Trading glossary, a synthetic dictionary of financial terms may help novice traders and ordinary investors to have an idea of how the stock market really works.
Successful investing is anticipating the anticipations of others.
John Maynard Keynes
In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.
Peter Lynch
The stock market is a device for transferring money from the impatient to the patient.
Warren Buffett
Price is what you pay. Value is what you get.
Warren Buffett
Rule No. 1: Never lose money. Rule No. 2: Never forget Rule No. 1.
Warren Buffett
Know what you own, and know why you own it.
Peter Lynch
In the long run, a portfolio of well-chosen stocks will always outperform a portfolio of bonds or a money market account.
Peter Lynch
The big money is not in the buying and selling, but in the waiting.
Charlie Munger
The market can stay irrational longer than you can stay solvent.
John Maynard Keynes
The stock market is never obvious. It is designed to fool most of the people, most of the time.
Jesse Livermore
It was never my thinking that made the big money for me, it always was my sitting.
Jesse Livermore
It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.
George Soros
Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.
Paul Samuelson
The stock market is filled with individuals who know the price of everything, but the value of nothing.
Philip Fisher
The tape tells the truth, but often there are times when you read it wrong.
Richard Wyckoff
A synthetic dictionary of investors and financial terms may help traders, and above all non-professional ones, to have a good knowledge of stock market vocabulary, stock market analysis, and it’s conditions. Then if you want to consult a complete and full glossary of this kind, that can be made up by more than 8,000 terms, you can visit the following links:
www.nasdaq.com/investing/glossary/; www.investopedia.com/dictionary/;
Account Executive – A stockbroker by any other name. More specifically, the term refers to a NASD-registered securities representative, but also is used generically to describe almost any salesperson.
Accredited Investor – Wealthy investors in an, generally maintaining a net worth of at least $1 million or earning at least $200,000 per year, with the privilege of investing in risky private stock sales and other securities. The term itself is defined under Regulation D of the Securities Act.
Accumulation – Term used by technical analysts describing a stock whose price is holding steady, thus implying that investors are willing purchase or “accumulate” shares at this price.
Active Market – Term associated with stocks or other securities that trade with a relatively high measure of liquidity, typically exhibited in high volume and narrow spreads; in an active market. It is also a matter of opinion, as one man’s active market may be another’s illiquid market.
Affiliate – Any person directly or indirectly holding 10% or more of a corporation’s outstanding shares — typically directors, elected officers and immediate family members. As such, they are subject to reporting stock sales and purchases and are restricted from making certain transactions in the company’s stock.
Aftermarket – (1) Sometimes called “secondary market,” this term refers to the trading in a security after its initial public offering. (2) The term may also be used in reference
to trading after regular market hours.
Agency – (1) Term used to describe a security issued by a U.S. Government agency; or (2) a stockbroker buying or selling a security without taking a financial risk (i.e. making a market). In the latter case, the broker simply handles the transaction between the buyer and seller for a commission.
All or None – (1) Term used to describe a trading order instructing the broker to buy or sell the entire amount of the order in one transaction or not at all; or (2) a condition where an underwriter must sell every share or unit in a security’s offering or the issuing company has the right to cancel the entire offering – in modern underwritings, this condition is seldom imposed.
American Stock Exchange (AMEX) – Founded in 1921 and located in New York, it’s the third-largest U.S. stock exchange. While minimum listing requirements are similar to those of the more popular Nasdaq stock market, shares trade on the AMEX in the same “auction” manner utilized by the much larger New York Stock Exchange as opposed to Nasdaq’s “market making” methods. In recent years, the AMEX exchange has lost prominence in stock listings and trading volume to both Nasdaq and the NYSE. However, the AMEX has enjoyed gains in trading “derivative” securities such as options and futures contracts.
Analyst – Person or other party that purports to serve as an authority on the evaluation of a security for investment consideration. Most established brokerage firms employ analysts to review stocks and other securities for “buy,” “sell” or “hold” recommendations. Many other analysts operate independent of brokerage firms and commonly publish their analysis in newsletters or other publications. However, analyst qualifications run to extremes and many amateurs or biased parties often distribute securities analysis that may be misleading or one-sided.
Annual Report – Publication distributed once each year by public corporations to inform shareholders of company progress and attract potential investors. Most annual reports contain only financial highlights and general business information, but some also include fancy graphics printed on glossy paper – reflecting a considerable expense outlay. For detailed financial reports and disclosures, all public companies whose shares are listed on the major U.S. stock exchanges are required to file a detailed annual report with the SEC via form 10-K.
