What is the difference between a stock and an ETF?

A stock is a share of ownership in one company. An exchange-traded fund holds a basket of securities and trades on an exchange like a stock, so one purchase spreads exposure across every holding in the fund.

Where should a new trader begin?

Start with stocks, ETFs, and market indexes, then learn market capitalization, earnings per share, and the price-to-earnings ratio. Move on to trading styles such as day trading and momentum once the instruments are familiar.

Glossary topic

Trading & Markets Basics

The working vocabulary of active markets: stocks, ETFs, indexes, valuation ratios, and the trading styles built on them.

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24 terms

Start here

A Three-Concept Reading Path

1StockA stock is a security that represents ownership in a corporation, with voting, dividend and liquidation rights determined by its share class.
2Exchange-Traded Fund (ETF)An exchange-traded fund (ETF) is a pooled investment fund whose shares trade on an exchange at market prices throughout the session, with exposure set by its holdings.
3Market CapitalizationMarket capitalization is the total dollar value of a company’s outstanding shares, found by multiplying the current share price by the number of shares outstanding.

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Why this topic matters

This is the working language around every trade: stocks, ETFs, market indexes, market capitalization, earnings, valuation ratios, and the trading styles that use them, from day trading and scalping to momentum and mean reversion.

Connect the chart with the business and the benchmark behind it. Read earnings and valuation on the same basis, compare a stock with its index, and match the trading style to the time you can commit. Clear definitions make the research workflow faster.

Topic questions

Trading & Markets Basics FAQ

#

1 term

52-Week High/Low

The 52-week high and low are the highest and lowest prices a security reached over the trailing year, and together they define its one-year price range.

A

1 term

Active Investing

Active investing is an approach that chooses specific securities, position weights and allocations to pursue a defined objective instead of tracking an index.

B

1 term

Blue-Chip Stocks

Blue-chip stocks are shares of large, established companies with recognized industry positions, long operating histories and records of stable earnings.

D

2 terms

Day Trading

Day trading is a trading style that opens and closes a position within the same trading day, so the traded position carries no overnight exposure.

Dow Jones Industrial Average (DJIA)

The Dow Jones Industrial Average (DJIA) is a price-weighted index of 30 large US companies whose level equals the sum of their share prices divided by the Dow divisor.

E

4 terms

Earnings per Share (EPS)

Earnings per share (EPS) is a profit measure equal to net income less preferred dividends, divided by the weighted average common shares outstanding.

Emerging Markets

Emerging markets are countries whose stock markets an index provider classifies as emerging, using criteria such as market size, liquidity and investor access.

Equities

Equities are ownership stakes in companies, held directly as stocks or through equity funds, giving investors a share of a business rather than a loan to it.

Exchange-Traded Fund (ETF)

An exchange-traded fund (ETF) is a pooled investment fund whose shares trade on an exchange at market prices throughout the session, with exposure set by its holdings.

F

1 term

FAANG Stocks

FAANG is market shorthand for five large US technology and internet companies: Meta Platforms, Apple, Amazon, Netflix, and Alphabet.

I

1 term

Initial Public Offering (IPO)

An initial public offering (IPO) is a company’s first public sale of shares, priced and allocated in the offering before the stock begins trading on an exchange.

M

4 terms

Market Capitalization

Market capitalization is the total dollar value of a company’s outstanding shares, found by multiplying the current share price by the number of shares outstanding.

Market Index

A market index is a calculated value that tracks a defined group of securities under a stated weighting rule to measure how that market segment performs.

Mean Reversion

Mean reversion is the movement of a price, spread or ratio back toward a defined central value, and a trading approach that positions for that move.

Momentum Trading

Momentum trading takes positions in the direction of an established price move, using defined measures of strength, entry triggers and exit rules.

P

2 terms

Paper Trading

Paper trading is simulated order entry and portfolio tracking that uses virtual capital to practice a process without executing live-market trades.

Price-to-Earnings Ratio (P/E Ratio)

The price-to-earnings (P/E) ratio is a stock’s share price divided by its earnings per share, showing how many dollars investors pay for each dollar of earnings.

S

3 terms

S&P 500

The S&P 500 is a float-adjusted, market-capitalization-weighted index of 500 leading U.S. companies and a standard benchmark for large-cap U.S. stocks.

Scalping

Scalping is a short-horizon trading style that seeks small price changes through frequent entries and exits, often holding positions for seconds or minutes.

Stock

A stock is a security that represents ownership in a corporation, with voting, dividend and liquidation rights determined by its share class.

T

2 terms

Trading

Trading is the buying and selling of financial instruments and the active management of the resulting positions through defined entries, position sizes and exits.

Trading Volume

Trading volume is the number of shares or contracts that change hands in a security during a set period, with each trade counted once rather than once per side.

U

1 term

Unicorn

A unicorn is a privately held startup valued at $1 billion or more, a valuation milestone usually set by the price of its latest venture funding round.

V

1 term

Valuation

Valuation is the process of estimating what a company, share, or asset is worth, using discounted cash flows, market multiples, or the value of net assets.

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