Key Market Terms & Concepts (Module 1: Lesson 4)

Module 1: Introduction to the Stock Market

Key Market Terms & Concepts

Lesson 4: By the end of this class, you will understand the key terminology and different market types that every trader should know. This knowledge will help you follow market commentary, research, and your own trades with confidence.

Every Stock Has The Following...

Key Market Terms

One of the first things to understand is market capitalization, or market cap. This is a way to measure the size of a company. You calculate it by multiplying the current share price by the total number of shares outstanding.

Shares outstanding include all the shares a company has issued, including those held by insiders and restricted shares.

Float is the number of shares actually available for public trading.

Float is important because it tells you how many shares are available for investors to buy and sell. A small float can make a stock more volatile since fewer shares are available to absorb buying or selling pressure.

Volume is the number of shares traded over a specific period, usually daily. High volume can indicate strong interest in a stock.

Volatility measures how much a stock’s price moves over time. Stocks that move up and down quickly are called volatile, while those that move slowly are considered stable.

Liquidity refers to how easily shares can be bought or sold without causing a big change in the price. Highly liquid stocks are easier to trade, while low liquidity can make it harder to enter or exit positions.

Companies On The Market Are Divided Into...

Sectors and Industries

Stocks are grouped into sectors and industries to help organize the market:

Sectors are broad categories, like Technology, Healthcare, or Energy.

Industries are more specific groups within a sector, such as Semiconductors in Technology or Biotech in Healthcare.

Knowing a company’s sector and industry can help you understand the factors affecting its performance.

Understanding the sectors, their rotation, and industries within each sector helps us better understand how a company is performing because we can compare it to its peers. If, for example, a stock is losing value but the sector and industry it belongs to are positive, we can identify that it is probably because of something within that company. On the other hand, if a sector and industry are moving down overall, we could potentially use that as an opportunity to acquire more shares if our company is solid.

Join The PB Community

Not A Member Yet?

Not A Problem!

There Are Two Main

Speculative Trading Styles

Traders use different approaches depending on how long they hold positions:

Swing Trading

Swing trading involves holding trades for several days or weeks to capture short-term trends. Swing traders often look at a company's financials, thematics, and other factors in addition to the charts.

Day Trading

Day trading is buying and selling within the same day, taking advantage of intraday price movements. Day traders don't always look at a company's health, or care, depending on whether or not they're trading the volume while it's present.

Your trading style will influence the types of stocks you choose and how you manage risk. Many traders prefer a mix of both.

Let's Dive Into

Alternative Markets (Brief Overview)

Besides stocks, there are other markets where traders operate. Each of these are separate from the major exchanges and have their own set of regulations, risks, and account types. A trader may need to create a different account type in order to trade these, based on what the broker may or may not offer.

Options

Options are contracts giving you the right, but not the obligation, to buy or sell a stock at a certain price.

Futures

Futures are contracts to buy or sell something at a set price on a future date.

Forex

Forex is trading the differences in value between pairs of currencies.

Crypto

Crypto is buying and selling digital assets like Bitcoin or Ethereum.

KEY TAKEAWAYS

Each stock has it's own Market Capitalization, Shares Outstanding & Float, Volume, Volatility, & Liquidity.

Companies are divided into sectors and industries based on what they do and how they've registered for the exchange, and this allows us to analyze a company in a relational way.

There are two primary styles of speculative trading: day trading and swing trading. Many traders prefer a combination of both.

There are alternative financial markets we can use to make money and diversify our investments, but each has it's own rules, risks, and requirements.

Knowing the key terms will allow you to read market commentary, research reports, and charts more effectively. It also helps you make more informed trading decisions, whether you are watching a stock for days or executing trades within the hour.

Brokers & Brokerage Accounts

Products

Trading Topics