Annuity – Contract between an individual and an insurance company, providing lifetime income to the person on whose life the contract is based, in return for either a lump-sum or periodic payment to the insurance company.
Arbitrage – Versatile little word that takes on many different personalities, but essentially means the act of profiting from a difference in price. For example, arbitrage could apply to buying and selling currencies in different markets to take advantage of price disparities, or it may refer to an investor or market maker buying one stock and then selling it short to profit from the difference between bid and ask prices. (See “Spread”)
Arbitration – Two parties agree to settle a dispute by binding themselves to the decision of a third-party referee outside of the courts; frequently used for customer disputes against stockbrokers and their firms.
Ask – The lowest price at which a dealer or market maker will sell a security. (See “Bid,” “Offer,” “Quote”)
Asset – Anything that an individual or a corporation owns. In corporate finance, assets include items of value such as cash, land, equipment and even intellectual properties, and are generally separated on a company’s balance sheet into two categories: current assets (those which can be converted into cash within a year or less) and fixed assets (those which are expected to remain fixed for longer than one year).
Asset Financing – Companies borrow money secured by specific assets such as land, buildings or equipment rather than by general obligation. In some respects, this is the corporate equivalent of going to the pawnshop.
Associated Person – Almost anyone who is employed, owns or directs a brokerage firm, including managers and salespersons but generally excluding clerical or administrative personnel.
At the Close – Trade order specifically instructing the transaction to be filled in the last trade for a particular security on a trading day or to be canceled otherwise.
At the Money – “Options speak” referring to a security and an option strike price which are the same. (See “In the Money,” “Out of the Money.”)
At the Open – Trade order specifically instructing the transaction to be filled in the first trade for a particular security on a trading day or to be canceled otherwise.
Authorized Stock – Maximum number of shares that a corporation may issue through its charter. The corporation must amend its charter or articles of incorporation, usually by vote of approval by a majority of shareholders, in order to increase or decrease this amount.
Automatic Reinvestment – Applying to most mutual funds and about 800 stocks, the vehicle for enacting this strategy in stocks is commonly known as a dividend reinvestment plan (DRIP), which allows shareholders to receive dividends in the form of new shares rather than cash. It works the same way for mutual funds, and most funds offer automatic reinvestment as a choice for investors.
Average Down – When you buy the same security at different times and at sequentially lower prices, in effect you are lowering, or averaging down, your cost per share. For example, if you bought 100 shares at $18, then 100 shares at $14, you would have invested a total of 200 shares at an average cost of $16 per share. Buy another 100 shares for $10 and your average would drop to $14 per share. Many investors who are confident in the long-term potential for a particular stock will consider falling prices a buying opportunity and accumulate more shares at lower prices.
Average Life – Average time before a bond is likely to be called or retired, which often is less than the time until the bond matures.
Away from the Market – Trade orders that cannot be executed because they are above or below the current bid or ask. For example, a limit order to sell 100 shares of Microsoft at $95 when the best or lowest offer is $89 will not be filled and is said the be “away from the market.”
Baby Bond – Bond with a face value of less than the traditional $1,000.
Back Office – Term which refers to the administrative and clerical departments within a brokerage firm.
Balance Sheet – Key financial statement showing a corporation’s assets, liabilities and shareholder capital.
Balanced Fund – Mutual fund that invests in a portfolio balanced between equity, such as stocks, and debt instruments, such as bonds.
Bank Quality – Term describing the highest quality of creditworthiness by an issuer of bonds or other debt securities; debt rating of BBB or higher by Standard & Poor’s or Moody’s.
Basis Point – One hundredth of a percent; generally used to describe changes in bond yields. For example, a bond yield that changes from 6.01% to 7.11% is said to have gained 110 basis points.
Bear Market – Popular term describing a period where general market conditions are marked by declining securities prices. (See “Bull Market”)
Bear Spread – In options, a strategy employing two contracts designed to profit from a drop in a stock’s price. Bearer Bond – Class of bonds which are not registered in the name of any particular owner, rather they are the property of the party which holds physical possession of the bond certificate. As such, bearer bonds pay interest and principal to whomever “bears” the bond itself, much in the way cash in your wallet is a “bearer” certificate.
Bearer bonds are rarely issued any more by U.S. corporations, and are more likely to be the subject of a Hollywood cops-and-robbers script than your portfolio.
Beneficial Owner – Person or party that really owns a security or “benefits” from the ownership. The term is used most often to describe the real, or beneficial owners of securities when those securities are held in “street name” in the person’s brokerage or bank account.
