Stock Market Terms Flashcards
(26 cards)
Arbitrage
Purchasing an asset from one market and selling it to another market where the selling price is higher than what you paid for it, resulting in profit.
Averaging Down
Investment Strategy involving buying additional shares of an asset/stock after its price has fallen, resulting in a lower average purchase price
Bear market
Market condition in which prices are expected to fall. Typically entails major indexes/stocks decreasing by at least 20% compared to previous highs.
Beta
Measure of an assset’s risk in relation to the market.
A stock with a beta of 1.5 means that the stock typically moves 50% more than the market in the same direction.
Higher beta = riskier investment (generally)
If the market rises by 10%, the stock will rise by 15%
If the market falls by 10%, the stock will fall by 15%
Bull market
Market Condition in which prices are expected to rise
Buyback
When a company repurchases outstanding shares to reduce the number of shares on the market and return profits to their investors, resulting in an increased value of the remaining shares
Capitalisation
Total market value of all a company’s outstanding shares.
Calculated by multiplying total number of shares by current share price.
Aka market cap
Capital Gains
The profit earned after selling an asset or investment for a higher price than you paid for it.
Current Ratio
Measure of a company’s ability to pay ST debt.
Determined by dividing current assets by current liabilities.
Debt-to-Equity Ratio
Function of a company’s debt relative to its equity, or the value of its assets minus its liabilities.
Ratio found by dividing total liabilities by total shareholder equity.
Dollar-Cost Averaging
Investment strategy in which you invest a fixed amount on a regular basis regardless of the price of the asset.
Economic Bubble
A situation where asset prices surge to significantly higher levels than the fundamental value of that asset.
Exchange-Traded Funds ETFs
Collection of stocks/bonds combined in a single fund that can be purchased and traded on major stock exchanges.
Similar to mutual funds, they’re a pooled investment fund, meaning a “pool” of money is aggregated from multiple investors.
Going Long
Buying stock shares with the expectation that the asset’s price will rise, resulting in a profit
Going Short
Selling stock shares with the expectation that the asset’s price will fall.
When going short on an asset, an investor borrows the asset, sells it, and hopefully purchases it later at a lower price if the price does decline - resulting in a profit
Growth and Income Funds
Type of mutual fund or ETF that has both a history of capital gains (growth) and income generated from dividends (income).
Growth and Income funds have a two-sided strategy of both LT growht and ST income
Growth Stocks
Common stock of a company whose revenues are expected to grow at a significantly higher rate than what’s average for that industry.
Head and Shoulders Pattern
Refers to a specific chart formation seen on a technical analysis chart - generally considered to represent impending BEAR market
Appears when a stock price reaches 3 peaks:
- when the price peaks then declines
- rises above that peak and declines again
- rises a third time (but not as high as the second peak) and declines again
The second peak represents the formation’s head and the 1st and 3rd peaks = shoulders.
Limit Order
An order to buy or sell a stock at or below a specific price. Limit orders give traders control over how much they pay.
Liquidity
Measurement of how quickly and easily a stock can be bought or sold without impacting its price. Cash = v liquid, house = illiquid
Margin
aka Buying on Margin
When investors borrow money from a broker to purchase a stock, similar to a loan
Market Index
Tracks the performance of a certain collection of stocks, often grouped to represent a certain industry.
Tool for investors to gauge the health of the stock market by comparing current and past stock prices
Mutual Funds
Pools of investments from shareholders used to mutually buy securities like stocks, bonds, other assets
Order Imbalance
Occurs when orders of one type of stock aren’t offset by opposite orders, resulting in an excess of orders for that specific stock and sometimes volatile price changes
