Friends who are just getting into the stock market are often thrown into confusion by all kinds of jargon—retail investors, large investors, market makers, main forces, plus bull markets and bear markets, going long and going short. Just these specialized terms alone are enough to make people’s heads spin. In fact, if you spend a little time understanding these stock-related terms, you’ll find there’s logic behind them all—and you’ll be able to communicate more effectively with other investors.

The concept that I most often see beginners mix up is going long versus going short. Going long is easy to understand: you’re bullish on the outlook, buy stocks, and wait for them to rise. But going short is different—because you expect the stock price to fall, you borrow shares from a broker and sell them first. After the stock price really drops, you buy them back at a lower price and return them to the broker; the difference in price is your profit. There’s also an even more dramatic phenomenon called a short squeeze, where short sellers didn’t expect the stock price to surge instead, and are forced to buy back at much higher prices—at which point the stock price can jump in an exaggerated way.

When you trade, you’ll also hear terms like “limit up” and “limit down.” These specialized terms refer to the price movement limits set by the exchange. For example, some markets stop trading once the maximum daily rise reaches 10%—that’s a limit up. The opposite downward limit is called a limit down. There’s also “suspension,” which is when the exchange temporarily halts trading of a particular stock to protect investors’ rights and interests.

When you watch the market, you’ll notice that some terms describe market sentiment and trading tactics. “Inducing buying” means the main players intentionally manufacture the illusion that the price is rising to attract retail investors to follow—only for the price to fall instead. Conversely, “inducing selling” is creating a false appearance of a decline. “Shakeout” refers to the main players suppressing the stock price within a certain range, forcing investors who aren’t firm in their resolve to sell off—so that the main players can buy at a cheaper price. “Protecting the market” works the opposite way: when the market is sluggish, the main players buy in and drive the price upward.

If you want to analyze stock price trends, you need to understand a few technical-analysis terms. A “golden cross” occurs when the short-term moving average crosses upward through the long-term moving average, which usually indicates the stock price may continue rising. A “death cross,” on the other hand, is the opposite: when the short-term line crosses downward through the long-term line, it suggests the stock price may fall. There are also “support levels” and “resistance levels.” Support levels are prices where the stock repeatedly can’t fall any further; resistance levels are prices where the stock repeatedly can’t break through and rise.

Common technical indicators include RSI, KD, and MACD. RSI greater than 70 suggests the market may be overheated and could reverse downward; less than 30 suggests it may reverse upward. The KD indicator above 80 indicates the stock is strong; below 20 indicates weakness. MACD, meanwhile, uses a combination of the fast line, the slow line, and the histogram to judge trends. When the fast line breaks upward through the slow line, it’s a bullish “golden cross”; when it falls below the slow line, it’s a bearish “death cross.”

From a financial perspective, some stock terms are especially important. The price-to-earnings ratio (PE) is the stock price divided by earnings per share. The higher the PE, the more expensive the stock appears relative to fundamentals, and there may be a bubble. The price-to-book ratio (PB) is the stock price divided by net assets per share; the lower the PB, the smaller the risk is usually. Earnings per share (EPS) represents how much money the company earns per share, and it’s a key metric for evaluating profitability. Return on equity (ROE) reflects how much return your invested money generates; the higher the ROE, the stronger the company’s profitability.

There are also operational terms you should pay attention to. “Getting trapped” means you buy in and then the stock price falls, causing paper losses. “Untrapping” (getting out of the loss) is when the stock price rebounds to around your purchase price. “Cutting positions” or “cutting your losses” means selling at a low price to stop the loss when you’re in a loss. “Full position” means putting all your funds into buying stocks, while “liquidating the position” means selling all your stocks. “Consolidation” is when the stock price fluctuates within a relatively narrow range—neither rising nor falling significantly.

You also need to understand dividend-related terms. “Dividends” are payments that listed companies give to shareholders; they can be cash dividends or stock dividends. “Ex-rights and ex-dividends” means that after a company distributes dividends, this portion is deducted from the stock price. So even if you receive the dividend, the stock price will correspondingly drop, and your total assets won’t increase.

Before you enter the stock market, you must also understand the concept of risk management. “Systematic risk” is the risk faced by the entire market—for example, policy changes, interest rate adjustments, and other factors that affect all stocks. “Non-systematic risk” applies only to a specific stock—for example, a company’s poor operations. Stocks with high “volatility” have sharp price swings, while those with low volatility are relatively stable. “Stop-loss” means setting a loss threshold; when it’s reached, the system automatically sells to limit the losses.

Actually, no matter how many stock terms there are, they all boil down to these core concepts. If you master these specialized terms, you’ll be able to trade with more confidence and won’t be misled just because you don’t understand the jargon. Most importantly, keep learning and practicing—only then can you truly understand how these terms apply in real trading.