Friday, February 3rd 2012 - 06:14:23 pm

TradeStocksAmerica.com Glossary of Terms

Glossary of Terms
(Some abbreviations are for communication on the Trading Room)

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Large Cap stock – usually considered a company that has over $5 billion capitalization (number of shares times price per share). Companies are usually classified as either large cap, medium cap, small cap, or micro cap, depending on their market capitalization, but the dividing lines are somewhat arbitrary. As a general guideline, the market capitalization is $5 billion or more for large caps, $1 billion to $5 billion for medium caps, $250 million to $1 billion for small caps, and less than $250 million for micro caps. When calculating the market caps of foreign companies who have issued ADRs in the US, only the outstanding ADR shares are considered, not the shares issued by that company in other countries.

Level 1 is a real time quote with bid, ask and size of shares available at that price.

Level 2 is the real-time quotes of the bid and ask prices for each individual market maker for a given NASDAQ or OTCBB stock. Level II quotes enable investors to identify the market maker offering the lowest bid-ask spread.

Level 3 quotes is everything included in Level II quotes plus the ability to enter quotes, execute orders, and transmit other information. Only NASD member firms which are market makers have this ability to change this information.

Limit order - is an order to a broker to buy a specified quantity of a security at or below a specified price, or to sell it at or above a specified price (called the limit price). This ensures that a person will not pay more for the stock than whatever price is set as his/her limit. This is one of the two most common types of orders, the other being a market order.

Liquidity - The ability of an asset to be converted into cash quickly and without any price discount or delay.

Listed stock - usually refers to a stock that is listed on the NYSE or AMEX as opposed to the NASDAQ.

LOD – a stock’s price hits the low price of day up to that point.

LOL – laughing out loud.

Long - is buying a financial instrument first with the anticipation that the stock will rise in price which results in profits.

Long position - The state of actually owning a security, contract, or commodity; also called long. The purchase of the security occurs first followed by selling. Opposite of short position.

Low float – A low number of shares of a security that are outstanding and available for trading by the public. If a high volume of stock is purchased on a stock that has low float, the stock will go up much faster in an exaggerated fashion, as well as coming down when selling occurs.

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