Stock Trading Terminology

Knowing some stock trading terminology can be useful if you are in the market. Below you will find a list of stock trading terms and their definitions.

Stock Trading terminology

Active Trading and Passive Trading - Two different ways to look at the market.

Affidate of Loss - Reporting a lost stock certificate.

After Hours Trading – Trading the market after the major indexes have closed.

Bottom Picking/Top Picking – Trying to get into a stock at the exact top or bottom.

Buying the Dips – Buying a stock after it has pulled back a little.

Buying to Cover – Buying a stock or option to close out a short position.

Buying Power – The amount of money which you can use to buy and sell securities.

Call Options – Gives you the right to buy a given stock at a given price on or before expiration.

Candlestick Patterns – Patterns that form in the individual days that seem to predict price pattern.

Cashless exercise - tempararly borrowing money to exercise employee stock options.

Chart Patterns – Patterns that appear in a chart and seem to predict price movements.

Clearing Broker - The person in charge of making sure transactions run smoothly.

Covered calls – Selling calls on stocks you own to generate income.

Cyclical Stock - Stocks that make huge moves.

Day Trading – Opening and closing a position within a single day.

Dollar Cost Averaging - Buying share at a consistant rate hoping to get the best return.

Efficient Market Hypothesis - Belief that you cannot beat the market.

Futures - Buys a certain stock in the future.

Good till Canceled - An order that is good until it is canceled

Hindenburg Omen - An indicator of market tops.

Holding The Market Illegally trying to stop prices from falling

January Effect - The superstition that January sets a pace for the rest of the year.

Naked Short Selling - Illegally shorting shares that do not exist.

Option Spreads – combining multiple different options, either combining calls and put, or strike prices, or both.

Oscillators – Indicators that use mathematical formulas to give you buy and sell signals.

Pump and Dump - When Scam artist attempt to manipulate a stock.

Put to Call Parity - The strategy of getting the same return with options as you would with the stock.

Put Options – Gives you the right to sell a given security at a given price on or before expiration.

Reverse Stock Split - A split where the number of shares are reduced.

Short Interest - How many people are holding shorts on a stock.

Stock Market Holidays - Days which the stock market will not be open.

Stock Pullback - When a strong stock falls a little.

Spread Betting Betting weather or not a stock will be higher or lower then a given level.

Stock Split - Where an investor gets more shares and the stock drops in value.

The Great Depression - The worst economic period in US history.

Swing trading – Trading stocks with a 2-5 day time frame.

Treasury Stock Method - a factor of diluted shares, where in the money options are counted.

Uptick Rule - A rule to lessen the effect of short selling.

Weekend Effect - The theory that Mondays are the worst days for stocks.

Yankee Market- the US stock market.

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