A
- All-time high (ATH)
- The highest price an asset has ever traded at. Breaking above it means every holder is in profit, which can reduce selling pressure.
- Alpha
- Return earned above a benchmark after adjusting for risk. Positive alpha suggests skill (or luck) beyond simply owning the market.
- Annual percentage yield (APY)
- The yearly return on savings or an investment including the effect of compounding.
- Arbitrage
- Profiting from a price difference for the same asset in two markets by buying in one and selling in the other simultaneously.
- Ask
- The lowest price a seller is currently willing to accept. Also called the offer.
- Asset allocation
- How a portfolio is divided among asset classes such as stocks, bonds, cash and real estate. It is the main driver of long-term risk and return.
- Averaging down
- Buying more of a holding after its price has fallen, lowering your average cost. It increases exposure to a position that is already losing.
B
- Bear market
- A decline of 20% or more from a recent high, usually accompanied by pessimism. The average bear market has been shorter than the average bull market.
- Beta
- A measure of how much a stock moves relative to the market. A beta of 1.5 means it has historically moved about 1.5 times as much as the index.
- Bid
- The highest price a buyer is currently willing to pay.
- Bid-ask spread
- The gap between the bid and the ask. Narrow spreads indicate liquid markets; wide spreads raise your trading cost.
- Blue chip
- A large, established, financially sound company with a long record of stable earnings.
- Bond
- A loan to a government or company that pays interest (the coupon) and returns the principal at maturity.
- Book value
- A company’s total assets minus total liabilities, as reported on its balance sheet.
- Breakout
- When price moves decisively above resistance or below support, often on higher volume.
- Broker
- A firm licensed to execute buy and sell orders on behalf of clients.
- Bull market
- A sustained rise in prices, commonly defined as a 20% gain from a low.
- Buyback
- When a company repurchases its own shares, reducing share count and usually boosting earnings per share.
C
- Call option
- A contract giving the right, not the obligation, to buy an asset at a set price before a set date.
- Candlestick
- A chart bar showing the open, high, low and close for a period. The body colour shows whether price closed up or down.
- Capital gain
- Profit from selling an asset for more than you paid. It may be taxed differently depending on how long you held it.
- Capitulation
- A wave of panic selling where investors give up, often near the end of a decline.
- Cash flow
- The cash moving in and out of a business. Operating cash flow shows what the core business generates.
- Circuit breaker
- An automatic trading halt triggered when an index or stock falls by a set percentage within a day.
- Compound interest
- Earning returns on previous returns as well as on your original money, causing growth to accelerate over time.
- Consumer Price Index (CPI)
- A measure of the average change in prices paid by consumers for a basket of goods and services; the headline inflation gauge.
- Correction
- A decline of 10% to 20% from a recent high.
- Coupon
- The annual interest payment on a bond, expressed as a percentage of its face value.
- Cyclical stock
- A company whose earnings rise and fall with the economic cycle, such as automakers, airlines and industrials.
D
- Day order
- An order that expires automatically if not filled by the end of the trading day.
- Day trading
- Buying and selling within the same day, closing all positions before the market closes.
- Dead cat bounce
- A brief recovery in a falling market that is followed by further declines.
- Discounted cash flow (DCF)
- A valuation method that estimates future cash flows and discounts them back to today at a required rate of return.
- Diversification
- Spreading money across many investments so that no single loss can do serious damage.
- Dividend
- A portion of profits paid to shareholders, usually quarterly.
- Dividend yield
- Annual dividends per share divided by the share price.
- Dollar-cost averaging (DCA)
- Investing a fixed amount at regular intervals regardless of price, buying more shares when prices are low.
- Drawdown
- The decline from a portfolio’s peak to its subsequent low, usually shown as a percentage.
E
- Earnings per share (EPS)
- Net profit divided by the number of shares outstanding.
- EBITDA
- Earnings before interest, taxes, depreciation and amortisation; a rough proxy for operating profitability.
