Most Viewed Puts And Calls
What Is Speculation?
A Correct Basis For Speculating
Minor Movements In Prices
What Stocks To Buy
Stock Some Terms Explained
When To Buy Stocks
Stop Loss Orders
The Desire To Speculate
Possibilities Of Profit
Two Kinds Of Traders
Major Movements In Prices
When To Sell Stocks
The Money Market And Stock Prices
What Stocks Not To Buy
Stock Some Terms Explained
There are certain terms used in connection with stock speculation that
are very familiar to those who come in contact with stock brokers, and
yet are not always familiar to those who do business by mail.
Undoubtedly the majority of our readers are familiar with these terms,
but we give these definitions for the benefit of the few who are not
familiar with them.
Trader: A person who buys and sells stocks is usually referred to as a
trader. The word probably originated when it was customary to trade one
stock for another and later was used to refer to a person who sold one
stock and bought another. He was a trader; but the person who buys
stocks for a profit and sells them and takes his profit when he gets an
opportunity, may not be a trader in the strict sense of the word.
However, for convenience, we use the word "trader" in this book to refer
to any one who buys or sells stocks.
Speculator: This word refers to a person who buys stocks for profit,
with the expectation of selling at a higher price, without reference to
the earnings of the stock. He may sell first, with the expectation of
buying at a lower price, as explained in Chapter XVII. on "Short
Selling." In many cases where we use the word "trader," it would be more
correct to use the word "speculator."
Investor: An investor differs from a speculator in the fact that he buys
stocks or bonds with the expectation of holding them for some time for
the income to be derived from them, without reference to their
speculative possibilities. We believe that investors always should give
some consideration to the speculative possibilities of their purchases.
It frequently is possible to get speculative profits without increase of
risk or loss of income.
Bull: One who believes that the market price of stocks will advance is
called a bull. Of course, it is possible to be a bull in one stock and a
bear in another. The word is used very frequently with reference to the
market, a bull market meaning a rising market.
Bear: The opposite of a bull is a bear. It refers to a person who
believes that the market value of stocks will decline, and a bear market
is a declining market.
Lambs: "Lambs" refers to that part of the public that knows so little
about stock speculating that they lose all their money sooner or later.
The bulls and bears get them going and coming. If the lambs would read
this book carefully, they would discover reasons why they lose their
Long and Short: Those who +own+ stocks are said to be long, and those
who +owe+ stocks are said to be short. Short selling is explained in
Odd Lot: Stocks on exchanges are sold in certain lots. On the New York
Stock Exchange, 100 shares is a lot; and on the Consolidated Stock
Exchange, 10 shares is a lot. Less than these amounts is an odd lot.
When you sell an odd lot you usually get 1/8 less than the market price;
and when you buy an odd lot, you usually pay 1/8 more than the market
price; that is, 1/8 of a dollar on each share where prices are quoted in
Point: It is a common expression to say that a stock went up or down a
point, which means a dollar in a stock that is quoted in dollars, but a
cent in a stock that is quoted in cents, as many of the stocks are on
the New York Curb. In cotton quotations, a point is 1/100 part of a
cent. For instance, if cotton is quoted at 18.12, it means 18 cents and
12/100 of a cent per pound, and if it went up 30 points the quotation
would be 18.42.
Reaction: Every person who has traded in listed stocks probably is
familiar with this word. It means to act in an opposite direction, but
it is used especially to refer to a decline in the price of a stock that
has been going up.
Rally: "Rally" is the opposite of the sense in which "reaction" usually
is used. When a stock is going down and it turns and goes up, it is
called a rally.
Commitment: This term is used referring to a purchase of stock. It is
more commonly used by investment bankers when they contract to buy an
issue, but the term sometimes is used by traders.
Floating Supply: The stock of a company that is in the hands of that
part of the public who is likely to sell, is referred to as floating
Next: A Correct Basis For Speculating
Previous: What Is Speculation?