U.S. Stock Terms Quick Reference: Beginners Can Easily Understand Market Quotes

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Seeing a screen full of English terms and jumping numbers, do you feel a bit overwhelmed? Don’t worry; this article is your quick reference guide. In recent years, individual investors like you have been entering the market at an unprecedented rate.

Did You Know? Data from Cboe EDGX Exchange shows that retail investors’ average daily trading volume increased by 176% from Q1 2018 to Q3 2024.

After reading, you will be able to understand basic company information and U.S. stock quotes, confidently taking your first investment step.

Key Takeaways

• Understanding company fundamentals, such as stocks, market cap, and P/E ratio, helps you choose good investments.
• Open a trading account, familiarize yourself with U.S. stock trading hours, and learn to use limit orders to protect your investments.
• Recognizing bull and bear markets and monitoring the S&P 500 and Nasdaq indices can help you understand market trends.
• ETFs and blue-chip stocks are great tools for risk diversification, while growth stocks offer higher growth potential.
• Continuous learning and using resources like financial websites can help you progress in U.S. stock investing.

Understanding Companies: Core Fundamental Indicators

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Before deciding to invest in a company, you need to learn how to read its “health report.” These core indicators help you understand the company’s basic situation and determine if it is worth investing in.

Share: Proof of Becoming a Company Shareholder

When you buy a company’s stock, you are not just purchasing a code; you become one of the company’s shareholders. Owning one share means you own a small portion of the company.

Stocks, also known as equity, represent your ownership stake in the company. It is a certificate proving your ownership relationship with the company.

Ticker Symbol: The Company’s “ID Number”

Every listed company has a unique English abbreviation, which is its ticker symbol. You need to enter this code when searching and trading stocks in trading software.

Market Cap: The “Total Value” Measuring Company Size

Market cap reflects a company’s total value, calculated as: Stock Price × Total Shares Outstanding. It directly shows the market’s valuation of the company. Generally, the larger the market cap, the bigger the company scale and the more stable its industry position.

P/E Ratio: Measuring If the Stock Price Is Expensive

The P/E ratio is an important indicator for assessing whether the stock price is reasonable. It is calculated as: Stock Price / Earnings Per Share. Simply put, it tells you how much you need to pay to earn $1 of company profit. A lower P/E ratio may indicate the stock is undervalued, but you need to compare it with the industry average. For example, the S&P 500’s P/E ratio was around 25 in 2024.

Earnings Per Share (EPS): Profit Created Per Share

Earnings Per Share (EPS) shows the profit a company earns for each outstanding common share. Higher EPS generally indicates stronger profitability. This indicator is also the basis for calculating the P/E ratio.

Dividend: Cash Returns to Shareholders

Some mature and stably profitable companies regularly return a portion of profits to shareholders in cash, which is the dividend. For investors seeking stable cash flow, dividend-paying companies are very attractive. However, many growth companies choose not to pay dividends, instead reinvesting profits for faster development.

Pre-Trading Preparation: Accounts and Rules

After understanding company fundamentals, the next step is to prepare your “ammunition” and “battlefield map.” Before investing real money, you must familiarize yourself with basic trading rules to avoid unnecessary issues.

Brokerage Account: Your “Stock Wallet”

A brokerage account is your dedicated account for buying and selling U.S. stocks, like a “wallet” holding stocks and funds. As a non-U.S. resident, opening an account requires some preparation. You need to choose a regulated, reputable broker to ensure asset safety.

Account Opening Tips Platforms like Biyapay allow convenient funding in multiple currencies. After opening, you can transfer funds via wire from your bank account (e.g., a licensed Hong Kong bank account) to start investing.

Typically, you need to provide the following documents to prove identity and legitimate fund sources:

• Identity Proof: Such as a passport scan.
• Address Proof: Such as recent utility bills.
• Tax Documents: You need to fill out the W-8BEN form to enjoy tax benefits on dividends.

Trading Unit: Minimum U.S. Stock Trading Unit

U.S. stock trading is very flexible, with a minimum unit of 1 share. This means even with a few hundred dollars, you can buy one share of high-priced stocks like Apple or Nvidia and become a shareholder. You do not need to buy in lots (100 shares).

