Blue Chip
Blue chip refers to stocks of large, financially stable companies with a long operating history, the kind that show up in most diversified portfolios. Coca-Cola and Johnson & Johnson are commonly cited examples. The label describes stability and track record, not a guarantee against losses; blue chip stocks can still fall in price.
Portfolio
A portfolio is the full collection of assets an investor holds, which might include individual stocks, ETFs, and cash. Spreading a portfolio across different companies and sectors is what keeps one bad quarter from a single stock from sinking the whole account.
Getting in: IPOs, indices, and how shares are sized
IPO (Initial Public Offering)
An IPO is the first time a private company sells shares to the public, often called "going public." Before an IPO, only private investors and employees can own a piece of the company; after, anyone can buy shares on an exchange.
ETF (Exchange-Traded Fund)
An ETF is a fund that trades on an exchange like a single stock, but holds a basket of assets, often built to track an index. Buying one share of an S&P 500 ETF gives exposure to all 500 companies in that index in a single trade, rather than buying each one separately.
IDX Composite (IHSG)
The IDX Composite is Indonesia's main stock index, tracking all companies listed on the Indonesia Stock Exchange. It is not the index that moves the price of US stocks. If you are watching a US holding on Gotrade, the more relevant benchmarks are indices like the S&P 500 or the Nasdaq Composite.
Lot
On the Indonesia Stock Exchange, shares are typically bought in lots of 100. Gotrade works differently: it offers fractional share investing, so you can buy a portion of a single US share rather than a full lot. That matters in practice, since some US stocks trade at several hundred dollars a share, and a lot-based system would put them out of reach for a small account.
(Suggested visual: side-by-side comparison graphic of lot-based buying vs. fractional share buying)
How a trade actually gets priced
Bid
The bid is the highest price a buyer is currently willing to pay for a stock.
Ask / Offer
The ask, or offer, is the lowest price a seller is currently willing to accept.
Spread
The spread is the gap between the bid and the ask. Say a stock shows a bid of $50.00 and an ask of $50.10. A market sell order fills close to $50.00, and a market buy order fills close to $50.10. That $0.10 gap is effectively a cost of trading: the wider the spread, the more the price has to move in your favor before the trade breaks even. Spreads tend to widen on stocks that trade less often.
(Suggested visual: simple price-ladder diagram showing bid, ask, and the spread between them)
Liquidity
Liquidity describes how easily a stock can be bought or sold without moving its price. A stock that trades tens of millions of shares a day, like a large tech company, is highly liquid: a typical order barely nudges the price. A thinly traded small-cap stock can move several percent on a single sizable order.
Volatility
Volatility measures how much a stock's price swings over a given period. A low-volatility stock might move 1 to 2 percent on a typical day. A high-volatility stock can swing 8 to 10 percent in a single session on news or earnings. Higher volatility means bigger potential gains and bigger potential losses in the same trade.
(Suggested visual: candlestick chart comparing a low-volatility stock to a high-volatility one over the same time period)
Reading the market's mood: bull and bear
Bull Market
A bull market is a sustained period of rising prices, generally accompanied by investor confidence and economic growth.
Bear Market
A bear market is the opposite: a sustained decline, commonly defined as a drop of 20 percent or more from a recent high. US indices entered a bear market in 2022, with the S&P 500 falling more than 20 percent from its previous peak over the course of the year. Bear markets do not move in a straight line; they typically include sharp rallies along the way that can look like a recovery before the decline resumes.
(Suggested visual: line chart showing an uptrend period next to a downtrend period for visual contrast)
Is a stock cheap or expensive: valuation terms
EPS (Earnings Per Share)
EPS is a company's net profit divided by its total shares outstanding. A company earning $100 million in profit with 50 million shares outstanding has an EPS of $2.
P/E Ratio (Price to Earnings)
The P/E ratio divides a stock's price by its EPS, showing how much investors are paying for each dollar of earnings. A stock priced at $40 with an EPS of $2 has a P/E of 20.
P/B Ratio (Price to Book Value)
The P/B ratio compares a stock's market price to its book value (assets minus liabilities, per share), often used alongside P/E to gauge whether a stock looks over- or undervalued relative to its underlying assets.
Market Cap (Market Capitalization)
Market cap is a company's total value on the stock market: share price multiplied by total shares outstanding. A company with 1 billion shares trading at $50 each has a $50 billion market cap.
Two companies can have very different P/E ratios for legitimate reasons. A higher P/E is not automatically a sign of an overpriced stock; it can reflect that the market expects faster future growth. A lower P/E is not automatically a bargain either; it can reflect that the market expects slower growth or trouble ahead. These ratios are a starting point for comparing similar companies, not a verdict on their own.
