STOCK MARKET 101
STOCK MARKET 101.
By MARCUS DE MARIA.
When starting to trade on the stock market for the first time the terminology can be a bit daunting, so here is a Stock Market 101 – giving you the language of The City…
Stock Market
Ask: The current price for which a security may be bought (purchased)
Buying power: The dollar amount of securities that a client can purchase using only the (special memorandum) account balance and without depositing additional equity
Bid: The current price at which you could sell your stock
DJ30: Equivalent to the UK’s FTSE, in America Dow Jones Industrial Average / DJ30 is 30 of the largest US companies; (which represent in value about a 1/5 of US stocks)
Fill: An executed order; the price at which an order is executed
FTSE 100 (Financial Times Stock Exchange): Largest 100 companies on the UK stock market (by market capitalisation = no. of shares x share value) When markets move by many points it is because the FTSE 100 companies have moved up or down by this much
Fundamental Analysis: Method used to evaluate the worth of a share by studying the financial data of the company. E.g. looking at earnings / profits, sales, management team etc
Initial public offering (IPO): A company’s initial public offering, sometimes referred to as “going public”, and is the first sale of stocks by the company to the public
Limit Offer: An order to buy or sell when a price is fixed
Long: Establishing ownership of the responsibilities of the buyer of a stock;
holding securities in anticipation of a price increase in that security
Margin: An account in which purchase of stock may be financed with borrowed money
Market Index: Group of shares from which the average movement is calculated to see if the market’s general movement is up or down
Market Maker: A broker or bank which is continually prepared to make a two-way price to purchase or sell a security or currency
Market Order: Instructions to the broker to immediately sell to the best available bid or to buy for the best available offer
NYSE/NASDAQ: 2 of America’s main stock exchanges. The New York Stock Exchange and the NASDAQ which consists mainly of technology stocks
Open Trades: Current trades that are still held active in the customer’s account
Range: The difference between the high and low price during a given period
Selling Short: Selling a security and then borrowing the security for delivery
with the intent of replacing the security at a lower price
Stock market: Market for buying and selling shares of a company. If you buy shares in a company it means you own a tiny part of it. Companies sell shares on the market to raise money for expansion, pay for equipment, fund projects etc
Stops (Buy): Buy stops are orders that are placed at a predetermined price over the current price of the market. The orders become a “buy at the market” order if the market is at or above the price of the top order
Stops (Sell): Sell stops are orders that are placed at a predetermined price below the current price. Sell stop orders become “sell at the market” orders if the market is at or below the price of the stop order
Stop Loss: Risk management technique in which the trade is liquidated to halt any further decline in value
Technical Analysis: Uses just the share’s price and volume information, and the chart patterns that these form to decide whether the share is likely to go up or down
Tick: Minimum fluctuation of a stock
Trailing Stop: A stop-loss order that follows the prevailing price trend
Charting
Breakout: The point when the market price moves out of the trend channel
Channel: In charting, a price channel contains prices throughout a trend
Resistance: A price level at which rising prices have stopped rising
and either moved sideways or reversed direction
Support: An historical price level at which falling prices have stopped falling
and either moved sideways or reversed direction
Technical Analysis: A form of market analysis that studies demand and supply for securities and commodities based on trading volume and price studies. Using charts and modeling techniques, technicians attempt to identify price trends in a market
Trendline: A line drawn that connects either a series of highs or lows in a trend. The trendline can represent either support as in an uptrend line or resistance as in a downtrend line
Trending Market: Price moves in a single direction, generally closing at an extreme
Volume: Shares traded for a given market or stock
About the Author
Marcus de Maria is founder of Investment Mastery. See: www.investment-mastery.com