Glossary
48 investing terms, each defined in plain English.
- Asymmetric Bet
- A position where the possible upside far outweighs the capped downside.
- Bear Market
- A sustained fall of 20%+ from a recent high.
- Beta
- How much a stock moves relative to the whole market.
- Bid-Ask Spread
- The gap between the highest bid and the lowest ask.
- Blue Chip
- A large, long-established, financially solid company.
- Brokerage
- The company that places your trades on an exchange for you.
- Bull Market
- A sustained rise, conventionally 20%+ off a low.
- Call Option
- The right to BUY 100 shares at the strike price.
- Candlestick
- A chart mark showing open, high, low and close for one period.
- Catalyst
- A specific dated event expected to move a stock.
- Compound Interest
- Returns earning returns on themselves over time.
- Correction
- A drop of 10–20% from a recent high.
- Debt-to-Equity
- Total debt ÷ shareholder equity. How leveraged a company is.
- Diversification
- Spreading money across assets so no single failure ruins you.
- Dividend
- A cash payment a company makes to shareholders out of profits.
- Dividend Aristocrat
- An S&P 500 company that has raised its dividend 25+ years running.
- Dividend Yield
- Annual dividend ÷ share price, as a percentage.
- Dollar-Cost Averaging
- Investing a fixed amount on a fixed schedule regardless of price.
- Drawdown
- The fall from a portfolio’s peak to its trough.
- EPS
- Earnings per share: company profit split across all shares.
- Equity
- Ownership in a company; the collective term for its stock.
- ETF
- Exchange-Traded Fund: a basket of assets that trades like one stock.
- Exchange
- The regulated marketplace where buyers and sellers are matched.
- Expense Ratio
- The annual % fee a fund charges you.
- FOMO
- Fear of missing out: buying because something already went up.
- Index
- A measured basket of stocks used to track a market.
- Index Fund
- A fund that simply copies an index instead of picking stocks.
- IPO
- Initial Public Offering: the first sale of a company’s shares to the public.
- Leverage
- Using borrowed money or derivatives to amplify exposure.
- Liquidity
- How easily you can sell without moving the price.
- Loss Aversion
- Losses hurt roughly twice as much as equivalent gains feel good.
- Market Capitalisation
- Share price × total shares. The market’s price tag on the whole company.
- Moving Average
- The average closing price over the last N days, plotted as a line.
- Option
- A contract giving the right, not the obligation, to trade at a set price.
- P/E Ratio
- Price ÷ earnings per share. What you pay per $1 of profit.
- Penny Stock
- A very low-priced, thinly traded, often unlisted stock.
- Position Sizing
- Deciding how much to risk on one idea.
- Premium
- The price paid for an option contract. The maximum a buyer can lose.
- Put Option
- The right to SELL 100 shares at the strike price.
- RSI
- A 0–100 momentum gauge; above 70 "overbought", below 30 "oversold".
- Share
- One unit of ownership in a company.
- Short Interest
- The % of a company’s shares currently sold short.
- Short Squeeze
- A price spike caused by short sellers being forced to buy back.
- Strike Price
- The fixed price an option lets you buy or sell at.
- Theta Decay
- The daily loss of an option’s value as expiration approaches.
- Ticker
- The short code that identifies a stock, like AAPL for Apple.
- Volatility
- How violently a price swings around, up or down.
- Volume
- How many shares changed hands in a period.