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The financial market can seem like an impenetrable, jargon-filled world. But with a little effort you can learn the language of the financial market and dominate the conversation.
In this week’s newsletter, I will introduce you to the main financial market jargon and what they mean.
Financial market jargon
What are slangs?
Jargon are terms used in a particular field or field of activity that may not be understood by people outside that area. In general, jargon is used to simplify or shorten communication between experts in the field. However, these terms can sometimes confuse people who are not familiar with them.
Why does jargon exist in the financial market?
Jargon exists because the financial market is a complex place and people need a way to communicate about issues concisely. Jargon is one way to do this, and it allows people to communicate more efficiently.
Learn the language of the financial market
Basic financial market conditions
The most important financial market terms are those related to stocks, bonds and other assets. Learn the meanings of key terms used in investment conversations below:
Action: It is a security that represents a portion of the capital stock of a public company. By purchasing a share, the investor becomes a partner in the company and has the right to receive dividends (if any) and participate in the general meeting of shareholders, where they can vote on the decisions made by the company’s managers. Shares are traded on the Stock Exchange
Scholarship: It is the place where shares of public companies are traded. The stock exchange functions as a marketplace, where buyers and sellers meet to conduct transactions. Transactions on the Stock Exchange are regulated and controlled by the competent authorities, such as the Securities Commission (CVM).
Price: It is the price at which a share is traded on the stock market. The share price reflects the value that investors place on the company in question and can change throughout the day as trading takes place.
Institutional investor: They are investment funds, insurance companies, banks and other institutions that have large purchasing power and usually make large investments in stocks. Institutional investments weigh heavily in financial market decisions and can significantly affect stock prices.
Derivatives: A derivative is a financial product based on another asset, such as a stock, currency or commodity. Derivatives are used to hedge (reduce) financial risks.
Liquidity: Liquidity refers to the ease with which an asset can be converted into cash without losing its value. Stocks are considered highly liquid as they can be easily traded on the stock market. Other assets, such as real estate, are less liquid because they take longer to sell and can fluctuate widely in price.
The most advanced terms of the financial market
Advanced financial market terms can seem confusing and intimidating, but they don’t have to be.
With a little knowledge you will be able to understand them and even use them in your conversations. Here are some of the more advanced terms you’ll find:
Blue Chip:
It is a nickname for Stock Exchange securities that have greater liquidity and market capitalization, such as Petrobras (PETR3; PETR4), Vale (VALE3), Bradesco (BBDC4), Itaú (ITUB4) and Ambev (ABEV3). These stocks are always among the most traded during the day.
Bearish / Bullish:
These terms describe the mood of the market. A decline means the market is falling and investors are selling, while a rise means the market is rising and investors are buying.
Rally:
The term is used in the stock market when the stock market suddenly rises for two or three days, for example. This happens when investors buy stocks in large quantities.
upside down:
It is how much the price of a financial asset can increase compared to the current price. This is why the expression “the asset still has a 10% increase” is said, for example.
Standard:
It is a reference indicator used in the financial market, which enables comparison of the performance of other assets. Investment funds, for example, use ibovespa as a benchmark. For fixed income assets, an example of a standard is CDI.
Short:
It is the practice of positioning yourself as “short”, meaning “sold”. It occurs when an investor ‘bets’ that a certain asset will fall, whether it is a currency, such as the dollar, or a company’s shares.
Day trading:
These are financial market operations that start and end on the same day. They are usually a little more risky because of the leverage that the brokers distribute to the players. On the other hand, day trading reduces the possibility of losing trades, since the investor is not “positioned” between two trading sessions.
Protection:
This term is used when an investor buys an asset and hedges using an uncorrelated asset.
Lord, you have converted!
Tips for using financial market jargon in practice
With a few tips, you can incorporate the terms into your routine and have more fluent conversations about the financial market.
Here are some tips for using financial market jargon in practice:
1. Learn the language of the financial market. Like any other jargon, financial market terms can be difficult to understand if you are not familiar with the subject. Learn the meaning of some of the most commonly used terms and make a list for future reference.
2. Use jargon correctly. When using a financial market term, make sure you are using it correctly. In some cases, context can change the meaning of a term, so be aware of the nuances.
3. Avoid using jargon when talking to laypeople. If you are talking to someone who is not knowledgeable about the subject, avoid using financial market jargon so as not to confuse the person. Use simpler terms to explain complex concepts more clearly and concisely.
4. Pay attention to your interlocutor. When you talk to other people about the financial market, make sure they understand what you are saying. If you see confusion, explain terms more simply or use practical examples to illustrate your points.
Conclusion
If you are an entrepreneur or intend to become one, learning the language of the financial market is essential for talking to investors, banks and other market partners. Follow my newsletter at linkedin and learn even more about the business world!
Fabio Baptista
CEO | Fiscal Member and Board | Speaker | Social-Sales | Mentoring for startups
