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

money.



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

Chapter XVII.



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

dollars.



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

supply.





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