Investing Glossary
A plain-English glossary of stock market terms. From P/E ratios to candlesticks, find definitions, formulas, and real examples.
1
10-K
Annual report filed with the SEC by public companies. Contains comprehensive financial statements, risk disclosures, and business overview required by SEC regulations.
10-Q
Quarterly report filed with the SEC by public companies. Contains unaudited financial statements and management discussion for each of the first three quarters (Q4 is in the 10-K).
5
52-Week High
The highest price a stock has traded at during the previous 52 weeks (one year). Used to assess valuation and identify overbought conditions.
52-Week Low
The lowest price a stock has traded at during the previous 52 weeks. Used to assess how far a stock has fallen and whether it's oversold.
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A
Adjusted Closing Price
A stock's closing price adjusted for corporate actions like dividends, splits, and distributions that affect share price.
After-Hours Trading
Stock trading that occurs after the official market close at 4:00 PM ET. Lower volume and wider spreads than regular hours make after-hours trading riskier.
Analyst Price Target
An individual or consensus analyst estimate of what a stock's price should be in 12 months. Used to assess whether a stock is undervalued or overvalued.
AUM (Assets Under Management)
The total market value of all assets (stocks, bonds, cash) managed by an investment fund, advisor, or firm on behalf of clients.
Average Volume
The average number of shares traded per day over a specific period, typically 20, 50, or 200 days. Measures liquidity and trading interest.
B
Balance Sheet
A financial statement showing a company's assets, liabilities, and shareholders' equity at a specific point in time.
Bear Market
An extended period of declining stock prices and negative investor sentiment. Opposite of bull market. Typically triggered by economic recession, rising rates, or corporate earnings decline.
Beta (β)
A measure of stock price volatility relative to the overall market. Higher beta means more volatile than the market.
Bid-Ask Spread
The difference between the ask price (sellers want) and the bid price (buyers offer). Represents the cost of liquidity and market maker profit.
Blue-Chip Stock
Stock of a large, well-established, financially sound company with a strong track record. Considered lower-risk, less volatile than smaller stocks.
Bollinger Bands
A technical indicator consisting of a moving average with upper and lower bands based on standard deviation. Bollinger Bands measure volatility and price extremes.
Book Value
The accounting value of a company's net assets, calculated as total assets minus total liabilities. Also called shareholders' equity or net worth.
Bull Market
An extended period of rising stock prices and positive investor sentiment. Opposite of bear market. Bull markets are typically driven by economic growth or improving corporate earnings.
C
Capital Expenditures (CapEx)
The cash spent by a company on acquiring or upgrading physical assets like equipment, buildings, and technology. Necessary for growth but reduces free cash flow.
Cash Flow Statement
A financial statement showing how cash enters and leaves a company, divided into operating, investing, and financing activities.
Consensus Rating
The average analyst rating (Buy, Hold, Sell) across all covering analysts. Reflects the Street's collective view on whether a stock should rise, stay flat, or fall.
Correction
A temporary decline of 10-20% in stock market indices or individual stocks from recent highs. Less severe than a bear market but still significant.
Current Ratio
Current assets divided by current liabilities. Measures a company's short-term liquidity and ability to pay obligations due within one year.
D
Day Range
The highest and lowest prices at which a stock traded during a single trading day.
Days to Cover
Short interest divided by average daily volume. Estimates how many trading days it would take short sellers to cover all shorted shares at current trading volume.
Debt-to-Equity Ratio
Total debt divided by shareholders' equity. Measures financial leverage and the degree to which a company is financed by creditors versus owners.
Dividend
A payment of cash or stock by a company to its shareholders, usually distributed from profits.
Dividend Aristocrat
A company that has increased its annual dividend for at least 25 consecutive years. A mark of financial strength and management commitment to shareholders.
Dividend Yield
Annual dividend per share divided by stock price, expressing dividend as a percentage return.
E
Earnings Date
The date when a publicly traded company announces its quarterly or annual financial results.
Earnings Per Share (EPS)
Net income divided by shares outstanding, showing profit per share.
Earnings Per Share Surprise (EPS Surprise)
The difference between actual reported EPS and the analyst consensus estimate. Positive surprises often drive stock prices up; negative surprises drive them down.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of operating profitability that removes financing and accounting effects.
Enterprise Value (EV)
The total economic value of a company, calculated as market cap plus debt minus cash. Represents what an acquirer would pay to buy the entire company.
EV/EBITDA
Enterprise Value divided by EBITDA. A valuation metric that compares total company value (including debt) to operating profit, useful for comparing companies with different capital structures.
Ex-Dividend Date
The cutoff date for dividend eligibility. Shareholders must own the stock before the ex-dividend date to receive the next dividend payment.
Exchange-Traded Fund (ETF)
A fund holding a basket of securities (stocks, bonds, or commodities) that trades like a stock on stock exchanges.
Expense Ratio
The annual cost of owning a fund (mutual fund or ETF), expressed as a percentage of assets. Low expense ratios mean more of your money stays invested.
Exponential Moving Average (EMA)
A moving average that gives more weight to recent prices, making it more responsive to recent price changes than SMA.
F
Fed Funds Rate
The interest rate at which banks lend reserve balances overnight. The Federal Reserve's key tool for controlling monetary policy and the entire interest rate structure.
Float
The number of shares available for public trading, excluding shares held by insiders, founders, and restricted shares. Determines supply for trading.
Form 4
SEC filing that reports insider trading activity (buys, sells, options exercises) by company executives, directors, and shareholders with > 10% ownership.
