Stock Trading Key Terms

Learn about some of the key aspects of stock trading

By Terri Deno

Stock trading is an important part of the economy in both the U.S. and globally. The stock market is a large indicator of economic stability in the country. Many people are affected by stock trading, because stocks are a large part of pensions, 401k accounts and other investment vehicles. From individuals to large corporations, knowing about the basics of stock trading is essential in order to understand the impact of the market on short- and long-term investments.

Bear market

A bear market is a market of securities that shows declining stock prices. Similarly, a bull market is the opposite type of market, with steadily increasing prices.
Try: Stock Trading To Go provides information on bear markets and how looking at historical prices can help one to understand its volatility.

Guaranteed investment contract (GIC)

Guaranteed investment contracts are offered by life insurance companies. These contracts are offered to pension funds so investors can get paid a specific rate for a set term.
Try: Financial Web provides an expanded definition of what guaranteed investment contracts are and the advantages for having GICs in an investment portfolio.

Hedge fund

A hedge fund is a specific type of mutual fund that involves speculation on the future of stocks and options.
Try: Get a full explanation of hedge funds from Magnum Funds.

Mutual fund

A mutual fund is a collective investment that pools money from investors and puts it into a variety of investments that include bonds, stocks and securities. A mutual fund is managed by a professional that regularly trades the investments.
Try: CNN Money provides a list of the top things an investor needs to know about investing in mutual funds.

Overbought indicator, oversold indicator

An overbought indicator is a specific indicator that points to a place where prices have increased or declined too much or too fast. This indicator is used to gauge whether the increase or decline will cause a reaction in the market.
Try: Investopedia provides an overview of some common overbought indicators and the steps on building an indicator for a specific investment.

Selling short

Selling short is a process of selling shares of stocks that an investor does not actually hold. This is done so the investor may buy back the stock at a lower price.
Try: The Investor Guide explains the process of selling short and its advantages and disadvantages.