Our Online Trading glossary of terms explains the most basic and necessary terms you need to familiarize yourself with before making your first deal.
After-Hours Trading – Also called extended trading, this refers to any trades conducted outside of normal trading hours, or 9:30 am to 4:00 pm Eastern Time. Increases in online trading has made it possible for individual investors to take advantage of, however there can be increased risk during this time.
Bulletin Boards – Boards allow investors to share information online through chat forums. While they can be extremely useful tools caution is always advised. It can be difficult to confirm the authenticity of information gained through such forums.
Closing Price – This is the “final” price at which a stock sells for the day. An increase in after-hours trading means this can be a difficult rate to precisely calculate. Many news outlets have elected to preserve the traditional stock exchange hours and report only the trades before 4 pm Eastern time.
Day Trading – By quickly buying and then selling on stocks day traders can make small profits rapidly. This practice is high risk and recent legislation seeks to limit its prevalence.
Initial Public Offerings (IPO) – When a private company first options its stock for the public it is referred to as an IPO. This initial stock can be difficult for individual investors not affiliated with the company.
Limit Orders – A limit order is a way of placing limits on how much you will buy or sell a stock for. A minimum or maximum amount can be chosen.
Nasdaq – The National Association of Securities Dealers Automated Quotation System electronically generates pricing figures for brokers. Companies must meet certain requirements in order to trade through the Nasdaq.
Online Trading – This refers to any buying or selling of stock through the internet rather than a broker.
Options Trading – These are contracts that give their holder the authority to exchange securities at a certain time and price.
OTC Bulletin Board – This board is an online tool that offers real-time quotes, as well as closing prices and basic company information. Many small companies that do not qualify for The Nasdaq will use this system.
Penny Stock Rules – “Penny stocks” are securities offered by small companies that usually cost less than $5. Penny stock rules is a term for the requirements an investor must meet in order to trade with these stocks.
Pink Sheets – An electronic board that allows small companies not listed in The Nasdaq to be listed and take advantage of stock exposure.
Short Sales – Short sales are made when brokers think the price will fall. By selling the stock immediately and then buying it back once the price has fallen means good profiting opportunities. Usually short sales are made with borrowed company stock and will incur interest.
Stop-Limit Order – A combination of a limit order and a stop order, a stop-limit order is a way to ensure that stock is only purchased at specific prices.
Stop Order – This is an order to your broker to buy or sell stock at a specified rate. In a fast-moving market this can still be a risky maneuver.