- Efficient market hypothesis
- The theory that prices quickly reflect all available information, making it hard to consistently beat the market.
- Exchange-traded fund (ETF)
- A fund holding a basket of assets that trades on an exchange like a single stock.
- Ex-dividend date
- The date from which a buyer no longer receives the next declared dividend.
- Expense ratio
- The annual fee a fund charges, as a percentage of assets.
F
- Federal funds rate
- The US Federal Reserve’s target rate for overnight lending between banks; the anchor for many other interest rates.
- Fiat currency
- Government-issued money not backed by a physical commodity, such as the US dollar or euro.
- Float
- The number of shares available for public trading, excluding those held by insiders.
- Forex (FX)
- The global market for exchanging currencies, the largest financial market by volume.
- Free cash flow
- Operating cash flow minus capital expenditures: the cash a company can use for dividends, buybacks or debt reduction.
- Fundamental analysis
- Evaluating an investment from its financial statements, competitive position, management and economic conditions.
- Futures
- Contracts to buy or sell an asset at a set price on a future date, used for hedging and speculation.
G
- Gap
- A price jump between one period’s close and the next period’s open, often after news.
- Gross domestic product (GDP)
- The total value of goods and services produced by an economy over a period.
- Growth stock
- A company expected to grow revenue and earnings faster than average, often trading at higher valuations.
- Guidance
- A company’s own forecast of future revenue or earnings, often more market-moving than past results.
H
- Hedge
- An investment made to offset potential losses in another position.
- Hedge fund
- A privately offered pooled fund using a wide range of strategies, typically for accredited investors.
- High-frequency trading (HFT)
- Computer-driven trading that executes huge numbers of orders in fractions of a second.
I
- Index
- A statistical measure of a group of securities, such as the S&P 500, used as a benchmark.
- Index fund
- A fund designed to match the performance of an index at low cost.
- Inflation
- The rate at which the general level of prices rises, eroding purchasing power.
- Initial public offering (IPO)
- The first sale of a company’s shares to the public.
- Interest rate risk
- The risk that rising rates reduce the value of existing bonds and other rate-sensitive assets.
- Intrinsic value
- An estimate of what an asset is fundamentally worth, independent of its market price.
- Inverted yield curve
- When short-term bond yields exceed long-term yields; historically a recession warning sign.
L
- Leverage
- Using borrowed money or derivatives to increase exposure. It magnifies both gains and losses.
- Limit order
- An order to buy or sell only at a specified price or better.
- Liquidity
- How easily an asset can be bought or sold without moving its price.
- Long position
- Owning an asset in expectation that its price will rise.
M
- Margin
- Money borrowed from a broker to buy securities, using your holdings as collateral.
- Margin call
- A broker’s demand for more funds when account equity falls below the required minimum.
- Market capitalisation
- Share price multiplied by shares outstanding; the market’s value of a company.
- Market maker
- A firm that continuously quotes bid and ask prices, providing liquidity and earning the spread.
- Market order
- An order to buy or sell immediately at the best available price.
- Moving average
- The average price over a set number of periods, plotted as a line to smooth out noise and show trend.
- Mutual fund
- A pooled investment priced once per day at its net asset value.
N
- Net asset value (NAV)
- A fund’s assets minus liabilities, divided by shares outstanding.
- Nonfarm payrolls
- The monthly US report on jobs added outside agriculture; one of the most market-moving releases.
O
- Options
- Contracts granting the right to buy (call) or sell (put) an asset at a set price by a set date.
- Order book
- The live list of buy and sell orders for an asset, organised by price.
- Overbought / oversold
- Conditions where price has risen or fallen sharply and may be due for a pause, often gauged with RSI.
P
- P/E ratio
- Share price divided by earnings per share. It shows how much investors pay for each dollar of profit.
- PEG ratio
- The P/E ratio divided by the expected earnings growth rate; adjusts valuation for growth.
