Understanding the stock market is not an easy task. When beginners enter the market, they have many questions in their minds. In fact, most of the newcomers spend more time on Google to learn about the various aspects of the stock market. There are many terminologies used in the share market but it is not possible for a newcomer to know each and every terminology. However, there are few important terminologies that every investor must know. By learning the basic terminologies, you would be able to understand most of the share market concepts and technicalities. In this article, we list down some of the common terms which every beginner must know.
Important Stock Market Terminologies
- Stock Market
The stock market is an exchange where the traders indulge in buying and selling of stocks of companies. You can trade or invest in the market either through online mode or offline mode.
- Buying
Buying means investing money by purchasing the shares or taking a position in a company’s stock.
- Selling
Selling means getting rid of the shares of the company in the share market. A trader or an investor sells his shares when he has earned profits or wants to cut down his losses.
- Ask
Ask is the price at which people are willing to sell their stocks.
- Bid
Bid is the price that people are willing to pay to purchase the stocks.
- Ask-Bid Spread
Ask-Bid spread is the difference between what people are willing to pay for a stock and what they are getting it for.
- Bull Market
A bull market is a phase or condition of the market where the investors expect a rise in the stock prices.
- Bear Market
A bear market is a phase or condition of the market where the investors expect stock prices to fall.
- Market Order
Market order is a type of order in which the transaction to purchase or sell a stock is executed quickly at the market price.
- Limit Order
Limit order is a type of order in which the transaction to purchase or sell a stock is executed only when the stock reaches the specified price level.
- Day Order
A day order is given by the client to its broker to execute a transaction at a specific price level. If the specified price level of the stock is not reached then the order expires at the end of the trading session.
- Volatility
It is the pace at which the price of a stock moves up or down.
- Going Long
It means purchasing a stock at a low price with the hope that it will go higher.
- Averaging Down
Averaging down means purchasing the stock when the price is falling down so as to lower the overall purchase price of the stock.
- Capitalisation
It is the market value of the company.
- Float
Float is the number of shares that are available for trade after deducting the shares held by the insiders.
- Authorized Shares
Authorized shares are the total number of shares of a company available for trade.
- Initial Public Offering (IPO)
Initial Public Offering is brought when a private company wants to go public by listing itself for the first time on the stock exchange.
- Secondary Market
After the shares of the company get listed on the stock exchange, anyone can purchase or sell them through the open market which is also called the secondary market.
- Dividend
When the company shares a portion of profits with shareholders it is called dividend.
- Broker
A broker is a person who buys or sells shares on the stock exchanges on your instructions in your account.
- Exchange
It is a place where different types of financial instruments are traded.
- Portfolio
A portfolio is the collective pool of your various investments.
- Margin
When you borrow money from the broker to buy shares and no upfront payment is involved, it is called the margin.
- Stock Symbol
It is one to three character alphabet that represents the name of the company listed on the stock exchange.
- Sector
In the stock market, the listed companies belong to the different sectors of the economy.
Conclusion
The above mentioned are some of the popular terminologies that are used in day to day trading on the stock exchange. By understanding them, you can become a better trader or investor. When you will regularly deal in the stock market, they will also become a part of your vocabulary. If you want to learn more about the stock market, you can contact Kotak Securities. They teach how to trade in stock market to beginners and help them become successful traders.
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