Trading Term Glossary

Keeping track of all the trading and Investment terms can be tricky, so we’ve gone to the lengths of compiling a Trading Term Glossary, all in the same place!

  • Bull Market

    This is where the market is in an upward trend (increasing in value).
  • Bear Market

    This is where the market is in a downward trend (decreasing in value).
  • Long

    To ‘Long’ a stock would be to buy the stock. So you could buy 1 stock at 0.10 and if that stock increased to 0.11, then you could sell the stock for a 10% gain; equally, if this dropped below 0.10, you would be losing money.
  • Short

    Shorting a stock is where you borrow the stock to sell, so you could borrow 1 stock at 0.10, then if they dropped to 0.09, you could *buy* them back (as it’s borrowed) for a 10% gain; equally, if this went above 0.10, you would be losing money.
  • Short Squeeze

    Is the act in which investors deliberately push the price of an asset up, to force a short trader to buy back their borrowed shares at a premium.
  • Bid

    Is the price that an Investor / Trader is willing to pay for the share.
  • Ask

    Is the price that an Investor / Trader is willing to SELL the share for.
  • Spread

    Is the difference between the Bid and Ask price, so if the bid was 0.10 and the ask was 0.12, then the spread is 0.02 or 20%. When looking for a stock, be careful, as some brokers will very happily increase the spread to ridiculous levels, in order to profit off you. The tighter the spread, the more profit you make.
  • Market Maker

    A market maker is someone who has a large amount of control over the market, they are responsible for managing the spread of a stock, so when you see a large spread, this is where your money is going!
  • After Hours Trading

    This covers both Pre and Post trading, only a select few companies qualify for after-hour trading and by utilising them, you can be ahead of the rush on a great… or awful, quarterly report. Typically pre hours for Nasdaq stocks are 9am to 2.30pm GMT and Post trading hours are from 9pm to 12:59am.
  • Trading Volume

    The amount of shares that are traded on a daily basis. We aim to only buy stocks that have over 500k traded volume on a daily basis, anything below this can be extremely hard to liquidate. The price of the stock also needs to be considered when looking at volume!
  • EPS (Earnings per share)

    Is the *quite literal* meaning of the term; It’s the amount of profit the company makes per share. EPS is calculated by dividing the company’s net profit with its total number of outstanding shares.
  • P/E (Price/Equity) Ratio

    Is the stock price divided by the Earnings per Share (EPS). This calculation will show how much an investor is willing to pay per $1 of profit. So if a company had a P/E ratio of 4.00, that means that an investor is willing to pay $4.00 for $1.00 of profit. A higher P/E ratio could suggest that the market is expecting growth in the stock.
  • Market Cap

    Is the total number of outstanding shares, multiplied by the stock price.