Penny Shares Glossary

Although most brokerage procedures are quite straight forward, entering the world of stocks and shares for the first time can be quite daunting. Not only are there several common procedures to learn but also a sea of jargon that seems to envelop all aspects of trading and finance.

When starting out it is a good idea to familiarize yourself with some of the most common terminology as without doubt these are things that will crop up in most transactions.

In order to take some of the mystery out of share dealing we have included here a full list of terms in our free guide to investing, plus links to websites specialising in financial terms - but here are a few common abbreviations.

Ask: The price at which stock holders are willing to sell their shares.

Averaging Down: Buying more shares of a stock you already own - at a lower price because the stock has been dropping - thus reducing the average price per share.

Bear Market: Market where prices are falling and are expected to fall further.

Blue Chip Stocks: Companies that are considered safe, conservative and with low risk.

Bid: The price that buyers are willing to pay for shares.

Bull Market: Market where prices are rising and expected to continue rising.

De-listing: When a stock ceases to be traded by a stock exchange it is considered de-listed. This may be due to a failure to meet the exchanges listing requirements, movement to another exchange, or begin taken over by another company.

Dividend: The cash distribution to shareholders of company profits.

Earnings per Share: Company profits over the most recent year divided by the number of shares that have been issued.

Flotation: The issuing of shares in a company to the public for the first time on a stock market.

Holding Company: A company that controls one or more other companies.

IPO: Initial Public Offering. See Flotation.

Liquidity: The degree of ease with which an asset can be turned into cash.

Market Capitalisation: A method of calculating a company’s worth - the number of shares of a company times the price per share.

Mid Price: The mid point between the 'Bid' and 'Offer' prices.

Net asset value: The Company’s total assets minus its total liabilities.

Offer Price: The price shown by a 'Market Maker' at which an investor may buy shares, so long as the number of shares does not exceed the indicated 'Market Size'.

OTC (Over the Counter): Over-The-Counter stocks refer to any issue that is not traded on a regulated exchange.

Penny Shares: You can treat penny shares as those with a price of between 1p and 300p

Portfolio: A collection of investments held by an individual.

Pink Sheets: Stocks that trade without any reporting requirements or regulation, and have no responsibility to the investor.

Price earnings (P/E) ratio: The current share price divided by earnings per share.

Registrar: The person responsible for keeping a register of shareholders and issuing certificates.

Risk Tolerance: The amount of uncertainty/speculation you are willing to accept with your investments. If you are prepared to lose your money but want to try and reap some massive returns, you have a high risk tolerance.

Shell Company: A company that is incorporated but has no significant assets or operations.

Short-Selling: Selling in the hope of buying them back at a later date for a profit.

Small Cap Stocks: Companies with a market capitalisation is less than £100 million.

Spread: The difference between the bid price and the ask price of a share.

Stag: An investor who applies for a new issue in the expectation of realising a profit as soon as dealing in shares begins.

Stamp Duty: A government tax on the purchase of shares.

Technical Analysis: A method of stock research that looks at patterns on the trading chart in an attempt to predict future prices.

Ticker Symbol: The letter combination that represent a particular stock. For instance RYLP.PK refers to Royal Petroleum Corporation.