Stock Market Jargon
Before embarking on anything, it is crucial that one first understands the terms used in the industry. Here are some terms which are widely used when discussing the stock market(you'll need this to understand financial news and sound smart in front of your friends)
Stock Exchange
A stock exchange is a platform or a market which allows securities to be bought and sold or 'exchanged'
Broker
A broker is a person or a platform who organizes transactions between the buyer and the seller
Tickers
A stock's ticker is basically it's 'label' on the stock market. For example, Tesla's is 'TSLA'. So if you were to search 'TSLA' on the National Association of Securities Dealers and Automated Quotations(NASDAQ) stock exchange, you would be able to find the Tesla(TSLA) that Elon Musk owns. You can then buy or sell Tesla(TSLA) through your broker.
Long/Short
When investors say long/short, it usually has no correlation to duration or time. Instead, it is used to refer to the buying or selling of stocks. When someone is long on a stock, they are buying it, with the belief that it would go up. When someone is short on a stock, it's the opposite, they are selling it, with the belief that the stock would go down.
Bullish/Bearish
In bullish markets(like the one we just exited), the stock market moves in a general upwards direction. In a bearish markets(like the on we just entered), the stock market moves in a general downwards direction. Being bullish or bearish can also be used to describe a person's opinion on a stock(just like long or short). If someone is bullish on say Tesla(TSLA), they would expect the prices of Tesla(TSLA) to rise. If someone is bearish on Tesla(TSLA), they would expect the prices of it to fall.
**It's important to note that over 90 years, the stock market has had a general uptrend, meaning that if you buy and hold you would always come up on top.
Bid/Ask
Your bid price is how much you are willing to pay for the stock. An ask price is how much people want to sell the stock for.
Fill
When the bid and ask prices meet, a transaction occurs and a stock is exchanged. So, when you place an order, for example to buy 1 Tesla(TSLA) stock for US$500 and someone else places an order to sell it at the same price, your order will be filled and you will receive the stock.
Limit Order
A limit order is where you set the price at which you would like to buy or sell a stock. When the price of the stock reaches the price that you set, if there is a willing buyer/seller, the transaction will occur. This should be the type of order used most of the time.
Market Order
A market order is an order which you place at market value. This means that you just place an order to buy or sell, and you will just fill whatever prices another person decides to sell or buy at. It is to buy or sell a stock ASAP and is usually not a good idea to use.
Volatility
Volatility is basically how much a stock's price varies and changes. The more volatile a stock, the more it's prices will change.
Liquidity
Liquidity is how easily you can convert the stock back into cash. A stock is said to have high liquidity when it has many transactions occurring daily.
Volume
Volume is the number of stocks being exchanged each day on a specific ticker. The more volume there is, the more liquidity.
Portfolio
Your collection of stocks. Basically, all the different stocks that you own.
Quarter
A quarter is 3 months.
Recession
A recession in stock market terms, is when the stock market declines for 2 consecutive quarters. During this period, companies usually let go of staff due to less sales and revenue and hence unemployment rises and productivity falls.
Market Capitalization
Market capitalization(Mkt cap) is how much the stock market thinks the company as a whole is worth. This is calculated by taking the cost of each share and multiplying it by the total number of shares. (Cost of each share)*(Total number of shares)
Blue Chip Stocks
Blue chip stocks are stock like Google(GOOGL) or Amazon(AMZN), they have massive market capitalization and are often seen as safer and more recession-proof.
Dollar-Cost Averaging
Dollar cost averaging is where you buy(usually) or sell on dips or rises. This helps to average the cost price of each stock, allowing you to make more money when the stock market decides to go in your favor. As mentioned, the stock market always eventually goes up, therefore, dollar cost averaging on a short order is usually not recommended when investing.
Dividends
Dividends are a sum of money paid out by the company to it's investors. It is calculated annually and displayed as a percentage of the stock. So, when the dividend yield for a company is 10%(it is very high), and the price of the stock is $100, it means that in the previous year, that company paid it's investors $10 each, just for holding the stock! Dividends can be paid out monthly, quarterly, or annually.
ETFs(Exchange Trade Funds)
ETFs put simply, is a basket of stocks of the same qualities(or category) which you can buy without having much capital(money). For example, a big company would buy stocks from Tesla(TSLA), Google(GOOGL), Apple(APPL) and Amazon(AMZN). Because buying each of these stocks individually is expensive, it's difficult for normal people like you and I to purchase each of these stocks(buying 1 of each stock yourself would cost about US$4,000 in total). Hence, the big company buys all these stocks, bundles it together and sells it to you for just $200(roughly). Just like that, you've spent US$200 to acquire a portion of APPL, GOOGL, AMZN and TSLA.
However, there is a downside. You do have to pay the big company which bundles the stocks a small fee(about 0.44%) and the percentages of each company in the bundle is decided by the big company, not you. This means that the bundle could contain 50% of APPL, 10% of GOOGL, 25% of AMZN and 15% of TSLA. But that is all stated beforehand, so be sure to check and make sure that the percentages align with your investment plan.
While writing this article, I realized that I couldn't really put in that many images as most of them look about the same as the 2 I have there. I apologize for the bland text.
Also, if I did miss anything our, please feel free to let me know in the comments or just contact me through email at 'jingrui.wu.2002@gmail.com', I am extremely open to criticism as I am still learning too!
If you enjoyed this article, please do continue to follow me on my journey to become a millionaire in the next 10 years.
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