Stock Market Glossary
Plain-English definitions of the investing terms every beginner runs into
The stock market has a language of its own. Between the ratios, the acronyms, and the jargon, it is easy to feel lost when you are just starting out. This glossary gathers the terms you will meet most often and explains each one in plain English — no prior knowledge assumed. Skim it start to finish, or jump straight to the term you need.
Definitions are a starting point, not the whole picture. Each term links to a fuller explanation with a worked example, and every concept here can be practiced risk-free in CustomStocks' paper trading simulator, using real market prices and no real money at risk.
B
Beta
Beta measures how much a stock tends to move relative to the overall market. A beta of 1 means the stock moves roughly in line with the market; above 1 means it is more volatile, and below 1 means it is steadier. Investors use it to gauge how much a stock might add to — or calm — a portfolio's swings. Full definition →
Blue-Chip Stock
A blue-chip stock is a large, well-established company with a long track record of stable earnings, and often a history of paying dividends. These are the household names investors lean on for relative stability, though no stock is risk-free. Full definition →
D
Dividend Yield
Dividend yield is a stock's annual dividend per share divided by its share price, expressed as a percentage. It shows how much income a stock pays relative to its price, letting you compare dividend payers on an equal footing. A $2 annual dividend on a $50 stock is a 4% yield. Full definition →
E
Earnings Per Share (EPS)
EPS is a company's net profit divided by its number of outstanding shares — the slice of profit attributed to each share. It is one of the most-watched measures of profitability and the building block of the P/E ratio. Full definition →
L
Market Liquidity
Liquidity describes how easily a stock can be bought or sold without significantly moving its price. Highly liquid stocks have many buyers and sellers and tight bid-ask spreads, so orders fill quickly at predictable prices; thinly traded stocks are harder to exit. Full definition →
M
Market Capitalization
Market cap is the total market value of a company's shares: share price multiplied by the number of shares outstanding. It is how investors size companies — large-cap, mid-cap, and small-cap — and a better gauge of size than share price alone. Full definition →
P
Penny Stock
A penny stock is a very low-priced share, often trading under $5, issued by a small company. They can look tempting because you can buy many shares cheaply, but they are typically volatile, thinly traded, and among the riskiest corners of the market. Full definition →
Price-to-Book Ratio (P/B)
The price-to-book ratio compares a stock's share price to its book value per share — the company's assets minus its liabilities, per share. A P/B near 1 means the market values the company close to its accounting net worth; a high P/B means investors expect growth beyond the balance sheet. Full definition →
R
Return on Equity (ROE)
ROE is net income divided by shareholders' equity, expressed as a percentage. It measures how efficiently a company turns the money shareholders have invested into profit. A consistently high ROE can signal a well-run business, though debt can flatter the number. Full definition →
S
Short Squeeze
A short squeeze happens when a heavily shorted stock rises sharply, forcing short sellers to buy shares back to limit their losses. That buying pushes the price up further, which squeezes even more shorts — a feedback loop that can cause dramatic, brief spikes. Full definition →
Put These Terms Into Practice
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