U.S. Stock Trading Hours: Opening and Closing

The U.S. stock market has fixed trading hours. Major exchanges like NYSE and Nasdaq have regular hours as follows:

Friendly Reminder: Convert to Beijing Time Due to U.S. daylight saving and standard time:

• Daylight Saving Time (approx. March to November): Beijing Time 9:30 PM – 4:00 AM next day
• Standard Time (approx. November to March): Beijing Time 10:30 PM – 5:00 AM next day

Three Major Exchanges: NYSE, Nasdaq, and AMEX

The U.S. stock market mainly has three exchanges:

1. New York Stock Exchange (NYSE): The oldest, with many long-established “blue-chip” companies like Coca-Cola and Procter & Gamble. It uses a “designated market maker” system, where each stock has a specialist maintaining order.
2. Nasdaq Exchange: Fully electronic, famous for tech companies like Apple, Google, and Microsoft. It uses multiple competing market makers for fast trading.
3. American Stock Exchange (AMEX): Primarily serves small and medium enterprises.

Executing Trades: Core Order Types

Everything is ready; now you can place orders. When clicking “buy” or “sell” in trading software, you will see different order type options. Choosing the right order type helps execute your strategy better.

Market Order: Execute Quickly at Current Market Price

A market order is the simplest and most direct type. It means you want to execute immediately at the current best market price.

Everyday Analogy It’s like going to a market and saying to the vendor: “I’ll take this pound of apples!” You don’t care if it’s exactly $2.95 or $3.05; you just want it now.

Market orders are fast and almost guaranteed to execute. But drawbacks are obvious, especially in volatile markets:

• You cannot control the final execution price.
• In fast-moving prices, the quoted price and actual execution may differ significantly, known as “slippage”.
• A brief price drop may trigger your stop-loss market order, resulting in selling at a much lower price than expected.

Limit Order: Buy or Sell at Specified Price

A limit order lets you set a maximum buy price or minimum sell price you accept. The order executes only when the market reaches or betters your set price.

Everyday Analogy It’s like telling the vendor: “If apples drop to $2.5 per pound, I’ll buy two pounds.” You lock in your maximum willing price.

For example, a stock is at $100. You think it’s high and only want to buy at $98 or lower. You place a $98 limit buy order.

• If the price drops to $98 or lower, your order executes.
• If the price stays above $98, your order does not execute, avoiding high-price buying.

Limit orders effectively protect your budget, preventing overpaying in volatile markets.

Call Auction: Pre-Opening Price Determination Mechanism

Ever wondered how stocks get their 9:30 AM opening price? It’s through call auction. Before official opening, exchanges collect all buy/sell orders. The system then calculates a price that maximizes traded shares, becoming the official opening price. All matched orders in the auction execute at this uniform price.

Matching: Order Matching Process Between Buyers and Sellers

After submitting an order, the exchange’s electronic system finds a “counterparty,” which is matching. It is like a high-speed automated matching system following “price priority, time priority” principles.

The process is roughly:

1. Submit Order: You submit buy/sell via software.
2. Enter Queue: Validated order enters an electronic “order book” with others.
3. Find Match: System scans for matching price/quantity counterparty.
4. Execute Trade: Trade executes immediately upon match; ownership transfers.
5. Settlement: Funds and stocks clear in one to two business days.

Understanding U.S. Stock Quotes: Bull/Bear Markets and Major Indices

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Once you master basic trading, the next step is learning the market’s “weather forecast.” Understanding if it’s a bull or bear market and major index trends helps make wiser decisions.

Bull Market and Bear Market: Market Ups and Downs

You often hear news say “bull market is here” or “market enters bear territory”? These describe overall trends vividly.

• Bull Market: Long-term upward trend. Imagine a bull attacking upward with horns, representing rising prices.
• Bear Market: Long-term downward trend. From bears swiping downward with paws, representing falling prices.

Did You Know? A 20% drop from highs defines entering a bear market; a 20% rise from lows marks a new bull market.

