Stocks Vocabulary

10-K Filing

A comprehensive report of a company’s annular performances at the end of the fiscal year; typically includes information about the company’s structure, equity, and earnings.

10-Q Filing

A comprehensive report of a company’s performance filed at the end of each quarter; includes the same type of information as a 10-K and there is no filing at the end of the 4th quarter because that is when the annual 10-K filing is required.

8-K Filing

A report detailing important, material, unscheduled corporate events; includes information like acquisitions, government major contracts, addition or resignation of directors or management team, etc.

After Market/After Hours

The time from 4:00 PM EST to 8:00 PM EST when trading can take place after the marker officially closes. Specialty brokerage accounts are required to participate in this.

Ask/Offer

The lowest price a seller is willing to sell the stocks.

Assets

Everything the company owns on its name, including the cash, equipment, land, technology, etc. This shows the total wealth of the company.

Authorized Shares

The maximum number of shares that a company is legally allowed to issue.

Average Down

Adding to an existing long stock position at a price lower than the initial purchase. Traders do this when a stock price falls after they have already purchased shares and are still confident that the overall direction of the stock will be upward. Not recommended to inexperienced traders.

Average Up

Adding to an existing long position at a price higher than the initial purchase. Traders do this when a stock price rises after they have already purchased shares and are confident the upward move will continue.

Bearish

Believing the price of the stock is going to fall.

Bear Market

A market in which stock prices are consistently falling.

Beta

A measurement of relationship between stock price of any particular and the movement of the whole market. How correlated is the movement of that stock to the movement of the whole company.

Bid

The highest price that a buyer is willing to pay for a stock; opposite of ask/offer.

Blue Chip Stock

Stocks of large, well established and financially sound companies which hold a record of consistently increasing the role of paying dividends over decades to its stock holders. Blue Chip stocks usually have a market cap in the billions and tend to be one of the leading companies in a sector.

Board Lot

A standard trading unit as defined by the particular exchange board that refers to the minimum size order in terms of number of shares requires for a market maker to post your order and be visible to everyone on Level 2. Size usually depends on per share price and the common sizes are 100, 1,000, 2,500, 5,000, and 10,000.

Bonds

A debt investment or promissory note issued by companies or governments to its buyers. The investor loans the entity money for a defined period of time. It speaks about the specified amount held for a specified time period by the buyer.

Breakdown

A definitive downward price movement through the support level. Typically confirmed with heavy trading volume.

Breakout

A definite upward price movement through the resistance level. Typically confirmed with heavy trading volume.

Broker/Brokerage Firm

A registered securities firm. Acts as an advisor for the purchase and sole of listen stocks/securities, they do not own the securities at any point during the transaction, but they charge a commission for their service.

Bullish

Believing that the price of a stock is going to rise.

Bull Market

A market in which a group of securities’ stock prices are consistently rising or expected to rise.

Business Day

Monday to Friday, excluding holidays.

Chasing

Buying into a market move that has already established a trend or a breakout. Usually is an emotional reaction like FOMO when you don’t want to miss the move when, in fact, the move has already happened and those who entered much earlier are looking to exit and take profits. Although this most commonly refers to buying, the term is also used when selling or short selling.

Closing Price

The final price at which a stock is traded on a given particular trading day. Whatever the last trade is at 4:00 PM EST.

Commodities

Products used for commerce that are traded on a separate, authorized platform. Includes agricultural products and natural resources.

Convertible Securities

A security (bonds, debt notes, debentures, preferred stocks) of an issuer that can be converted into other securities usually free-trading shares. The conversion usually occurs at the option of the holder once the restricted holding person is satisfied, but it may sometime occur at the option of the issuer.

Defensive Stock

A stock that provides a constant dividend and stable earnings even in periods of economic downturns even in the extreme critical situations of the stock market these companies continue to pay dividends at a constant rate.

Diversification

Reducing the investment risk by purchasing shares of different companies operating in different sectors. Instead of putting all eggs in one basket, you spread your money out on different stocks and in different sectors.

Dividend

A portion of a company’s earnings paid to its shareholders, it is usually declared as a percentage of current share price or some specified value, usually decided by the board of directors of the company.

