Trading Glossary - 300+ Terms & Definitions

The bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller is willing to accept (ask) for a security. For example, if a stock has a bid of $49.95 and ask of $50.05, the spread is $0.10.

Leverage is the use of borrowed capital to increase potential returns of an investment, which also increases potential losses. Using 2:1 leverage means controlling $20,000 worth of stock with only $10,000 of your own money.

Support is a price level where a security tends to find buying interest and stop declining, while resistance is a price level where it tends to stop rising due to selling pressure. These levels are often marked by previous lows (support) and highs (resistance).

A bull market is a prolonged period of rising prices and investor optimism, typically characterized by 20% or greater gains from recent lows. A bear market is a sustained decline of 20% or more from recent highs, reflecting investor pessimism.

RSI (Relative Strength Index) is a momentum oscillator ranging from 0 to 100 that measures the speed and change of price movements. RSI above 70 typically indicates overbought conditions, while below 30 suggests oversold conditions.

A stop loss is an order to sell a security when it reaches a certain price, designed to limit losses on a position. For example, setting a stop loss at $45 on a stock bought at $50 limits maximum loss to $5 per share.

Cryptocurrency is digital or virtual currency secured by cryptography, typically decentralized and based on blockchain technology. Bitcoin is the first and most well-known cryptocurrency, created in 2009.