There are various different terms used in the stock market by the traders, brokers, and other market analyzers during trading hours in securities exchange.
Many people are not familiar with basic share market terms. So in this blog, we are going to discuss 30 basic stock market terms or share market basic for beginners that will make you understand the stock market in a better way.
The stock market is the place where the buyers and sellers intending to buy and sell stocks meet.
It is a virtual market, as nowadays all the trading takes place online through DEMAT ACCOUNTS. As trading is online, there are many common terms related to the stock market.
Whats in it for you
30 IMPORTANT TERMS
IMPORTANT STOCK MARKET TERMS WITH MEANINGS
1> BUY →
BUY means to buy shares of any company.
2> SELL →
SELL means to sell shares of any company.
ASK is the price that the seller is willing to get for the share he/she is offering to sell.
BID is the price at which the buyer is willing to buy a particular share.
5> SPREAD →
SPREAD is the difference between the price at which the buyer wants to buy and the price at which the seller wants to sell the shares of a particular company in stock market.
6>BULL MARKET →
BULL MARKET is that market where the investors are expecting the prices to rise. BULL MARKET represents a rise in price as BULL attacks its prey by thrusting his horns upwards.
BULLISH are the investors who expect the prices of that particular shares to rise and hence buy huge stocks of that company in the stock market.
7> BEAR MARKET →
BEAR MARKET it that market where the investors are expecting the prices to fall. BEAR MARKET represents a fall in the as the bear attacks its prey by swiping down, hence this down movement represents the bear market.
Some investors are BEARISH for a particular stock as they expect the prices of that particular share to fall and hence keep themselves away from those stocks in the stock market.
8> PORTFOLIO →
PORTFOLIO is the collection of stocks of a particular investment if you are an investor all the stocks that you have bought create your portfolio.
9> MARGIN ACCOUNT →
MARGIN ACCOUNT lets a person borrow money from the broker and buy shares.
10> DIVIDEND →
DIVIDEND is a part of the profit of a company that shareholders get . Shareholders can get it in the form of cash, stock, etc. It is not necessary for any company to pay a dividend. The board of directors decides the distribution of dividends.
11> STOCK EXCHANGE →
STOCK EXCHANGE is the place where securities of various companies float. The stock exchange provides a forum for buying and selling existing shares floating in the market. The stock market is the pulse of the economy.
12> BROKER →
BROKER is an assistant to the stock market. it acts as an intermediary between an investor and a stock exchange. It helps various investors in allocating their money into financially sound companies. These brokers charge a commission for each buying and selling deal. “Broker” itself means “ to arrange a deal”.
13> AUTHORIZED SHARE →
AUTHORIZED SHARE means the total shares that the company can sell in the market.
AUTHORIZED SHARE CAPITAL is the total capital that a company can raise by floating all its shares.
14> INITIAL PUBLIC OFFER (IPO) →
INITIAL PUBLIC OFFER is when a private company converts itself into a public company and gets its shares listed on any stock exchange. It is the first time when shares of that company float in an open market.
Once a company gets listed with any stock exchange its shares can be sold freely in the market by any of its shareholders.
15> GOING LONG →
GOING LONG means to buy shares with the intention to keep those shares in the portfolio for a long run or long period of time, with an intention to sell them later at higher prices.
It simply means buying shares and keeping them for a long time.
16> VOLATILITY →
VOLATILITY is the condition of the market when the prices of the stocks goes up and down by 1 or more percent it is called a volatile market. A volatile market has less security and hence riskier but one can make huge gains if invested soundly.
The stocks which have a relatively stable price are called low volatile shares and which show huge price deflations are called high volatile stocks.
17> SHORT SELLING →
SHORT SELLING means to sell those shares which are not a part of your portfolio at the current price (usually higher) and later buying these stocks at a lower price, hence making the difference as profit.
Certainly, Short selling has a huge risk but the rewards for this risk are equally high.
18> LONG SELLING →
LONG SELLING means to sell those shares which are part of your portfolio, long selling is just the opposite of short selling and it includes comparatively less risk.
19> LIMIT ORDERS →
LIMIT ORDERS are those orders which get executed only at the time when the stock price reaches the price put by the investor to buy or sell. This order does not come into action unless the stock price reaches the set limit.
20> MARKET ORDERS →
MARKET ORDERS are those orders which are to be executed at the same price as the current market price and hence the order is executed as soon as the required buyer or seller is found.
21> DAY ORDERS →
DAY ORDERS are the ones that expire if the stock price does not reach the given price on that particular day. It is an instruction by the investor to the broker to cancel the order if it does not meet the required conditions on that particular day.
22> LEVERAGE →
LEVERAGE means to borrow capital to buy shares, you can buy shares of more amount as compared to the amount which you can afford, so comparatively leverage can increase your return on investment but it can also put you into a very dangerous situation.
23> TRADE VOLUME →
TRADE VOLUME implies the number of stocks of a particular company that are bought or sold. This trade volume has a huge effect on the liquidity of any firm.
24> FOREX →
FOREX actually means foreign exchange and it is dealing in the currencies of various different countries.
25> BLUE CHIP STOCKS →
BLUE CHIP STOCKS are the stocks of companies which are leading in their industry some common examples
– Reliance industries
26> DEMAT ACCOUNT →
DEMAT A/C stands for DEMATERIALIZED ACCOUNT this account is mandatory for any investor to trade in the stock market. The Demat account consists of all the share certificates in digital format as all the trading nowadays take place in Demat format.
27> EARNING PER SHARE →
EARNING PER SHARE is the amount earned by the shareholders on each share held by them. This is of importance to shareholders. The higher the earning per share higher is the profitability of the firm.
28> STOP LOSS →
It is the minimum price set by the investor to sell a particular security, this is done to minimize the loss at the time of fall in the share price. For a share whose current price is Rs.120 and you buy the share with a stop loss of Rs.100, now, if the price of the share drops and reaches to Rs. 100 then these shares automatically get sold to minimize further loss.
It is the reverse of stop loss. It is the maximum price set by the investor to sell a security. For a share whose current price is Rs.100 and target is Rs.150 now, if the share price reaches Rs. 150 then the shares will be automatically sold.
30> CLOSE →
It is the time when the stock market closes.
There are various important that are used in the stock market and by the brokers as well as the traders.
You should be aware of all these terms if you are interested in trading.
In this blog you are made aware of the 30 most important stock market terms like buy, sell, bid , bull market , bear market, close etc.
ALSO READ MY BLOG – THE ULTIMATE GUIDE TO SHARES?
FREQUENTLY ASKED QUESTIONS (FAQ)
ANSWER- It means to buy and sell shares in the share market.
ANSWER- PORTFOLIO is the collection of stocks of a particular investment if you are an investor all the stocks that you have bought create your portfolio.
ANSWER- BULL MARKET is that market where the investors are expecting the prices to rise. BULL MARKET represents a rise in price as BULL attacks its prey by thrusting his horns upwards.
ANSWER- BEAR MARKET it that market where the investors are expecting the prices to fall.
ANSWER- It is the time when stock market closes