s value
11. Electronic Communication Network (ECN) – Computer system that facilitates stock trading outside of a
stock exchange
12. Fundamental Analysis – Examining the financial health and strength of a company to determine its share
price, future value, and earnings expectations
13. Good ‘Til Cancelled (GTC) – When your order is valid until you cancel it; placing an order to buy 100
shares at $10 GTC means that is a standing order until you tell the system to kill it
14. Hedge – Limiting your losses or reducing risk by placing orders to cover two or more possible events in the
market
15. Initial Public Offering (IPO) – The first time a company’s stock is available to the public on an exchange
16. Limit Order – When you want to buy or sell a stock at a specific price or better
17. Liquidity – Being able to sell or buy shares in a stock without the transaction seriously affecting the stock’s
price; also refers to how easy it is to buy or sell shares
18. Margin – Borrowing money to trade for more than what you have in your account
19. Margin Call – When the amount of money you have in your margin account falls below the broker’s
minimum margin requirement, or the lowest amount you must have in your account
20. Market Capitalization – One measure of a company’s worth; the price of a share multiplied by the
number of shares currently in the market
21. Market Order – When you want to buy or sell a stock at its current price
22. Moving Average – The average of a stock’s price over a period of time, adjusted daily; gives you an idea of
a stock’s trend
23. Open-high-low-close (OHLC) – A type of chart that shows you the open, high, low, and close price of a
stock for a period of time; a candlestick chart is an OHLC chart
24. Price-to-Earnings Ratio (P/E Ratio) – How much a stock costs relative to how much the company earns
per share of stock; calculated by dividing the stock price by the company’s earnings per share (EPS)
25. Quote – The bid, ask, and last price for a stock at a given point during the trading day
26. Short Sale – When a trader borrows shares from a brokerage, sells them, then buys them back when the
stock is cheaper, returning them to the broker and pocketing the difference (the profit); used when you
think a stock’s price is going to decrease. For example, ABC is at $10. You borrow 100 shares and sell them
for $1,000. The price goes down to $9. You buy 100 shares of ABC for $900 and return them to the broker,
thus pocketing a $100 profit ($1,000 minus $900)
27. Spread – The difference between the bid and ask price
28. Stop Order – When you want to buy or sell a stock after it reaches a certain price; at that time, the order
turns into a market order. Used often to limit losses or to protect profits (also known as a stop-loss order)
29. Technical Analysis – Examining a stock’s price through the use of metrics, indicators, past data, and other
techniques to identify trends
30. Uptick – When a stock’s price rises
31. Volatility – How much a stock’s price rises or falls over a period of time; a highly-volatile stock will have its
price go up and down drastically over a period of time, while a stable stock has low volatility
32. Volume – The amount of shares being traded at a given point in time; this gives you an idea of how much
interest there is in the stock
33. Yield – The percentage of a stock’s price that is paid out in a dividend; For example, a stock that is worth
$50 per share and pays out a dividend of $5 per quarter has a quarterly yield of 10%