Glossary

A plain-English reference to the financial and trading terms you will encounter throughout BullBearStock. Each definition is intentionally short: enough to give you a working understanding, with a pointer to deeper material on our Stock Basics hub where it exists.

60 terms

A

Alpha: The portion of an investment's return that cannot be explained by the broader market's movement. Positive alpha means the position outperformed its benchmark after adjusting for risk; negative alpha means it underperformed.
Ask Price: The lowest price at which a seller is currently willing to sell a security. When you place a market buy order, you typically pay the ask. The gap between the bid and the ask is the spread.
Average True Range (ATR): A volatility indicator that measures how much a symbol typically moves over a given period, expressed in price units. Traders use ATR to size positions and place stops at distances that match the symbol's normal noise.

B

Backtesting: Running a trading strategy against historical data to estimate how it would have performed. Useful for stress-testing rules, but past performance never guarantees future results and over-optimised backtests usually fail in live markets.
Bear Market: A sustained period in which prices fall significantly, commonly defined as a 20% or greater decline from a recent high, accompanied by widespread pessimism. Bear markets can last months or years.
Beta: A measure of how much a stock's price tends to move relative to the broader market. A beta of 1 moves in line with the market; above 1 is more volatile, below 1 is less volatile.
Bid Price: The highest price a buyer is currently willing to pay for a security. When you place a market sell order, you typically receive the bid.
Bid-Ask Spread: The difference between the highest bid and the lowest ask. Narrow spreads indicate liquid, actively traded symbols; wide spreads indicate illiquidity and higher transaction costs.
Blue Chip Stock: Shares of a large, well-established company with a long record of stable earnings and (usually) dividend payments. Blue chips are generally less volatile than smaller stocks but offer slower growth.
Bollinger Bands: A volatility indicator that plots an upper and lower band around a moving average. The bands widen when volatility rises and narrow when it falls, helping traders see whether price is at an extreme.
Bull Market: A sustained period of rising prices and broad optimism, commonly marked by a 20% or greater advance from a recent low. Bull markets can run for years before reversing.

C

Candlestick Chart: A price chart in which each bar (candlestick) shows the open, high, low, and close for a period. The body's colour indicates whether the close was above or below the open, making trend and reversal patterns easier to read.
Capital Gain: The profit realised when an asset is sold for more than its purchase price. Capital gains are typically taxable; the rate often depends on how long the asset was held.
Circuit Breaker: An exchange-imposed trading halt triggered by a sharp, fast move in a stock or index. Circuit breakers exist to slow panicked trading and let participants reassess before activity resumes.

D

Day Order: An order that is automatically cancelled if it does not execute by the close of the trading day on which it was placed. Most brokers default to day orders unless you specify otherwise.
Day Trading: Buying and selling securities within the same trading day, with no positions held overnight. Day trading requires substantial time, capital, and discipline; the majority of day traders lose money.
Diversification: Spreading investments across different securities, sectors, geographies, or asset classes so that no single bad outcome can severely damage the overall portfolio. Often called the only free lunch in investing.
Dividend: A cash (or sometimes stock) payment made by a company to its shareholders, typically out of profits. Dividend payments are usually scheduled quarterly.
Dollar-Cost Averaging: Investing a fixed amount of money on a regular schedule regardless of price. The approach removes timing decisions and tends to lower the average entry price over volatile periods.
Drawdown: The peak-to-trough decline of an account or strategy before it makes a new high. Maximum drawdown is one of the most important risk metrics, it tells you how bad things have gotten in the past.

E

Earnings Per Share (EPS): A company's net profit divided by its number of outstanding shares. EPS is the headline number most analysts compare against expectations on earnings day.
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortisation. EBITDA gives a view of operating profitability before financing and accounting effects, useful for comparing companies with different capital structures.
ETF (Exchange-Traded Fund): A pooled investment vehicle that trades on an exchange like a stock. ETFs typically track an index, sector, or theme and offer instant diversification at low cost.
Ex-Dividend Date: The first trading day on which a stock trades without entitlement to its upcoming dividend. To receive the dividend, you must own the stock before this date.

F

Float: The number of shares of a company that are available for public trading, excluding insider and restricted holdings. Low-float stocks tend to be more volatile because a small amount of trading moves the price a lot.
Fundamental Analysis: The practice of valuing a company by examining its financial statements, industry position, management, and economic context. Contrasted with technical analysis, which focuses on price and volume patterns.

H

Hedge: A position taken specifically to offset the risk of another position. Hedges reduce downside but also typically reduce expected return, the cost is the price of the protection.

I

Index: A statistical measure of the value of a basket of securities, such as the S&P 500 or NASDAQ Composite. Indices are used as benchmarks against which individual portfolios are compared.
IPO (Initial Public Offering): The first sale of a private company's shares to the public, after which the stock begins trading on an exchange. IPOs are often volatile and may carry holding restrictions for early investors.