(Suggested visual: screenshot of a Gotrade stock page highlighting where EPS, P/E, and market cap appear)
Managing risk once you're in a position
Cut Loss
Cutting a loss means selling a stock at a loss deliberately, to prevent a small decline from turning into a larger one. Many traders set a cut-loss level in advance, before emotion is involved in the decision.
Average Down
Averaging down means buying more shares of a stock that has dropped, to lower your average purchase price. It can work well if the decline is short-term noise on a business that is otherwise sound. It can also turn a manageable loss into a much larger one if the decline reflects a real deterioration in the company, since you are committing more money to a position that is already underperforming.
Margin Trading
Margin trading means borrowing money from a broker to buy more stock than your own cash would allow. It amplifies gains, and just as directly, it amplifies losses; a large enough decline can trigger a margin call, where the broker requires you to deposit more funds or sell positions to cover the loan.
Short Selling
Short selling means borrowing shares and selling them, betting the price will fall so you can buy them back cheaper. Borrow and sell 10 shares at $100 ($1,000), and if the price drops to $70, buying them back costs $700, a $300 profit before fees. The risk runs in the other direction too: if the price rises instead, the loss has no fixed ceiling, since a stock's price can in theory keep climbing.
Corporate actions that can change your position
Rights Issue
A rights issue is when a company offers new shares to its existing shareholders, usually to raise capital, often at a discount to the current market price.
Stock Split
A stock split divides existing shares into more, smaller-priced units without changing the total value of the company or your position. Apple completed a 4-for-1 split in 2020, and Nvidia completed a 10-for-1 split in 2024; in both cases, shareholders ended up with more shares at a proportionally lower price per share, with the value of their holding unchanged on the day of the split.
(Suggested visual: before/after graphic showing share count and price before and after a split)
Buyback
A buyback is when a company repurchases its own shares from the market, reducing the number of shares outstanding. All else equal, this increases each remaining share's claim on future profit.
Divestment
Divestment is the sale or disposal of part of a company's assets or business operations, often to refocus on its core business or raise cash.
Insider Trading
Insider trading, in the illegal sense, means trading a stock based on material information that is not yet public, such as a confidential earnings report. It is worth distinguishing this from legal insider transactions: company executives and major shareholders can and do buy or sell their own company's stock, but they must disclose those trades publicly and cannot act on non-public information when doing so.
Common mistakes beginners make with these terms
Knowing a definition is not the same as knowing how to use it. A beginner who memorizes "P/E ratio: price divided by earnings" but never compares it across companies in the same industry will still misjudge whether a stock is expensive; a P/E of 30 might be high for a utility company and unremarkable for a software company growing 40 percent a year.
Context gets lost just as often. Liquidity is a good example: a stock can have a textbook-correct low P/E and still be a poor entry point if it trades so thinly that a single order moves the price against you.
The most expensive mistake tends to be acting on a term rather than understanding it. Hearing that a stock is "in a bull market" and buying immediately, without checking why the price moved or what it costs at current levels, is how FOMO turns a vocabulary list into a loss.
What this means for your next trade
These 27 terms cover most of what you will see on a stock report, a broker app, or a company's ticker page: ownership and profit, how trades are priced, how the market's mood is described, how a stock's value is judged, and how risk is managed once you hold a position. None of them replace research on a specific company, but they make that research legible instead of intimidating.
The practical next step is to open a real ticker page and find these terms for yourself: locate the bid and ask, check the P/E ratio, see whether the company pays a dividend. Gotrade's fractional share investing also means you can apply these terms with a small position size while you're still building confidence, rather than needing a full share's worth of capital to get started.
FAQ
Do I need to memorize all of these terms before I start investing? No. Start with the ones that affect a trade directly: bid, ask, spread, P/E ratio, and dividend. The rest will become familiar through use.
How is this glossary different from fundamental or technical analysis? A glossary defines the vocabulary. Fundamental analysis uses terms like EPS and P/E to judge a company's financial health; technical analysis uses price and volume patterns, including concepts like volatility and liquidity, to time entries and exits.
Why does a stock's P/E ratio vary so much between industries? Different industries grow and generate cash at different rates. Comparing a software company's P/E to a utility company's P/E directly is usually misleading; comparing it to other companies in the same sector is more useful.
Do I need a lot of capital to start applying these terms? Not necessarily. Fractional share investing, available on Gotrade, lets you buy a portion of a higher-priced US stock instead of a full share, so you can start small while you learn how these terms play out in practice.
Disclaimer: Gotrade is the trading name of Gotrade Securities Inc., which is registered with and supervised by the Labuan Financial Services Authority (LFSA). This content is for educational purposes only and does not constitute financial advice. Always do your own research (DYOR) before investing.
