Stock market glossary
What is a P/E ratio, when does a stop-loss trigger, what is a value trap? Explained in plain words, without jargon.
85 terms
0–9
A
B
- BacktestA rule is applied to past prices to see how it would have performed back then.
- Bear marketA longer period of falling prices, usually more than 20 % from the high.
- BetaHow strongly a share swings compared with the overall market.
- Bollinger BandsTwo lines around a moving average that show the usual range of swings.
- BondA loan you give a government or company in exchange for fixed interest.
- BrokerThe bank or app through which you buy and sell securities.
C
- CandlestickA chart element showing the open, high, low and close of a period.
- Closing priceThe last price of a trading day. Many indicators are based on it.
- Coin (cryptocurrency)A digital currency such as Bitcoin or Ether, traded around the clock.
- Concentration riskToo much money in one share, sector or region.
- Consensus estimateThe average of what analysts expect for revenue or profit.
- CorrectionA decline of the overall market or a share of roughly 10 to 20 % from its high.
D
- Debt ratio (leverage)How large a company's debt is relative to its equity or earnings.
- Dip (pullback)A clear price drop from the recent high, measured from the 6-week high for shares.
- DiversificationSpreading money across many different investments so that a single loss hurts less.
- DividendThe part of its profit a company pays out to its shareholders.
- Dividend yieldThe annual dividend as a percentage of the current price.
- DrawdownThe decline from the last peak to the following low, in percent.
E
- Earnings per share (EPS)A company's profit divided across each individual share.
- Earnings surpriseHow far reported profit differs from analysts' expectations.
- EntryThe price from which the analysis rates a purchase as reasonable. Fixed when a share reaches four stars.
- ETFAn exchange-traded fund that usually tracks an index.
F
- Fixed trading levelsEntry, target and stop are set once and do not change afterwards.
- Floor signsFive checks of whether a price decline is coming to a halt.
- Free cash flowThe cash actually left after running the business and investing.
- FundA pool in which money from many investors is invested together.
G
H
I
L
M
- MACDAn indicator that uses two moving averages to read changes in trend and momentum.
- Market capitalisationA company's stock-market value: share price times number of shares.
- Market conditionsHow the overall market is doing right now: normal, nervous or in a correction.
- Market orderBuy or sell immediately at the next available price, with no price limit.
- Moving averageThe average price over recent days, recalculated each day. Smooths out swings.
O
P
- P/B ratio (price-to-book)Market value compared with the equity shown on the balance sheet.
- P/E ratio (price-to-earnings)How many years of profit you pay for a share: price divided by earnings per share.
- P/S ratio (price-to-sales)Market value compared with annual revenue.
- Panic sellingSelling out of fear during a sharp drop, often close to the low.
- Payout ratioWhat share of profit is paid out as dividends.
- Position sizeHow much money you put into a single share.
- Price (quote)The price at which a security is currently trading.
Q
R
- ResistanceA price area where rises have often stalled in the past.
- ReturnThe gain or loss on an investment relative to the money put in, usually in percent per year.
- Return on equity (ROE)How much profit a company makes with its owners' money.
- Revenue growthBy how many percent revenue rose or fell compared with the previous year.
- Risk-reward ratioPossible gain to the target divided by possible loss to the stop.
- RSI (Relative Strength Index)An indicator from 0 to 100 showing whether a price has risen or fallen unusually strongly lately.
S
- Savings planA regular purchase of a fixed amount, for example monthly into an ETF.
- ScoreA number from 0 to 100: how good a dip currently looks as an entry.
- SectorThe industry a company operates in, such as technology or healthcare.
- Securities accountThe account at your broker that holds your securities.
- Share (stock)A slice of ownership in a company. Holding a share makes you a part-owner.
- Short sellingA bet on falling prices: selling borrowed shares and buying them back later.
- Spread (bid-ask)The difference between the buying price and the selling price of a security.
- StarsFive levels from "warning sign" to "strong floor" that sum up an analysis.
- Stock exchangeA regulated marketplace where securities are bought and sold.
- Stock splitOne share is divided into several; the price drops accordingly, the value stays the same.
- Stop (on DipCatcher)The level below the entry at which the analysis is considered to have failed.
- Stop-limit orderA stop that becomes a limit order when triggered, instead of selling at the next price.
- Stop-lossA sell level below your purchase price that is meant to limit a loss.
- SupportA price area where falls have often stopped in the past.
T
- TargetThe price at which DipCatcher considers a dip recovered.
- Ticker symbolThe exchange abbreviation of a security, for example SAP.DE or AAPL.
- Total lossLosing all the money invested, for example when a company goes bankrupt.
- Trading feesWhat your broker charges per buy or sell.
- Trading hoursThe hours during which an exchange is open for trading.
- Trading volumeHow many shares were traded on a given day.
- Traffic light (value-trap check)Green, yellow or red: whether a drop looks like a normal pullback or like a trap.
- Trailing stopA stop that automatically moves up as the price rises.
- TrendThe basic direction of a price over weeks or months.
V
W
Not investment advice. Investing carries risk up to total loss.