Stock Market Primer
Glossary A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
Acid Test Ratio - The ratio of quick assets to current liabilities. You use this ratio to determine if a company has good cash flow.
Adjusted Market Price - The market price adjusted for stock dividends, rights, splits and reverse splits.
Advance-Decline Line - Each day's number of declining issues is subtracted from the number of advancing issues. The net difference is added to a running sum if the difference is positive. The net difference is subtracted from the running sum if the difference is negative.
Amex - The American Stock Exchange, Inc.
Annuity - A contract where the buyer (annuitant) pays a sum of money to receive regular payments for life or a fixed period of time.
Authorized Capital - The authorized capital stock multiplied by par value.
Average Directional Movement Index (ADX) - A technical indicator developed by J. Welles Wilder, which measures a market's trend intensity.
Basis Points - Term used to describe amount of change in yield. One hundred basis points equals one (1) percent.
Bear - an investor who sells his stocks, and gambles on buying it back at a lower price.
Bear Market - A sustained period of falling stock prices usually preceding or accompanied by a period of poor economic performance known as a recession. The opposite of a Bull Market.
Block trade - a transaction involving over 10,000 shares.
Blue chip - the highest and best shares to buy. Comes from poker, where a blue chip is the most valuable.
Boolean - A variable that may have one of only two possible values: true or false. After George Boole, English logician, credited with the invention of Boolean logic.
Break - A very fast drop in price.
Breakaway Gap - The movement of price into a new range that leaves an area on a chart at which no trading occurred.
Breakout - The point when the market price moves out of the trend channel.
Broker - the person who can order stocks to be bought or sold.
Bull - an investor who buys stocks, and gambles on selling it at a higher price.
Bull Market - A stock markte that is characterized by rising prices over a long period of time. The time span is not precise, but it represents a period of investor optimism, lower interest rates and economic growth. The opposite of a bear market.
Candlestick Charts - A charting method, originally from Japan, in which the high and low are plotted as a single line and are referred to as shadows. The price range between the open and the close is plotted as a narrow rectangle and is referred to as the body. If the close is above the open, the body is white (or green). If the close is below the open, the body is black (or red).
Cash Dividend - Part of a Company's after tax earnings which the board of directors decides to distribute to the shareholders.
Chaikin Oscillator - Created by subtracting a 10-day EMA from a three-day EMA of the accumulation/distribution line.
Clearing house - central place where securities traded in the stock exchange are brought to ensure balance of shares transacted prior to delivery to the transfer agent. It is where settlement of accounts for buy/sell transactions executed by stockbrokers is done.
Close - the final price of the stock at the end of the trading day.
Closely held corporation - a corporation that only allows a few people to invest in it, such as friends and relatives.
Commission - the profit that a broker gets every time you buy or sell a stock through him or her.
Composite Index (Phisix) - a market indicator that averages 30 stocks in 3 different categories to determine how the market as a whole is doing.
Convergence - The coming together of prices and/or indicators. Opposite of Divergence.
Correction - Any price reaction within the market leading to an adjustment by as much as 1/3 to 2/3 of the previous gain.
Cyclical stock - a stock that tends to rise and fall with the economy.
Dip - a drop in the price of a stock that is temporary, making it the ideal time to buy the stock.
Discount brokers - a simple broker that only takes orders on buying and selling.
Dow Jones Average - a market indicator that averages 65 stocks in 3 different categories to determine how the market as a whole is doing.
Ex-Rights - The date set by the Exchange starting from which the buyer is no longer entitled to recently declared subscription rights.
Equity Ratio - The ratio of stockholder's equity to total assets multiplied by 100.
Fully Diluted EPS - A calculation of earnings per share using all of the common shares currently outstanding plus any additional shares that could result from the conversion or exercise of any outsatnding convertible preferred stock, convertible bonds, rights, or warrants.
Fundamental analysis- a method of stock analysis based on the management of the company and past stock movements.
Going public - when a company puts their stock up for sale.
Gross - value before tax.
Growth stocks - stocks that pay low dividends, but are expected to grow.
High - the highest price of the stock during the trading day.
Home run - a referral to an investors large gain in a short period.
Hostile takeover - a company or person that tries to buy a controlling amount of stocks in a company in order to control it. Usually this is not for the good of the company, and is similar to raiders.
Hot stock - a stock whose price rises quickly the day it goes public.
Income stocks - stocks that have consistently paid high dividends.
Initial Public Offering (IPO) - The formal name for going public.
Limit order - an order that limits the price the broker can buy or sell at.
Limit order to sell - an order to sell stocks only if they can be sold at a certain price.
Low - the lowest price of the stock during the trading day.
Market order - an order to buy or sell at the best price available.
Market trend - the upward or downward movement of a market for six months or more.
NYSE - The New York Stock Exchange.
Odd lot - an amount of stocks that is not the usual trading number.
Portfolio - a collection of stocks that is owned by an investor.
Privately held corporation - a corporation that allows only a select group of people to purchase stock.
Price Earnings Ratio (P.E.R. or PE) - The ratio of average market price to earnings per share; it is a measure of the number of times that a stock's price exceeds its earnings.
Proxy ballot - a voting ballot that allows you to control what happens with the company you have stock in.
PSE - Philippine Stock Exchang
Publicly held corporation - a corporation that allows anyone in the public to purchase their stock.
Raiders - a person or group of people that attempt to buy over 50% of the shares of a company in order to control the company by using the voting power of the stocks.
Return on Equity - Return on equity encompasses the three main "levers" by which management can poke and prod the corporation -- profitability, asset management, and financial leverage.
Round lot - an amount of stocks that is the usual trading number, such as 100 on the NYSE.
SEC - Securities and Exchange Commission.
Shareholder - a person who buys stock in a corporation, and therefore becomes a part-owner of the corporation.
Stag - an investor who buys and sells stocks rapidly, usually to make profits quickly.
Stockbroker - investment securities company which buys or sells stocks as an agent for individual and institutional investors. In addition , takes orders and also offers advice on investing.
Stock certificate - the actual piece of paper that is evidence of stock ownership, usually watermarked and patterned to make itself hard to forge.
Stock exchange - organized market place in which stocks and bonds are traded. Broker-members of the exchange meet at the "trading floor" where they buy and sell securities for the account fo their clients.
Stop order - an order to sell all stocks if the price of the stock drops to a certain point.
Technical analysis - an analysis of a stocks future based strictly on numbers, such as earnings, sales, and assets.
Tombstones - the advertisements that are put out when a company goes public.
Transfer agent - a firm that cancels and issues stock certificates of a corporation. It also maintains an accurate and updated records of the stockholders - their names, addresses and the number of shares.
White knight - a person or company that saves another company from an unwanted hostile takeover.
Yo-yo stock - a stock with a price that often rises and often drops rapidly.