Wall Street isn't just a place; it's a culture. It's a culture around money, trading, and stock market news. Though it may seem elite to beginners, anyone can start trading like a professional—or at least invest their money and get a brighter future as a result of it.
The truth is that a lot of the elite vibes people get from traders isn't just because of the money; it's the fact that they use terms that most people don't know. It just seems exclusive, even though everyone is welcome to trade.
If you are new to trading, you might as well start talking like a trader. This list of the most common stock market terms will help you understand what's going on with trading talk you hear.
(Note: For the sake of this article, we are going to assume you know basic terms like shares, mutual funds, index funds, commodities, and stockbroker.)
Earnings Per Share
Earnings Per Share is one of the most common stock market terms out there, and it's typically used during valuation periods. When you invest in a company, you want to know that the company is doing something wise with your cash.
When a company tells you their Earnings Per Share, they are showing you how much money they made with each share investment you've made.
Beta is one of the most common stock market terms to regularly confuse newbie investors. Marked by a Greek "B," beta is a measure of a stock's volatility and riskiness compared to the market.
A stock with high beta has a lot of volatility, and could potentially have higher returns than a typical market rate. However, it also could crash far harder than typical stocks.
Low beta stocks, on the other hand, tend to be low-risk but low reward.
While you might think this usually means that something's super great, the stock market term is a bit different. Outstanding refers to the amount of stocks held by shareholders, rather than the stocks that were bought back by the company.
If you invest in cryptocurrencies, you might have heard this term being used upon the news that Ethereum will soon overtake Bitcoin. However, its roots are in the stock market. This term stands for the total value of all shares a company has on the market.
For example, a company with 1000 outstanding stocks worth $4 would have a market capitalization of $4,000. Another company with 4000 outstanding stocks worth $1 would have a market capitalization of $4,000 too.
Today, it's one of the most common stock market terms used in publications. It's easy to see why; it's a useful measure.
OTC is a term that pharmacists use to discuss medicines that are low-risk, low-cost, and non-prescription. When it's used as one of the most common stock market terms, OTC refers to a decentralized stock exchange that is generally conducted via phone or email.
Trading on the OTC, rather than a major stock exchange like the NYSE, is considered to be riskier. A lot of penny stocks (some of the most dangerous investments you can make) are OTC-based.
Another one of the more common stock market terms you might hear is "market value." This literally translates into the cost at which a security is valued at. If you pay for something at market value, you're getting it at the price you'd expect it to be traded at.
Blue Chip Stocks
These are the stocks traded in major exchanges that are considered to be "good as gold." They are low volatility, high-value, and are aligned with highly successful companies. Apple, IBM, and Berkshire Hathaway are all blue chip companies.
These are two of the most common stock market terms to hear on a trading floor—and are therefore two of the most important. A bid is the highest price someone is willing to pay for a stock share. An ask is the lowest price you're willing to pay.
Liquidity is one of the most common stock market terms as far as describing different types of investments. Liquidity describes how easily it can be bought and sold on the market, or how quickly it can be converted into cash.
Stocks that aren't easily traded are not very liquid. Meanwhile, high-demand stocks will be extremely liquid in nature.
Trading on Margin
You might have heard about margin accounts, or how the worst stock market crash in US history, the 1929 Stock Market Crash, was caused by too many people trading on margin. Though you would expect the practice to be banned, it's still one of the most common stock market terms out there.
Trading on margin means that you are trading using the stockbroker's credit rather than your own money. You will need to open up a margin account, set up a deposit, and then trade within the maximum limit that a brokerage will allow you to trade.
Market Order/Limit Order
Market Orders are immediate, real-time orders for shares that are done at the best market value prices at that time. Limit Orders, on the other hand, will only be executed when the minimum selling price has been hit, or when the order is below the maximum buying price.
Both are fairly common stock market terms, and they have a lot of uses. If you're new to trading, Limit Orders are typically the best option.
Bull Market/Bear Market
A bull market is a market that is booming. A bear market tends to be one that is not faring very well. Bull markets happen during times of growth. Bear markets happen during times of recession.
A company's prospectus is the writeup that shows you what you should expect from a security. This will tell you how they're going to use the money you give them, what their business plans to do, and what you should be aware of as an investor.
This is one of the most common stock market terms used by people who are debating whether they should buy or sell a stock. It should be, too. After all, you should know what you're investing in, right?
About the Creator
Iggy Paulsen is a fan of anything and everything wholesome. He loves his two dogs, hiking in the woods, traveling to Aruba, building DIY projects that better humanity, and listening to motivational speakers. He hopes to eventually become a motivational speaker himself.