People who have interest and enthusiasm in the stock market usually get confused with a lot of things when they start learning about the stock market. especially different terms and names in the stock market are always confusing beginners.although trading and investing don’t need a lot of money initially, it is essential to be equipped with enough knowledge about the stock market. and it is very important to upskill every time because the stock market is an ocean to learn.
you will need continuous learning to become a successful trader and investor. knowledge and skill are very important in the stock market. before you enter technical studies and practical investing in the stock market it is very important to understand some basic terms involved in the stock market and it is called stock market terminology. here we are going to discuss 60 important and basic stock market terms that every beginner should know. it is very easy to understanding. so go through the terms and understand them.
What is stock market terminology?
Stock market terminology is a collection of industry-specific terms that we use frequently when we read or talk about the stock market.it is very important to learn and understand stock market terminology because we have to understand easily when we see a term about the stock market. so it is always important to learn well before you start to earn. this terminology will help you to understand the basic terms in the stock market.
Important stock market terms
BUY: To buy shares of a company, or take position in a company.
SELL: To sell the shares at your target/stop loss.
TARGET: Is the price where you plan to sell the shares in profit.
STOP LOSS: is to limit the loss on a position/trade if market makes an unfavorable move.
BID: Bid is the highest price that the buyer of a stock is ready to pay for a particular stock.
ASK: Ask is what people who are looking to sell their stocks are looking to get for their shares.
ASK-BID SPREAD: is the difference between a stocks ASK price and BID price.
OHLC: O-Open price, H- day’s High price, L-day’s LOW price, C-Close price.
VOLUME: Number of shares of a company traded during a particular time
VOLUME: Number of shares of a company traded during a particular time.
MARKET DEPTH: Market depth shows the different prices and the number of orders lined up at each price to buy or sell.
52 WEEK HIGH: Highest price of a security traded in last 52 weeks (one year).
52 WEEK LOW: Lowest price of a security traded in last 52 weeks (one year).
UPPER CIRCUIT: is the limit above which a stock price cannot trade on a particular trading day.
LOWER CIRCUIT: is the limit below which a stock price cannot trade on a particular trading day.
TREND: A trend is a general direction of a market or an asset price.
UP TREND: A trend where price of stocks move in upward direction.
DOWN TREND: A trend where price of stock moves in downward direction.
SIDEWAYS TREND: A trend where price of stocks moves in sideways direction. ie no upward and downward movement in price.
BULL MARKET: Bull market is the condition of stock market in which price are continuously rising.
BEAR MARKET: Bear market is the condition of stock market in which price are continuously falling.
POSITION
POSITION: A position is the amount of a security, commodity, or currency which will own by an individual, dealer, institution, or other fiscal entity.
LONG POSITION: Long position in a security means that you own the security for long period.
SHORT POSITION: Short position in a security means that you own the security for short period.
PORTFOLIO: Portfolio is a collection of stocks you own.
AVERAGING: Averaging is an investing strategy in which a stock owner purchases additional shares of a previously initiated investment after the price has dropped further.
LEVERAGE: Leverage is the borrowed money from your broker. for example 10x leverage means you can trade with the money of 10 times your capital.
MARGIN: Margin is the borrowed money from your broker. Margin trading allows you to buy more stock than you’d be able to normally.
VOLATILITY: Volatility is a rate at which the price of a security increases or decreases for a given set of returns.
LIQUIDITY: Liquidity refers to how easy it is to buy and sell shares of a security without affecting the asset’s price. ie there will be enough volume of shares and participants.
SQUARE OFF: Square off is a process of closing or exiting one’s currently held position.
SYMBOL: A stock symbol is an arrangement of characters usually, letters representing particular securities listed
SECURITY: A security is a tradable financial asset.
SCRIP: A scrip is a substitute or alternative to legal tender that entitles the bearer to receive something in return.
SCRIP: A scrip is a substitute or alternative to legal tender that entitles the bearer to receive something in return.
WATCH LIST: A watch list is a list of securities monitor for potential trading or investing opportunities.
GAP UP: A Gap Up is when a stock opens at a higher level than the previous day’s high.
GAP DOWN: A Gap Down is when a stock opens at a lower level than the previous day’s low.
RISK REWARD RATIO
RISK REWARD RATIO: The risk-reward ratio measures the difference between a trade entry point to stop-loss and a sell or take-profit order.
RALLY: A rally is a period of sustained increase/decrease in the prices of stocks.
BULL RALLY: A rally of price of the stock in upward direction.
BEAR RALLY: A rally of price of the stock in downward direction.
BREAKOUT:A breakout is a stock price moving outside a defined support or resistance level with increased volume.
CORRECTION: A correction is a decline of 10% or more in the price of a security from its most recent peak.
MARKET CAP: Market capitalization is the aggregate valuation of the company based on its current share price and the total number of outstanding stocks.it is calculated by multiplying the current share price and the number of outstanding shares of the company.
DIVIDEND: A sum of money paid by a company to its shareholders out of its profits.
BONUS: Bonus shares are additional shares that will give to the current shareholders without any additional cost, based upon the number of shares that a shareholder owns.
IPO: Initial public Offering, is the process of by which a private company can go public by selling of its stocks to public.
FPO: Follow on Public Offering is a process by which a company, which is already listed on an exchange, issuing new shares to the investors or the existing shareholders.
PRIMARY MARKET: Primary market is the place where new issue of shares of a new company will happen.
SECONDARY MARKET: Secondary market is wherein the trading if shares happens.
FLOAT: Float is the number of shares that is available to the public for trading in the secondary market.
FLOAT: Float is the number of shares that is available to the public for trading in the secondary market.
AUTHORIZED SHARES: Authorized shares are the maximum number of shares that a company is legally permitted to issue.
BROKER: Broker is a person/firm who purchases or sells an investment on behalf of the investor/trader in return for a commission.
FACE VALUE: Face value is the original cost of the stock, as listed on the certificate.
SHARE: A share is the single smallest denomination of a company’s stock which shows your ownership in the company.
STOCK: Stocks are securities that represent an ownership share in a company.
DERIVATIVE: A derivative is a financial security with a value that is reliant upon or will derive from, an underlying asset or group of assets.
SECTOR: Sector is an area in which businesses share the same or a related product or service.
FII: Foreign Institutional Investors
DII: Domestic Institutional Investors
Final thoughts
It is very essential to learn the basics before you will start investing. in this post, beginners in the stock market always get confused by a variety of terms about the market. so it is important to know some basic and common terms about the stock market. in this post, we discussed some basic terms of the stock market. by knowing these terms you can easily understand the news, discussions about the stock market. I hope this post helped you to improve your stoke market terminology knowledge.
happy investing.