Penny Stock Terminology

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Affordable Stock Terminology

The market professionals at Affordable Stock have assembled a useful collection of stock market terms for our members and new penny stock investors. The stock market has a language all its own, and it is essential to gain a firm foundation of penny stock information and stock market terminology to make wise investment decisions. Stock market definitions of some of the most commonly used, and often misunderstood, terms are included below for our penny stock picks subscribers and those just entering the dynamic world of stock investing.

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Balance of Power:

More commonly referred to as ‘BOP’, is a proprietary technical indicator calculated from both a security’s price and volume. The primary purpose of BOP is to help uncover periods of ‘systematic’ accumulation (buying) and ‘systematic’ distribution (selling).

Time Segmented Volume:

More commonly referred to as TSV, is a proprietary technical indicator calculated from both a security’s price and volume. As the name suggests, various time-segments of both price and volume are compared to one another in order to uncover periods of accumulation (buying) and distribution (selling). Periods, which may typically lead to a sustained price swing in one direction or the other.

Relative Strength:

The relative strength is generated by comparing the relative price performance of any two items (such as two stocks or a stock and a market index). If the first item in your comparison is out-performing the second item, the relative strength line will be rising.

Moving Average:

The tracking of a stock over time to get the amount of movement up or down over a given time.

Money Stream:

An indicator to view the price Vs. volume of a stock. If money stream is moving upwards at a greater angle than the price, it shows the stock in a bullish stage.

Common Stocks:

Common stocks are the most common form of equity ownership in a corporation. Each share of common stock represents an equity interest in the company, a right to vote on important matters, and the right to an equitable share of the company’s success in the form of dividends or capital appreciation. Preferred stock supersedes common stock in first right to corporate dividends. Penny stocks are a type of common stock issued usually by small companies.

Inside Market:

The highest bid and the lowest offer prices for a stock pick among all competing Market Makers in a NASDAQ security, i.e., the best bid and offer prices for a particular stock offering.

IPO Date:

The IPO or Initial Public Offering is the date that the penny stock pick started publicly trading.

Limit Order:

A Limit Order is an order to buy or sell a stock market offering at a customer specified price. The broker may receive a range or one specific price for the penny stock pick from the client. Visit our stock trading tips section for information about Limit Orders.

Market Capitalization:

The stock market term Market Capitalization refers to the measurement of corporate worth and is an important factor in the valuation of stock. Market capitalization is figured as the share price multiplied by the number of shares outstanding of a publicly traded company.

Market Makers:

The 500 NASDAQ member firms that use their own capital, research, retail and systems resources to represent a stock. The market makers compete with each other for the most customer stock orders by showing quotations for a guaranteed number of shares. When a stock order is placed the market maker purchases or sells from his own resources immediately rather than shopping around. These stock market transactions happen in a matter of seconds, greatly speeding stock market trading process. More useful stock market information for investors from Affordable Stock.

Mean Recommendation:

A stock market term commonly used by analysts, this number relates to the average recommendation for a particular stock pick. The mean recommendation values are from 1 to 5. A five indicates a sell, and a one indicates a strong buy.

OTCBB:

The Over-the-Counter Bulletin Board (OTCBB) is an electronic quotation system that displays real-time quotes, market volume info, and last-sale prices for OTC stock offerings. The great majority of penny stocks (aka micro-cap stocks) are listed on the OTCBB. Penny stock brokers and dealers use the OTCBB to check penny stock prices and offer quotes and bids for small-cap stocks and OTC securities.
The OTCBB is overseen by NASD but is not a part of the NASDAQ. Companies trading on the OTCBB must be fully reporting by SEC standards, but are not required to quote market capitalization, corporate governance, and minimum share price as is done on NASDAQ or the NYSE.

P/B Ratio (Price/Book Ratio):

A stock analysis statistic where the price of a stock pick is divided by the reported book value of the company offering the stock.

P/E Ratio (Price/Earnings Ratio) :

A stock analysis statistic where the current price of a stock pick is divided by the reported actual earnings per share of the issuing corporation.

Penny Stock:

Penny stocks are a type of common stock issued most frequently by very small companies and offered at less than $5.00 per share. They are also known as micro-cap or small-cap stocks. Penny stock picks have the potential for high gains in a very short period of time, and with this gain potential comes a higher degree of risk. Penny stocks are traded on the OTCBB (over the counter bulletin board) or via the Pink Sheets.

Pink Sheets:

The Pink Sheets is a centralized online quotation service that collects and publishes market maker quotes for OTC stock offerings in real time. Small-cap or penny stocks are commonly traded via the pink sheets and their website is another good source of stock market terms and penny stock information.

Preferred Stock:

Stock investment offerings which provide a specific fixed rate dividend that is paid to share holders before any dividends are paid to common stock holders. Preferred stocks are also paid out first in the event of company liquidation. These stock picks represent non-voting partial ownership in the company.

Sales Load:

Sales Load is the stock market terminology for a sales fee on a stock purchase. The fee on a stock pick varies depending on the type it and the way it is sold. Mutual funds often charge sales load. Today there are many high quality no-load funds and penny stock picks.

Securities and Exchange Commission (SEC):

The Securities and Exchange Commission (SEC) administers the laws and regulations that promote full public disclosure and protect the stock investors against fraudulent and shady practices in the stock markets.