Stock Lingo Guide
Stock Lingo Guide
The stock market is its own world with its own language, and its own natives. At one point in time, you may have found yourself in a stock market atmosphere where you started to feel overwhelmed at all of the words, phrases, and terms that were being thrown around like the common words: money, buy, sell, yes and no. The stock market culture is one to be learned and its language is one to be taught. Here at LVGI, we wanted to give you a stock lingo guide so you may be informed and taught how to have a conversation or equipped to jump into the waters of investing your valuable time and money.
Resourced from stock guru, Timothy Sykes, here are some common terms and phrases you need to know when it comes to the stock market:
The Stock Market
Let’s start with the basics. The stock market is any exchange between one person or another to buy and sell stocks and also for companies to issue stock. Traders is a term for an investor actively engaged in the stock market and is out to make money. The sole purpose of the stock market is to make money. Period.
An example of a stock exchange would look like this: If I were to buy 3,000 shares of Amazon stock for $300, and then I then I sold it for $400 6 months later, I would have received a profit from this exchange. There is also a possibility, that the stock goes down and I can only sell my stock for $250. This would be an example of a loss of $50.
This is a simple example, but this is the entirety of stock exchanges broken down into a simple example. This type of transaction happens thousands of times daily, and there are many different strategies to go about this.
The term arbitrage refers to buying and selling the same stock on different markets and at different price points. Some markets may have a stock that is going for $20 a share, and others that have that same stock going for $20.50. Often times people will buy the stock at $20, and turn around and sell it for $20.50 profiting the difference for a quick profit.
This is a very important term to understand. Companies will prepare an annual report to impress and comfort shareholders or to give some bad news. This report allows traders to judge the financially stability of the company causing the stock price to go up or go down depending on the report.
This term is self-explanatory but is important to understand. This is when the stock of the company has been consistently on a slow decline. Often people will buy in at this point if they expect the stock to rebound or increase in the near future.
This term refers to when the stock has had a drastic decrease and is falling at a fast speed.
This is the opposite of a bear market and usually means the stock is rising at a fast speed.
The term beta refers to the measurement between the price of the stock and the movement of the whole market usually in reference to its relationship with one another. An example would be if a specific stock has a beta of 2.5, and the market moves by 2 points, then that specific stock will move by 2.5 points.
A broker acts as middleman for you and the exchange and receives a fee handling the transaction.
The term bid refers to the amount of money a trader is willing to pay per share and is balanced with the amount the seller wants for that particular share. It is often settled between the difference.
The market closes at 4pm, but there is after hour trading that goes until 8pm.
This refers to a specific type of trader who is only interested in making quick profit. Sometimes this leads to large financial success, but often takes more work from people dedicated to spending many hours a day. Another term for day traders is “active traders.”
A dividend is a portion of money that a company pays, from its earnings, to all of its shareholders, either quarterly or annually. Not all companies offer dividends.
This is the term used when an exchange has been officially completed.
This term is used for a market milestone of a stock or index that reaches a high point than it previously did before.
An index is a benchmark that is used between a trader and a portfolio manager. If a market index is at 20%, but you only received a 12% then you did not do very well.
IPO or Index Public Offering
This term refers to the first offering or sale by a company for the public. This happens when a company decides to go public.
The concept of leveraging is risky business, but it works for many people. When you leverage, you are initially borrowing stock from your broker in hopes to make a profit by keeping the balance after paying back what is owed.
This is another self-explanatory term, but is important to know. It refers to when a stock has reached a lower point than expected or hoped for.
Similar to leverage, a margin account borrowers’ money from a broker to purchase stock or an investment. The difference made is usually the profit received. Risky as well.
The moving average refers to the medium price of stock during a given specific time.
The stock market officially opens at 9:30 a.m. Eastern Time. Usually traders start paying attention and making their plan around 8:00 a.m. It refers to when traders can exchange at a specific rate.
Penny Stocks or “Pink Sheets”
Penny stocks are any stock that trades for $5 or less. Often found in smaller companies and not found on the major New York Stock Exchange market.
Like a painter, a trader’s portfolio is a spread of their investments. It collects the total amount of value and its diversification. Another way of putting is that it’s a trader’s collection of investments.
A rally happens when there is a major increase in the general price level of a market or stock. There can be bear rallies or bull rallies.
When a group of stocks belong to the same industry, this means they belong in the same sector. Understanding a specific industry may help you decide where to buy in that specific industry.
A stock symbol is 1 to 4 letter symbol that represents a specific publicly company in the market. For example, our symbol is LVGI and can be found on the OTC markets.
Volatility refers to the overall price movements of a stock. High volatility refers to when there are major increases or decreases of a specific stock giving day traders an exciting platform for action.
Volume refers to the number of shares traded within a specific time period often measured by daily actions. Traders will usually study the volume of a specific share before they plan to buy or sell.
For our last term we want you to understand “yield.” This term refers to measure of a return that is received from a dividend by dividing the price paid per stock and the amount of the annual dividend given.
We hope these terms will help you understand the stock market and will get you prepared to dive in with the sharks. If you don’t know where to start, you can always start with investing in LVGI found on the OTC markets. If you have any questions, feel free to contact us today.