Stock Market Terminology
I’m Meta Matt, Director of Education and welcome to PB University LITE! This is a 50 Class Trading 101 Series geared towards both new and veteran traders alike! We go over everything from Trading Psychology, Technical Analysis, and Options Trading to Commodity Trading, Forex, and more!! This 50 Class series is not designed be taken in order, it is instead designed for traders to browse and pick which classes interest them. I will include the list of classes at the bottom of this page.
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This is class #1, which is our Stock Market Terminology Class!! First let's start with the concept of a "bull market." A bull market is a period of time in which stock prices are generally rising and investors are optimistic about the future of the market. On the other hand, a "bear market" is a period of time in which stock prices are generally declining and investors are pessimistic about the market's future.
Another important term to understand is "dividend." A dividend is a payment made by a company to its shareholders, usually in the form of cash or additional shares of stock. Dividends can be a good source of income for investors, but it's important to note that companies are not required to pay dividends and may choose to reinvest profits back into the business instead.
Now, let's move on to some other important stock market terms:
- “Outstanding shares”: Outstanding shares refer to the number of shares of a particular stock that are owned by all shareholders, including restricted shares (which are shares owned by insiders or large shareholders) and free-floating shares (which are shares available for public trading). The total number of outstanding shares can affect the price of a stock, as a larger number of outstanding shares may dilute the value of each individual share.
- "Stock split": A stock split is a corporate action in which a company increases the number of outstanding shares of its stock by issuing more shares to current shareholders. This can be done to make the stock more affordable for individual investors or to increase the liquidity of the stock.
- "Initial public offering (IPO)": An IPO is the first time that a company's stock is made available for purchase by the general public.
- "Blue chip stocks": Blue chip stocks are stocks of well-established companies with a long track record of stability, reliability, and strong performance. These stocks are often considered to be a safe investment.
- "Growth stocks": Growth stocks are stocks of companies that are expected to grow at a faster rate than the overall market. These stocks may be riskier, but they also have the potential for higher returns.
- "Value stocks": Value stocks are stocks of companies that are trading at a lower price compared to their intrinsic value, as determined by fundamental analysis. Investors who buy value stocks are hoping to capitalize on the undervalued price and realize a profit when the stock's price eventually rises to its true value.
- "Index fund": An index fund is a type of mutual fund or exchange-traded fund (ETF) that tracks the performance of a specific market index, such as the S&P 500.
- "Stock market index": A stock market index is a statistical measure of the changes in the value of a portfolio of stocks, representing a particular market or market sector. Some well-known indices include the Dow Jones Industrial Average (DJIA) and the S&P 500.
- "Sector": A sector is a group of companies in the same industry, such as technology or healthcare.
- "Market capitalization": Market capitalization, also known as "market cap," is the total value of a company's outstanding shares of stock. It is calculated by multiplying the company's stock price by the number of shares outstanding.
- "Earnings per share (EPS)": Earnings per share is a company's profit divided by the number of outstanding shares of stock. It is used to determine the profitability of a company.
- "Price-to-earnings ratio (P/E ratio)": The price-to-earnings ratio is a measure of a company's stock price relative to its earnings per share. It is calculated by dividing the stock price by the EPS.
- "Return on investment (ROI)": Return on investment is a measure of the profitability of an investment, calculated by dividing the profit by the cost of the investment. For example, if an investment of $100 generates a profit of $20, the ROI is 20%.
- "Short selling": Short selling, also known as "shorting," is the practice of selling a stock that the seller does not own, with the hope of buying it back at a lower price in the future.
- "Margin": Margin is the use of borrowed money to buy securities, such as stocks. It allows investors to potentially amplify their returns, but it also increases the risk of losses.
- "Bonds": Bonds are debt securities issued by corporations or governments to raise capital. They pay periodic interest to bondholders and return the principal when the bond matures.
- "Yield": Yield is the return on an investment, expressed as a percentage of the investment's cost. For example, if a bond with a face value of $100 pays $5 in annual interest, its yield is 5%.
- "Stop-loss order": A stop-loss order is an order placed with a broker to sell a stock if it reaches a certain price, with the goal of limiting potential losses.
- "Limit order": A limit order is an order to buy or sell a stock at a specific price or better.
- "Market order": A market order is an order to buy or sell a stock at the best available price.
Now, let's move on to some advanced stock market terms:
- "Derivatives": Derivatives are financial instruments whose value is derived from the value of an underlying asset, such as a stock or commodity. Examples of derivatives include futures contracts and options. NFTs are derivatives of crypto.
- "Futures contract": A futures contract is a standardized agreement to buy or sell a specific asset at a predetermined price at a specified time in the future.
- "Options": Options are financial contracts that give the holder the right, but not the obligation, to buy or sell an underlying asset at a specific price on or before a certain date.
- "Hedge fund": A hedge fund is an investment fund that uses a variety of strategies, including the use of derivatives, to generate returns for its investors. Hedge funds are typically only available to accredited investors and are known for their high risk and potentially high return.
- “PBU”: PBU Stands for Pennybois University!! Our extensive stock trading education program!!
PB University LITE Class List
1) Trading Terminology
2) Stock Market Indices
3) Common, Preferred, and Penny Stocks
4) Diversification of Assets
5) Fundamental Analysis Made Easy
6) Technical Analysis Made Easy
7) Risk Management In The Market
8) Portfolio Management
9) How To Follow Market News
10) Trading Psychology
11) Options Explained
12) The Greeks In Options Trading
13) How To Short Sell Options
14) Covered CALLS
15) Spread Trading
16) Online Brokers for Options Trading
17) Implied Volatility Calculators & Tools
18) Protective PUTS
19) Iron Condors
20) Straddles
21) Reading Level 2
22) Taxes
23) Trading Psychology Techniques
24) The Art Of Trading
25) Becoming A Jedi In The Stock Market
26) Futures Trading Explained
27) Commodity Trading 101
28) Regulatory Environments
29) How To Become A Millionaire
30) $100K In 100 Days
31) Wash Sale Rule
32) Behavioral Finance Part 1
33) Behavioral Finance Part 2
34) 5 Charting Indicators
35) Fair Value Gap
36) Insider Trading and Market Manipulation
37) Stock Chart Types
38) Moving Averages 101
39) Base vs Precious Metals
40) Electricity Trading 101
41) Trading Brokers 101
42) 5 Trading Strategies
43) 85% Trading Rule
44) Are Win Rates A Scam?
45) Futures Trading 101
46) ATR Indicator Strategy With The Greeks
47) MACD Indicator 101
48) Bollinger Bands Indicator 101
49) Wedges, Triangles, Flags and Pennants
50) RSI Divergence 101
