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Stock Market Terminology

A1 Stock Picks believes that a well-informed stock investor is a successful one. In order to arm our members, as well as potential new investors, with the stock information they need to make careful decisions (especially about our daily stock picks), our team has assembled some of the most common, and often misunderstood, stock market terms in use in the investing world. Learning how to pick stocks effectively involves research, background knowledge, and a keen eye for stock information.

Following is a list of important stock market definitions, including different types of stocks, modern trading terms, market cycle descriptors, and all kinds of stock market terminology. Feel free to contact us via email at Ceo@A1stockpicks.com if you can’t find the answer to your question on the website and we will get back to you promptly.

Balance of Power:

More commonly referred to as ‘BOP’, is a proprietary technical indicator calculated from both a security’s price and volume. The primary purpose of BOP is to help uncover periods of ‘systematic’ accumulation (buying) and ‘systematic’ distribution (selling).

Time Segmented Volume:

More commonly referred to as TSV, is a proprietary technical indicator calculated from both a security’s price and volume. As the name suggests, various time-segments of both price and volume are compared to one another in order to uncover periods of accumulation (buying) and distribution (selling). Periods, which may typically lead to a sustained price swing in one direction or the other.

Relative Strength:

The relative strength is generated by comparing the relative price performance of any two items (such as two stocks or a stock and a market index). If the first item in your comparison is out-performing the second item, the relative strength line will be rising.

Moving Average:

The tracking of a stock over time to get the amount of movement up or down over a given time.

Money Stream:

An indicator to view the price vs. volume of a stock. If money stream is moving upwards at a greater angle than the price, it shows the stock in a bullish stage.

Beta:

Beta is a measure of the volatility (aka instability or risk) of a stock offering relative to the overall market average. A Beta of less than one specifies lower risk than the market; a Beta greater than one denotes a higher risk than the overall stock market. NASDAQ uses the Standard & Poor (S&P) 500 as the principal index to measure the overall market for Beta.

Common Stocks:

The basic, most common form of equity ownership in a corporation. Each share of common stock represents an equity interest in the company, a right to vote on important matters, and the right to an equitable share of the company’s success in the form of dividends or capital appreciation. Preferred stock supersedes common stock in first right to corporate dividends.

Consensus Rating:

Consensus Rating is a good stock market definition to know when learning how to pick stocks that perform well. This rating is the average of stock analysts recommendations for a single stock pick. Many different ratings systems are used among brokers and a standard system is necessary to calculate a consensus of their recommendations. The I/B/E/S (Institutional Broker Estimate System) ratings are calculated using a standard set of recommendations each with an assigned numeric value:
  • 1. Strong Buy
  • 2. Buy
  • 3. Hold
  • 4. Underperform
  • 5. Sell
One of these values is assigned for each broker recommendation and the stock pick consensus recommendation appears as the mean (average) of the cumulative broker values.

Dividend:

This is another basic stock market term that’s important to understand, since dividends are often confused with stock terminology such as capital gains, revenue, and appreciation. Dividends are the distribution of corporate earnings to shareholders, prorated by the class of security (such as Common or Preferred, Class A or Class B stock offerings) and paid in the form of money or stock shares. The dividend pay out amount is decided by the Board of Directors and paid quarterly in most situations. Mutual fund dividends are paid out of fund investment income on a quarterly basis as well.

Dow Jones Industrial Average - DJIA :

The Dow Jones Industrial Average index - (DJIA) is a price-weighted average of 30 actively traded blue chip stocks (the Big Ones!), mostly made up of industrial companies but including American Express and AT&T. This index was originated and continues to be published by Dow Jones & Co. The DJIA is the oldest and most widely quoted of all the stock market indexes.

I/B/E/S (Institutional Broker Estimate System):

A standardized system that provides a consensus and detail forecasts from the data of many different security analysts, including earnings per share, stock revenue, cash flow, long-term growth projections and stock pick recommendations.

Limit Order:

A Limit Order is an order to buy or sell a stock market offering at a customer specified price. The broker may receive a range or one specific price for the stock pick from the client.

Preferred Stock:

Stock investment offerings which provide a specific fixed rate dividend that is paid to share holders before any dividends are paid to common stock holders. Preferred stocks are also paid out first in the event of company liquidation. These stock picks represent non-voting partial ownership in the company. The greatest benefit of owning preferred stock is the first and greater claim on corporate dividends. The four different types of preferred stock include: cumulative preferred, non-cumulative, participating, and convertible (aka preference shares).

Stock Market Analyst:

A person with expertise in the evaluation of stock investments. The stock analyst will research stock performance and expectations and make recommendations for promising stock picks to private or corporate stock investors. Stock market analysts tend to specialize in a particular industry or business sector.

Stock Symbol:

The modern 4 or 5 letter stock symbol was developed by Standard & Poors and has now become standardized as a means of identifying a particular company’s stock and on which exchange it trades.
The first four letter positions identify which stock markets the security trades on, and the fifth letter identifier indicates special situations. This modern stock market terminology has become an essential part of the stock market vocabulary and how investors research stock. (See Resources Section for a Table of Stock Symbol Identifiers)

Weighted Alpha:

The Alpha is a measure of how much a stock has risen or fallen over a one-year period. This Alpha measure is weighted, assigning more weight to recent activity and less to activity at the beginning of the period. Thus the weighted alpha is a measure of one year growth with an emphasis on the most recent price activity. Stock picks that have risen over the year will have a positive weighted Alpha. Stock picks that don’t change have a "small" Weighted Alpha. Stock investments that drop in price over one year have a negative Alpha.

More Information:

See also our information on:

Stock Trading Basics

Stock Investment Basics

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