When I first entered the share market world, I spend enormous time googling the basic stock market terms which are used in the share market.
Although there are many terminologies which a stock market trader should know, they are a handful of them which are used very often.
This basic domain knowledge of these terms is really important if you want to enter the stock market to succeed.
In this blog, we are going to present an elementary guide for the beginners to help them understand the basic key terms used in the share market.
So let’s get started:
What is the Stock Market?
The stock market is a type of exchange which allows traders to buy and sell stocks as well as companies to issue stocks.
A stock represents the equity of the company whereas are the pieces of a company.
The stock market mainly serves two purposes.
Firstly to provide capital to companies so that they can use this fund for expanding their business.
The second purpose that the stock market serves is to give the investors an opportunity to share in the profits of companies which are listed in the stock exchange.
What do Stock Trading Terminology mean?
Stock market terminologies are industry-specific terms which are frequently used when we read or talk about the stock market.
Experts and novice often use these terms to talk about strategies, charts, indices and other elements of the stock market.
Below is an elementary guide of basic terms which are frequently used in the stock market:
- Buy – Means to buys shares or take position in a company.
- Sell – Getting rid of the shares as you have achieved your goal or want to cut down losses.
- Ask – Ask is what people who are looking to sell their stocks are looking to get for their shares.
- Bid – Bid is what you are willing to pay for a stock.
- Ask-Bid Spread– Spread is the difference between what people want to spend and what people want to get.
- Bull – A bull market is a market condition where investors are expecting prices to rise.
- Bear – A bear market is a market condition where investors are expecting prices to fall.
- Limit Order – A limit order is a type of order which executes at the price placed for buy or sell.
- Market Order – A market order is a type of order which executes as quickly as possible at the market price.
- Day Order – A day order is a direction to a broker to execute a trade at a specific price that expires at the end of the trading day if it is not complicated.
- Volatility – Means how fast a stock moves up or down.
- Going Long – Betting on the stock price will increase so that you can buy low and sell high.
- Averaging Down – This is when an investor buys as the stock goes down so as to increase the price at which purchased.
- Capitalization – This is what the market thinks a company’s value is.
- Float – This is the number of shares which can be actually traded after deducting the shares held by insiders.
- Authorized Shares – This is the total number of shares that a company can trade.
- IPO – It is an Initial Public Offering that happens when the private company becomes a publicly traded company.
- Secondary Offering – This is another offering in order to sell more stocks and to raise more money form the public.
- Dividend – Portion of the company’s earning which is paid to the shareholders.
- Broker – A broker is a person who buy or sell stocks on your behalf.
- Exchange – An exchange is a place where different types of investment are traded.
- Portfolio – A collection of investments owned by you.
- Margin – Margin account lets a person to borrow money from the broker to buy shares.
- Sector – A group of stocks in the same sector.
- Stock Symbol – A one to three character alphabet root symbol which represents a company listed on the exchange.
Knowing about the above share market terminologies will make you a better trader.
It takes time as well as dedication to grasp the intricacies of securities trading, but when you do, the stock trading terminologies above will become a part of your daily vocabulary.