Ok, so today, while in a conversation with a friend who had brought a company to my attention which he thought could be profitable, something occurred to me.
When I first entered into the world of stock trading, as a wide-eyed innocent newbie, I had NO idea what half of the terms meant. Or even where to start in order to learn them.
So here it is, my attempt at a small but comprehensive vocabulary post to help you get a little better understanding of the language of stock trading.
Bears vs. Bulls
Bears versus Bulls is like saying up versus down. A "Bear", is a trader or holder who is expecting and banking on the price of whatever stock he/she is holding to go down.
On the reverse, "Bulls" are holders who are expecting and hoping for the priuce to rise.
These terms will often be used to describe market movements. IE. "Today there was a lot of Bearish pressure on Apple, dropping the price significantly."
Floor vs. Ceiling
The "Floor" of a stock can be seen when the price is falling. As a stock drops in price it will hit a certain level in which the bulk of buyers will begin to assume that it cannot drop anymore and that it is a smart time to buy. As this happens the price will stabilize, and then begin to rise again, as if a ball were bouncing off of the "Floor" of a room.
The "Ceiling", likewise, is the price reached as a stock rises where investors begin to think that it has gone as high as it will and that it is time to sell, the price will stop rising as the "Ceiling" is hit and the price then begins to fall.
Support levels
"Support levels" are specific prices where there are pre-existing buy or sell orders. Lets take Apple for example, the stock is trading at levels around $ 124 USD. It would be reasonable to assume that since Apple, (AAPL) is a large, and fairly stable company that the "Support levels" are fairly close to the current price.
I would estimate that there would be significant UPWARD support should the price drop to $ 120 USD. And significant DOWNWARD support should the price reach $ 130 USD.
Similar to the Floor and Ceiling, support levels are prices where the direction and trend of the stocks movements are tested.
IPO
An IPO (Initial Public Offering) is when a company that has previously not been traded publicly, IE. a company that is not able to be purchased on stock broker sites, and is likewise not available to the general public, makes its first appearance.
A companies IPO is the first opportunity to purchase the stock at a preset value. KING Digital, the makers of Candy crush, for example, began their IPO at just over $ 22 USD. By the end of the day however they were trading almost 20% lower, at around $ 18 USD.
It should be noted that when a company offers its IPO there is often significant price change as the shares offered are either bought up quickly and sought after or stagnate because of low public interest.
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