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Trading Terms That All New Traders Should Be Aware Of

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In the past 20 years, the world of stock trading has changed completely. Just a few decades ago, it was unthinkable that the average Joe could participate so freely and openly in the stock market. That privilege was reserved solely for financial brokers, industrialists and other tycoons. Today, however, thanks to the rise in popularity of online trading platforms and discount brokerages that has changed completely.

Thanks to these innovations, anyone can now participate in the trading market. Whether you want to trade stock, currency, or any other asset, the opportunities have been made available for you. Online trading platforms have made trading a whole lot more accessible, easier and available for people. Websites like https://tradingplatforms.com/are in large part responsible for the rise in numbers of market traders.

But, with so many more people getting interested in trading, the interest in the market is rapidly rising. Leading many to ask questions about what certain terms that are casually thrown around when it comes to trading mean. So, in this article, we are going to answer what some basic terms that every trader should be aware of mean.

“In the Black”

Starting it out on a positive note, let’s take a look at a commonly used phrase. “In the black” is a saying that gets thrown around quite a bit in the world of finance, and many people might be confused by what it means. Often times, we associate “black” with negative emotions. Misery, unhappiness, even depression. And for this reason, when non-traders hear the words “in the black” they might assume a company is having a rough time of it.

However, this could not be further from the truth. In fact, it is quite the opposite. When we say “in the black” what we mean is that a company is doing well. It means that they are making money and owe no debts to anyone. The term comes from old-school record keeping practices. Back then, profits were written in black ink, and so the term endured to this day.

But then, the question becomes, what term refers to a company losing profits?

“In the Red”

It is probably unsurprising to learn that “in the red” refers to something negative. After all, red is a color that we often associate with danger, rage, and a plethora of other negative emotions. The phrase can often be used colloquially to refer to a person lacking cash. However, it originates in the business world. As we said, back in the day, book keepers would mark profits in black ink. They would also mark financial losses in red ink, and it is from this practice that the practice originated.

So, now we know what terms are used when referring to profits and losses. But these are not the only terms to know when trading. Let us take a look at some more important terms, that should not go forgotten.

Volatility

The gamblers out there might be familiar with what volatility refers to. When we speak about a market’s rate of volatility we are discussing the rate at which the prices of share fluctuate. Often times, people might not realize why volatility is important. Those who are unfamiliar with the trading world assume that the higher the volatility rate is, the worse the investment. However, that is not always the case. In fact, there are certain trading strategies that bank on the volatility rate being higher. As an example, day traders look for volatile markets, which they can exploit in order to increase their daily profits.

However, it is absolutely true that placing cash on volatile markets is a bigger risk than placing cash on stable ones. It is for this very reason, that many new and inexperienced traders prefer to place their investments on markets that are low risk / low reward. So, before you take the time to put down an investment, look at the popular startup trends on the market, and do your best to predict the volatility of these stocks.

Ask / Offer

Lastly, we are taking a look at the terms Ask or Offer. This is, perhaps, one of the most important terms you need to know, because it directly relates to the investments you will be making. The terms ask or offer refer to the lowest amount of money that the stock provider is willing to accept for a share of the stock. For example, let us say that you are willing to buy a piece of candy for $4. However, the asking price is $5. This means, that you would need to secure at least one more dollar in order to get your hands on the piece of candy.

This same logic applies to stocks. The seller is unwilling to accept a sum that goes lower than his set “ask” or “offer”, and in order to purchase that stock, you will need to come up with at least that much cash.

Written by Marcus Richards

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