- Penny stock
- A very low-priced, often thinly traded share with high risk and sometimes limited disclosure.
- Pip
- The smallest standard price move in a currency pair, usually 0.0001.
- Purchasing Managers’ Index (PMI)
- A survey-based indicator of business activity; above 50 signals expansion.
- Portfolio
- The collection of all investments held by a person or institution.
- Preferred stock
- Shares that pay fixed dividends and rank ahead of common stock for payouts, usually without voting rights.
- Price-to-book (P/B)
- Share price divided by book value per share.
- Price target
- An analyst’s estimate of where a stock will trade in the future, typically over 12 months.
Q
- Quantitative easing (QE)
- A central bank buying bonds to lower long-term interest rates and add money to the financial system.
- Quarterly earnings
- The financial results public companies report every three months.
R
- Rebalancing
- Selling assets that have grown overweight and buying those underweight to restore a target allocation.
- Recession
- A significant, broad decline in economic activity lasting more than a few months.
- Resistance
- A price level where selling has repeatedly stopped advances.
- Return on equity (ROE)
- Net income divided by shareholders’ equity; a measure of profitability.
- Risk tolerance
- How much loss and volatility an investor can accept, financially and emotionally.
- Relative Strength Index (RSI)
- A momentum oscillator from 0 to 100; above 70 is often called overbought, below 30 oversold.
- Rule of 72
- A shortcut: 72 divided by the annual return approximates the years needed to double money.
S
- Sector
- A group of companies in the same industry area, such as technology, healthcare or energy.
- Secondary market
- Where investors trade existing securities among themselves, such as on a stock exchange.
- Sharpe ratio
- Excess return divided by volatility; higher means more return per unit of risk.
- Short selling
- Borrowing shares and selling them, hoping to buy them back cheaper later. Losses are theoretically unlimited.
- Short squeeze
- A rapid price rise forcing short sellers to buy back shares, pushing the price higher still.
- Small cap
- A company with a relatively small market value, commonly between about $300 million and $2 billion.
- Spread
- The difference between two prices or rates, such as bid and ask, or two bond yields.
- Stablecoin
- A cryptocurrency designed to hold a stable value, usually pegged to the US dollar.
- Stock split
- Dividing each share into multiple shares, lowering the price per share without changing total value.
- Stop-loss order
- An order that becomes a market order once a set price is reached, used to limit losses.
- Support
- A price level where buying has repeatedly stopped declines.
- Swing trading
- Holding positions for days to weeks to capture a single price swing.
T
- Technical analysis
- Studying price, volume and chart patterns to judge likely future moves.
- Ticker symbol
- The short code identifying a security on an exchange, such as AAPL.
- Total return
- Price change plus dividends or interest, the true measure of investment performance.
- Treasury
- Debt issued by the US government: bills (short-term), notes (2–10 years) and bonds (20–30 years).
- Trailing stop
- A stop-loss that moves up with price by a set amount or percentage, locking in gains.
U
- Underweight / overweight
- Holding less or more of an asset than its weight in a benchmark; also used as analyst ratings.
- Unrealised gain
- A profit on paper on a position you still hold.
V
- Value stock
- A company trading at a low price relative to its earnings, cash flow or assets.
- VIX
- An index of expected 30-day S&P 500 volatility derived from option prices; nicknamed the “fear gauge”.
- Volatility
- How much and how quickly prices move, often measured by standard deviation.
- Volume
- The number of shares or contracts traded in a period.
W
- Wash sale
- Selling at a loss and rebuying the same or a substantially identical security within a short window; tax rules may disallow the loss.
- Whale
- An individual or entity holding enough of an asset to move its price, a term common in crypto.
Y
- Yield
- The income return on an investment, such as interest or dividends, as a percentage of price.
- Yield curve
- A chart of bond yields across maturities. Its slope reflects expectations for growth, inflation and interest rates.
- Year-to-date (YTD)
- Performance from the first trading day of the current year to today.