Tendies? YOLO? Can anyone explain this to me?

Views 117K Contents 254

JM investor joined discussion · Mar 30, 2022 12:22

Investing jargon explained | Stock market terms you need to know to profit from the market

Hello Everyone! I am here again to post my long-winded post
Thank you @Meta Moo to always prepare such a fun activity to let us have an oppurtunity ti learn!
In my channel, I have posted a video on the general terms, lingo or language for investment.

As my video was prepared last year, thus, the terms are very general. For the terms like Yolo, tendies etc, I strongly recommend the post from @NANA123 at this LINK as I really enjoy her post!

Without further ado, let's start!
As usual, you may refer to my video for a better illustration as they are animated:

From YouTube

Please give me a like and subscribe my channel if you manage to gain some insights, as I really used my sweat and blood to prepare the video
To be profitable in the stock market, we need to understand these terms, so we can do our own research diligently and won't be manipulated by the media. If you are a new investor and wanted to profitable in the stock market, please watch this video until the end as this is a very important video for you. Please take out your pen and make a note if necessary. Hopefully you will then be able to discuss the stock market with others easily.

Just a quick recap:

A share is the single smallest denomination of a company's stock. Shareholder is the person who owns a share of the company. Stock exchange is where the company list their share to trade publicly. IPO is the process by which a private company can go public by selling its stocks to general public to raise money to expand their business.

Now let us move to the first part of the video where I will talk about the terms to describe market conditions.

Let us understand the terms to describe the market condition. Probably these 2 terms are the one that you will be encountering very frequently.

The first term is bull market. Bull market refers to a market condition when prices continue to rise, or expected to rise.

By contrast, bear market refers to a market condition when prices continue to decline, or expected to decline. Technically, bear market happens when the price has fallen 20% or more from recent highs.

One of the commonly held belief about why “Bull” and “Bear” are used to describe the market condition is from the way the animals attack their opponents. A bull thrusts its horns up to the air, while a bear swipes its paws downward.

We can also use these 2 terms to describe our point of view. If I am bullish on this stock, means I have confident it will be going up. Bearish view means I expect the stock will be going down.

Bull and bear market on different sectors can happen at the same time. For instance, while most of index and sectors are in bull market, $ARK Innovation ETF (ARKK.US)$ , fall into bear market territories in the first week of March 2021.

Next, let us understand the term “trend”. In general, we can classify trends into up-trend, down-trend and consolidation (no trend).

This is an example for a chart with an up-trend pattern. We can see that the overall movement of the price is going upward. We can also observe higher high and higher low along the trend.

By contrast, down-trend is a trend where the overall movement of the price is going downward. You can observe lower high and lower low along the trend.

Consolidation means the stock is neither move upward or downward in a clear direction. Instead, it remains range-bound. We will talk more about this in our technical analysis video.

Let us further look into the terms used to describe different phases of bull or bear markets.

This is a typical bull market- with an uptrend pattern. During the bull-market, the price is going higher.

This brings a new term: Rally. Bull market rally is a period of continuous increase in the stock price.

However, it does not move in a straight line, right? Do you notice there are periods where a short decline happened? This part is called “retracement”. In short, retracement is a temporary price reversal that takes place within a larger trend.

If the retracement is within 10-20% from the high, this is called “market correction”. If we refer to the Nasdaq in Feb and Mar this year (2021), the retracement was around 11%. This retracement is called “correction”.

If the stock price experience a 2-digit percentage drop within a short period of time, we can call this a “Market crash!” Some infamous examples of market crashes are below: the dotcom bubble burst in 2001, the 2008 financial crisis, and the most recent, COVID-19 pandemic in year 2020.

Now, the stock market has retraced 20% from its recent high. Bear market is coming. In a bear market with a down-trend, here are the terms we need to know.

When the stock price goes down, it does not move in a straight line too. Most of the time, downtrends are interrupted by brief periods of recovery, or small rallies, when prices temporarily rise. This part is also called “retracement” in a down-trend. However, there are also several specific terms used to describe them: Sucker rally, bear market rally or dead cat bounce. If you heard these terms in future, it generally signifies the up-ward movement is temporary, and people are expecting the price will continue to drop.

Reversal in stock market is a change in the major direction or trend of the stock price. But sometimes, a reversal is a false signal. A false reversal signals are called bull trap or bear trap depending on the trend.

Index and benchmark

Now, let us look at the terms generally used to describe stocks.

