Stock Market Glossary: 120 Terms Explained Simply

A

After-hours trading

Trading that takes place after an exchange’s normal session. It often has fewer participants, wider spreads and sharper price moves.

Ask

The lowest price a current seller is willing to accept.

Asset

Something with financial value, such as cash, shares, bonds or property.

Average down

Buying more after a price falls, reducing the average purchase price but increasing exposure and risk.

B

Balance sheet

A financial statement showing a company’s assets, liabilities and shareholders’ equity at a particular date.

Bear market

A prolonged period of broadly falling market prices and weaker confidence.

Bid

The highest price a current buyer is willing to pay.

Bid-ask spread

The gap between the best bid and best ask. It is an immediate cost of trading and a clue about liquidity.

Bond

A loan made to a government or company in return for interest and repayment terms.

Book value

A company’s accounting assets minus its liabilities. It is not automatically the same as market value.

Breakout

When price moves beyond a previously watched level or range. A breakout can fail and is not a guarantee of continuation.

Broker

A regulated firm or platform that provides access to markets and handles investment orders.

Brokerage account

An account used to hold cash and investments and place orders through a broker.

Bull market

A prolonged period of broadly rising market prices and stronger confidence.

Buyback

When a company purchases its own shares. Retired shares can reduce the share count.

C

Candlestick

A chart bar showing the open, high, low and close for a selected period.

Capital gain

The increase in value realised when an asset is sold for more than its purchase price.

Capital loss

The decrease in value realised when an asset is sold for less than its purchase price.

Cash flow

The movement of cash into and out of a business. It can differ from accounting profit.

CFD

A contract for difference that tracks a price without owning the underlying asset. CFDs commonly use leverage and carry substantial risk.

Chart timeframe

The period represented by each candle or bar, such as one minute, one day or one week.

Compound growth

Growth earned on both the original amount and earlier gains over time.

Correction

A noticeable market decline that is smaller or shorter than a full bear market.

Correlation

A measure of how closely two assets tend to move in relation to one another.

Cost basis

The amount paid for an investment, usually adjusted for fees and certain later transactions.

D

Day trading

Opening and closing positions within the same trading day.

Debt

Money a company or person owes and must repay under agreed terms.

Dilution

A reduction in existing shareholders’ percentage ownership, often caused by the issue of new shares.

Diversification

Spreading exposure across different investments or economic drivers to reduce dependence on one outcome.

Dividend

A payment a company may choose to make to shareholders from available cash.

Dividend yield

The annual dividend per share divided by the current share price. A high yield can reflect increased risk or an expected cut.

Dollar-cost averaging

Investing a set amount at regular intervals rather than investing everything at one price.

E

Earnings

A company’s profit after the relevant costs and expenses.

Earnings call

A presentation and question session in which management discusses financial results and the business outlook.

Earnings per share (EPS)

Profit attributable to each share. Diluted EPS also considers possible additional shares.

EBITDA

Earnings before interest, tax, depreciation and amortisation. It is a useful comparison measure but is not the same as cash flow.

Enterprise value

A broad company-value measure that commonly combines market capitalisation with debt and subtracts cash.

ETF

An exchange-traded fund: a basket of investments that can be bought and sold like a share.

Ex-dividend date

The date from which a new buyer is no longer entitled to the next declared dividend.

Exchange

An organised marketplace where securities are listed and traded under set rules.

Exchange rate

The price of one currency measured in another currency.

Execution

The completion of a buy or sell order. The final price can differ from the price first seen.

Expense ratio

The yearly operating cost of a fund, expressed as a percentage of the money invested.

F

Financial statement

A formal report describing a company’s financial position or performance.

Float

Shares generally available for public trading, excluding holdings that are not normally traded.

FOMO

Fear of missing out: the urge to act because other people appear to be profiting.

Free cash flow

Cash left after a business covers operating needs and capital expenditure.

Fundamental analysis

Studying a company’s business, finances, competition and valuation.

G

Gap

A jump between trading prices where little or no trading occurred in between.

Gross margin

Gross profit expressed as a percentage of revenue.

Growth stock

A company whose value is strongly linked to expectations of above-average future growth.

Guidance

Management’s estimate or range for future business performance. It is not guaranteed.

H

Hedge

A position designed to reduce exposure to a particular risk. A hedge can carry costs and create other risks.

I

Index

A rules-based measure tracking a selected group of securities.

Index fund

A fund designed to follow a particular market index.

Inflation

A broad rise in prices that reduces the purchasing power of money.

