By Remitbee - Mar 11, 2021
Trading stocks is difficult, especially when understanding the different terms, acronyms, numbers and data is practically like learning a foreign language. Our currency exchange allows you to trade your currency to buy different stocks without the high fees and low exchange rates common at banks and trading platforms.
We’ve compiled some definitions for the most common stock trading terms to help you get started.
Annual Report– Companies prepare annual reports as a way to keep their shareholders informed. They tend to contain cash flow information, management strategy, major changes in the last year and any other relevant or significant information. Stock traders read these to try to determine a company’s financial viability and solvency.
Arbitrage – Arbitrage occurs when someone purchases a specific company’s stocks on one market at a lower price point and sells those same stocks on a different market for a higher price.
Ask – An ask is when a stock trader offers shares for a specific price. They place an order asking other buyers to purchase their stocks.
Averaging Down – Investors may purchase more stock in a company as the stock’s price decreases to lower their average purchase price. This strategy can be used if you believe the stock price is going to rebound and rise in the future.
Bear– The term bear market is used when prices are constantly falling. Bear markets tend to cause people to want to sell instead of buy, which makes the market continue to fall.
Beta – Beta is the statistical measurement of how a stock performs when held against the market as a whole. Investors can use this measurement to understand if there is risk associated with keeping a certain stock and how much.
Blue Chip Stocks – Blue chip stock tends to come from stable, big, trusted companies that are well-known. They tend to be profitable and pay consistent dividends to their stockholders.
Bourse – Bourse is a slang term for the stock market, and originated as a term for a house where rich men used to gather to trade shares. Today it mostly refers to non-U.S. stock exchange markets or the Paris stock exchange specifically.
Bull – The term bull market is used when stock prices are constantly rising. They tend to be accompanied by optimism from stock traders.
Broker – A broker is a person who purchases and sells stocks for people for a commission. Their job is to trade on the stock market for clients.
Bid – A bid is when a stock trader makes an offer to another trader to buy shares. It’s almost like a bid at an auction.
Buy – Stock traders buy shares in a company, generally when they are optimistic that the stock’s price is going to rise.
Close – This is when the stock market closes for the day. For example, the New York Stock Exchange and Nasdaq both close at 4 p.m., with after-hours trading closing at 8 p.m. No trading can occur after this.
Day Trading – Day Trading is the habit of purchasing and selling the same stocks within a single day. When traders buy stock in the morning and turn around and sell it at a profit in the afternoon, this is day trading.
Dividend– Dividends occur in larger, more stable companies, where they pay a portion of their earnings to shareholders. Retirees and longer-term investors tend to prefer these kinds of stocks.
Exchange – An exchange is a place where stock investments are traded. The NYSE and Nasdaq in the United States are the most famous stock exchanges.
Execution – Execution happens when a stock trading order is fulfilled. If you place an order for your broker to purchase 10 shares of a certain company at $20, the order has been executed when the stock has been purchased.
Haircut – A haircut refers to a situation where there is a very fine - sometimes just a few cents – the difference between a bid and an ask price of a particular stock.
High – The term high is used when a stock reaches a record price for that company. It can also refer to a stock that has set a new record for the stock market as a whole or is at a 30-day-high.
Index –An index is just a benchmark used as a goal for stock traders. For example, the New York Stock Exchange (NYSE) Tick Index can be calculated by adding all of the NYSE stocks that have an uptick minus those that have a downtick.
Initial Public Offering (IPO) – This is when a company sells shares on the stock market for the first time.
Leverage– Leverage is used when you borrow shares in stock from your stockbroker with the intention of increasing profit. At a certain point, you have to return the shares and you can keep the difference. This can be dangerous because if the stock price falls, you now owe money.
Limit Order – This is an order to buy or sell only if certain conditions are met. For instance, traders can place buy limit orders for 10 shares of a stock if it costs $20 or less, but not more than that price.
Low– The term low is used to represent an all-time low for a company’s stock or a stock exchange.
Margin– Margin trading refers to using borrowed money to trade stock market shares. This can be risky and is more akin to gambling since any loss will affect you more heavily since you now have to pay it back as debt. We recommend avoiding this, particularly if you are new to the stock market.
Moving Average – This is the average price of the stock over a set period of time. For example, a 10-day moving average would be determined by adding the price of a stock on each day and dividing that number by 10.
Open – This is the time that stock markets open in the morning. In the United States, they open at 9:30 A.M. for example.
Order – If an investor puts in a bid to buy or sell stocks or options contracts, this is an order.
Pink Sheet Stocks – Pink sheets, also known as penny stocks, are traded at $5 a share or less. These aren’t found in any major stock exchange and tend to only be from much smaller companies.
Portfolio – A portfolio refers to your collection of stocks as a whole.
Quote – A quote is just the stock’s current price at a certain moment in time. Having up-to-date price information can help people analyze whether a trade is good or not.
Rally – A stock price is said to rally when it increases at a faster pace than is average.
Sector – Sectors of the stock market are the same as industries or niches in business. Shares from companies that are similar, like technology or fashion, are grouped into sectors.
Share Market – A-share market is any market where shares of companies are being bought and sold. This is basically another term for the stock market.
Short Selling – Short selling a stock entails purchasing shares from your broker with the intent to return them. People short sell when they think prices will decrease, because they sell the borrowed stocks, repurchase them once the price has fallen, and return them to the broker, pocketing the difference.
Spread – Spread refers to the difference between what someone is willing to spend to buy a stock and what someone is willing to sell the stock for. For example, if someone is willing to sell a certain stock for $20, but the buyer only wants to pay $15, the spread is $5.
Stock Symbol – This is a one to four-letter root that represents a publicly traded company in the stock exchange. Apple’s stock symbol is AAPL.
Volatility – Volatility is a statistical measurement of how much and how often a stock’s price rises or falls. Stocks that seem frequent, large-scale changes are considered volatile stocks that can bring great risk or reward.
Volume – Volume refers to the total number of shares being traded in a company at one time. If there is more volume, stocks are more active and it is easier to acquire or unload them.
Yield – Yield indicates the return on investment from either selling a stock or from a dividend. It can be calculated by dividing the annual dividend amount by the price that was paid for the stock. For example, if your stock was purchased for $20 per share, and it yields a $1 dividend per year, that is a 5% yield.
We hope this guide helped to clear up some confusion surround the stock market! Don’t worry if you don’t remember everything just yet. You’ll learn more and start to understand the different strategies as you start to buy and sell stocks and have more exposure. Plus, you can always bookmark and return to this article in the future for a refresh. If you end up trading on the NYSE or Nasdaq, you can also use Remitbee’s currency exchange services to swap your CAD for USD to continue trading.