Stock Market Vocab You Need to Know

If you're new to stock trading, it may be confusing to approach a lot of new terms you aren't familiar with. This can potentially make your initial venture into the world of trading difficult. To make this easier, you might want to familiarize yourself with some basic stock market vocab words before taking the leap into buying and selling stocks.

American Stock Exchange: The American Stock Exchange, also referred to as AMEX, has the third highest trading volume in the United States, the majority of which is of index options and shares in companies of small to medium in size. Recently, AMEX has merged with Nasdaq.

Consumer Price Index: Also referred to as the CPI, the Consumer Price Index measures consumer goods and services prices. It also measures the inflation pace and is published once a month.

Current assets: Your current assets include any assets that can be converted into cash in less than a year.

Dividend: Common and preferred shareholders can receive a portion of company profits as payments known as dividends.

Earnings per share: Also referred to as EPS, this total is a company's profit divided by its common outstanding shares.

Face value: Also referred to as par value, this is the amount agreed to be paid by an issuer at the maturity date.

Financial statement: An accounting data report that allows investors to better understand the financial history of a firm.

Initial Public Offering: Also referred to as an IPO, this is a company's first stock sale to the general public.

Market capitalization: This is the total amount of outstanding shares in dollars, for the total shares multiplied by the current market price.

Market order: This is an order to buy or sell a stock at the best available price, which can typically be executed at the time of the order.

Market price: The current price of a security at which it can be bought or sold; the price is determined by supply and demand.

Market value: The worth of a company as determined by investors, calculated as outstanding shares multiplied by the firm's current market price.

P/E ratio: The current stock "price" divided by annual "earnings" per share.

Shareholder: Someone who owns shares in a corporation.

Short sale: The sale of a security by a seller who does not own it, but is obligated to repurchase it at a later date.

Stock certificate: A shareholder's documentation of the shares they own of a corporation.

Stock split: This occurs when a company issues new stock shares, lowering the market price of the stock to the price it was before the split.

Stock symbol: Also known as a ticker symbol, this is a security's label used for trading.

Voting rights: Something possessed by security holders on votable matters within a company.

While this isn't a complete list of terms, it covers many of those you'll want to be aware of as you begin your journey as a trader.

Disclosure: All investments involve risk, and not all risks are suitable for every investor. The value of securities may fluctuate and as a result, clients may lose more than their original investment. The past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit or protect against loss in a down market. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing.