Document No.
TWI-001
Title: Date Prepared
UNDERSTANDING STOCK 15 August 2017
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MARKET TERMS
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Understanding Stock Market Terms
Stock Market Terminology and Definitions
Everyone, beginner and veteran traders alike, can learn from this…
Table of Contents
1. Definition of Terms
1.1 Fundamental Analysis
1.2 Technical Analysis
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Document No.
TWI-001
Title: Date Prepared
UNDERSTANDING STOCK 15 August 2017
Document Security Level
MARKET TERMS
For Personal Use Only
(not for sale)
Page
2 of 6
Compiled by :
The Wise Investor Revision
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1. Definition of Terms:
Invest - putting your money where it can grow
Stock - a share in the company
Dividends - the amount of money paid by the company to its shareholders
Common Stock - the type of stock that is least prioritized when declaring
dividends, mostly profit from price appreciation
Preferred Stock - the type of stock that is first prioritized when declaring
dividends
Risk - the potential of gaining profits and losing your capital, the more the risk,
the more the reward
Returns/Rewards - profits earned by investors in their investment either
through dividends or price growth
Short Term - less than six weeks
Medium Term - six weeks to nine months
Long Term - more than nine months
Investors - people who invests their money with the expectation of gaining
returns over longer timeframe
Traders - people who buy and sell stocks and earn from price growth over a
shorter timeframe
Blue-Chip Stocks - stocks of the biggest companies in the country
Growth Stocks - stocks which have high growth potential
Value Stocks - stocks which have low P/E ratio
Speculative Stocks - stocks which are overpriced compared to its similar
stocks
Defensive Stocks - stocks which does not decrease its price immediately even
when the market is down
Penny Stocks - stocks which have small market capitalization and trade at
very low price
Stock Market - where investors or traders buy and sell company stocks
Stock Market Index - a measurement of the value of the entire stock market or
a particular industry in the market
PSEi (aka PSE Composite Index) - the stock market index of Philippine Stock
Exchange which consists of top 30 listed companies based on market
capitalization
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Document No.
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Industry Index - the index of a group of companies which are classified based
on their business activities (i.e. Financial, Holdings, Industries, Mining & Oil,
Properties, Services)
Bullish - when a particular stock market or stock is uptrend
Bearish - when a particular stock market or stock is downtrend
Initial Public Offering (IPO) - when firms are selling their company shares for
the first time in the public to raise capital
Market Value - the value at which a stock can be sold in the market
Unrealized P/L - profits or losses which are not yet realized until the investor
has sold the stock
Buying Power - the available money an investor has in his account for buying
stocks
Buy Order - a type of order when the investor wants to buy stocks
Sell Order - a type of order when the investor wants to sell stocks
Volume - number of shares bought and sold in a particular day
Bid - the prices at which the buyers want to buy a particular stock, arranged in
descending order
Ask - the prices at which the sellers want to sell a particular stock, arranged in
ascending order
Trade - made when the bid and ask price have matched
Brokers - firms who execute the buy and sell orders and get commission fees
for every transaction
Portfolio - a group of financial assets such as stocks held by the investor
Average Cost/Price - the price at which you bought the market plus the
commission fees
Shares - the number of stocks you bought
Board Lot - the standardized minimum and multiple number of shares to be
traded for a particular stock, depends per price range
Stock Order - ordering stock, either buy or sell order
Normal Orders - orders which follow the normal board lot
Oddlot Orders - orders which are less than the minimum board lot
Good to Day (GTD) - an option in ordering where your order will expire at the
end of trading day when not fulfilled
Good to Week (GTW) - an option in ordering where your order will last for a
week
Good to Month (GTM) - an option in ordering where your order will last for a
month
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Document No.