L

Leverage: The use of borrowed money to increase the size of a position beyond what your own capital alone would allow. Leverage magnifies both gains and losses and is one of the fastest ways to blow up an account.
Limit Order: An order to buy or sell only at a specified price or better. A limit order guarantees the price you pay or receive but does not guarantee execution, the market may never reach your level.
Liquidity: How easily a security can be bought or sold without significantly moving its price. Highly liquid securities have tight spreads and large daily volume; illiquid ones can be hard to exit.
Long Position: Owning a security with the expectation that its price will rise. To go long is to buy; the position profits when the price increases and loses when it falls.

M

MACD: Moving Average Convergence Divergence, a momentum indicator built from the difference between two moving averages. Crossovers and divergences from price are commonly used trade signals.
Margin: Borrowing money from a broker to buy securities. Margin amplifies returns but also creates the risk of a margin call, in which the broker demands you deposit more cash or close positions.
Market Cap: The total market value of a company's outstanding shares, share price multiplied by share count. Used to classify companies as large-cap, mid-cap, small-cap, or micro-cap.
Market Order: An order to buy or sell immediately at the best currently available price. Market orders guarantee execution but not the exact price, especially in fast-moving or thinly traded markets.
Moving Average: The average price of a security over a defined number of recent periods. Moving averages smooth out short-term noise and help traders see the underlying trend.
Mutual Fund: A pooled investment vehicle managed by a professional, priced once per day at the market close. Unlike ETFs, mutual fund shares cannot be traded throughout the day.

P

P/B Ratio: The price-to-book ratio compares a company's market price to its accounting book value per share. Useful for valuing asset-heavy businesses such as banks and insurers.
P/E Ratio: The price-to-earnings ratio compares a company's share price to its earnings per share. A higher P/E suggests the market expects faster growth; lower P/E suggests slower growth or higher perceived risk.
Penny Stock: A very low-priced stock, often under five dollars per share, typically issued by small companies and traded on less-regulated venues. Penny stocks are usually highly volatile and easy to manipulate.
Portfolio: The complete collection of investments held by an individual or institution. A well-constructed portfolio is diversified across positions whose returns do not all rise and fall together.
Position Size: The number of shares (or dollar value) committed to a single trade. Disciplined traders calculate position size from their per-trade risk limit and stop distance, never from gut feeling.

R

Resistance: A price level at which selling pressure has historically been strong enough to halt or reverse upward moves. A break above resistance is often interpreted as a bullish signal.
RSI (Relative Strength Index): A momentum oscillator that measures how stretched a price is from its recent average, on a 0–100 scale. Readings above 70 are commonly called overbought; below 30, oversold.

S

Sector: A grouping of companies that operate in the same broad area of the economy, for example, Technology, Health Care, or Financials. Sector performance often diverges depending on the macro environment.
Short Interest: The total number of shares of a stock that have been sold short and not yet covered. High short interest can signal bearish sentiment but also creates conditions for a short squeeze.
Short Selling: Borrowing shares to sell them now with the obligation to buy them back later, profiting if the price falls. Short selling carries theoretically unlimited risk because a stock's price can rise without bound.
Slippage: The difference between the price you expected on an order and the price you actually received. Slippage tends to be larger on illiquid symbols, fast markets, and after-hours sessions.
Stochastic Oscillator: A momentum indicator that compares a closing price to its range over a recent period. Like RSI, it produces overbought and oversold readings used to spot potential reversals.
Stop Order: An order that becomes a market order once the price reaches a specified trigger level. Stop orders are commonly used to enter on breakouts or to exit losing positions automatically.
Stop-Loss Order: A stop order placed in the opposite direction of a position to cap potential losses. Setting a stop-loss before entering a trade is one of the most important risk-management habits.
Support: A price level at which buying pressure has historically been strong enough to halt or reverse downward moves. A break below support is often interpreted as a bearish signal.

T

Ticker Symbol: The short, unique identifier assigned to a publicly traded security on its exchange, for example, AAPL for Apple. Tickers may differ across exchanges for the same company.
Trailing Stop: A stop order that automatically moves with the price in the direction of a profit. Trailing stops lock in gains while leaving room for the trade to keep running.

V

Volatility: A statistical measure of how much a security's price varies over time. Higher volatility means larger and more frequent price swings, and therefore higher risk per share held.
Volume: The number of shares traded in a security over a given period. Rising volume on a price move adds conviction; a move on light volume is more easily reversed.
VWAP: Volume-Weighted Average Price, the average price at which a security has traded during a session, weighted by volume. Institutional traders often use VWAP as an execution benchmark.

Y

Yield: The income return on an investment, expressed as a percentage of price, for example, a stock's annual dividend divided by its share price. Bond yields move inversely to bond prices.