Beginner Level
What Is It?
This glossary defines essential terminology used in financial markets, covering trading, market structure, and price formation concepts.
Key Terms
Ask/Offer: The price at which a seller is willing to sell an asset.
Bid: The price at which a buyer is willing to purchase an asset.
Bid-Ask Spread: The difference between the bid and ask prices, representing transaction cost and market maker profit.
Liquidity: The ease with which an asset can be bought or sold without affecting its price.
Market Order: An order to buy or sell immediately at the best available current price.
Limit Order: An order to buy or sell at a specific price or better.
Volume: The number of shares or contracts traded in a given period.
Market Cap: Total value of a company's outstanding shares (stock price × shares outstanding).
Ticker Symbol: Unique series of letters representing a publicly traded security.
Exchange: Organized marketplace where securities, commodities, and other financial instruments are traded.
Intermediate Level
Trading Terms
Slippage: The difference between expected transaction price and actual execution price.
Market Impact: The effect of a trade on the market price of the security.
Order Book: Electronic list of buy and sell orders for a security, organized by price level.
Depth: The quantity of orders at each price level in the order book.
Fill: Completion of an order through execution.
Partial Fill: Execution of only a portion of an order due to insufficient liquidity.
Good Till Canceled (GTC): Order that remains active until executed or canceled by the trader.
Fill or Kill (FOK): Order that must be executed immediately in full or canceled entirely.
Advanced Level
Professional Terms
Dark Pool: Private trading venue where institutional investors trade large blocks without displaying orders publicly.
Payment for Order Flow (PFOF): Compensation brokers receive for routing orders to specific market makers.
NBBO (National Best Bid and Offer): The highest bid and lowest ask price available across all exchanges.
Reg NMS: Regulation National Market System governing equity market structure in the U.S.
MiFID II: European regulatory framework for financial markets and investor protection.
CAT (Consolidated Audit Trail): System tracking orders throughout their lifecycle for regulatory oversight.
Tick Size: Minimum price increment for a trading instrument.
Circuit Breaker: Trading halt triggered by extreme price movements to prevent market panic.
Short Sale: Sale of borrowed securities with the expectation of buying them back later at a lower price.
Uptick Rule: Regulation requiring short sales to be executed at a price higher than the previous trade.
Key Takeaways
Market terminology spans basic trading mechanics to sophisticated market structure concepts. Understanding these terms enables effective participation in and analysis of financial markets.