TWI-001
Title: Date Prepared
UNDERSTANDING STOCK 15 August 2017
Document Security Level
MARKET TERMS
For Personal Use Only
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Good to Cancel (GTC) - an option in ordering where your order will last until
you cancel
Cash Dividends - dividends declared through cash
Stock Dividends - dividends declared through additional shares of stocks
Profits/Gains - the amount that an investor earns when he sells stocks at a
price higher than his average costs
Losses - the amount that an investor losses in his capital when he sells stocks
at price lower than his average costs
Stock Split - when a company decides to split its stocks in a particular ratio to
increase liquidity (i.e. 1 to 2)
Reverse Stock Split - opposite of stock split, when a company decides to
combine its stocks in a particular ratio to decrease number of shares (i.e. 2 to
1)
Most Active - most active stocks in a particular day in terms of volume traded
Top Gainers - list of stocks which has increased in price in a particular day
Worst Losers - list of stocks which has decreased in price in a particular day
Year to Date (YTD) - the period from the beginning of the year (January 1) to
present
Investment Strategy - set of rules and behaviors an investor practices towards
his investment portfolio
Peso Cost Averaging - an investment strategy where you put the same
amount of money into a particular stock in a regular schedule
Value Investing - an investment strategy where investors look for undervalued
stocks
Growth Investing - an investment strategy where investors look for companies
which have a high growth potential
Cut Loss - realizing your loss by selling the stock to save you from a bigger
loss
Average Down - buying a stock for a lower price than your average cost
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Document No.
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Title: Date Prepared
UNDERSTANDING STOCK 15 August 2017
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1.1 Fundamental Analysis
Fundamental Analysis - evaluates the economic and financial factors that
affect the intrinsic value of a company, studies the causes of market
movements
Intrinsic Value - the actual and true value of the company based on all
aspects of its businesses
Overvalued - when the current price of the stock is not justified by its company
earnings
Undervalued - when the current price of the stock is below its intrinsic value or
industry P/E ratio average
Income Statement - provides an overview of assets, liabilities and equity
Balance Sheet - provides an overview of revenues, expenses and net income
Statement of Cash Flows - traces the company's cash movement from
operating, investing and financial activities
Financial Ratios - ratios derived from the financial statements of the
companies which are used for evaluating the overall condition of its company
performance
Price to Earnings Ratio (P/E Ratio) - measures the current price of a stock
over its company earnings per share, the lower the better
Earnings per Share (EPS) - company earnings for the year divided by the
number of shares
Leverage - borrowing capital through loans and using it to fund company
activities
Debt Ratio - the ratio of total debt to total assets of the company, the lower the
better
Debt to Equity Ratio/Leverage Ratio - the ratio of a company's debts to the
value of its equity (preferred and common stocks)
Dividend Payout Ratio - the ratio of dividends paid in relation to company's net
income
Dividend Yield - the percentage of dividends declared in relation to the stock's
current price
Par Value per Share - the price of the stock during its Initial Public Offering
(IPO)
Book Value per Share - the value of the stock in the company's books, total
equity divided by number of shares
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Document No.
TWI-001
Title: Date Prepared
UNDERSTANDING STOCK 15 August 2017
Document Security Level
MARKET TERMS
For Personal Use Only
(not for sale)
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Compiled by :
The Wise Investor Revision
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Price to Book Value Ratio - the ratio used to compare company's current price
and its book value, the lower the better
1.2 Technical Analysis
Technical Analysis - the study of financial market action/ price action
Trend - the general direction of a market, or the price of an asset
Uptrend - the price of a stock moves at a higher high and a higher low
Downtrend - the price of a stock moves at a lower high and a lower low
Sideways - the price of a stock moves in a flat manner
Chart - contains the summary of a stock's prices within a certain period
Open - the first price a stock trades at
High - the highest price it reaches in a trading day
Low - the lowest price it reaches in a trading day
Close - the final trading price of the day
Volume - measures the number of shares or value of those shares that trade
in a day
Value Traded - volume multiplied by the price that investors have paid for a
stock
Indicators/Oscillators - measure the price movements, momentum, and others
based on price and volume of a stock
Support - a price level which historically, a stock has had difficulty falling
below
Resistance - a price level which historically, a stock has had difficulty breaking
above
Breakdown - a break below the support level
Breakout - a break above the resistance level
Reversal - the change of a price level from resistance/support to
support/resistance after a breakout/breakdown
Stop Loss - a price that has been previously identified as the maximum loss a
trade can assume
- End –
Reference: http://www.pseacademy.com.ph
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