Terminology

Question 1

Averaging Down:

Answer 1

When an investor purchases more of a stock as the price decreases.
- meaning your average purchase price decreases

Question 2

Bear Market:

Answer 2

This is referring to the stock market being in a down trend

• or period of falling stock prices.
• opposite to ‘Bull Market’

Question 3

Beta:

Answer 3

• 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 would mean for every point that moves in the market, stock XYZ move 1.5 points and vice versa.

Question 4

Blue Chip Stocks:

Answer 4

• These are large, industry leading companies. Offering a stable/reliable record of significant dividend payments and usually have a sound fiscal management.
• Term is believed to have been coined by the significance of blue chips in casinos.

Question 5

Bull Market:

Answer 5

• When the stock market is in a prolonged stage of increasing stock prices.
  (Opposite of ‘Bear Market’)

Question 6

Broker:

Answer 6

A person who buys or sells an investment for you in exchange for a fee, (commission).

Question 7

Day Trading:

Answer 7

• The practice of buying or selling within the same trading day - before the close of the markets Traders that participate in day trading are often called ‘active’ traders or ‘day’ traders

Question 8

Dividend:

Answer 8

The amount of the companies earnings that is payed to shareholders.
- or people that own ‘hat’ company’s stock, on a quarterly or annual basis. Not all companies do this.

Question 9

Exchange:

Answer 9

An exchange is where different investments are traded.

- the most well known in the US are the ‘New York Stock Exchange’ and ‘Nasdaq’

Question 10

Execution:

Answer 10

When an order to buy or sell has been completed

Eg. If you had a working order to sell 100 shares and you have executed, then you have sold all 100 shares.

Question 11

Hedge:

Answer 11

This is used to limit loses. You do this by taking an offsetting position.
Eg. If you hold 100 shares of Gold, you could short the stock or future positions on the stock.

Question 12

Index:

Answer 12

An index is a benchmark, which is used as a reference marker for traders and portfolio managers.
Eg. A 10% index may sound good but if the overall market index return was 12% then you didn’t do very well and therefore could have invested in an index fund saving time by not trading frequently.
Eg. ‘Dow Jones’ industrial average and ‘Standard & Poor’s

Question 13

Initial Public Offering (IPO):

Answer 13

The first sale or offering of a stock by a company to the public, rather just being owned by private or inside investors

• ‘Insider’ refers to the director or senior officer of a company
• as well as any person or entity that owns more than 10% of a companies shares.

Question 14

Entity:

Answer 14

A legally created person as opposed to a natural person.