Stock Definition: Basic Terms and Types of Stocks

Stocks are an investment in a company. And when you purchase a company’s stock, you are purchasing a small piece of that company. It called a share.

Stock Word Written Wooden Cube Photo

The stock of a company is all of the shares into which ownership of the company is divided. In American English, the shares are usually known as stocks.

Stocks are an equity investment that represents part ownership in a company. It also entitles you to part of that company’s earnings and assets.

However, stoc is simply a small piece of a corporation. A “public” corporation is one that has issued shares by selling them to the general public.

When you buy shares of a company, then you become a co-owner. As an owner, you have, in theory, a right to piece of the profits the company generates.

See also: Types of Stocks in the Market (Part 1)

What is Stocks?

When you own stock in a corporation, you are the shareholder because you share in the company’s profits. Moreover, companies sell shares of stock to investors on the stock market as a way to raise money to grow the business.

There are two main types of stock: common and preferred.

Common stock

A common stock usually entitles the owner to vote at shareholders’ meetings and to receive dividends. As a unit of ownership, common stock typically carries voting right. That can be exercised in corporate decisions.

Over the long term, common stock, by means of capital growth, yields higher returns than nearly every other investment.

Voting Right

A voting right is the right of shareholders to vote on matters of company policy. It also including the decisions on the makeup of the board of directors.

Preferred stock

 Preferred stocks generally do not have voting rights. Though they have a higher claim on assets and earnings than the common stockholders.

But some people consider preferred stock to be more like debt than equity. As well as a good way to think of these kinds of shares is to see them. As being in between bonds and common shares.

See also: Types of Stocks in the Market (Part 2)

Key Basics Stocks Market Terms

After-hours Deal

 The stock market usually closes at 4:00 pm. After this scheduled time, deals can also be made but the transaction is dated the next day. And it call an after-hours deal.

Annual Report

An annual report is a report prepared by a company that’s intended to impress shareholders. It contains tons of information about the company, from its cash flow to its management strategy.

An audit report to shareholders is produced yearly. This report of stock market news is produced by all publicly quoted companies.

Authorized Shares

Authorized share capital is the number of stock units (shares) that a company can issue as stated in its memorandum of association. Also, its articles of incorporation is always bigger than the public float.

Furthermore, the part of the authorized share which has been issued to shareholders is referred to as the issued share capital of the company.


The ask is the price a seller is willing to accept for a security. Which is often referred to as the offer price.

Render of computer keyboard with ARBITRAGE button.


Arbitrage refers to buying and selling the same security on different markets and at different price points.

Averaging Down

This is when an investor buys more of a stock as the price goes down. This makes it so your average purchase price decreases.

Balance Sheet

In the financial accounting, a balance sheet is the summary of the financial data. And which show the liabilities and assets of a company.


Regarding sale or purchase in the stock market, bargain is a common word.

In a bargain business, a company entity is acquired by another for an amount. That is less than the fair market value of its net assets.

Bear market on stock.

Bear Market

This is the opposite of a bull market. A bear market is one in which investors anticipates stocks prices to fall. This is where short sellers shine.

And also a bear market is a general decline in the stock market over can make. It is a transition from high investor optimism to widespread investor fear and pessimism.

See also: The Origin of Bull and Bear Market.


Beta is used in finance as a measure of the investment portfolio risk.

Moreover, a beta of 1.5 means that for every 1% change in the value of the benchmark, the portfolio’s value changes by 1.5%.

Blue Chip Stocks

These are shares of big and reputed corporations offering stable record of important dividend payments.

A blue chip is stock in a company with a national reputation for quality, reliability, and the ability to operate profitably in good times and bad.


A bourse is more usually known as a stock exchange.

bourse is a market organized for the purpose of buying and selling securities, commodities, options and other investments.


To buy is to acquire possession and ownership of a good or service in exchange for payment, either in the form of money or the equivalent value.

Buy means is to take a position or to buy shares in a company.

Bull market on stock.

Bull Market

A bull market is a period of general market condition that means stock prices are expected to rise. It’s the opposites of a bear market.

The term “bull market” is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, real estate, currencies, and commodities

See also: Bull and Bear Markets: Breaking Down the Differences


A broker is an individual person who buys or sells an investment for you in exchange for a fee. A broker who also acts as a seller or as a buyer becomes a principal party to the deal.


The bid is the amount of money a trader is willing to pay per share for a given stock.

Bid, in a financial market, the price a market maker will buy a commodity.


Market capitalization refers to what the market thinks a company’s value is. The amount of money used for setting up a new business.

Day Trading

The practice of buying and selling in the same trading day, before the close of the markets on that day, is call day trading.

Day trading is speculation in securities, specifically buying and selling financial instruments within the same trading day.


A debenture is a type of debt instrument that is not secure by physical assets or collateral. Moreover, a debenture is a medium- to long-term debt instrument used by large companies to borrow money. And at a fixed rate of interest.


