A Glossary of All the Terms You Need to Know in Trading (A-C)

Venturing into any new topic scares the daylights out of me. This is partly due to jargons. You need not be afraid as I will demystify the jargon in parts.

Are you ready? Let’s dive in!

A

Accumulation: Buy more

Arbitrage: Buying and selling of the same item in different countries to take advantage of the difference in price.

Ask (aka Sell): The price a seller is willing to sell at that point of time.

Average down: Increasing the number of shares you own of the same company as the prices don’t go the direction you have predicted. This is done to lower the average price per share. Eg. You bought shares of Apple at $100, looking to profit when the price rises. The price of Apple shares drops to $90 instead and you buy more shares to lower the average price per share.

B

Bear: Prices are constantly falling. The opposite as a bull.

Beta: The relationship between the price of the stock and the whole market. Eg. Apple’s stock has a beta coefficient of 2. Apple’s share price will move 2 times more (on average) than that of the market’s movement.

Bid (aka Buy): The price a buyer is willing to buy at that point of time.

Bid ask spread: The price difference in the bid and ask price.

In this example, the bid ask spread is $1.52 ($266 – $264.48).

Blue chip: Large companies with a history of growth. Such companies tend to be well known.

Bond: An IOU issued by corporations or governments.

Breakout: Price of the stock piercing through its resistance level and staying above that.

Broker: A financial organization which facilitates the buying and selling of financial products. Find out which broker suits you.

Bubble: An escalation of prices which does not support its fundamentals. This escalation of prices is unlikely to be sustainable in the long run.

Bull: Prices are on the rise. The opposite as bear.

Buy to close: You purchase a stock to close out your position. This happens when you are done with your short selling.

Buy to open: You purchase a stock to initiate a position. This occurs when you are bullish and want to go Long.

C

Capital gain: Gains from price movement. This is not taxable if you are a resident in Singapore. Eg. You bought shares of Apple for $100. You sold them for $120 after a month. Your capital gain is $20 per share.

Cash flow: The amount of money that’s flowing into and out of a company.

Channel: A well defined price range where the stock is trending.

Commodity: A physical object such as food, energy, materials and metals that is traded in an exchange. Eg. Corn, cotton, crude oil, natural gas, gold and copper.

Consolidation: A pause from the previous price movement of a stock.

Consolidation of FE’s stock price (marked out in the yellow rectangle) after a bull run

Contracts for Difference (CFD): A leveraged financial derivative where the underlying (stock, forex, commodity) is closely mirrored. There is no ownership of the underlying.

Convergence: The direction of price and oscillator is the same.

Cyclical: Seasonal

Are you enlightened and eager to start learning about trading like these kids?

Stay tuned to the next list of essential trading terms. Learning something new does not need to be overwhelming.

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