WHAT IS THE STOCK MARKET?
The stock market is a place where parties (both individuals and institutions) buy and sell stocks. There are several world-renowned exchanges like the New York Stock Exchange and the NASDAQ.
Stocks listed on these exchanges can be bought and sold. These stocks represent shares of ownership in a company. These companies sold shares of ownership in order to raise capital to fund their own operating expenses or grow the business.
Companies with stocks for purchase on a publicly-traded market must follow certain rules set forth by regulatory agencies like the SEC (Securities and Exchange Commission). They must be transparent about their accounting and make their business operations public.
Investors can also purchase stocks privately—they don’t have to be traded on a trading platform like the NYSE or the NASDAQ.
WHAT IS STOCK TRADING?
A stock trader is an investor in the financial markets. Stock traders can be professionals trading on behalf of a financial company or individuals trading on behalf of themselves. Individual traders, also called retail traders, often buy and sell securities through a brokerage or other agent.
The Key Stock Market Terms Every Trader Should Know / Understand
Let’s look at some of the most important stock market terms you’ll encounter as you learn how to trade stocks. Feel free to bookmark this page so you can return to it later as a handy reference.
Buy Stock – Means to buys shares or take position in a company.
Sell Stock – Getting rid of the shares as you have achieved your goal or want to cut down losses.
Ask – Ask is what people who are looking to sell their stocks are looking to get for their shares.
Bid – Bid is what you are willing to pay for a stock.
Ask-Bid Spread– Spread is the difference between what people want to spend and what people want to get.
Bull Market – A bull market is a market condition where investors are expecting prices to rise.
Bear Market – A bear market is a market condition where investors are expecting prices to fall.
Limit Order – A limit order is a type of order which executes at the price placed for buy or sell.
Market Order – A market order is a type of order which executes as quickly as possible at the market price.
Day Order – A day order is a direction to a broker to execute a trade at a specific price that expires at the end of the trading day if it is not complicated.
Volatility – This means how fast a stock moves up or down.
Going Long – Betting on the stock price will increase so that you can buy low and sell high.
Averaging Down – This is when an investor buys as the stock goes down so as to increase the price at which purchased.
Capitalization – This is what the market thinks a company’s value is.
Float – This is the number of shares that can be actually traded after deducting the shares held by insiders.
Authorized Shares – This is the total number of shares that a company can trade.
IPO – It is an Initial Public Offering that happens when the private company becomes a publicly-traded company.
Secondary Offering – This is another offering in order to sell more stocks and to raise more money form the public.
Dividend – Portion of the company’s earning which is paid to the shareholders.
Broker – A broker is a person who buys or sells stocks on your behalf.
Exchange – An exchange is a place where different types of investments are traded.
Portfolio – A collection of investments owned by you.
Margin – Margin account lets a person borrow money from the broker to buy shares.
Sector – A group of stocks in the same sector.
Stock Symbol – A one to three character alphabet root symbol which represents a company listed on the exchange.
Annual Report – An annual report is a report prepared by a company that’s intended to impress shareholders. It contains tons of information about the company, from its cash flow to its management strategy. When you read an annual report, you’re judging the company’s solvency and financial situation.
Arbitrage – Refers to buying and selling the same security on different markets and at different price points. For instance, if stock XYZ is trading at $10 on one market and $10.50 on another, the trader could buy X shares for $10 and sell them for $10.50 on the other market, pocketing the difference.
Beta – A measurement of the relationship between the price of a stock and the movement of the whole market. If stock XYZ has a beta of 1.5, that means that for every 1 point move in the market, stock XYZ moves 1.5 points, and vice versa.
Blue Chip Stocks – The stocks behind large, industry-leading companies. Blue-chip stocks offer a stable record of significant dividend payments and have a reputation of sound fiscal management. The expression is thought to have been derived from blue gambling chips, which is the highest denomination of chips used in casinos.
Bourse – This stock market term is a little murky. Technically, it’s just another name for the stock market and originates from a house in which wealthy men gathered to trade shares. However, when you hear it in today’s conversations about the stock market, it usually either refers to the Paris stock exchange or to a non-U.S. stock exchange.
Day Trading – The practice of buying and selling within the same trading day, before the close of the markets on that day, is called day trading. This is my primary trading strategy, although I have a long-term portfolio, as well. Traders who participate in day trading are often called “active traders” or “day traders.”
Haircut – In its simplest stock market terms, a haircut is an extremely thin spread between the bid and ask prices of a given stock. It can also refer to a situation in which a stock price gets reduced by a specific percentage for margin trades or other purposes.