Stock index, is a basket of secruities that measures the price performance. Each country has its own major index. In the US, three major indices are:

No. 1. $Dow Jones Industrial Average (.DJI.US)$

You can also call it Dow Jones, or simply the Dow30. $Dow Jones Industrial Average (.DJI.US)$ tracks the performance of 30 large companies in US from different sectors. Examples of famous companies in $Dow Jones Industrial Average (.DJI.US)$ as of March 2021 are $Apple (AAPL.US)$ , $Boeing (BA.US)$ , $Microsoft (MSFT.US)$ , $Visa (V.US)$ , $Nike (NKE.US)$ , $Disney (DIS.US)$ and $Coca-Cola (KO.US)$ .

No 2. $S&P 500 Index (.SPX.US)$

$S&P 500 Index (.SPX.US)$ tracks the stocks of 500 large-cap U.S. companies. As S&P500 is tracking top 500 companies, it is my favourite benchmark to analyze the market. In addition, with 500 top companies, it is also a well-diversified index. Thus, SPY, S&P 500 ETF Trust, an ETF that tracks S&P 500, is one of my favourite ETF to deposit my cash to grow my wealth.

And the third is $Nasdaq Composite Index (.IXIC.US)$ .

The $Nasdaq Composite Index (.IXIC.US)$ tracks the prices of all the securities traded on the Nasdaq Stock exchange. As more than 40-45% of companies listed in Nasdaq are in technology sector, the movement of the Index is heavily influenced by what's happening in the technology sector.

$NASDAQ 100 Index (.NDX.US)$ , which includes 100 of the largest domestic and international non-financial companies listed on the Nasdaq Stock exchange based on market capitalization, is also a good benchmark to be analyzed.

In other countries, the popular indices include $FTSE Singapore Straits Time Index (.STI.SG)$ for Singapore, Kuala Lumpur composite index for Malaysia, $Hang Seng Index (800000.HK)$ for Hong Kong or Nikkei 225 index for Japan.

Indices or benchmark are used to track the market performance. However, we could not buy or sell indices or benchmark. Instead, we can invest or trade the Exchange traded funds, (ETF) that tracks an index. Before we talk about ETF, let us first understand the terms used in investing and trading.

Investment is purchasing assets that have the potential to produce income or profit. In short, we invest in the asset that we expect the value will appreciate and grow our wealth gradually. In general, investment takes over an extended period like years or even decades through buying and holding.

By contrast, trading involves frequent transactions in a much shorter time-frame, it could be a quarter of year, a month, a week, a day, or even within a few minutes.

Buy or Long. When we buy a stock or long a stock, it signifies that we are buying a share and hoping for the price to go up. In this case, as a buyer, we “buy” a share to “open” the position. We then can sell the share to another buyer. In this case, we are the “seller”, we “sell” the share to “close” the position. In this case, if the selling price is higher than the buying price, the difference is called “profit”.

The increase in a stock value is called “capital gain”. If we do not sell it, it is called unrealized profit, or paper gain. If we sell the asset and pocket the money, it is called “realized profit”.

If the selling price is lower than the buying price, then the difference is called “loss”. Similarly, if we have not sold the asset at loss, it is considered as unrealized loss, or paper loss. If we sold the asset, then it is called “realized loss”.

Please watch my video at around 10 minutes mark for the example for a much better illustration.

Short selling is where we sell the shares to someone else, without holding the shares at the firstplace. So, we need to borrow the stock from someone else, for example, a broker. In this case, we are the sellers who sell the share to “open” a position. As we borrow the stock from the broker, we are obligated to return the share. Thus, we need to “buy” the share back and return it. So how do we profit from it?

Same, please refer to the video for a better illustration:
This is a general scheme to show how a trader can profit from the short-selling. As long as we buy back the shares at the lower price and return it to the lender, we are profiting!

Example 2: (Please refer to the video for a better illustration:)

A and B are good friends. A is going overseas for a year, so he asked B to take care of his brand new iphone 11. In this scenario, A is the owner while B is not. This means B is obligated to return A the iphone when A is back.

While A is away, B sell this iphone 11 at 1000 dollars. One year later, B is reminded to return A the iphone 11. At that time iphone 12 has already launched, so the market price for iphone 11 is therefore only around 600 dollars. So B purchases a new iphone 11 at 600 dollars and return it to A. A still gets his iphone 11 without knowing that B the short seller has profited 400 dollars in this process!

Please take note that the maximum we can earn as a short seller is when the stock price drops to 0, as it requires us 0 dollars to buy it back and return to the broker. But, the risk is unlimited, because in principle, the stock price can go infinitely high.

