Learn Trading Concepts
Clear, practical explanations of stock market terms and trading concepts — written for traders, not textbooks.
19 articles across 5 topics
Share Structure & Dilution
What Is Share Structure? A Trader's Guide
Share structure is the breakdown of a company's total shares into categories: authorized, outstanding, restricted, and float. It determines how many shares can trade freely and how dilution risk affects the stock price.
What Is Float in Stocks? Why Traders Watch It Closely
Float (or public float) is the number of a company's shares that are freely available for public trading. It excludes restricted shares, insider holdings, and locked-up shares. Low-float stocks are more volatile because fewer shares are available to buy and sell.
What Is Stock Dilution? How It Destroys Shareholder Value
Stock dilution occurs when a company issues new shares, reducing the ownership percentage of existing shareholders. Each share becomes worth less because the same company value is spread across more shares. Dilution is especially common in OTC and small-cap stocks that need cash.
What Are Low Float Stocks? Volatility, Squeezes & Risk
Low float stocks are shares with a small number of freely tradable shares — typically under 10-20 million. Because supply is limited, any surge in buying demand can cause dramatic price spikes. They are favorites of day traders and momentum players.
Authorized vs Outstanding Shares: What's the Difference?
Authorized shares are the maximum number of shares a company is legally allowed to issue, set in its corporate charter. Outstanding shares are the shares actually issued and held by investors. The gap between the two represents potential future dilution.
What Is Toxic Financing? The Hidden Killer of Penny Stocks
Toxic financing refers to convertible debt structures where lenders can convert their loans into stock at a discount to market price. As they convert and sell, the stock price drops, allowing them to convert even more shares at lower prices — creating a death spiral that wipes out existing shareholders.
Level 2 & Order Flow
What Is Level 2 Market Data? How to Read the Order Book
Level 2 market data shows the full order book: all pending buy orders (bids) and sell orders (asks) at different price levels, along with order sizes and the market makers or ECNs behind them. It goes beyond Level 1 data (best bid/ask only) to reveal the depth of supply and demand.
What Is the Bid-Ask Spread? Why It Matters for Every Trade
The bid-ask spread is the difference between the highest price a buyer is willing to pay (bid) and the lowest price a seller will accept (ask). It represents the immediate cost of executing a trade and is a key indicator of a stock's liquidity.
What Is Market Depth? Understanding Supply and Demand in Real Time
Market depth is a measure of the volume of buy and sell orders waiting at different price levels in the order book. Deep markets have lots of orders at many price levels (high liquidity). Thin markets have few orders (low liquidity, higher volatility).
What Is Time and Sales? Reading the Tape Like a Pro
Time and Sales (also called the tape) is a real-time record of every executed trade for a stock, showing the exact time, price, and number of shares traded. It reveals whether trades are hitting the bid (selling pressure) or the ask (buying pressure).
What Is an Order Book? How Stock Orders Get Matched
The order book is an electronic list of all pending buy and sell orders for a stock, organized by price level. Buy orders (bids) are sorted highest to lowest; sell orders (asks) are sorted lowest to highest. When a bid matches an ask, a trade executes.
OTC Markets
What Are OTC Markets? A Complete Guide for Stock Traders
OTC (over-the-counter) markets are decentralized exchanges where stocks trade directly between parties through a dealer network, rather than on a centralized exchange like NASDAQ or NYSE. OTC markets are home to thousands of smaller companies, penny stocks, and foreign ADRs.
What Are Pink Sheet Stocks? Risks, Tiers & How to Trade Them
Pink sheet stocks are securities traded on OTC Markets' Pink tier — the lowest tier with the least regulatory requirements. Companies on pink sheets may have limited financial disclosure, making them the riskiest category of publicly traded stocks.
OTCQB vs OTCQX: What's the Difference Between OTC Tiers?
OTCQX and OTCQB are the top two tiers of OTC Markets. OTCQX is the highest tier with the strictest requirements — companies must meet financial standards, have audited financials, and maintain a minimum bid price. OTCQB is the venture tier for early-stage companies that are SEC-reporting. Both are significantly more transparent than the Pink tier.
What Is Caveat Emptor in OTC Stocks? The Skull and Crossbones Warning
Caveat Emptor (Latin for 'buyer beware') is a warning flag placed on OTC stocks by OTC Markets Group when there are concerns about the company — including questionable promotion, fraud suspicion, undisclosed corporate actions, or complete lack of current information. It's the skull and crossbones of OTC trading.
SEC & Insider Filings
What Is SEC Form 4? How to Track Insider Buying and Selling
SEC Form 4 is a filing required whenever a company insider (officer, director, or 10%+ shareholder) buys or sells company stock. It must be filed within 2 business days of the transaction. Form 4 is the primary tool traders use to track insider activity.
What Is Insider Buying? How to Use It as a Trading Signal
Insider buying is when a company's officers, directors, or major shareholders purchase shares of their own company stock on the open market. It's widely considered one of the most reliable bullish signals because insiders have deep knowledge of their company's financial health and prospects.
10-K vs 10-Q: What's the Difference Between SEC Annual and Quarterly Filings?
The 10-K is a company's comprehensive annual report filed with the SEC, containing audited financial statements, risk factors, and management discussion. The 10-Q is the quarterly version — unaudited and shorter, but more frequent. Together they are the foundation of fundamental analysis.
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