Forward Price-to-Earnings (Forward P/E) Ratio
The ratio of a stock's price to its estimated future earnings per share, used to value stocks on expected performance.
Free Cash Flow (FCF)
The cash generated by operations minus capital expenditures. Shows how much cash is available for dividends, buybacks, debt repayment, or growth.
G
Gross Margin
The percentage of revenue remaining after deducting cost of goods sold. Measures production efficiency and pricing power.
Guidance (Earnings Guidance)
Company management's forecast of future financial performance, typically for the next quarter or full year. Often more important to stock price than current earnings.
I
Income Statement
A financial statement showing a company's revenue, expenses, and profit (or loss) over a period.
Index Fund
A mutual fund or ETF designed to track a market index by holding the same stocks in the same proportions as the index.
Insider Trading
Buying or selling a company's stock by company insiders with access to material non-public information. Legal when disclosed; illegal when based on undisclosed material information.
IPO (Initial Public Offering)
The first time a private company's shares are offered to the public. IPO allows private companies to raise capital and create liquidity for early investors.
L
M
MACD (Moving Average Convergence Divergence)
A trend-following momentum indicator that shows the relationship between two moving averages. Traders use MACD crossovers to identify trend changes.
Market Capitalization
Stock price multiplied by shares outstanding; the total market value of a company.
Market Maker
A financial firm that buys and sells securities to provide liquidity. Market makers profit from the bid-ask spread and facilitate trading by always being willing to buy or sell.
Market Order
An order to buy or sell shares immediately at the current market price. Guarantees execution but the exact price is uncertain.
Moving Average
An average price calculated over a rolling window of past trading days. Smooths price trends and identifies support/resistance levels.
N
O
Operating Cash Flow (OCF)
The cash generated from a company's core business operations. Shows how much cash the business produces before capital investments and financing activities.
Operating Margin
Operating profit as a percentage of revenue. Measures how much profit remains from core operations after covering operating expenses.
P
Payment Date
The date on which the company actually distributes the dividend payment to eligible shareholders. The final step in the dividend timeline.
Payout Ratio
The percentage of earnings paid to shareholders as dividends. Shows whether a dividend is sustainable and how much profit is retained for reinvestment.
PEG Ratio (Price/Earnings Growth)
The P/E ratio divided by earnings growth rate. Compares valuation to growth, helping determine if a stock is cheap or expensive relative to its growth prospects.
Penny Stock
Stock trading at a very low price, typically under $5 per share. Often highly speculative, volatile, and thinly traded with high fraud risk.
Pivot Points
Technical analysis levels calculated from prior trading day prices, used to identify potential support and resistance.
Pre-Market Trading
Stock trading that occurs before the official market open at 9:30 AM ET. Lower volume and wider spreads make pre-market trading riskier than regular hours.
Price-to-Book Ratio (P/B)
Stock price divided by book value per share. A valuation metric used to compare market price to accounting value of assets.
Price-to-Earnings (P/E) Ratio
The ratio of stock price to earnings per share, used to value stocks.
Price-to-Sales Ratio (P/S)
Stock price divided by revenue per share. A valuation metric less prone to manipulation than P/E because revenue is harder to distort than earnings.
R
Record Date
The date the company records who owns the stock for dividend purposes. Only shareholders of record as of this date receive the dividend.
Relative Strength Index (RSI)
A momentum oscillator measuring the speed of price changes. RSI ranges from 0 to 100, with readings above 70 suggesting overbought conditions.
Return on Assets (ROA)
A profitability ratio measuring how efficiently a company uses its assets to generate profit.
Return on Equity (ROE)
Net income divided by shareholders' equity. Measures how efficiently a company generates profit from shareholder capital invested in the business.
Revenue
The total amount of money a company receives from selling goods or services before any expenses are deducted. The top line of the income statement.
Reverse Stock Split
A corporate action that reduces the number of outstanding shares and increases the per-share price. Often a sign of financial distress or a precursor to delisting.
S
Shares Outstanding
The total number of common shares a company has issued and outstanding. Used to calculate earnings per share, market cap, and per-share metrics.
Short Interest
The number of shares that have been borrowed and sold short. Measures bearish sentiment and potential for short squeezes if the stock rises sharply.
Short Squeeze
A rapid price increase that forces short sellers to buy shares to cover their positions, causing further price increases in a self-reinforcing cycle.
Simple Moving Average (SMA)
The average closing price over a fixed number of trading days, with each day weighted equally.
SPAC (Special Purpose Acquisition Company)
A shell company formed to raise capital and acquire an operating company. Alternative to IPO that allows private companies to go public faster but often with less due diligence.
Stock Split
A corporate action that divides existing shares into multiple shares, lowering the per-share price without changing a shareholder's total value.
Stop-Loss Order
An order that automatically becomes a market sell order if the stock price falls to a specified level. Used to limit losses on a position.
Support and Resistance
Price levels where a stock tends to stop declining (support) or stop rising (resistance), based on historical trading patterns.
T
V
VIX (Volatility Index)
The "fear index" that measures the market's expectation of volatility over the next 30 days. Derived from S&P 500 index option prices. Rising VIX signals market stress.
Volatility
The magnitude and speed of price fluctuations in a stock or market index. Higher volatility means larger price swings; lower volatility means more stable prices.
Volume
The number of shares traded during a specific time period. High volume suggests strong investor interest; low volume suggests weak interest.
VWAP (Volume-Weighted Average Price)
The average price at which a stock has traded throughout the day, weighted by volume. Day traders use VWAP to identify fair value and support/resistance.