The Top Online Trading Terms You Need to Know

When reading an online trading post, many people can already see the dollars rolling in. That is one of the common misconceptions new traders have. “You need to learn the lingo of online trading before jumping into the trading pool,” Samuel Thompson, a senior financial analyst at Wilkins Finance confirms. As with any activity, there are certain terms, rules and regulations you need to be aware of before you can truly understand what is expected of you. What are some of the top online trading terms you need to comprehend before starting to trade?

A Stock Symbol

The stock symbol consists of a few letter of the alphabet and it individualizes a company registered on the stock exchange. A good example would be that of Apple, which has a stock symbol of AAPL.

Volatility of a Market

When talking about the volatility of the stock market, a trader refers to the movement of the price of a specific stock. When a stock market is highly volatile, it means that there is a huge amount of activity within that market, thus many traders are buying and selling stocks that, in turn, cause the price of stock to fluctuate tremendously.

Volume

This is thestock traded during a certain time point during the day. The volume of trade is normally calculated according to the amount of trading activity that took place during the day.

Order

An investor uses an order to purchase or trade stock from an online trading platform.

Quote

When looking at a quote, you can see all the relevant information about a certain stock and its trading value.

Rally

As with a race car rally, one can only imagine how fast the activity proceeds. When using the term “Rally” in the online trading world, you are looking at a market where the stock price is increasing at a huge pace over a short period of time.

Margin

When working on a margin, you are able to determine how much money you are able to borrow from a broker in order to make a trade.

Spread

When making use of a spread, you, as the seller, can see what at what value you want to sell it and another trader, the buyer, can see what your asking price is for that specific amount of stock.

Initial Public Offering (IPO)

An IPO is a very important piece of stock as this represents the very first trade offered to the general public. If you successfully purchase an IPO, you are the first person, other than those within the company who has a stake in the business.

Index

An index is a marker which is used as a reference marker for traders. If you trade below the index, you are making a loss and not keeping an eye on what the trade market is rising or falling.

Dividend

A dividend is an organization’s income that is handed over to investors or individuals that claim the stock on a yearly or quarterly basis.

Execution

This is when the action of purchasing or trading stock has been finalised. If you have intended to sell 500 shares, it means that all 500 shares you had on offer have been bought by another trader.

Exchange

An exchange is a place in which different investments are traded and sold off.

Hedge

A hedge is used to make your trading losses a little less. By making use of a hedge, you set a stop-loss for when you are trading stock that can lead to financial losses.

If you are familiar with the above terms and understand each of these terms within the world of online trading, you are ready to make a trade. You need to remember, however, that online trading is a learning game and with every trade you make, you learn new things. These terms serve as ground rules of what you need to do in order to make a profit. Without it, you might lose all the money you have invested as you do not fully comprehend what is meant by certain terms.