Stock Market Definitions (M – R)
Stock Market DefinitionsBelow is a trader’s dictionary of common stock market definitions to assist individual investors who may be new to trading.
Here you will find additional stock market definitions that we put into words to make it as easier for new and also non-investors to understand. Many of these stock market terms are also used in greater detail in our Japanese Candlesticks Category, our Technical Analysis Category, and in illustrations in our Daily Market View.
We hope that you will find this information useful to your stock market trading education!
Stock Market Definitions M-R
Market Maker is an exchange member whose function it is to assist in the making of a market. The broker/dealer offers both bids and offers, when there are no public buy or or sell orders.
Market Order is an order to buy or sell options at the current market price.
Moving Average Convergence-Divergence (MACD)
A combination of three exponentially smoothed moving averages.
Mutual Fund: Fund run by an investment company that raises money from shareholders and then invests it in bonds, options, stocks, commodities or money markets.
Naked Option or Uncovered Option is where an investor buys or sells an option without owning the underlying security.
On-Balance Volume (OBV)
This stock market definition means cumulative volume. If prices close higher than the previous trading session, the volume for the higher day is added to the OBV. On the other hand, volume is subtracted from the OBV on days when prices close lower than the prior day.
Open interest
In futures contracts it is the number of outstanding contracts. It is equal to the total number of long and short positions.
Overbought
A term used when a price has moved too far, too fast in an upward direction.
Oversold
A term used when price has moved too far, too fast in a downward direction.
Open Interest is the total number of outstanding open contracts in a particular option series.
Out of the Money
In options a call is out-of-the-money when the stock price is below the strike price. (conversely, a put option is out-of-the-money when the stock price is higher than the strike price.
Overvalued
A term used to describe when a stock is trading at a higher than reasonable price.
Paper trade
A popular way individuals new to investing can simulate real-life trade circumstances, using imaginary (or paper) money.
Position
A term used to describe a current open trade. i.e. If you bought 100 shares of XYZ, your position would be long 100 shares of XYZ .
Portfolio: The combined holdings of an individual’s of assets, including stock, bonds, commodities, real estate investment, etc
Protective Stop
To limit losses on an open position, investors place a ‘protective stop’, or a ‘stop order’ to close the position at a predetermined level.
Put Options
The right (but not the obligation) to sell the underlying stock at a predetermined price within a certain time period.
Relative Strength Index (RSI)
An oscillator developed by Welles Wilder, which compares the ratio of positive to negative closes over a specific time period.
Resistance Level
A trading level where evident selling holds the prices from advancing.
Retracement
Price movement in the opposite direction of the recent trend.
Reverse Stock Split
A balanced decrease in the shares of stock held by stockholders. i.e. a 1-for-2 stock split would result in stockholders owning 1 share for every 2 shares owned before the split. (companies will initiate a reverse split to increase the market price of its own stock)
Resistance
A technical analysis stock market definition used to identify a price level that is higher than the current stock price and where the stock has previously traded but failed to break through.
Reward / Risk Ratio
Pertains to the amount of risk involved in a position as compared to the potential profit. Divide the maximum profit by potential loss. A risk/reward ratior of 1 or better mean the potential profit is higher than the potential risk.
Return on Investment
The percentage of profit (or loss) you might make on an investment.
Stock Market Glossary (A-B) Stock Market Terminology (C-E)
Stock Market Trading Terms (F-L) Stock Market Definitions (M-R)
Glossary of Stock Market Trading Terms (S-Z)