Downtick

When a security trades at a lower price than the previously executed transaction.

Downtrend

When the overall price movement of a stock or security is downward; the bear market goes through this.

Equity

Common and preferred stocks, which represents shares in the ownership of a company.

Face Value

The cash denomination or dollar value of an individual security stated by the issuer. Also known as par value.

Float

The total number of free trading shares of stock available to the public. Calculated by subtracting all restricted stock and insider shares held by the officers and directors of the company from the total number of outstanding shares. The smaller it is, the easier it is for the stock price to move. Think about the jungle; small shares, less vine pressure (ability to move). Larger shares, more vine pressure.

Forward Stock Split

An attempt to increase the number of outstanding shares of a company by splitting the existing shares. It is usually done to increase the availability of shares in the market. The usually ratios are 2:1 or 3:1, i.e. one share is split into two or three.

Front Loading/ Front Running

The buying of a security by an individual, group, or fund ahead of an expected move. This often occurs when those buying have access to inside information that the general public does not. Illegal.

Gap Down

When a stock opens for trade below the closing price of the previous day.

Gap Up

When a stock opens for trade above the closing price of the previous day.

Golden Cross

A bullish technical analysis term used to describe when a short term moving average breaks above a long term moving average. If a 50-day moving average crosses over the 200-day moving average. Stocks typically start to trade higher after this occurs.

Hedge

A strategy or attempt in reducing the risk of adverse price movements of assets. Reducing risk in position.

Hedge Fund

An alternative investment fund that uses pooled funds in a number of different strategies and asset classes to achieve high returns for investors. These tend to be more aggressive with their investment styles and strategies and, therefore, typically carry more risk than mutual funds with the potential for greater returns.

Income Stock

A security which has a solid record of dividend payments and offers a dividend higher than other common stocks.

Index

A statistical measurement of change in the economy or security market. Has their own calculation methodology and are usually measured as a percentage change in the base value over time. SMP 500, 500 top companies in the US.

Initial Public Offering (IPO)

A company’s first issue of shares to the general public.

Insider Information

Facts about a company that are not yet public. Can be in the form of financial performance, business plans, executed contracts, etc. Any information that once made public may affect the underlying value of a company’s assets and, therefore, its share price.

Level 2

A window providing traders with price depth. Displays all available orders and price quotes from market makers including price, order size (share amount), and the time in which the order was placed. Unlike the one before it, which only shows the inside best bid and ask price (highest bid and lowest ask), this shows supply and demand at price levels beyond the best bid and ask.

Limit Order

An order to buy or sell a security at a specified price, The order will. be executed only at the specified limit price or better. Sets a minimum price the seller is willing to accept and the maximum price the buyer is willing to pay. Limit orders do not guarantee execution.

Listed Stocks

The shares of an issuer that are traded on a major stock exchange like the NASDAQ or NYSE (not the OTC or Pinksheet markets).

Long/Going Long

Buying shares of a security in anticipation of a rise in price.

Market Capitalization

The total value of all a company’s outstanding shares. It is calculated by multiplying the total number of outstanding shares by the current market price of one share. Determines the company’s size in terms of its wealth.

Market Maker

Broker-dealer firms that facilitate electronic trading and fulfill customer order flow. They compete for order flow by posting buy and sell quotes. Once an order is received the market maker fills the order from current inventory or looks for a matching order to offset the previous transaction. When a customer places an order with their brokerage firm, the brokerage firm routes that order through a market maker for execution.

Market Order

An order to buy or sell a security at the best available price. Will execute immediately and guarantee execution, but not price.

Margin/ Buying on Margin

Buying a security by only paying a portion of the total cost and borrowing the balance of the cost from your bank, broker or brokerage firm. There is no interest on the money borrowed so traders buying on margin must be confident the percentage gain realized from the purchase of the security will be greater than the interest rate on the money borrowed.

Margin Call

When a broker or bank demands an investor who is trading on margin deposits additional funds or securities to bring the value of their account up to the minimum maintenance margin required. This will happen when the value of the money borrowed on margin decreases past a certain point determined by the broker or bank.