Trading Terms

Long: Buying a stock and holding it. If an investor believes a stocks share price will increase they will go long on that stock.

Shorting: Selling a stock instead of buying it. An investor would borrow shares from their brokerage firm and sell them immediately. They would then buy the shares back when the price is lower and give the shares back to the brokerage firm, thus keeping the difference as a profit. 

Bullish: Being optimistic about rising prices for a stock. Investors and analysts can be bullish of specific stocks or sectors.

Bearish: Being optimistic about falling prices for a stock.  Just like being bullish, investors and analysts can bearish towards stocks or sectors. This usually leads to the investor shorting those stocks.

Upgrade: When a buy rating on a stock is improved. These ratings are made by brokerage firms which analyze certain stocks and determine a rating for them. If Goldman Sachs upgrades the rating on a specific stock, this would positively affect the share price.

Downgrade: When a buy rating on a stock gets worse. These ratings are made by brokerage firms which analyze certain stocks and determine a rating for them. If Goldman Sachs does not think highly of a specific stock and downgrades them, this would negatively affect the share price.

P/E: P/E is the price-to-earnings ratio. It is basically the price paid for each share relative to the stocks earnings per share and is multiple typically used to price a stock. When a P/E is high (over 25) it can me the company is growing or it can mean the company is overpriced. A low P/E is the opposite, it typically means the company is not growing or the company is underpriced. To distinguish between the two an analysis on the company needs to be done.

EPS: EPS is earnings per share. This is the amount of earnings that is allocated to each share. This is the most common term used in the stock world in regards to earnings/net income as it lets investors know how much earnings the company is generating for each share.

Speculation: Trying to predict price movements in order to generate a profit. This is usually done with high risk stocks. It is essentially a type of gambling because of the risk involved.

52 Week High/Low: The highest and lowest point at which the stock has traded over 52 weeks. These points are important to investors as they can used to determine buying or selling points. Example: AAPL is currently trading at their 52 week low, so this could be an opportunity to buy the stock at a value price.

Technical Analysis: An analysis method that involves looking at historical prices and movements.  This analysis involves looking at patterns in historical price movements in order predict future methods. There are many patterns that can be found in a stock.

Takeover: The acquisition of a company by another company. There are two different types of takeovers: friendly takeovers and hostile takeovers. A friendly takeover is when the board of directors and management of the company being acquired agree with the takeover because it provides value for shareholders. A hostile takeover is when the board and management do not agree with the acquisition and thus tries to make sure it doesn’t happen. If they are acquired, that is a hostile takeover.

Dividend: Money given to shareholders by the company. This money comes from the company’s earnings and this money can be reinvested (plowed back) into the company or paid out in dividends. The dates that dividends are paid can be different for every company.

After Hours Buy/Sell: Talk to your broker, or call your bank. It usually costs a small additional premium to buy or sell after hours. $0.50 per 100 shares is common. It should be noted that there is less liquidity after hours.