Initial public offering (IPO)

The process through which a private company first offers shares to public investors.

Insider

A director, senior employee or major owner with a close relationship to a company.

Interest rate

The cost of borrowing money or the return paid for lending or saving it.

Investing

Buying assets with the aim of building value or income over a longer period.

L

Leverage

Using borrowed money or derivatives to control a larger position. It magnifies both gains and losses.

Liability

A debt or financial obligation owed by a company or person.

Limit order

An order that sets the worst acceptable buying or selling price. It may not be completed.

Liquidity

How easily an asset can be traded without sharply moving its price.

Long position

A position that generally benefits if the asset’s price rises.

M

Margin

Money or collateral required to open and maintain a leveraged position.

Margin call

A demand for more funds or a reduction in positions when account equity falls below a broker’s requirement.

Market capitalisation

Share price multiplied by the number of shares outstanding. It measures the market value of a company’s equity.

Market maker

A participant that regularly quotes buying and selling prices to help provide liquidity.

Market order

An order that prioritises immediate execution rather than a particular price.

Moving average

An average of past prices that updates over time and smooths short-term movement.

N

Net income

Profit remaining after all recorded expenses, interest and taxes.

O

Operating margin

Operating profit expressed as a percentage of revenue.

Options contract

A contract giving defined rights connected to an underlying asset before or at expiry. Options can be complex and can lose their full value.

Order book

A visible list of current buy and sell orders at different prices.

Overbought

An indicator description suggesting recent buying momentum has been unusually strong. It does not guarantee a fall.

Oversold

An indicator description suggesting recent selling momentum has been unusually strong. It does not guarantee a rise.

P

P/E ratio

The share price divided by earnings per share. It needs growth, quality and business context.

Paper trading

Practising with simulated money rather than risking real capital.

Portfolio

The full collection of investments and cash owned by an individual or organisation.

Position

The amount of an asset or market exposure currently held.

Position sizing

Choosing how much capital or risk to allocate to one position.

Pre-market trading

Trading before an exchange’s normal session, usually with lower liquidity than regular hours.

Price target

An analyst’s estimate of a possible future price. It is an opinion, not a promise.

Profit margin

Profit expressed as a percentage of revenue. Different margin measures include different costs.

Public company

A company whose shares can be traded by public investors on a market.

Public float

The portion of shares generally available for public trading.

Pullback

A temporary move against the broader direction of price.

R

Resistance

An area where selling previously became noticeable. It is not a guaranteed ceiling.

Return

The gain or loss from an investment, including relevant income and price change.

Revenge trading

Taking impulsive trades in an attempt to recover a recent loss quickly.

Revenue

Money earned from selling goods or services before expenses are deducted.

Risk

The possibility that an outcome differs from what was expected, including the chance of permanent loss.

Risk management

Rules and decisions used to limit how much damage one position or event can cause.

Risk-to-reward

A comparison between the amount at risk and a reasonable possible gain.

RSI

Relative Strength Index, a momentum indicator measuring the speed and size of recent price changes.

S

Sector

A group of companies operating in a similar part of the economy.

Share

A unit of ownership in a company or fund.

Share class

A category of shares with particular voting, dividend or ownership rights.

Share price

The current market price for one share. It does not show company size by itself.

Shares outstanding

All shares currently held by shareholders, including insiders and institutions.

Short position

A position that generally benefits if price falls. Losses can be very large if price rises.

Slippage

The difference between the expected order price and the actual execution price.

Spread

The difference between the best available buying and selling prices.

Stock

A security representing ownership in a company.

Stock split

An adjustment that changes the number of shares and price per share without directly changing the company’s total value.

Stop loss

An instruction intended to close a position at a chosen level. Gaps and fast markets can produce a different execution price.

Support

An area where buying previously became noticeable. It is not a guaranteed floor.

T

Technical analysis

Studying price, volume and market behaviour using charts and related tools.

Ticker symbol

The short code used to identify a listed security.

Trading

Buying and selling assets with a greater focus on price movement and defined timing.

Trading halt

A temporary pause in trading, often caused by major news, volatility or exchange rules.

Trading plan

Written rules covering entries, exits, risk, position size and review.

Trend

The general direction of price over a chosen timeframe.

V

Valuation

The process of comparing price with earnings, cash flow, assets, growth and risk.

Volatility

The size and speed of price movement. High volatility is not automatically the same as permanent risk.

Volume

The number of shares or contracts traded during a period.

VWAP

Volume-weighted average price: the average session price weighted by trading volume.