Alpha: Often considered the active return on an investment, it gauges the performance of an investment against a market index used as a benchmark. The excess returns of a fund relative to the return of a benchmark index is the fund’s alpha.
Averaging Down: This is when one buys more of a product as the price goes down. This makes it so that the average purchase price decreases.
Bear Market: This is trading talk for the stock market being in a down trend, or a period of falling stock prices. This is the opposite of a bull market.
Beta: A measurement of the relationship between the price of a stock and the movement of the whole market. If stock XYZ has a beta of 1.5, that means that for every 1 point move in the market, stock XYZ moves 1.5 points and vice versa.
Blue Chip Stocks: These are the large, industry leading companies. They offer a stable record of significant dividend payments and have a reputation of sound fiscal management. The expression is thought to have been derived from blue gambling chips, which is the highest denomination of chips used in casinos.
Bull Market: This is when the stock market as a whole is in a prolonged period of increasing stock prices. Opposite of a bear market.
Broker: A person who buys or sells an investment for you in exchange for a fee (a commission). The company is called the brokerage firm.
Day Trading: The practice of buying and selling within the same trading day, before the close of the markets on that day. Traders that participate in day trading are often called “active traders” or “day traders.”
Dividend: This is a portion of a company’s earnings that is paid to shareholders, or people that own hat company’s stock, on a quarterly or annual basis. Not all company’s do this.
Dividend Yield: This usually refers to the measure of the return on an investment that is received from the payment of a dividend. This is determined by dividing the annual dividend amount by the price paid for the stock. If you bought stock XYZ for $40-a-share and it pays a $1.00-per-year dividend, you have a “yield” of 2.5%.
Index: An index is usually a compilation of prices from different instruments from a particular market, making it a good benchmark of that market, hence it is often used as a reference marker for traders and portfolio managers to measure their performance against. Examples are the Straits Times Index (Singapore), Hang Seng Index (Hong Kong) and Standard & Poor’s 500 (USA).
Long: Going long or having a long position means that you buy a product with the expectation of prices heading up. Opposite of short.
Margin: A margin account lets a person borrow money (take out a loan essentially) from a broker to purchase an investment. The difference between the amount of the loan, and the price of the products, is called the margin.
Portfolio: A collection of investments owned by an investor. You can have as little as one product in a portfolio to an infinite amount of products.
Quote: Information on a product’s latest trading price. This is sometimes delayed by 20 minutes (on free platforms) unless you are using an actual broker trading platform.
Rally: A rapid increase in the general price level of the market or of the price of a product.
Sector: A group of stocks that are in the same business. An example would be the “Technology” sector including companies like Apple and Microsoft.
Short: Going short or having a short position means that you sell a product with the expectation of prices heading down. Opposite of long.
Spread: This is the difference between the bid and the ask prices of a product, or the amount someone is willing to buy it and someone is willing to sell it.
Symbol: A unique combination of number or alphabets, which denote a particular product traded on the exchange. Eg. EUR/USD (Euro vs. US Dollar), APPL (Apple), BN4 (Keppel Corp), XAU/USD (Gold). Do note that each product may be represented by different symbols on different exchanges.
Volatility: This refers to the price movements of a product or the market as a whole. Highly volatile products are ones with extreme daily up and down movements and wide intraday trading ranges. This is often common with products that are thinly traded, or when there is a lot of news in the market.
Volume: The number of products traded during a particular time period, normally measured in average daily trading volume.