Definition of Market Correction A market correction is when a stock market index (like the S&P 500 or Dow Jones) drops by 10% or more from its recent high but less than 20%. If the decline goes beyond 20%, that’s considered a bear market. Corrections are a normal part of the market cycle and usually don’t last very long—historically, they often resolve in a few months.

Definition of Volatility Index (VIX) The VIX is calculated by the Chicago Board Options Exchange (CBOE). It’s derived from the prices of S&P 500 index options. Higher option prices often mean investors are bracing for bigger swings in the market, which pushes the VIX higher.

Definition of MSCI MSCI stands for Morgan Stanley Capital International, a company that provides some of the most widely used investment indexes and analytics in the world. Think of MSCI as the “scorekeeper” for global stock markets. When you hear about funds that track the MSCI World Index or the MSCI Emerging Markets Index, what they’re really doing is following the performance of groups of stocks MSCI has bundled together.

Definition of Shanghai Composite Index The Shanghai Composite Index (often called the Shanghai Composite) is the main stock market index that tracks all the stocks listed on the Shanghai Stock Exchange (SSE) in China. Think of it as China’s version of the S&P 500 or Dow Jones in the U.S.—a barometer for how Chinese companies are doing and how investors feel about the Chinese economy.

Definition of the Hang Seng Index The Hang Seng Index (HSI) is the main stock market index for Hong Kong. Think of it as Hong Kong’s version of the Dow Jones or S&P 500. It tracks the performance of the largest and most influential companies listed on the Hong Kong Stock Exchange, including banks, real estate developers, and tech giants.

Definition of Nikkei 225 The Nikkei 225 is a price-weighted stock market index made up of 225 blue-chip companies across multiple industries in Japan. “Price-weighted” means companies with higher stock prices carry more influence on the index, regardless of their total market size. It’s published by the Nihon Keizai Shimbun (that’s where “Nikkei” comes from—Japan’s leading financial newspaper). First introduced in 1950, it’s considered the leading indicator of Japan’s overa

Definition of DAX The DAX, short for Deutscher Aktienindex (German Stock Index), is Germany’s version of the S&P 500 or Dow Jones. It tracks the 40 largest and most liquid companies listed on the Frankfurt Stock Exchange. Think of it as a snapshot of Germany’s corporate heavy-hitters—big names like Siemens, Adidas, BMW, Volkswagen, and Deutsche Bank often appear in this list.

Definition of FTSE 100 When you hear people in the financial world talk about “the FTSE,” they’re usually referring to the FTSE 100 Index(pronounced “Footsie 100”). It’s the stock market index of the 100 largest companies listed on the London Stock Exchange (LSE) by market capitalization.

Definition of Russell 2000 Index The Russell 2000 is a stock market index that tracks the performance of about 2,000 smaller publicly traded companies in the U.S. It’s considered the best measure of how small-cap stocks (companies with relatively small market values) are doing. While the S&P 500 gets all the headlines for tracking America’s biggest corporations, the Russell 2000 gives you a peek into the health of the smaller players that make up the backbone of the U.S. eco

Definition of Nasdaq The Nasdaq (short for the National Association of Securities Dealers Automated Quotations) is both a stock exchange and a stock market index. It’s known for being the world’s first electronic exchange, launched in 1971, and is home to many of the largest technology and growth companies, including Apple, Microsoft, Amazon, and Tesla.

Definition of S&P 500 The S&P 500 (short for Standard & Poor’s 500) is one of the most well-known stock market indexes in the world. It tracks the performance of 500 of the largest publicly traded companies in the United States, covering industries like technology, healthcare, finance, energy, and consumer goods.

Definition of Dow Jones The Dow Jones Industrial Average (DJIA)—often just called “the Dow”—is one of the most widely recognized stock market indexes in the world. It tracks the performance of 30 large, publicly owned companies based in the United States. These companies span multiple industries, making the Dow a quick snapshot of how the stock market—and in many ways, the economy itself—is doing.

Definition of an Index An Index is a measurement tool that tracks the performance of a group of assets—usually stocks or bonds—so investors can see how a particular market or segment of the market is doing. Think of it as a financial scoreboard. The most famous indexes include the S&P 500, which follows 500 of the largest U.S. companies, and the Dow Jones Industrial Average, which tracks 30 major corporations.

Definition of Market Sentiment Market sentiment is the overall mood of investors about the market (or a specific stock, sector, or asset). Are people feeling optimistic (bullish), pessimistic (bearish), or just…meh (neutral)? That collective mood often shows up in prices, trading volume, and volatility.

Definition of Market Depth Market depth shows how much real buying and selling interest exists at different prices for a stock, ETF, or crypto. It’s the stack of limit orders waiting in line—how many shares are bid below the current price and how many are offered above it. Deeper markets = more shares at many price levels = easier to trade without moving the price.

Quick Definition of Liquidity Liquidity is how fast you can turn something you own into spendable cash without losing much value. Cash in your checking account? Ultra-liquid. A rare trumpet from 1930? Cool… but not liquid.

