Stock Trading Basics

A type of brokerage firm that provides investment advice and access to analyst ratings.

Individuals employed by brokerage firms who analyze companies and their stocks, assigning ratings to indicate their potential.

Recommendations given by brokers and analysts regarding buying or selling stocks.

The action of advising clients to trade stocks frequently, potentially leading to higher transaction costs.

A fee charged by brokers for each stock transaction.

The tendency for analysts to be overly optimistic about companies and their stocks, often leading to biased recommendations.

A type of brokerage firm that focuses on executing trades at lower costs, offering limited services.

The unique skills and personality traits of individual brokers within a brokerage firm.

A brokerage firm that offers investment advice and executes transactions, often charging higher fees.

A brokerage firm that executes transactions but does not offer investment advice, typically charging lower fees.

An order to buy or sell a stock at its prevailing market price.

An order to buy or sell a stock only if the price is within limits that you specify.

A transaction involving 100 shares of a stock.

A transaction involving fewer than 100 shares of a stock.

An order to execute a transaction when the stock price reaches a specified level.

An order to buy a stock when the price rises to a specified level.

An order to sell a stock when the price falls to a specified level.

The abbreviated term used to identify a stock for trading purposes.

Indicates whether you are buying or selling a stock when placing an order.

The number of shares you want to buy or sell when placing an order.

Specifies how you want to execute the order, either at market price or within a specified range.

When placing an order, to specify whether you own the stock or are selling borrowed stock.

Online brokerage services that offer low commission rates for buying or selling stocks.

Placing an order to buy or sell a security through an online brokerage firm.

A fund where cash is deposited until it's used for online brokerage transactions, allowing for potential interest earnings.

The use of borrowed funds to buy stocks, magnifying potential profits but also losses.

The percentage of the stock purchase value that you need to invest personally when using margin trading.

A request from a brokerage firm for investors to increase the cash in their account to maintain the minimum margin requirement.

The maximum amount that can be borrowed from a brokerage firm for a stock purchase using margin.

The process of selling a stock that you don't own with the expectation of buying it back at a lower price in the future.

The practice of borrowing a stock from a brokerage firm or another investor to short sell it.

The difference between the sale price of a shorted stock and the repurchase price, resulting in a profit if the price falls.

The percentage of the short sale value that you need to invest personally when short selling.

The maximum amount that can be borrowed from a brokerage firm for a short sale.

The potential for magnified losses when trading on margin or short selling, as your investment loss is amplified by the borrowed funds.

The tendency for investors, especially those who have experienced recent investment success, to make riskier investments due to increased confidence.

A risk arising from buying stocks on margin or short selling, where a decline in the stock price can lead to further losses and potentially margin calls.

The practice of using the proceeds from successful investments to make further, potentially riskier, investments, potentially leading to magnified losses.

The initial margin requirement for short selling is calculated by the sum of the short sale proceeds and an initial margin deposit.

In short selling, if you sell a stock for $2000, you must deposit an initial margin of $1000 to meet the 150% margin requirement ( proceeds of the short sale + initial margin deposit = 150% of the short sale value).

The margin requirement for short selling can vary depending on the listed stock price. For prices above $2, it's usually 150% of the market value. However, it can be fixed amounts like $3.00 per share for prices between $1.50 and $1.99.

Short selling involves borrowing a stock, selling it, and buying it back later. The profit is the difference between the sale price and the buyback price, minus borrowing costs.

Short selling involves risk because the stock price can rise, causing losses for the short seller. Their profit depends on the stock's price going down.