10 Must-Know Terms:
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Arbitrage:
The practice of taking advantage of price discrepancies of a particular stock across different markets or exchanges to make a risk-free profit. -
Ask:
The price at which sellers are willing to sell a stock. It represents the lowest price at which a trader can purchase the stock at a given moment. -
Bid:
The price at which buyers are willing to buy a stock. It represents the highest price at which a trader can sell the stock at a given moment. -
Broker:
A person or entity that serves as a middleman between investors and the stock market, enabling the purchase and sale of securities. -
Compounding:
The process of reinvesting earnings or returns from an investment to generate additional earnings over time. -
Dividend:
A payment made by a company to its shareholders, usually in the form of cash or additional shares, as a distribution of profits. -
Market Order:
An order to buy or sell a stock at the prevailing market price, executed immediately. -
Moving Average:
A statistical calculation that smooths out price fluctuations over a specified period, providing an indication of the stock's overall trend. -
Spread:
The difference between the bid and ask prices of a stock. It represents the cost of executing a trade and can vary based on market liquidity. -
Portfolio:
The collection of financial assets, such as stocks, bonds, and other investments, held by an individual or entity.
The Bottom Line:
Understanding these ten must-know terms provides investors with the necessary language and insights in stock trading. By continuously expanding their knowledge of stock trading terms, investors can enhance their ability to analyze market trends, manage risks, and build successful investment strategies.