Depreciation refers to two aspects of the same concept:

  • The decrease in value of assets (fair valued depreciation)
  • The allocation of the cost of assets to periods in which the assets are use (depreciation with the matching principle)

In addition, depreciation is a method of reallocating the cost of a tangible asset over its useful life span of it being in motion. Businesses depreciate long-term assets for both accounting and tax purposes.

Dividends word in wood.


A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. And also distribution of reward from a portion of company’s earnings. And is paid to a class of its shareholders.

Dividends can be issued as cash payments, as shares of stock, or other property, though cash dividends are the most common.


An exchange is a place in which different investment are traded. The most well-known in the United States are the New York Stock Exchange and the NASDAQ.


When an order to buy or sell has been completed. If you put in an order to sell 100 shares, this means that all 100 shares have been sold.

Execution is the completion of a buy or sells order for a security. The execution of an order occurs when it filled, not when the investor places it.


The foreign exchange market or forex is a worldwide decentralize or over-the-counter (OTC) market for the trading of currencies.

This market determines the foreign exchange rate.

Hedge Funds

Hedge funds are alternative investments using pooled funds that employ numerous different strategies to earn active return, or alpha, for their investors.

The term “hedge fund” originated from the paired long and short positions that the first of these funds used to hedge market risk.

IPO abbreviation of Initial Public Offering by wood letters.


Initial Public offering (IPO) or stock market launch is a type of public offering in which shares of a company are sell to institutional investors.

An IPO is the first sale which happens when a private company becomes a publicly-traded company, in order to raise money.

Limit Order

A limit order is an order to any stock broker specifying any fixed price limit.  

Limit orders also allow an investor to limit the length of time an order can be outstanding before cancelation. Always use limit orders, not market orders.


In finance and economics liquidation is the process of bringing a business to an end and distributing its assets to claimants.

Also, liquidation is converting the prevailing assets to cash.


A margin account lets a person borrow money (take out aloan) from a broker to purchase an investment.

A margin account is a loan account by a share trader with a broker which can use for share trading. But the difference between the amount of the loan and the price of the securities call the margin.

Moving Average

A moving average is a calculation to analyze data points by creating a series of averages of different subsets of the full data set. It is also know  a moving mean (MM) or rolling mean and is a type of finite impulse response filter.

However, a moving average commonly use with time series data to smooth out short-term fluctuations. And also highlight longer-term trends or cycles.

Market Order

Market order is a request to buy or sell a security at the best-available price to executed immediately at the current market prices.

A market order provides instruction to execute, as quickly as possible, a transaction at the present, or market price.

Businessman assembling a word PORTFOLIO on wooden plank.


The term “portfolio” refers to any combination of financial assets such as stocks, bonds, and cash. A collection of investments owned by an investor makes up his or her portfolio.


A quote refers to specific market data relating to a security or a commodity.

Information on a stock’s latest trading price tells you its quote. This is sometimes delay 20 minutes, unless you are using an actual broker trading platform.


A rally is a period of sustained increases in the price of stocks, bonds or indexes.

This type of price movement can happen during either a bull or a bear market. And it is call either a bull market rally or a bear market rally, respectively.


A group of stocks that are in the same industry belong to the same sector. Some traders prefer to trade in a specific sector, such as energy. Because they know the industry well. And they can better predict stock price fluctuations.


The term “sell” generally refers to the act of exiting a long position in an asset or security.

Stock Symbol

A ticker symbol or stock symbol is a unique series of letters assign to a security for trading purposes. A stock symbol may consist of letters, numbers or a combination of both.

Trading Volume                       

Is the amount (total number) of a security (or a given securities, or an entire market) that was trade during a given period of time.

Trade volume is a measure on stocks, bonds, options contracts, futures contracts and all types of commodities.

Business Man Text Volatility Concept Image.


In finance, volatility is the degree of variation of a trading price series over time as measured by the standard deviation of logarithmic returns.

Volatility is a statistical measure of the dispersion of returns for a given security or market index. Highly volatile stocks are those with extreme daily up and down movements and wide intraday trading ranges.


The number of shares of stock traded during a particular time period, normally measured in average daily trading volume. Volume can also mean the number of shares you purchase of a given stock.


The yield on a security is the amount of cash (in percentage terms) that returns to the owners of the security. In the form of interest or dividends received from it.

Frequently refers to the measure of the return on an investment that is received from the payment of a dividend. This determines by dividing the annual dividend amount by the price paid for the stock.


Knowing your stock market terms will make you a better trader. You can  make a lot of money investing in stocks or trading in the stock market, but it is not something for the new investors.

 Understanding the stock market can be an intimidating task for any new investor. Not only are there many concepts and technical terms to figure out. But almost everybody is trying to give you advice.

But always remember the old stock market saying: “Bulls make money, bears make money, but pigs get slaughter!” This will perhaps save you many times from losing on your investment.

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