Like most professions, the stock market has a language all of its own.
Below is some important terminology which you should know.
1. Bull or bear – A bear market is a falling market whilst a bull market is a rising market. Similarily, a speculator who has the view that the market or a specific share will fall in price is referred to as a 'Bear', and one who has the view that the market or a specific share will rise in price is referred to as a 'Bull'. Common usage would be, 'I am bullish on stock XYZ'.
2. Short, medium & long term - These phrases are also bandied around but what time period qualifies as long or short? The bottom line is that the answer is different for everybody. An aggressive option trader would consider a couple of hours as short-term and a few weeks as long-term. That said, the general view is that short-term is anything less then one year, medium-term is one to three (or five) years, whilst long-term is anything above this.
3. Trader or investor - Although there is no line in the sand when making the distinction, a trader is generally a short-term speculator who will be trading frequently to generate income. Although not always the case, traders generally use technical analysis and are less concerened about the underlying assets/prospects of the security they are trading. An investor generally takes a medium- to long-term view on a company or sector and analyses the fundamental factors that would lead to an increase in the underlying value of that company. Investors are generally less concerend about short-term price fluctuations.
4. Share, stock, equity, script, security - These are all used to refer to a listed company or instrument in the context of stock exchanges.
5. Dividend - This is the cash paid out from the company profits to shareholders.
6. Trading statement - When profits are expected to be better or worse then originally expected, or significantly different from the previous period, the company will issue a statement via the Stock Exchange News Services (SENS).
7. Brokerage - What you pay to the broker when you buy or sell shares.
8. Blue chip - The best quality companies.
9. Market capitalisation of a company (Market Cap) - The value of the company on the JSE. The number of shares multiplied by the current share price.
This is in no way a conclusive list of all terminology that exists in the markets. If there is anything to add please drop them in the comments below :)