Best Efforts – In an underwriting of securities, the term refers to an agreement between the issuer and the underwriter allowing the underwriter to call off the offering if it cannot sell the minimum agreed amount of securities.
Beta – Measurement of the historical volatility of a stock, portfolio or mutual fund relative to the general market as measured by the S&P 500 stock index. A beta value greater than 1.0 represents greater volatility than the general market; less than 1.0 represents less volatility than the general market.
Bid – Highest price at which a dealer or market maker will purchase a security. (See “Ask,” “Offer,” “Quote”)
Big Board – Nickname for the New York Stock Exchange (NYSE).
Block – Transaction involving a large number of shares or other units of a security. Blocks may vary in size depending on the liquidity of the security traded and the number of shares in the block transaction. Often however, blocks are transacted at a discount to the current market as an accepted cost of trading a large number of shares “away” from the market.
Blowout – Slang term referring to a party selling a large number of shares into the market without regard for the demand for shares or potential effect on the market price of the security.
Blue Chip – Financially strong, established company.
Blue Sky – Refers to securities registration or broker licensing, or the securities regulatory authorities of individual states. For example, if a stock broker in the state of New York has complied with licensing or registration requirements for Florida, Texas and Illinois, then he or she is said the be “blue skied” in those states and may solicit sales from account holders residing therein. Blue sky often is referred to in private placements, IPOs and secondary underwritings to designate the states in which securities may be sold. The term also is frequently used with many securities quoted on the OTC Bulletin Board or the Pink Sheets.
Board of Directors – Persons elected by a company’s shareholders to make important decisions such as electing officers of the company. Directors are also considered control persons and as such, are generally restricted from transacting in the company’s securities without proper reporting.
Boiler Room – Term often used to describe a brokerage firm or other sales organization where investors are aggressively solicited over the telephone; often associated with highpressure telephone sales tactics in connection with penny stocks and other risky investments.
Bond – Debt security with a maturity of greater than one year; a corporate IOU. Many different kinds of bonds are available to investors, such as convertible bonds, which may entitle a holder to shares of an issuer’s stock. Bond creditworthiness is commonly rated by Standard and Poor’s and Moody’s investor services. (See “Baby Bond,” “Bearer Bond,” “Bond Fund,” “Corporate Bond,” “Coupon Bond,” “Junk Bond,” “Zero Coupon Bond”).
Bond Fund – Type of mutual fund whose aim is to provide stable income with minimal risk. It may invest in preferred stocks as well as corporate, government or municipal bonds.
Bond Power – Form used to transfer ownership of a bond.
Book Value – Balance sheet measure of a company’s net worth. Generally calculated from total assets minus total liabilities, including any preferred shares, and often expressed as a per-share value when divided by the company’s number of outstanding common shares. Although used as a measure of a company’s fundamental net worth, it may prove deceptive. A company’s assets as expressed on its “books” often includes arbitrary adjustment for depreciation and does not take into account their fair market value if they were to be sold.
Boston Stock Exchange (BSE) – Regional stock exchange where shares of securities often traded on other U.S. exchanges, including NYSE, AMEX and Nasdaq, are traded.
Branch Manager – The person managing a branch office of a brokerage firm and supervising the activities of its affiliated stockbrokers.
Breadth – Comparison of issues traded on a stock exchange on a given day to the total number of issues listed for trading. Market trends are considered confirmed only upon reasonable breadth in the market.
Breakeven – Point at which neither a profit or loss exists. The term is applied in various ways. In options, for example, it is sometimes synonymous with “at the money,” whereas “in the money” refers to a potential profit position and “out of the money” a potential loss.
Breakout – Used in technical analysis of securities, referring to a pattern where the price of a security changes significantly, either up or down, from a previous range where the price held relatively steady.
Bridge Loan – Temporary loan used to provide a company with a portion of working capital while arrangements for permanent financing are executed. In initial public offerings, the lead underwriter often will provide a bridge loan to the company, secured by shares of the company’s stock. If the IPO is successful, the underwriter will typically be repaid its bridge loan through the sale of the security’s shares in the IPO, and often at a much higher price.
Broker – Stockbroker; any person who has been duly registered by the National Association of Securities Dealers and or a state’s securities regulation authority to take customer orders or to solicit the sale of a security. Brokers are also called Registered Representatives, as it is most common to become a broker by passing the NASD Series 7 examination.
Broker Loan – Rate of interest charged by a brokerage firm to its customers for securities bought on margin.
At the following link you can download the complete glossary: Trading-Synthetic-Dictionary.pdf
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