The stock market can be overwhelming, especially for beginners. The charts, numbers, and strategies may seem confusing in the beginning. And what makes it even more perplexing is the jargon or technical stock trading terms generally used by savvy traders.

If you’re new to the industry, it’s crucial to understand some essential terms. Understanding them will allow you to make more informed decisions about investing in the right stock.   

What is the Stock Market?   

A stock market is a platform wherein shares of publicly listed groups are bought and sold. For instance, when you buy shares in a company, you essentially own a small part of that company. The stock market typically allows companies to raise capital by investing in equity securities. This allows investors to profit from the growth of the company.   

To make it simpler, we have listed down a few key stock trading terms every beginner should know.   

1. Asset   

An asset is anything of value that can be traded. In the context of financial markets, assets include stocks, bonds, commodities, and currencies.  

2. Bear Market   

A market condition is when the prices of assets are falling. It is characterized by pessimism. Traders and investors are less likely to purchase equities, and many are looking to sell. This causes prices to fall.  

3. Bull Market   

In contrast, a bull market is when asset prices are rising. It indicates optimism and confidence in the market.  

4. Broker   

A broker is a person or firm that helps execute trades on behalf of investors.  

5. Spread   

It is the difference between the buying price (ask) and the selling price (bid) of an asset. It also is the broker’s profit margin.  

6. Liquidity   

Liquidity refers to how easy it is to buy and sell a stock. When there are many active buyers and sellers, and you may easily enter and exit a position, the stock is said to be more liquid.  

7. Volatility   

Volatility measures how much the price of an asset fluctuates over time. If an asset has high volatility, its price can change quickly in a short period.  

8. Leverage  

Leverage lets traders control a large position with only a small amount of money. It can increase both profits and losses.  

9. Margin  

Margin is the money you borrow from a broker to buy an asset. It’s the difference between the total value of your trade and the amount you borrowed.  

10. Order Types  

There are different types of orders in trading, but the most common are market orders (buy or sell at the current price) and limit orders (buy or sell at a specific price you set).  

11. Stop-Loss Order  

A stop-loss order is an instruction to sell an asset if its price drops to a certain level. This helps you limit your losses if the market moves against you.  

12. Take-Profit Order  

A take-profit order is a command to sell an asset once it hits a certain price, securing your profits.  

13. Pips  

Pips (percentage in points) is the smallest unit of price movement in forex trading, usually representing a change of 0.0001 in a currency pair’s price.  

14. Dividend  

A dividend is a portion of a company’s profits paid out to shareholders. Not all stocks pay dividends, but those that do give investors a regular income.  

15. ETF (Exchange-Traded Fund)  

An ETF is a type of investment fund that holds a mix of assets and is bought and sold on stock exchanges, just like individual stocks.  

16. Index  

An index is a tool that measures how a group of assets is performing overall.  

17. IPO (Initial Public Offering)  

An IPO happens when a company sells its shares to the public for the first time. It’s a way for the company to raise money by offering ownership to investors.  

18. Blue-Chip Stocks  

Blue-chip stocks are shares in large, well-established companies known for their stable performance. They’re often seen as safer investment choices.  

19. Short Selling  

Short selling is a strategy where a trader borrows an asset, sells it at the current price, and aims to buy it back later at a lower price to make a profit.  

20. Portfolio  

A portfolio is a collection of different investments that someone owns, like stocks, bonds, and other assets. It shows all the investments a person or institution has.  

End Note   

Learning these terms would just be the beginning. As you dive deeper into trading, you’ll find there’s so much more to discover. You can follow educational resources and start with a demo account first. Don’t worry; a lot of this will come naturally to you the more you do it. The more you engage with the market, the more confident and skilled you’ll become.