Definition of Volume Volume is the number of shares (or contracts) traded in a security during a set time period (minute, day, week, etc.). It tells you how busy the market was for that ticker. More trades = higher volume.

Definition of Bid-Ask Spread (Plain English) The bid-ask spread is the tiny gap between what buyers are willing to pay (the bid) and what sellers are asking to receive (the ask) for a stock, ETF, crypto, or any traded asset. That gap is a built-in cost of doing business—like a small toll to cross the bridge between “I want it” and “I own it.”

Definition of Market Maker A market maker is a firm (or algorithm) that constantly offers to buy and sell a stock, ETF, or option—posting two prices (a bid and an ask)—so there’s always someone on the other side of your trade. They earn a small profit from the spread between those two prices and keep the market moving.

Definition of High-Frequency Trading High-Frequency Trading (HFT) is algorithm-driven, ultra-fast trading that uses powerful computers and direct exchange connections to place thousands of orders in milliseconds. Think “race cars on Wall Street”—built for speed, tuned for tiny price edges.

Definition of Dark Pool A dark pool is a private trading venue where large investors (think pension funds or big institutions) buy and sell stocks away from public exchanges like the NYSE or Nasdaq. Prices aren’t displayed to everyone in real time, which helps big orders get filled without tipping off the whole market.

Definition of Block Trade A block trade is a very large order to buy or sell a security—typically 10,000+ shares of stock (excluding penny stocks) or $200,000+ in bonds—executed privately or off the open exchange to avoid moving the market price. These trades are usually arranged through an investment bank or a broker’s “block desk.”

Definition of Day Order When you place a stock trade, one of the key decisions you make is how long that order should stay active. A Day Order is one of the most common choices. Simply put, a Day Order is valid only for the trading day in which it was placed. If the market doesn’t meet your terms before the close, the order expires automatically. No overnight carry, no surprises the next day.

Definition of Fill or Kill If you like your stock orders the way you like your coffee—exactly how you want it or not at all—then you’ll appreciate the Fill or Kill order. A Fill or Kill (FOK) order tells the market: “Fill the entire order immediately at my stated price (or better), or cancel it right now.” There’s no partial fill, no waiting, and no compromise.

Definition of Good Till Canceled A Good ’Til Canceled (GTC) order is a standing instruction you place with your broker to buy or sell a security at a specific price that remains active until it’s executed or you cancel it. Depending on the broker, it can sit there for up to 30–90 days before auto-expiring (check your platform’s policy). In short: set it and don’t forget it.

Definition of Stop-Limit Order A stop-limit order combines two instructions: a stop price that triggers your order, and a limit price that sets the worst price you’re willing to accept. When the stop price is hit, your order becomes a limit order—and it will only fill at the limit price or better. That gives you price control, but no guarantee the trade actually executes.

Definition of Stop Order Want your investments to come with an “emergency brake”? That’s what a stop order does. It’s an instruction you place with your broker to buy or sell a security once it hits a specific stop price. When the stop price is reached, your order is activated—usually as a market order—to help you lock in gains or limit losses without staring at charts all day.

Definition of a Limit Order A limit order lets you set the maximum price you’re willing to pay to buy, or the minimum price you’re willing to accept to sell. - Buy limit order: “Buy ABC if it hits $50 or less.” - Sell limit order: “Sell ABC if it reaches $75 or more.” Your broker won’t execute unless the market meets your limit. It protects you from paying more (on buys) or accepting less (on sells) than you want.

Definition of Market Order A market order is an instruction to buy or sell a security immediately at the best price currently available. It prioritizes speed of execution over the exact price you’ll pay or receive.

Definition of Reverse Stock Split A reverse stock split is when a company reduces the number of its outstanding shares while increasing the share price proportionally. Think of it like trading in 10 dimes for 1 dollar bill — you still have the same amount of money, but in fewer pieces.

Definition of Stock Split A stock split is a corporate action in which a company increases the number of its outstanding shares by issuing more shares to existing shareholders. Although the number of shares increases, the overall value of the company (market capitalization) stays the same. Think of it like cutting a pizza into more slices—more pieces, same amount of pizza.

Definition of Common Stock Common stock represents ownership in a company. When you buy common stock, you’re essentially buying a small slice of that business. As a shareholder, you’re entitled to a portion of the company’s profits (usually in the form of dividends if paid), and you have voting rights to help elect the board of directors or vote on major company decisions. Think of common stock as your seat at the table—albeit maybe at the back if you only own a few shares.

What is Preferred Stock? Preferred stock is a type of ownership in a company that has a higher claim on assets and earnings than common stock. That means if the company pays dividends, preferred shareholders get theirs first. If the company goes belly-up (let’s hope not), preferred shareholders also get paid before common stockholders—though still after bondholders.

Definition of Dividend Stock A dividend stock is a share in a company that regularly pays out a portion of its profits to shareholders in the form of dividends—typically on a quarterly basis. These payments are usually made in cash, but can also come as additional shares of stock.

