Financial Terms Glossary
A comprehensive guide to technical analysis terms, fundamental metrics, market concepts, and sentiment indicators used in stock market investing.
Technical Terms
RSI (Relative Strength Index)
A momentum oscillator (0-100) that measures the magnitude of recent price changes. RSI > 70 indicates overbought; RSI < 30 indicates oversold conditions.
MACD
A trend-following momentum indicator that shows the relationship between two moving averages. Used to identify trend changes and momentum shifts.
Bollinger Bands
A volatility indicator consisting of a moving average and two standard deviation bands. Price near upper band suggests strength; near lower band suggests weakness.
Stochastic Oscillator
A momentum indicator comparing closing price to price range over a period. Helps identify overbought/oversold conditions and reversal points.
VWAP
The average price weighted by trading volume. When price is above VWAP, institutional buyers are in control; below VWAP suggests seller pressure.
SuperTrend
A trend-following indicator that identifies trend direction and generates buy/sell signals based on price and volatility. Useful for multiple timeframes.
Moving Average (MA)
An average of prices over a specific period (e.g., 20-day, 50-day, 200-day). Used to identify trend direction and support/resistance levels.
ATR (Average True Range)
Measures volatility by calculating the average range of price movement. High ATR indicates potential for larger moves; low ATR suggests consolidation.
Support
A price level where demand exceeds supply, typically causing falling prices to bounce upward. Previous lows and moving averages often act as support.
Resistance
A price level where supply exceeds demand, typically causing rising prices to pullback. Previous highs often act as resistance.
Breakout
When price breaks above resistance or below support with increased volume. Often signals the beginning of a new trend.
Divergence
When price and indicators move in opposite directions. Bullish divergence (price down, indicator up) often signals reversal upward; bearish divergence signals downward reversal.
Fundamental Terms
Market Cap
Total market value of a company's shares (share price × shares outstanding). Used to classify stocks as large-cap, mid-cap, or small-cap.
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Higher P/E suggests higher growth expectations; lower P/E may indicate undervaluation.
EPS (Earnings Per Share)
Company net income divided by shares outstanding. Growing EPS typically drives stock price appreciation over time.
Dividend Yield
Annual dividend per share divided by stock price. Represents the annual return to shareholders from dividends alone (not including price appreciation).
52-Week High/Low
The highest and lowest prices a stock has traded during the past 52 weeks. Used to assess relative valuation and volatility.
Beta
Measures a stock's volatility relative to the broader market. Beta > 1 indicates higher volatility; Beta < 1 indicates lower volatility.
Revenue Growth
The rate at which a company's sales are increasing. Important metric for assessing business momentum and future profitability.
Market Terms
Bull Market
A prolonged period of rising prices, typically with strong economic growth and investor optimism. Officially a 20%+ increase from recent lows.
Bear Market
A prolonged period of falling prices, typically with economic slowdown and investor pessimism. Officially a 20%+ decline from recent highs.
Trend
The general direction of price movement. Uptrend: higher highs and higher lows. Downtrend: lower lows and lower highs. Sideways: no clear direction.
Momentum
The rate of change of price. Strong momentum means rapid price movement; weak momentum means slow movement or consolidation.
Volatility
The degree of price fluctuation. High volatility means large price swings; low volatility means stable, small movements.
Volume
The number of shares traded in a period. High volume on price moves suggests strong conviction; low volume suggests weak move.
Consolidation
A period of sideways price movement with no clear trend. Often precedes a breakout or breakdown in price.
Overbought
A condition where technical indicators suggest price has risen too far too fast and is due for a pullback or reversal.
Oversold
A condition where technical indicators suggest price has fallen too far too fast and is due for a bounce or reversal.
Liquidity
The ease with which a stock can be bought or sold. High liquidity means tight bid-ask spreads and easy trading; low liquidity means wide spreads and difficult trading.
Covered Call
An options strategy where you sell a call option against 100 shares you already own, collecting premium in exchange for capping your upside at the strike price.
Sentiment Terms
Sentiment
The overall mood or attitude of investors toward a stock or market. Bullish sentiment = optimism, upside expectation. Bearish sentiment = pessimism, downside expectation.
Bullish
Positive outlook suggesting rising prices. A bullish indicator or signal suggests upward momentum or positive momentum.
Bearish
Negative outlook suggesting falling prices. A bearish indicator or signal suggests downward momentum or negative sentiment.
Neutral
No clear bias toward up or down. Neutral sentiment or indicators suggest uncertainty or consolidation without directional conviction.
Coverage Intensity
The volume of news coverage or discussion around a stock. High coverage intensity suggests increased market attention; low intensity suggests low attention.
Analyst Rating
Professional opinions from institutional analysts: Strong Buy, Buy, Hold, Sell, or Strong Sell. Combined ratings form a consensus recommendation.
Price Target
An analyst's projection of where a stock's price will be at a future date. Mean target is the average across analysts; used to gauge upside/downside potential.
Earnings Surprise
When reported earnings exceed or fall short of analyst expectations. Positive surprises typically drive price increases; negative surprises drive declines.
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