Glossary

 Ask:The sell price. Traders also speak of an ask price, the price requested. This usually indicates the lowest price a seller will accept.

Bid: The buy price. Traders also speak of a bid price, the price offered. This usually indicates the top price a purchaser will pay.

Bid/Ask Spread: The difference between the bid and ask prices. In thinly traded markets or instruments, this spread may be significant

Exchange-Regulated Delay: To receive live quotes from a stock exchange, you must pay a fee to the stock exchange. Service providers and brokers on the internet are only allowed to provide live quotes to their subscribers/clients if they pay additional fees. They are allowed, however, to send delayed quotes free of charge to as many subscribers/clients as they wish. The exchange-regulated delay varies depending on the stock exchange. It is 20 minutes, for example, for the New York Stock Exchange.

Indexes: A numerical measure of the way a variable has changed over some base period. A popular way to use an index is to say that in a given year the index is 100, so that differentials in other years can be expressed as percentage rises or falls from the base 100. All stock exchanges have one or more indexes that track the value of a basket of stocks over time so that investors can understand how the market is doing as a whole. For example, the American NASDAQ exchange has the NASDAQ 100 and NASDAQ composite. Some indexes are created and managed by private corporations, such as the widely known Dow Jones Industrial Average and S&P 500.

Laws of Supply and Demand: Theory about pricing in a perfectly competitive market. If there are more sellers than buyers, prices will drop until a consensus price is reached and vice versa. Thus prices are set according to supply and demand.

Limit Order: An order that might read: 'Buy 10 June BAB at 93.00', meaning a client is willing to pay no more than 93.00 for the June bank bill contracts. The order can be executed at a price below that, but if the price were a mere few points above, the broker would contact the client to check if he or she is allowed a few points leeway and, if so, would execute the trade. A buy order is a buy limit order when the limit price is below the current market price. A sell limit is a limit order when the limit price is above the current market price. If you want to buy at a price above the current market price or sell at a price that is below the current market price, you would create a (stop) order.

Market Order: An instruction to buy or sell shares and other financial instruments at the current market price, with minimum delay.

Market Price: The current price of an instrument or asset in the markets.

Portfolio Strategies: When combining different stocks that have different risks and different payout scenarios, you will averagely lose on some of your stocks and gain on others. The ideal outcome of course is to have larger gains than losses.

Risk Management: Trying to control outcomes to a known or predictable range of gains or losses. Risk management in investing is ensuring that you understand as many of the possible outcomes as possible and that you have prepared your portfolio for these outcomes. Risk management may be as simple as placing stop loss orders to prevent large losses or as complex as hedging positions with options or diversifying a portfolio to ensure that you are not overexposed to a single industry or instrument type.

Shares: A company’s shares represent partial ownership of the company. An investor who buys a company’s shares can profit in two ways – from income in the form of regular dividends (distribution of the company’s profits) that are paid to shareholders on a regular basis, and an increase in the value of the share itself due to growth in the companies sales, earnings and/or improved prospects for the future.

Stocks: Interchangeable with equities, shares and bonds.

Stocks Exchange: A public marketplace for trading equities (shares),. Stock exchanges date back to seventeenth-century Europe, where traders met in coffee houses to transact business. Modern exchanges evolved from those early meeting places. The exchanges are widely referred to as bourses, after the French for 'purse'.

Stock Charts: Graphs which depict the movements of a particular stock.

Stock Quotes:  The price you are supplied with to buy or sell stocks on an exchange.