Definition of Value Stock A value stock is a share of a company that appears to be trading for less than its intrinsic value. Think of it as a great company that’s momentarily on the clearance rack. Investors believe the stock is undervalued by the market and has solid fundamentals—like steady earnings, a strong balance sheet, and even dividends—but for whatever reason, Wall Street’s spotlight isn’t on it… yet.

Definition of Growth Stock A growth stock is a publicly traded company that is expected to grow at a rate significantly above the average for the overall market. These are the kinds of companies reinvesting their earnings back into the business instead of paying dividends, with the goal of expanding fast—think rocket fuel, not steady cruise.

Definition of Penny Stock A penny stock is typically a share of a small public company that trades for less than $5 per share. These stocks are often traded over-the-counter (OTC) through platforms like the OTC Bulletin Board or Pink Sheets, rather than on major exchanges like the NYSE or Nasdaq. Penny stocks are known for their low price, low trading volume, and high risk—but also the potential for high reward.

Definition of a Blue Chip Stock A blue chip stock refers to shares of a well-established, financially sound, and nationally recognized company with a history of reliable performance. Think of them as the all-star players in the stock market—companies that are leaders in their industries, pay regular dividends, and have a track record of weathering economic storms.

What is a Conglomerate? A conglomerate is a large corporation made up of several distinct and often unrelated businesses, all operating under one parent company. Unlike a company that sticks to one specific industry, a conglomerate spreads its interests across different sectors. Think of it as a financial “supergroup” — each division plays a different instrument, but they’re all under the same record label.

Definition of Holding Company A Holding Company is a business entity that exists primarily to own shares in other companies. It doesn’t usually make products or offer services itself—instead, it holds controlling interest in other businesses. Think of it like the parent who doesn’t run the lemonade stand but owns the stand… and the ice supplier… and the cup factory.

Definition of a Parent Company A parent company is a corporation that owns enough voting stock in another company to control its policies and management. The company it controls is called a subsidiary. Think of a parent company as the “boss” in the business family tree. While it may not run the day-to-day operations of its subsidiaries, it has the power to call the shots when it matters—like choosing leadership, approving budgets, or selling the business.

Definition of Subsidiary A subsidiary is a company that is controlled by another company, often referred to as the parent company. The parent usually owns more than 50% of the subsidiary’s voting stock, giving it control over business operations and decision-making. Put simply: a subsidiary is a business “child” owned by a business “parent.”

Definition of a Divestiture A divestiture is the sale, transfer, or disposal of a company asset, business unit, subsidiary, or investment. It’s the opposite of an acquisition. While companies often grow by acquiring more, a divestiture is about trimming the fat, refocusing, or raising cash. Think of it as a business shedding a layer it no longer needs—like a snake slipping out of old skin so it can grow.

Definition of Spin-off A spin-off is a type of corporate action where a company creates a new, independent business by separating part of its operations, assets, or divisions into a new entity. The shareholders of the parent company typically receive shares in the new company on a pro-rata basis.

In financial and business terms, an acquisition usually refers to one company buying another. When Company A acquires Company B, it means A now owns B — its assets, customers, operations, and all the headaches that come with it. But zoom out a bit: acquisitions aren’t just for Fortune 500 CEOs. Regular people like you and me can use this concept in powerful ways.

Definition: A merger is a financial and business transaction where two companies combine to form a single new entity. The goal? To grow bigger, faster, leaner—or all three. This isn’t one company “buying out” the other (though that sometimes is what’s really happening behind the scenes). In a true merger, it’s supposed to be a joining of equals—like a business marriage, minus the cake and awkward speeches.

Definition of Joint Venture A Joint Venture is a business arrangement where two or more parties agree to pool their resources for a specific task, project, or business activity. Each party contributes assets and shares profits, losses, and control, but they stay independent outside of the JV.

Definition of Franchise At its core, a franchise is a business model where one party (the franchisor) grants another party (the franchisee) the rights to use its brand name, business processes, and proven systems to sell a product or service. In exchange, the franchisee typically pays an initial fee and ongoing royalties to the franchisor. It’s like buying a “business in a box.” You get a recognizable brand, a tried-and-true operating playbook, and often ongoing support...

Definition of a Cooperative (Co-op) A cooperative is a business or organization that’s owned and operated by the people who use its services. Instead of being run for the profit of outside shareholders, a co-op exists to benefit its members. Each member has a say in how the organization is run—one member, one vote—regardless of how much money they put in. Think of it as “We all pitch in. We all benefit.”

A nonprofit organization (NPO) is an entity created to serve a public or mutual benefit other than the pursuit or accumulation of profits for owners or investors. Instead of distributing profits to shareholders, any surplus revenue is reinvested into the organization’s mission. Nonprofits can be charities, foundations, religious groups, educational institutions, hospitals, and even some trade associations. They’re typically tax-exempt under IRS code (like 501(c)(3) for chari