Market (Stocks And Crypto) Trading Terms For Beginners
Getting started with market trading can be difficult, especially if you don’t understand what everything means. Analysts and professional investors seem to have their own language, even if some of the words sound like English.
If want to learn how to start trading in the local stocks exchange (PSE), you can read our beginner’s guide to the Philipine Stock Exchange.
To help, we’ve compiled a list of the most commonly used terms in crypto and stock market trading that you should be familiar with if you want to get started.
This term is used to describe the action of buying and selling the same security or investment asset such as crypto on different markets and at different price points.
For instance, if a stock A is trading at ₱100 on one platform and ₱110 on another, you could buy a number of that stock for ₱100 and sell them for $110 on the other market – profiting from the difference in the market price.
2. Fundamentals analysis (fundamentals)
This is a method of evaluating a company and determining the intrinsic (actual) value of its stock. Companies are valued with no regard for their market prices, and are instead judged on their business performance. Buy and sell decisions are then made based on whether a stock is trading above or below this value.
Although a stock’s value is ultimately an opinion, relatively undervalued companies can outperform over the long term. Fundamental analysis can also be applied to other markets including cryptocurrencies and commodities. In that case, any factors that affect the value of the asset are considered.
3. Averaging down
An investment strategy where an investor buys more of a stock as its price goes down; resulting in the average cost for the entire investment decreasing. Investors use this strategy when the price of a stock or crypto is on a downward trend but is expected to rebound sooner or later.
Average down on a stock or crypto-only if you believe that the general consensus of a company is wrong and if you have the conviction that of its value.
4. Bear market
This is the industry term for a downward trend or a period of falling stock prices.
5. Bull market
The opposite of bear market, this is a term used to describe a prolonged upward movement in stock prices.
A term to measure the relationship between the movement of the whole market and the price of a stock. For example, as of writing DITO currently has a beta of 0.64, which means that for every 1 point move in the market, DITO moves 0.64 points and vice versa.
7. Blue chip stocks or companies
These are the stocks of industry-leading companies such as Ayala Corporation, BDO, Aboitiz, to name a few. This type of stock has a proven record of stable growth and possesses a good reputation when it comes to fiscal management.
This term was derived from blue gambling chips – the chips that hold the highest value among all chips used in casinos.
A person who does the market trading for you (buying and selling) in exchange for commission or fee.
The bid is the amount of money a trader is willing to pay per share for a given stock. It’s balanced against the ask price, which is what a seller wants per share of that same stock, and the spread is the difference between those two prices.
10. Day trading
A high-risk high reward strategy. A prominent practice in the stock trading market where investors buy and sell to and from the market within the same day, for instant profit. It’s done for immediate returns and short-term investment income goals. It’s much riskier than investing in a long-term portfolio, but it can be more rewarding if you have the time to constantly manage your investments.
Another type of trading strategy to reap immediate returns, but in a shorter time frame. This type of trading follows the same principles as day trading, however, traders do it in a much shorter time frame – some do their trades on a 15-minute time frame, some 5, or even under a minute. They repeat it, completing a number of trades throughout the day.
Day trading only makes a single to a few trades a day, while scalpers make a lot of trades in one day making them more profitable.
This type of trade takes advantage of a volatile market, making it possible to profit (or even lose) in a matter of seconds or even minutes.
This is the portion of a company’s earnings that is paid to its investors, shareholders, or stock owners. It’s given on a quarterly or annual basis, depending on the company. Take note that not every company pays dividends.
Buying dividend stocks is an investing strategy where you hold the stock and make profits from periodical payouts, instead of trying to sell it at a higher price.
The act of successfully performing a transaction such as putting a buy or sell order.
14. All-time high (ATH)
The term used to imply a record-breaking milestone in terms of price. When a stock or crypto reaches a price point greater than its previous record, it’s called an ATH.
Record highs can signal that a stock or index has never reached the current price point, but there are also time-constrained highs, such as 30-day highs.
A trader’s term benchmark. An index is basically used as a reference marker or the standard for portfolio or yield. For example, your portfolio managed to get a 10 percent return but the market index is 12 percent, while your return is positive, it is below the market’s average, standard yield, or index. In that case, it denotes that your portfolio still didn’t do well.
16. Initial Public Offering (IPO)
IPO is the first offering of a stock from a company to the public. When companies decide to go public they cease to become a solely owned private company with inside investors, instead, they offer ownership to the public in the form of stocks or shares.
The Securities Exchange Commission (SEC) has strict rules that companies must follow before issuing an IPO.
A simple term used to describe the price point of your entry into the market. A position can either be good or bad depending on your timing or the market’s condition. For example, if you’ve entered Bitcoin at ₱500,000 and held on to it since your entry, you’re in a good position because you’re already profitable. However, if you’ve entered it at ₱2,500,000 it’s still quite a slippery slope since Bitcoin has been bouncing up and down from that price point.
A very risky way of earning money from the market. Trading on margin is a means to borrow shares or stocks (or even crypto in a form of coins) from a broker, with a simple goal in mind – to increase your profit. Investors only need to put in a fraction of the cost that they would normally spend to open a larger position.
Margin increases an investor’s buying power but at a cost – you need to maintain a minimum balance in the account. Otherwise, you’ll risk liquidating your account and losing your money.
When you borrow the shares or coins, you’re supposed to sell them at a higher price point, you keep the profit while you return the difference.
This type of trade may sound simple, but it’s extremely risky. The size or amount of stock you can borrow (leverage) will depend on your collateral or existing funds. Should you continue to lose in the trade, at some point all your funds will be liquidated and you’ll be left with nothing.
Study this trading concept first before getting your feet wet.
The industry term for buying or selling a certain amount of stock or crypto.
A collective term for the investments an investor owns. You can have one stock or cryptocurrency in your investment profile and still call it a portfolio.
Information on a stock’s latest trading price tells you its quote. This is sometimes delayed by 20 minutes unless you’re using an actual broker trading platform.
When a stock or cryptocurrency is seeing a rapid increase in its price level, it’s called a rally. Depending on the market condition, a rally can either be a bull or bear rally. When a bear market sees an upward trend that’s as little as 10 percent, it’s considered a rally.
A spread is a term used for the difference between the buying price and the selling price.
For instance, if a trader is willing to buy a stock for ₱100 and a buyer is willing to pay ₱100 for it, the spread is ₱10. A spread can also be expressed as a percentage difference between the two prices.
The term used for the price movement in the stock or crypto market as a whole. Cryptocurrency is highly volatile since its prices can fluctuate wildly on a daily basis. In the stock market, this is often common with stocks that are thinly traded or have low trading volumes.
High-volatility stocks have the potential to earn you big profit off spikes or dips in a short period of time if you know how to trade. This is why trading cryptocurrencies are more exciting for many traders because of how rewarding it can get if done right. However, it’s also very risky and isn’t recommended for inexperienced traders.
The number of shares of stock traded during a particular time period, normally measured in average daily trading volume. Volume can also mean the number of shares you purchase of a given stock.
26. Market capitalization
This is the total value of a company or cryptocurrency that is traded on the market. The value is derived by multiplying the total number of shares (coins for crypto) by the current share price.
For example, Bitcoin as of writing has a market capitalization of $753,856,929,941 with a total supply of 21 million coins. Dividing the total market capitalization by its number of supply will give you its existing price which is $40,000+.