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 MarketThis is where the market is in an upward trend (increasing in value).
Bear MarketThis is where the market is in a downward trend (decreasing in value).
LongTo ‘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.
ShortShorting 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 SqueezeIs 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.
BidIs the price that an Investor / Trader is willing to pay for the share.
AskIs the price that an Investor / Trader is willing to SELL the share for.
SpreadIs 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 MakerA 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 TradingThis 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 VolumeThe 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) RatioIs 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 CapIs the total number of outstanding shares, multiplied by the stock price.