Financial Glossary

A measure of an investment's performance relative to a benchmark index. A positive alpha indicates the investment outperformed the market.

The lowest price a seller is willing to accept for a security. Also called the offer price.

A measure of a stock's volatility relative to the overall market. A beta of 1.0 means the stock moves with the market; above 1.0 is more volatile, below 1.0 is less volatile.

The highest price a buyer is willing to pay for a security. The difference between bid and ask is the spread.

Shares of large, well-established, and financially sound companies with a history of reliable performance. Examples include Apple, Microsoft, and Coca-Cola.

A market condition where stock prices are rising or expected to rise. The opposite is a bear market.

A market condition where stock prices are falling, typically defined as a decline of 20% or more from recent highs.

A portion of a company's earnings distributed to shareholders, usually paid quarterly as cash or additional shares.

The annual dividend payment divided by the stock's current price, expressed as a percentage. Indicates the income return on investment.

The practice of spreading investments across various assets, sectors, or geographies to reduce risk.

An investment strategy of regularly buying a fixed dollar amount of an asset regardless of its price, reducing the impact of volatility.

Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of a company's operational profitability.

Earnings Per Share. A company's net profit divided by the number of outstanding shares. A key metric for valuing stocks.

A marketplace where securities are traded. Major US exchanges include the NYSE (New York Stock Exchange) and NASDAQ.

Exchange-Traded Fund. A fund that holds a basket of assets and trades on an exchange like a stock. Examples: SPY, QQQ.

A technical analysis tool using horizontal lines to indicate areas of support or resistance at key Fibonacci levels (23.6%, 38.2%, 50%, 61.8%, 78.6%).

A discontinuity in the price chart where the opening price differs significantly from the previous closing price, often caused by after-hours news.

Initial Public Offering. The first sale of a company's shares to the public, transitioning from private to public ownership.

Using borrowed capital to increase the potential return of an investment. Also increases potential losses.

An order to buy or sell a security at a specific price or better. Buy limit orders execute at or below the specified price; sell limit orders at or above.

The ease with which an asset can be bought or sold without significantly affecting its price. High liquidity means tight bid-ask spreads.

Money borrowed from a broker to purchase securities. Margin trading amplifies both gains and losses.

Market Capitalization. The total value of a company's outstanding shares, calculated by multiplying share price by shares outstanding. Classifies companies as large-cap, mid-cap, or small-cap.

A technical indicator that averages a security's price over a specific period, smoothing out price fluctuations. Common periods: 50-day, 200-day.

A professionally managed investment pool that collects money from many investors to purchase a diversified portfolio of securities.

Price-to-Earnings Ratio. A stock's price divided by its annual earnings per share. Used to assess whether a stock is overvalued or undervalued.

The percentage of earnings paid to shareholders as dividends. A high payout ratio may indicate an unsustainable dividend.

Shares of small public companies that trade at low prices, typically under $5. Considered high-risk, high-volatility investments.

The collection of all investment holdings owned by an individual or institution, including stocks, bonds, ETFs, and cash.

The process of determining how many shares or contracts to trade based on account size and risk tolerance. A key risk management technique.

Real Estate Investment Trust. A company that owns or finances income-producing real estate and distributes at least 90% of taxable income as dividends.

A price level where a stock tends to stop rising due to increased selling pressure. Breaking through resistance is often seen as a bullish signal.

The ratio of potential loss to potential gain on a trade. A 1:3 ratio means you risk $1 to potentially gain $3. Generally, 1:2 or better is considered favorable.

Relative Strength Index. A momentum oscillator that measures the speed and change of price movements on a scale of 0 to 100. Readings above 70 indicate overbought; below 30, oversold.

A group of stocks in the same industry. The 11 GICS sectors include Technology, Healthcare, Financials, Consumer Discretionary, Communication Services, Industrials, Consumer Staples, Energy, Utilities, Real Estate, and Materials.

Borrowing shares of a stock and selling them with the expectation that the price will decline. The seller later buys back the shares at a lower price to return them.

The difference between the bid price and ask price of a security. A narrower spread indicates higher liquidity.

An order placed with a broker to automatically sell a security when it reaches a specified price, limiting potential losses.

A price level where a stock tends to stop falling due to increased buying pressure. Breaking below support is often seen as a bearish signal.

A unique abbreviation used to identify a stock on an exchange. Examples: AAPL for Apple, MSFT for Microsoft.

The degree of variation in a security's price over time. High volatility means large price swings; low volatility means more stable prices.

The number of shares traded during a given period. High volume often indicates strong interest or conviction in a price move.

The income returned on an investment, typically expressed as an annual percentage of the investment's cost or current market value.