The world of trading is so rich that it even comes with its own language.
When it comes to trading, you need to stay on top of all the technical terms, abbreviations, and industry jargon. While you may be tempted to think that the learning process should last weeks or months, the reality is that understanding and memorizing a few terms per day can turn you into a trading lingo expert within a matter of days.
To help you, our Falcon Funding team has compiled an A-Z trading glossary for beginners. By the end of this article, you will be familiar with all the key terms essential to navigating financial markets, analyzing trades, and making informed decisions.
Why Bother Learning Trading Lingo?
Every successful trader was once a nervous beginner. By mastering the basics and familiarizing themselves with key terms, they were able to build up the confidence and experience to navigate forex, stocks, and crypto. And you’re up next.
While experience, skill, and strategy are vital to your success, so is a deeper understanding of the fundamentals. The best way to achieve this milestone? Study the trading glossary.
By understanding trading lingo, you’ll be able to easily read market charts and reports, effectively communicate with fellow traders, and, most importantly, avoid costly mistakes due to misinterpretation. Moreover, the chances of passing a prop firm challenge or starting a successful independent trading venture skyrocket once you’ve mastered the basics.
Without further ado, let’s take a look at some basic trading terms.
A-Z Trading Glossary for Beginners
A
Asset Classes – Different types of financial instruments, such as stocks, bonds, commodities, and currencies.
Average Price – The mean price of a financial asset over a specific period, often used in technical analysis.
Ask Price – The lowest price a seller is willing to accept for an asset in the financial market.
B
Bear Market – A market condition where prices are falling, typically by 20% or more, suggesting pessimism among investors.
Borrowing Money – Taking out a loan or using margin accounts to trade.
Bull Market – A market condition where prices are rising, commonly driven by strong market sentiment and economic indicators.
Buying and Selling – The fundamental actions in any financial market, involving the exchange of financial instruments at a specific price.
C
Cash Flows – The movement of money in and out of a business or investment portfolio, used to assess financial health.
Closing Price – The last price at which a financial asset was traded before the market closed.
Company’s Profitability – A measure of how much net income a company generates relative to its total value and outstanding shares.
Current Market Price – The latest price at which a particular asset is traded on stock exchanges or other financial markets.
D
Day Trading – A trading strategy where traders buy or sell financial instruments within a single trading day to profit from price movements.
Derivative (Financial Derivative) – A financial agreement whose value is derived from an underlying asset, such as futures contracts or options.
Dividend – A portion of a company’s earnings distributed to shareholders.
E
Earnings (Net Earnings) – A company’s total profit after deducting all expenses, taxes, and costs from revenue.
Economic Indicator – Data points, such as GDP or interest rates, used to measure a country’s economic performance and predict future price movements.
Exchange Rate – The price at which one currency can be exchanged for another in the foreign exchange market.
Equity – The ownership interest in a company or financial asset.
F
Falling Prices – A decline in the price of a particular asset, often associated with a bear market or negative market sentiment.
Financial Agreement – A contract between two parties, such as a forward contract, outlining the terms for buying or selling an asset at a future price.
Financial Instruments – Assets that can be traded, such as stocks, bonds, futures contracts, and other financial instruments.
Financial Market – A marketplace where individuals and institutions trade financial assets like stocks, forex, and commodities.
Fixed Costs – Business expenses that remain constant regardless of production or sales, impacting a company’s net income.
Foreign Exchange (Forex Market) – The global market where currencies are traded, also known as forex trading.
Forward Contract – A financial agreement to buy or sell a particular asset at an expected price on a future date.
Fundamental Analysis – A method of evaluating financial assets by analyzing economic indicators, company financials, and market data.
Futures Contract – A standardized agreement to buy or sell a financial asset at a specific price on a future date.
G
Gross Domestic Product (GDP) – A key economic indicator that measures the total value of all goods and services produced within a country.
Growth Stock – A stock expected to grow at a rate higher than the market average.
H
Hedging – A strategy used to reduce risk by taking offsetting positions in financial instruments.
High Demand – A situation where buyers are willing to pay higher prices for a particular asset due to market conditions.
I
Initial Public Offering (IPO) – When a private company offers shares to the public for the first time, allowing investors to buy a stake in the company.
Interest Rates – The cost of borrowing money, set by central banks, influencing market capitalization and overall economic activity.
J
Junk Bond – A high-risk, high-yield bond with a lower credit rating.
K
Key Level – A price level on a chart that acts as a major support or resistance level.
L
Leveraged Position – A trading position that uses borrowed capital to increase potential returns but also increases risk.
Limit Order – An order to buy or sell a financial asset at a specific price or better.
Long Position – A strategy where a trader buys an asset expecting its price to rise.
Lowest Price – The minimum price at which a financial asset was traded during a given period.
M
Margin Accounts – Brokerage accounts that allow traders to borrow money to trade, requiring a certain level of funds as collateral.
Margin Call – A broker’s demand for additional funds when a trader’s leveraged position falls below the required margin level.
Market Cap (Market Capitalization) – The total value of a company’s outstanding shares, calculated by multiplying the current market price by the number of shares.
Market Data – Real-time or historical information on price movements, volume, and trading activity in a financial market.
Market Maker – A firm or individual that provides liquidity by actively buying and selling financial instruments.
N
Net Income – A company’s earnings after deducting all expenses and taxes.
Number of Shares – The total units of stock that a company has issued to investors.
O
Outstanding Shares – The total company shares held by investors, including retail and institutional shareholders.
P
Particular Asset – Any specific financial asset being traded, such as stocks, bonds, or commodities.
Price Movements – Changes in the price of a financial instrument based on market conditions.
Q
Quantitative Easing – A central bank policy to increase money supply by purchasing financial assets.
R
Risk Management – Strategies used by traders to minimize losses, such as stop-loss orders and diversification.
S
Stock Market – A financial market where stocks are traded between investors.
Stock Trading – The process of buying and selling shares of publicly traded companies.
Support and Resistance Levels – Key price levels where an asset tends to stop moving higher (resistance) or lower (support).
T
Technical Analysis – A trading method that analyzes market data, such as charts and indicators, to predict future price movements.
Total Value – The overall worth of an investment portfolio, company, or asset class.
U
Underlying Asset – The financial instrument upon which a derivative is based.
V
Volatility – A measure of how much the price of an asset fluctuates over time.
W
Willing to Pay – The maximum amount a buyer is prepared to offer for an asset.
X
Exchange-Traded Fund (ETF) – A fund that holds multiple assets and is traded on stock exchanges.
Y
Yield Curve – A graph showing the interest rates of bonds with different maturities.
Z
Zero Coupon Bond – A bond that does not pay interest but is issued at a discount to its face value.
How to Apply This Trading Glossary In Your Trades
Now that you’re familiar with the essential terms in our trading glossary, what next? It’s time to start applying these terms in real-world scenarios. As a beginner trader, studying and using these terms in your daily operations will allow you to trade more confidently.
At Falcon Funded, we help traders like you earn financial freedom and regular payouts by giving you access to a fully-funded account, competitive profit splits, and opportunities for growth.
Ready to start trading? Join a funded challenge and show us what you’ve got.
