Insight into stock trading terminology
All or None - The all or none order states you want the entire order filled or none of the order filled. You would use this type of order for thinly traded stocks.
Ask or Offer - The price of a stock or option at which a seller is offering to sell a security that investor may purchase a stock or option.
Bid - The price of a stock or option at which a buyer is willing to purchase a security; the price at which a customer may sell a security.
Bid / Ask Spread - The difference between the bid and ask prices for a particular stock or option.
Blue Chip Stocks - The stock of a well-established company having stable earnings and no extensive liabilities. Most blue chip stocks pay regular dividends even when business is faring worse than usual. Investors, who seek relative safety and stability, though prices per share are usually high, value them. Typically, such stocks are perceived to offer reliable returns, low yield, and low risk.
Board Lot - There are 1000 shares in a board lot if their selling or buying price is $.005 to $.095. There are 500 shares in a board lot if their selling or buying price is $.10 to $.995. Finally there are 100 shares in a board lot if their selling or buying price of more than one dollar.
Book Value - The difference between a company’s assets and its liabilities.
Buy and Hold - A strategy in which stocks are bought and then held for a long period of time, regardless of the market's fluctuations. This strategy is based on the assumption that in the very long term stock prices will go up and the market as a whole will rise despite any short-term fluctuations. Trade commissions are reduced as buying and selling less often and taxes are often reduced or deferred by holding positions longer.
Buy Stop Order - Investors typically use a stop order when buying stock to limit a loss or protect a profit on short sales. The order is entered at a stop price that is always above the current market price.
Cash Flow Per Share From Operations - Derived by adding depreciation, depletion and amortization to the company's net income and dividing this figure by the shares outstanding.
Current Price - The amount of money a security most recently traded for.
Day Order - A day order is an order that is "good for the day" and is automatically cancelled if it cannot be executed the day it was placed.
Debt - Expressed in percentage, this figure is based on fiscal year-end values of total debt to shareholder's equity.
Earnings Report Due Date - Anticipated date of next earnings report.
Exchange - Public market where securities are traded.
Earnings Per Share (EPS) Rating - Stocks are rated on a 1 to 99 scale comparing a company's earnings per share growth with all other publicly traded companies.
Good Till Cancelled - A Good till cancelled order instructs your broker to keep the order active until you cancel it. Obviously, you use this order with other order types to specify a time frame for the order.
Long-Term - A long period of time, or for a buy and hold investment strategy.
Limit Order - A limit order states the maximum price you are willing to pay for a stock. You can use this type of order to avoid entering a position if a stock gaps up or down at the opening and you want to avoid entering at an extreme price. Limit orders can be combined with "buy" or "sell on stop" orders as well.
Long Position - When you buy a stock from the long side, you are purchasing the shares with the hope that they will rise in price. This is the exact opposite of a short sale.
Margin Account - A customer account with a brokerage firm that allows an investor to buy stocks with money borrowed from the broker. Margin accounts generally offer low interest rates on margin loans to encourage investors to buy on margin. The limits on margin borrowing are usually set at 50% of the amount invested, but some brokerages may have even stricter requirements.
Market Capitalization - Total market value of company. Calculated by multiplying shares outstanding by the stock price.
Partial Fill - A limit order that is only partially executed because the total specified number of shares of stock or options could not be bought or sold at the limit price.
Penny Stocks - Reference to stocks that are under five dollars.
Price/Earnings (P/E) Ratio - Theoretically measures the value of a stock by dividing the current price by its earnings per share over the last twelve months.
Return on Equity - Presented as a percentage figure, it is derived by dividing annual income by an average of the latest fiscal year and the prior year's stockholders' equity.
Sell Stop Order - A sell stop order helps investors to avoid further losses or to protect a profit that exists if a stock price continues to drop. A stop order to sell is always placed below the current market price.
Shares Outstanding - The number of shares authorized in a corporate charter that have been issued for trade in the open market, and/or held by corporate officers
Shares Float Supply - Number of shares available to the public and institutions (reported in millions).
Short Selling - Borrowing stock or commodity futures contract from a broker and selling it, with the understanding that it must later be bought back and returned to the broker. Short selling is a technique used by investors who try to profit from the falling price of a stock. The investor's broker will borrow the shares from someone who owns them with the promise that the investor will return them later. The investor immediately sells the borrowed shares at the current market price. If the price of the shares drops, you "cover the short position" by buying back the shares, and your broker, returns them to the lender. The profit is the difference between the price at which the stock was sold and the cost to buy it back, minus commissions and expenses for borrowing the stock. But if the price of the shares increases, the potential losses are unlimited.
Spread - The difference between the current bid and the current ask or offered in trading of a given security.
Ticker Symbol - The identification code, consisting of one to five alpha-numeric characters, assigned to each stock for trading purposes.
Trailing Stops - The trailing stop order is similar to the stop loss order, but you use it to protect a profit, as opposed to protect against a loss.
Volume - The number of shares, or contracts traded during a given period, for a security or an entire exchange.
Warrant - A type of security issued by a company that allows the holder to buy a proportionate amount of stock at a specified future date.
Yield - Percentage rate of return based on annualized dividends.
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