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Did you hear about the explosion of new investors during the pandemic? One study shows that average new investors had little investment knowledge before they started.
The biggest hurdle for new investors is understanding trading terminology.
The stock market seems like a place to make some quick and easy money. But, there are some important trading terms to learn before jumping into the stock market.
Learning how to trade stocks properly will save you money and maximize your profits. Let’s discuss some stock trading terminology that will simplify your investment journey.
Bull vs Bear Market
Understanding bull and bear market predictions is an easy way to learn how to day trade. A bull market is where stock prices are predicted to rise above the market value. On the flip side, a bear market is where stock prices are predicted to fall below the market value.
Pay attention to market predictions to decide if you should buy or sell stock shares that day. It’s good to sell during a bull market and buy during a bear market. Read more information here about the bullish and bearish sentiment.
Market Correction
Because of the influx of new investors, the price of some stocks rose way above market value. It was a huge payday for seasoned long-term investors but a nightmare for new investors.
There are 2-3 market corrections a year that lowers inflated stock prices to market value. If you bought shares at an inflated price, the market correction lowered your share value.
There are ways to make up for the loss, so don’t panic when a market correction happens.
Dollar-Cost Average
Your dollar-cost average is the value of your shares in a given company. Try to sell your shares above or at your dollar-cost average.
Sometimes a stock price will fall below your dollar-cost average. Hold your shares until the price rises above or near your average share price.
Average Down
Take advantage of falling stock prices by averaging down your dollar-cost average. This works well if you want to buy more shares in a company at a lower price.
With a lower average share price, you have the opportunity to make more money when the stock rises again.
Trading for Beginners
It can be overwhelming to learn how to day trade during the first six months. You have to research companies and predict the rise and fall of stock prices.
It takes time to understand the ebbs and flows of the stock market. So, take your time and don’t rush into buying any stocks until you see how well a company performs.
Trading Terminology
Although many trading tips are circulating the web, you have to find a rhythm that works for you. Don’t allow the stock market to intimidate you.
Understanding basic trading terminology makes it easier to navigate the stock market. Check out the rest of our articles for more market trends and stock lingo to help you master the stock market.
