Trading slang expressions

Trading jargon: What it actually means

Trading jargon definition

Trading jargon refers to the informal expressions and terminology used by traders. Understanding what these stock market terms mean will help you better understand stock trading strategies, market conditions, financial news, and more.

Slang terms for money

Cash

Cash refers to physical money in the form of coins or paper currency. In trading, the term is used to describe liquid assets that are readily available for use.

Green

Green is a slang term for U.S. currency, which is green in color.

Cheddar

Cheddar is a slang term for money. It’s thought to originate from government-issued welfare packages that contained cheese.

Benjamins

Benjamins are $100 bills in the U.S. The term refers to Benjamin Franklin, whose portrait appears on the note.

Stock market slang

Bid

The bid is the maximum price a buyer is willing to pay for shares of a stock or other asset. In trading, placing a bid means making an offer to buy. If a seller agrees to that price, the trade goes ahead.

For example, a trader can put an order to buy at 12.00 and wait for a seller to sell at that price. The other option is to purchase from a seller asking for 12.02.

Bid-ask spread

The bid-ask spread is the difference between what buyers are willing to pay (bid) and what sellers want to receive (ask) for a stock, also known as the selling price. Smaller bid-ask spreads usually mean higher market liquidity and wider bid-ask spreads mean there’s less trading activity for that particular stock.

Blockchain

The blockchain is a decentralised digital ledger used to record transactions in a way that’s secure, transparent, and immutable. It’s most commonly used for cryptocurrency transactions like Bitcoin.

Each block contains a cryptographic hash of the previous block, timestamp, and transaction data that cannot be changed once added. This helps prevent fraud.

Blue chip

Blue chip stocks are shares in large, well-established companies known for their financial stability and history of growth. These companies have dependable earnings and usually pay dividends to investors.

Examples of blue chip stocks include Microsoft, American Express, McDonald’s, and Coca-Cola Co.

Bond

A bond is a type of loan made by an investor to a bond issuer, usually a government or corporation. In exchange, the issuer pays back the borrowed amount (called the principal) plus interest over time. Bonds are used to fund operations and are generally considered lower-risk investments compared to stocks.

Capitalisation

Capitalisation, also known as market capitalisation (market cap), is the total market value of a company’s outstanding shares. It’s calculated by multiplying the current share price by the total number of shares.

A company’s market cap (small-cap, mid-cap, or large-cap) tells investors how valuable it’s perceived to be. Investing across market caps can be a way to diversify a stock portfolio.

Day trading

Day trading involves buying and selling shares of a stock within the same trading day. Day traders hold their positions for hours or minutes with the aim of profiting from short-term price movements. They usually close all trades before the market closes to avoid overnight risk.

Debt-to-equity ratio

The debt-to-equity ratio (D/E ratio) compares a company’s total debt to its shareholders’ equity, or the value of its assets minus its liabilities. Investors use the D/E ratio to see how much a company relies on borrowing to finance its operations.

A higher debt-to-equity ratio (typically above 2) may suggest higher financial risk while a lower ratio (below 1) indicates lower risk.

Diversification

Diversification is the practice of spreading investments across various assets (stocks, bonds, commodities, real estate) to reduce risk. This allows potential losses from one asset class to be mitigated by positive performance from another, helping stabilise a portfolio and minimise overall risk.

Dividend

A dividend is a percentage of a company’s earnings paid out to its shareholders, usually on a quarterly basis. They can be paid in cash or distributed as additional shares.

ETF (Exchange-Traded Fund)

An ETF is a pooled investment fund that contains a basket of assets (e.g. stocks or bonds) and trades on an exchange like a regular stock. ETFs are an easy way to diversify holdings and often have lower fees compared to mutual funds.

Exchange

An exchange is a marketplace where stocks, bonds, commodities, and other securities are bought and sold. Examples include the New York Stock Exchange (NYSE) and Nasdaq.

Fundamental analysis

Fundamental analysis is when an investor studies a company’s financial health and economic outlook to assess the value of its stock. This can include reviewing annual and quarterly earnings, debt levels, growth potential, and industry trends. It’s most often used when making long-term investment decisions.

Futures

Futures are contracts to buy or sell a specific asset at a predetermined price on a set date in the future. Traders and investors use futures to hedge against price changes in current investments or speculate on where they think prices will go in the future.

Growth stocks

Growth stocks belong to companies whose revenues are expected to grow faster than their industry peers or market average. Instead of paying dividends, these companies often reinvest their earnings to fuel more growth and expansion. This makes them attractive to investors seeking capital appreciation.

Index funds

Index funds are investment funds that aim to replicate the performance of a market index, like the S&P 500. Investors buy into an index fund to get exposure to a broad range of companies, which provides instant diversification and can help reduce risk.

