A stock market is a platform where shares of public listed companies are traded. The stock exchange facilitates the trade of stock and other securities. Reputable facilitators of stock trading in the U.S. are the New York Stock Exchange and Nasdaq.

As with other markets, the stock market has its jargon. The jargon refers to terms used to describe various elements in the industry, including strategies, indices, and players. It is essential to familiarize yourself with these terms for you to be successful in the industry.

1. Price Target

A price target is a value placed on a stock by an analyst relative to its historical and projected earnings. Once an analyst raises their price target for security (stock), they anticipate the price of the stock targets to rise.

2. Stock Index

It is a reference point for stock market prices that guides investors in calculating market performance. The results are obtained through the application of weighted arithmetic mean, which compares current and past prices. The best index funds to invest in are Dow Jones Industrial Average and Standard & Poor’s 500.

3. Dividend

It is an amount of money paid to shareholders on a quarterly or annual basis by a company. Dividends are a fraction of a company’s profits or reserve. Therefore, the amounts received by shareholders may vary from time to time. It is important to note that not all companies pay dividends.

4. High and Low

High in the stock market alludes to the price of a stock reaching a greater price point than in the recent past. High records can either be within a day or a more extended period. For example, today’s high refers to the maximum price security traded during the trading day. Thirty-day high means the greatest price reached within 30 days of trading.

Low refers to the least price a stock traded. Record lows can as well be a day’s or be time-constrained as the highs.

5. Brokerage Firm or Stock Broker

Selecting a brokerage firm or a stockbroker is paramount in stock trading. A stockbroker is a person buying and selling shares on your behalf at a fee. A brokerage firm is an entity you instruct to trade stock for you in exchange for a commission. It is critical to select a brokerage or broker very carefully.

6. Bid

A bid is an amount an investor or stock trader is willing to part with to buy a stock. The offer is compared to the amount the seller wants for the same supply. The difference obtained is referred to as the spread.
7. Market Arbitrage
Market arbitrage refers to the buying and selling of the same security in different markets simultaneously. Market arbitrage aims to take advantage of the price difference. For example, an investor notices that in market Y, the price for ABC stock is at $7. In market Z, the same ABC stock is trading at $7.5. The investor may buy stock from market Y and sell it in market Z. In that process, the investor will earn a profit.

8. Averaging Down

Averaging down is a strategy one has to be very cautious when practicing. It refers to the action of an investor purchasing stock as the price is decreasing. This strategy is practiced when an investor believes that the consensus about the company is wrong. The investor, therefore, anticipates the stock price to upsurge at a later date.

9. Day Trading

It is the practice of speculating in the purchase and sale of securities within the same trading day. Traders practicing day trading strive to close all positions with the motive of earning profit. Day trading takes place within the trading hours of a stock market. In the United States, the stock market opens at 9:30 a.m. Eastern Time (ET) and closes at 4:00 p.m. ET.

10. Initial Public Offering (IPO)

IPO is the first offering of a private company’s shares to the public. The public issuance of shares allows a company to increase its capital base. The Securities and Exchange Commission requires a company to comply with stringent rules before issuing an IPO.

In the stock market, there are several terms used. As a new investor, the terms shown above are the most important phrases you should know about before investing. With these terms at your fingertips, you are equipped to trade.