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This is the third part of the terminology list:

Over-The-Counter (OTC) – To trade financial instruments (such as stocks, bonds, commodities or derivatives) directly between two parties, instead of trading them through the exchange markets.

Penny Stocks – Common shares of small public companies that trade at less than $1.00.

Preferred Stock – or preferred shares, preference shares or preferrends, are a special equity security that has properties of both an equity and a debt instrument. They are senior to common stock, but are subordinate to bonds.

Price to Earnings Ratio (P/E) – Found by dividing the price of the stock by the earnings per share of the company stock. This shows willingness of investor to make trades based on the belief the stock’s long term earnings will improve.

Primary Market – This is where the initial offering of stocks and bonds to investors is done. Any subsequent trading is done in the Secondary Market.

Public Company or Publicly Traded Company – This is a company that offer its securities (stocks, bonds and such) for sale to the general public, typically through a stock exchange.

Security – A negotiable financial instrument representing financial value. These can be debt securities such as bonds, banknotes, and debentures, or they can be equity securities such as common stocks, or they can be derivative contracts, such as forwards, futures, options and swaps.

Shares – A company will divide its capital into units of equal value, each unit will be called a share. These shares can be sold to raise capital for the company.

Shareholder – This will be the person who buys the shares. By acquiring a share or shares the shareholder becomes one of the owners of the company.

Short Selling – This is when a trader borrows stock, then sells it on the market, hoping for the price to fall, and then eventually buys it back. Thus, making money if the price fell and losing money if it rose.

Soft Commodities – Goods that are grown.

Stocks – Representation of capital paid or invested into a business entity.

Stock Exchange – Entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. To be able to trade a security on a certain stock exchange, it must be listed there.

Stock Market Index – This is a method of measuring a section of the stock market. These may be classified in different ways. There are the global stock market index which include companies without regard for where they are domiciled or traded, such as S&P Global 100 or MSCI World. There are national index which represents the performance of the stock market of a given nation, such as S&P 500 for US, the Nikkei 225 for Japan and FTSE 100 for the UK.

Stock Trader – Individual or firm who will buy and sell stocks in the financial markets.

Swap Derivative – In this derivative, counter parties exchange certain benefits of one party’s financial instrument for those of the other party’s financial instrument.

The New York Stock Exchange – This is a stock exchange located in Manhattan. It is the largest stock exchange and had a market capitalization, in Dec 2010, of US$13.39 trillion.

The New York Stock Exchange Index – Composed of the 1,600 stocks trading at the New York Stock Exchange.

The Standard and Poor’s Indexes – There are three main S&P U.S. Indexes, the S&P 500 Index, The S&P MidCap 400 Index and the S&P SmallCap 600 index. The S&P 500 Index contains 500 of the largest U.S. Companies. Changes in these indexes may be made several times a year, with companies being added or removed from the Indexes on a regular basis.

The Nasdaq Composite Index – National Association of Securities Dealers Automated Quotations Index – Computerized network where brokers trade over-the-counter securities.

The Russell 2000 Index – This is a small-cap (Small-capitalization=the average size of the companies included in this index is from around $1.26 billion) stock market index of the bottom 2,000 stocks in the Russell 3000 Index.

The Russell 3000 Index – This is a stock market index of US stocks. It measures the performance of 3,000 publicly held US companies, which represents approximately 98% of the investable US market.

Trading Techniques: Day Trading- Fast paced technique of buying and selling stocks within one business day. Momentum Trading- This technique involves watching out for stocks that will move upwards due to an event or factor which gives them momentum. It is normally used in conjunction with a new stock or when something happens to move the stock up or down rapidly and in great quantities. Fundamental Trading- This is the most common technique, it uses charts and other signals to track the stock market and thus decide when to buy and sell stocks and shares.



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This is the second part of the terminology list:

Dividend – The amount of profit the company will divide between its shareholders, usually four times a year.

Dow Jones Industrial Average – It is made up of 30 blue-chip stocks that represent various industry groups and used as a market indicator. Changes in the stocks in the Dow Jones are seldom made.

Earnings per share (EPS) – Amount of earnings per each outstanding share of a company’s stock.

Energy Commodities – These include electricity, gas, coal and oil.

Exchange-traded funds (ETF) – This is an investment fund traded on stock exchanges. An EFT holds assets such as stocks, commodities, or bonds and trades close to its net asset value.

Forward Contract – A contract between two parties to buy or sell an asset at a specified future time at a price agreed today.

Futures Contract – This is a standardized contract between two parties to buy a specified asset of standardized quantity and quality at a specified future date at a price agreed today.

Growth Stock – Shares in a small company that has the potential to grow much larger.

Hard Commodities – Commodity goods that are extracted through mining.

Indices – Number of stocks that are grouped and averaged to identify changes in a particular market.

Inflation – When prices rise and thus purchases decrease.

Initial Public Offerings – or offering or flotation is when a company issues common stock or shares to the public for the first time.

Interest – The amount it is charged when money is loaned.

Low Market Capitalization – When the shares in a company are performing badly and have lost their value.

Margin Account – When a brokerage firm allows the client to buy stock with credit.

Margin Buying – This is when a trader borrows money to buy a stock and hopes for it to rise in value.

Mutual Fund – When money from different investors is used jointly to purchase securities.

Net Asset Value – Term used to describe the value of an entity’s assets less the value of its liabilities.

Net Change – The difference in a stock’s value from one day to the next.

Net Worth – How valuable a company or individual is. This is worked out by subtracting all liabilities (anything owed) from all the assets.

Open-End Fund – This is a collective investment scheme which can issue and redeem shares at any time. These are available in most developed countries and a few examples are: mutual funds (US), unit trusts (UK) and hedge funds.

Options – When two parties agree to buy or sell an asset at a predetermined price.

Order- or exchange. This is an instruction from customers to brokers to buy or sell on the exchange. These instructions can be simple or complicated. Market Order or Open Order – When instructions are given to trade stock immediately at current market prices.

Limit Order – This is an order to buy a security at not more, or sell at not less, than a specified price. A Buy Limit order can only be executed at the limit price or lower. A Sell Limit order can only be executed at the limit price or higher.

Day Order – This is a market or limit order that is in force from the time the order is submitted to the end of the day’s trading session. A Good-Till-Cancelled Order requires a specific cancelling order. An Immediate-or-Cancel Order (IOC) will be immediately executed or cancelled by the exchange, although these do allow partial fills. Fill-Or-Kill Orders (FOK) are usually limit orders that must be executed or cancelled immediately and they require the full quantity to be executed.

Stop Order – or stop loss order, is an order to buy or sell a security once the price of the security has climbed above or dropped below a specified stop price. Buy Stop Order – This is typically used to limit a loss on a short sale. A buy stop price is always above the current market price. Sell Stop Order – Instruction to sell at the best available price after the price goes below the stop price. Stop Limit Order – This is a combination of a stop order and a limit order, once the stop price is reached, the stop-limit order becomes a limit order to buy or sell at no more or less than another, pre-specified limit price.

Trailing Stop Order – This is entered with a stop parameter, such as a percentage change or a rise or fall in the security price, which creates a moving activation price. If the trailing stop sell order is set at $1.00, the market order will be activated when the stock falls by $1.00. Trailing Stop Limit Order – Like a trailing order but instead of selling at market price when triggered, the order becomes a limit order. Trailing Stop Trailing Limit Order – This is the most flexible possible order.

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