IPO (initial public offering)

An IPO is when a company offers its shares for the first time on a stock exchange.

Long position

A long position means buying a stock with the expectation that its price will go up in the future. If the price does go up, the investor can sell stocks at a profit. Being ‘long’ means an investor has a bullish outlook on the stock.

Margin call

A margin call is when a trader’s margin account falls below the broker’s required level, essentially putting them in debt. The broker may demand additional funds or force the trader to liquidate positions to cover the shortfall. Margin calls usually happen when market losses reduce the value of a trader’s holdings.

Shares

Shares represent partial ownership of publicly traded companies. When someone buys shares, they become a shareholder and may be entitled to vote on company decisions or receive dividends (depending on the type of shares they own).

Short position

A short position is when a trader borrows shares and sells them with the aim of buying them back at a lower price in the future. If the share’s price drops, the trader profits from the difference. However, if the share’s price rises up then potential losses are theoretically unlimited.

Stock option

Stock options are a contract that gives buyers the right, but not the obligation, to buy or sell a stock at a fixed price before a specific date. Investors use stock options to hedge other investments or speculate on price movements.

Technical analysis

Technical analysis involves analysing past price charts, volume, and patterns to forecast future market movements. It’s often used by day traders and requires an advanced understanding of chart patterns and technical indicators.

Volume

Volume is the number of shares or other investments traded during a specific period. High trading volume indicates strong investor interest while low volume suggests quieter trading or a stock losing momentum.

Volatility

Volatility is a measure of how much a security’s price moves up and down over time. Higher volatility means larger price swings (and thus more trading opportunities) while lower volatility means more stability.

Yield

Yield is the income earned from an investment (e.g. interest or dividends) expressed as a percentage of the original investment. It helps investors compare the income potential of different assets.

Types of trading strategies

Day trading

Day trading is a short-term trading strategy where positions are opened and closed within the same trading day. The goal is to capitalise on small price movements throughout the day without holding any trades overnight.

Traders use various strategies for day trading, including scalping and gap trading, however it is inherently risky and requires careful risk management and an advanced knowledge of trading. Day traders often rely on technical analysis to time their entries and exits.

Position trading

Position trading is a longer-term investment strategy where traders hold their positions for weeks, months, or even years. The goal is to profit from major price movements over long periods of time, without getting caught up in daily market fluctuations. Position traders mostly rely on fundamental analysis but may also use technical analysis.

Scalping

Scalping is one of the fastest trading strategies. Scalpers aim to profit from small price changes and might enter and exit a trade within seconds or minutes. The strategy relies on technical analysis and fast execution – some scalpers place dozens or even hundreds of trades in a single day.

Swing trading

Swing trading involves holding positions for several days or even weeks to take advantage of short to medium-term price swings. Most swing traders look for an event that might push their stock to move favorably within a short period of time, such as an earnings report or geopolitical event.

Market conditions and trends

Bull & bear markets

Bull & bear markets are terms used to describe market sentiment. A bull market is when prices are rising consistently. If a trader believes a stock to go up, they’re described as ‘bullish’. A bear market is when prices fall by about 20% or more. Traders who believe stock prices will go down are known as ‘bearish’. They might sell their stocks or take a short position.

Market corrections & rallies

A market correction is a temporary price drop (usually about 10%) that interrupts a broader uptrend. A market rally, on the other hand, is a sudden and sharp increase in asset prices that’s often driven by positive news or strong momentum.

Risk management techniques

Risk management is an essential part of trading that helps reduce your potential losses and increase potential gains. Below, we define some common risk management terms in trading.

Diversification

Diversification involves spreading your investments across different asset classes or industries. This reduces the risk of any single trade or asset affecting your portfolio too much.

Hedging

Hedging involves using financial instruments, like options or futures, to offset potential losses from existing investments.

Position sizing

Position sizing involves calculating how much money to allocate to a trade based on the capital you have available. It ensures that no single trade puts too much of your capital at risk.

Risk-reward ratio

The risk-reward ratio compares how much you’re risking to how much you could potentially gain. For example, a 1:3 risk-reward ratio means you’re risking $100 to potentially make $300.

Stop-loss orders

A stop-loss order automatically closes your position if the price moves against you beyond a certain level. This helps limit losses.

Trailing stops

Trailing stops is a type of stop order that automatically adjusts with the market as your trade becomes profitable.

Disclaimer: FOREX.com Australia is a Contracts for Difference (CFD) issuer and our products are traded off exchange. We do not offer direct ownership of the product and exposure to the assets mentioned is available solely via Contracts for Difference (CFDs). This material relates to the underlying asset and does not constitute a recommendation or offer to trade.