Basic Trading Terminology Every Beginner Should Know

The stock market can feel like a different language when you first start out. Once you learn a few key terms, everything begins to make sense. Here are some of the most important basics every new trader and investor should understand.

💰 Bid and Ask

Bid: The highest price someone is willing to pay. Ask: The lowest price someone is willing to sell for. Spread: The difference between the bid and ask. 👉 Example: If Apple stock has a bid of $149.90 and an ask of $150.10, the spread is $0.20. Traders usually try to buy at the bid and sell at the ask.

📉 Short vs. Long

Going Long: Buying a stock or option because you think the price will go up. Going Short: Selling a stock you don’t own, betting it will go down. 👉 Think of long as bullish and short as bearish.

📊 Options Basics: Calls and Puts

Options give you the right (but not obligation) to buy or sell a stock at a certain price before a certain date. Call Option: A bet that the stock will go up. Put Option: A bet that it will go down. 👉 Example: If Tesla is $250 and you buy a $260 call, you are betting it will go above $260 before expiration.

📈 Futures Contracts

Futures are agreements to buy or sell an asset at a specific price on a future date. Used for commodities like oil or gold and indexes like S&P 500. Traded on margin, so they’re highly leveraged. Key Terms: Contract, Tick Size, Leverage. 👉 Example: A trader buys an S&P 500 futures contract betting the index will rise — small moves can mean big gains or losses.

🌍 Forex (Foreign Exchange)

Forex is the global market for trading currencies like USD, EUR, JPY. Trades are done in pairs (EUR/USD). It’s the largest financial market in the world. Key Terms: Lot, Pip, Leverage. 👉 Example: Buy 1 mini lot (10,000 units) of EUR/USD at 1.1000 → 1.1010 = 10 pips = $10 profit.

🧾 Other Common Terms

Ticker Symbol: Unique letters for each stock (AAPL, TSLA). Volume: Number of shares traded. Liquidity: How easy it is to buy/sell without moving price. Market Order: Executes instantly. Limit Order: Executes only at your chosen price.

🎯 Quick Takeaway

Learning trading terminology is like learning the rules of a new game. Once you understand the basics — bid/ask, long/short, calls/puts, futures, forex, and order types — you’ll follow market news with confidence.

🔑 Next article in the Learning Center: Order Types (market, limit, stop, etc)