Recent major cycles for reference:

Market Index: “Barometer” Measuring Overall Market Performance

Market indices are like “thermometers” or “barometers” for the stock market. They track price changes of representative stocks to reflect overall U.S. market performance. Rising indices mean most stocks are up; falling means poor performance. The three most watched U.S. indices are:

• S&P 500 Index
• Dow Jones Industrial Average
• NASDAQ Composite

S&P 500: Snapshot of the U.S. Economy

The S&P 500 tracks 500 large U.S. listed companies. It is seen as a snapshot of the U.S. economy overall. With broad coverage, it is considered the best gauge of large-cap U.S. market performance. Its sector distribution is diverse, mainly:

• Information Technology: Nearly 30%
• Financials: About 13%
• Healthcare: About 12.5%
• Others include communication services, industrials, consumer goods, etc.

Nasdaq: Tech Stock Bellwether

The Nasdaq Composite is known for many tech and innovative companies. If you care about tech sector quotes, this is your must-watch bellwether. In the Nasdaq 100 (top 100 non-financial Nasdaq companies), giants like Nvidia and Applehold nearly 10% and 9% weights.

Market Participants: Retail, Institutional, and Major Players

The market mainly has two investor types:

1. Retail Investors: Individual investors like you and me. You invest personal funds for goals like retirement savings.
2. Institutional Investors: Large professional institutions like banks, mutual funds, pension funds, and insurers. They manage vast funds for clients and are market “heavyweights.”

Expanding Investments: Mainstream Tools

Beyond direct stock trading, use mainstream tools to diversify risk and simplify investing. Understanding these enriches your portfolio.

ETF: One-Click Buy a Basket of Stocks

ETF stands for Exchange-Traded Fund. Think of it as a “stock basket” holding dozens or hundreds of companies. Buying one ETF share invests in all basket companies. It is a simple, efficient diversification method, ideal for beginners avoiding individual stock research.

Mutual Fund: Professional Management by Fund Managers

Mutual funds are similar to ETFs, pooling investor money for stocks, bonds, etc. The key difference is active management by professional fund managers. You entrust money to experts deciding buys/sells. Of course, management fees are typically higher than ETFs.

Blue-Chip Stock: Stable Large Company Stocks

Blue-chip stocks usually refer to large, stable, reputable companies. These are industry leaders with steady profits and dividend history. Investing in blue-chips is like choosing “star players,” with relatively lower risk. Today, many tech giants are seen as new-era blue-chips.

Growth Stock: High-Growth Potential Company Stocks

Opposite stable blue-chips, growth stocks are companies expected to grow much faster than average. They are often in fast-developing industries, reinvesting most profits in R&D and expansion, rarely paying dividends.

How to Identify Growth Stocks? Focus on key points:

• Revenue Growth: Is the company making money quickly?
• Return on Equity (ROE): How efficiently does it use shareholder money for profits?

Companies like Nvidia and Tesla are typical growth stock representatives over the past decade, delivering amazing returns for early investors. Of course, high growth comes with higher risk and volatility.

Congratulations! You now master core terms from company fundamentals to trading rules and judging overall U.S. stock quotes. You also understand mainstream tools like ETFs and blue-chips.

The Investment Journey Has No End to Learning Understanding terms is just the first step; real success comes from continuous learning. Bookmark this article and use these resources to progress:

• Financial Websites: Follow updates via Yahoo Finance and similar.
• Company Websites: Visit Investor Relations (IR) pages for firsthand info.
• Online Courses: Join free courses from brokers or Morningstar.

Wishing you a smooth start and steady progress in U.S. stock investing.

FAQ

How much money do I need to start investing in U.S. stocks?

The threshold for U.S. stocks is low. You can buy just one share, even of high-priced stocks. Many brokers have no minimum deposit. Thus, you can start with tens or hundreds of dollars based on your finances.

As a non-U.S. resident, do I need to pay U.S. taxes?

As a non-U.S. resident, you generally do not pay capital gains tax on stock sale profits. But you pay tax on dividends.

After submitting the W-8BEN form, dividend tax rates usually enjoy reductions, depending on your country’s tax treaty with the U.S.

Should beginners use market orders or limit orders?

For beginners, limit orders are usually safer. They ensure execution price does not exceed expectations, helping control costs. Market orders are fast but may lead to unfavorable prices in volatile markets.