27 Stock Trading Terms Every New Trader Needs To Know
As with learning anything new, there is a lot of jargon to get use to. Trading is no different.
These are the terms that you will come across the most and will need to know what they mean and how they apply to you.
#1 52-Week High – This refers to the highest price that a stock, currency or index has been trading over the past 52 weeks
#2 52-Week Low – Conversely, this is the lowest price that a stock, currency or index has been trading over the past 52 weeks.
#3 After-Hours Trading – This is trading that occurs outside of the normal stock market hours. In Australia, that is 10am-4pm Monday Friday.
There are some brokers that offer pre-market and after hours trading but trades can be hard to execute as there is much less activity at this time.
#4 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.
This also refers to the depth of a market. AKA, the number of buyers and sellers.
#5 Bear Market – This is when the market declines by 20% or more from recent highs
. #6 Bid-Ask Spread – The spread is the difference between the bid price and ask price prices for a particular security.
#7 Blue-Chip Stocks – This refers to stocks that have a market capitalisation of $10bn or more. #8 Bollinger Bands – Indicator that shows how far away a stock is trading from its mean.
The further away from the mean, the more likely the security will reverse back to the average. #9 Buyback – When a company decides to buy back it’s own stock from shareholders.
#10 Candlestick – This technical indicator shows investors the opening and closing prices of a particular security during a certain amount of time.
#11 Circuit Breakers – This is a measure that has been put in place by the as an effort to reduce panic-selling on U.S. stock exchanges.
#12 Commodities – Raw materials such as gold, water, coffee etc
#13 Dead Cat Bounce – This is when the market has dropped significantly but appears to be turning around for no reason and people trying to by the bottom. This is usually followed by a lower low.
#14 Institutional Investors – These are large companies or firms that are buying and selling. Sometimes referred to as “the big end of town”
#15 Initial Public Offering (IPO) – This is when a private company lists on the stock market for the first time.
#16 Margin – The deposit of collateral needed to trade securities, futures or currencies at leverage. #17 Market Capitalization – The market value of a company. It’s calculated by multiplying the share price by the number of shares outstanding. #18 Moving Average Convergence Divergence (MACD) – An indicator that tracks the momentum of the buying and selling of a security.
#19 Overbought – When a security is trading well above its long-term average.
#20 Oversold – When a security is trading well below its long term average.
#21 Range Trading – A method of trading between the high and low point over a set period.
#22 Relative Strength Index – An indicator that measures the momentum of price ranging between 0-100.
#23 Resistance Level – The price point at which a security struggles to go above.
#24 Short Selling – This is when a trader borrows a security and sells it into the open market with the aim of buying it back at a lower price at a later date.
#25 Stop Order – This trading order will execute a buy or sell action when a stock
reaches a set price.
#26 Support Level – The price point at which a security struggles to go below.
#27 Technical Analysis – Determining the future price movement of a security by looking at charts.
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