Nothing makes investing more intimidating than the jargon. Once you know the vocabulary, a lot of what sounds complex turns out to be straightforward. Here are the terms you'll encounter most often, explained without the fluff.
Market Directions
- Bull market
- A prolonged period of rising prices, typically defined as a 20%+ rise from recent lows. Investor sentiment is optimistic. "Bullish" means you expect prices to rise.
- Bear market
- A prolonged period of falling prices, typically a 20%+ drop from recent highs. Sentiment is pessimistic. "Bearish" means you expect prices to fall.
- Correction
- A 10–20% decline from recent highs. Less severe than a bear market. Corrections happen regularly — about once a year on average — and are considered healthy.
- Rally
- A strong upward move in price, often occurring within a broader downtrend. A "dead cat bounce" is a short-lived rally in a downtrend that doesn't signal a real recovery.
Valuation Metrics
- P/E Ratio (Price-to-Earnings)
- The share price divided by annual earnings per share. A P/E of 20 means you're paying £20 for every £1 of annual profit. Higher P/E = more expensive relative to earnings. The S&P 500 average is around 20–25.
- P/S Ratio (Price-to-Sales)
- Share price divided by revenue per share. Useful for companies that aren't yet profitable (common in tech growth stocks).
- Market Cap (Market Capitalisation)
- Total value of all a company's shares. Share price × total shares outstanding. Apple's market cap exceeded $3 trillion in 2024.
- EPS (Earnings Per Share)
- Net profit divided by number of shares. A rising EPS generally means a growing, profitable business.
- Book Value
- The net asset value of a company (assets minus liabilities). The P/B (price-to-book) ratio compares market price to book value.
Trading Mechanics
- Long position
- You own the asset and profit when it rises. Most retail investors are always "long."
- Short selling
- Borrowing shares to sell now, hoping to buy them back cheaper later and pocket the difference. Profit from falling prices, but losses are theoretically unlimited if the price keeps rising.
- Limit order
- An instruction to buy/sell only at a specific price or better. Protects you from bad fills in volatile markets.
- Market order
- An instruction to buy/sell immediately at the current price. Guaranteed to execute, but the price you get may differ from what you saw.
- Stop-loss
- An automatic sell order triggered when price falls to a specified level. Limits downside without requiring you to watch the screen constantly.
- Liquidity
- How easily you can buy or sell an asset without moving the price. Large-cap stocks are highly liquid. Small-cap stocks and most crypto are less so.
Returns and Risk
- Volatility
- How much an asset's price swings. High volatility = big moves in both directions. Measured statistically as standard deviation or beta.
- Beta
- How much an asset moves relative to the broader market. Beta of 1 = moves with the market. Beta of 2 = twice as volatile. Beta below 1 = less volatile than the market.
- Dividend yield
- Annual dividend divided by share price, expressed as a percentage. A £1 dividend on a £20 stock = 5% yield.
- Drawdown
- The peak-to-trough decline of a portfolio or asset. A portfolio that falls from £100,000 to £70,000 has a 30% drawdown.
Reading Signals
Now that you know the vocabulary, you're better placed to interpret market analysis. When Indikators generates a BUY/SELL/HOLD signal for a stock, it factors in many of these metrics — including momentum, P/E relative to sector, and volatility indicators — to give you a structured, explainable recommendation. Browse any symbol's signal history to see how past calls performed.