Here is the summary table to differentiate long buyer and short seller:

ETF and Individual stocks

Now, let us talk about the terms related to the stock or company that we can buy on the stock exchange.

Let us first start with ETF or exchange traded funds.

An ETF is a security that tracks an index, a commodity or a basket of assets, but we can trade them like a stock in a stock exchange. We can buy it, short it, invest it or trade it via a stock exchangeand their prices changes continuously.As I mentioned in the previous part, we could not buy and sell Index or the benchmarks like $Dow Jones Industrial Average (.DJI.US)$ or $S&P 500 Index (.SPX.US)$ . But, we can buy or sell the ETF that tracks them!

Please refer to this table on the ETF that tracks the benchmarks:

Stock classfication:I

Next, let us look at the terms related to stock classification.

For individual stock, the first term we need to know is “Ticker”. Ticker is also known as symbol of a stock. For example, $Apple (AAPL.US)$ ’s ticker is AAPL, $Tesla (TSLA.US)$ ’s ticker is TSLA and $McDonald's (MCD.US)$ ’s ticker is MCD. We use ticker to look for the stock in a broker’s platform.

Next we touch on Market Capitalization or Market Cap. According to Investopedia, Market capitalization refers to the total dollar market value of a company's outstanding shares of stock. To calculate the market cap, we multiply the total number of outstanding shares of a company with its current traded price. For example, a company has one million shares trading at 50 dollars each, its market cap is 1 million x $50 = 50 million dollars. In general, a company with a market cap of > 10 billion dollars is considered large cap. Mid cap company has a market cap of 2-10 billion dollars. Small cap company has a market cap of 300 million to 2 billion dollars. Company with lesser than 300 million is considered micro-cap company.

Generally, market capitalization corresponds to a company's stage in its business development. Large cap companies are generally mature, well-known companies within established industries. They are very stable, and in general, is the least susceptible to economic downturn. Mid-cap companies are in the stage of experiencing rapid growth. Midcaps may offer more growth potential than large caps. Small caps are young companies and the most susceptible to the economic downturn.

------------------------------------------------------------

Next may be a term that you kept hearing, it is the “Blue Chip”. In general, blue chip stock refers to the well-recognized company with good reputation. Typically, they are large, well-established and financially sound companies that have operated for many years. They are often the market leaders in their respective industries. However, not all blue-chips are worth to invest. We still need to combine fundamental and technical analysis to invest in a good blue chip that is not in the sunset industry.

FAANG or FAAMG.

Talking about blue-chips, then we should know the most famous blue-chips, the tech-giants in the technology sector: FAANG or FAAMG. F is Facebook; A is $Apple (AAPL.US)$ ; another A is $Amazon (AMZN.US)$ , N is $Netflix (NFLX.US)$ , M is $Microsoft (MSFT.US)$ , G is $Alphabet-A (GOOGL.US)$ . As on 17Mar, FAAMG weightage on S&P500 alone is around 20%.

Other than classifying the stocks with their market cap, there are also several ways to classify the stocks. One of the ways is to classify them via different sectors, for example technology, finance, consumer staples, energy and etc.

Hopefully my post manages to give you some insight on the general terms used in investing. See you in my next post!

Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only. Read more

Translate

Report

359K Views

Comment

NANA123 :

Report
Reply

Cancel Reply
NANA123 : Wonderful sharing

Report
Reply

Cancel Reply
Funn : Fantastic sharing. Appreciate your efforts. Thanks.

Report
Reply

Cancel Reply
赌徒 : Thank you!

Report
Reply

Cancel Reply
JM investor OP Funn : Thank you!

Report
Reply

Cancel Reply
Meta Moo : Good list! Thx for sharing.

Report
Reply

Cancel Reply
Milk The Cow : Hahaha, I didn't know that & now I finally understood.

Bear = Claws attack down
Bull = Horns attack up

And here I've been wondering for it for quite some year in which I've not search for the answer & just so happened to stumbled on ur video

Report
Reply

Cancel Reply
Milk The Cow Milk The Cow : By the way, nice drawings .

Report
Reply

Cancel Reply
JM investor OP Milk The Cow : there are many so call "theories" on why it is called bull or bear, I just chose the one which is easier for me to understand

Report
Reply

Cancel Reply
JM investor OP Milk The Cow : thank you!

Report
Reply

Cancel Reply

View more comments...

JM investor

learn investing in my YouTube channel at "JM investment journal"

6616Followers

25Following

4678Visitors