Leverage – I’m not a fan of leverage, but it’s good for you to know this stock market term. When you use leverage, you borrow shares in stock from your broker with the goal of increasing your profit. If you borrow shares and sell them all at a higher price point, you return the shares and keep the difference. It’s a dangerous game that I urge you to avoid playing.
Low – Low is the opposite of high. It represents a lower price point for a stock or index.
Quote – Information on a stock’s latest trading price tells you its quote. This is sometimes delayed by 20 minutes unless you’re using an actual broker trading platform.
Asset Allocation – Balancing out the percentage of various asset classes (such as stocks, bonds, and cash) in your portfolio is called asset allocation; the goal is to minimize risk and maximize reward.
Average Daily Trade Volume – ADTV – The number of trades for a particular security, divided by a specific number of days, will yield its ADTV, or average daily trading volume.
Backdoor Roth IRA – This strategy (not to be confused with a similarly named product) allows high-income earners to place their retirement savings into a tax-deferred Roth IRA.
Back-End Load – When investors sell their shares in a mutual fund, they pay this sales commission.
Balance Sheet – An accounting of a company’s assets, liabilities (debt), and the capital it receives from shareholders.
Balanced Fund – A mutual fund with a mixture of stocks, commodities, and/or bonds.
Bar Chart – This price evaluation tool gives a visual representation of a particular security’s change in price over time.
Bollinger Bands – A way to analyze the relative stability or volatility of a particular security by showing its price activity with bandwidths that represent the space between its highs and lows.
Bond – An organization such as a government or company can issue loans, represented by fixed-income bonds that offer the investor a relatively more stable return. After a certain period of time, established at the outset of the bond, it can be redeemed for a particular price. Government bonds are regarded as one of the most secure investment vehicles since it is extremely unlikely that the U.S. government will default on its obligation to repay the loan.
Call Option – Investors buy the right to purchase a specific number of shares of stock at an agreed price, without locking themselves into the obligation.
Call Option Volume – The amount of buying and selling of a certain security is called its volume. Stocks, currencies, and other types of asset classes all have a trading volume.
Candlestick – This technical indicator shows investors the opening and closing prices of particular security during a certain amount of time.
Capital Gains – The positive difference in value between an asset’s selling price and what the investor first paid for that asset is its capital gain.
Capital Gains Distribution – This is a payment distributed to shareholders of a mutual fund once certain stocks and securities have been liquidated and the dividends and interest earned have been calculated.
Cash Asset Ratio – This measurement tool allows investors to compare short-term liabilities and highly liquid assets.
Cash Flow – The amount of cash and/or equivalents a company brings in, obtained by calculating its income and subtracting its expenses. Cash flow also applies to individual investors as well, if they have income-generating assets such as stocks that pay dividends, rental properties, or ownership in a business. Investors often regard cash flow as the wellspring and fuel of their financial success and growth.
Profit Margin – A commonly used stat, profit margin helps investors see the profitability of their trading activity.
Put Option – This financial contract between buyer and seller gives the owner of the put the right (but not obligation) to sell 100 shares of a certain stock at an agreed price to the buyer before or on the expiration date.
Put Option Volume – The number of put option contracts traded in a specific market with a certain amount of time.
For all of you wanting to know how I decide to enter and exit my trades, I have listed those key points below:
- I have created a watchlist of the tickers I like to trade the most. Download my watchlist right “HERE”
- I review that watchlist against the alerts from the TT Blackbox each 5-minute interval.
- I focus on the $VIX. This measures volatility in the market. If volatility is moving up, the market is moving down, and vise versa. This simply means I start here and does not mean I will not trade against the market. However, I do not recommend that for the novice trader.
- Once I know the direction of the market, I start to focus on the tickers moving in that direction.
- Once these tickers alert on the TT Blackbox, I typically wait till the closure of the next 5-minute candle and I enter.
- I then immediately set a limit sell order for 5%. Keep in mind I am trading shares in the price range of $30-$400 tickers so 5% is big money.
- I exit my trades based on two points. One, being the TT Blackbox stops alerting or alerts in the opposite direction, and two being my 5% target has been met.
Here is a screenshot of the tickers I watch daily:
Transparent Traders created the first-ever solution that specifically alerts for swing trades. It will also alert for bullish & bearish day trades. Our Blackbox runs off of multiple algorithms and uses predictive A.I. to locate the most accurate day or swing trades that it calculates to give the best chance for success. Couple this with proper Due Diligence and our users are given the edge needed to be more successful in the trading world.