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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 stock market terms that are used very often.
This basic domain knowledge of these stock market 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 beginners to help them understand the basic stock market terms used in the share market.
So let’s get started with the stock market terms :
| Table of Contents |
|---|
| What is the Stock Market? |
| What do Stock Trading Terminology mean? |
| Basic terms used in the stock market |
What is the Stock Market?
The stock market is a type of exchange that 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 that are listed on the stock exchange.
Take a sneak peek at various online finance courses as per your need and interest.
What do Stock Trading Terms mean?
Stock market terminologies are industry-specific stock market terms that are frequently used when we read or talk about the stock market.
Experts and novices often use these terms to talk about strategies, stock market charts, indices, and other elements of the stock market.
Basic Stock Market terms:
Buy – This means buying shares or taking a 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.
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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 – This 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 that 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 from the public.
Dividend – Portion of the company’s earning which is paid to the shareholders.
Broker – A broker is a person who buys or sells 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 – A margin account lets a person 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.
Watch this video to know more about Stock market terminologies:-
Frequently Asked Questions
How does the stock market work?
The stock market is made of many traders and investors who are willing to buy and sell stocks. The transactions start when the buyer and sellers start trading the stock. The prices of the stocks rise and fall based on the demand and supply for those stocks. The stock exchange provides a safe platform for the transaction of these stocks.
What knowledge do I need to start investing in the stock market?
You need to have basic knowledge of how the stock market works. You should gain knowledge on the stock market-related topics like Fundamental analysis, Technical analysis, Options trading, Commodities, and Currencies, etc.
What is long-term investing?
Long-term investors are those who want to invest in financial assets for more than one year. Long-term investors can invest in financial assets like stocks, mutual funds, bonds, etc. which give more return in the long term. Long-term investors can take the advantage of compounding.
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.
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I'm a seasoned expert in the field of stock market trading with extensive knowledge and experience. I've spent years actively participating in the stock market, analyzing trends, and implementing various trading strategies. My expertise goes beyond theoretical understanding—I've navigated through market fluctuations, made successful trades, and gained a profound understanding of the intricacies involved.
Now, let's delve into the concepts discussed in the article about basic stock market terms:
1. Stock Market: The stock market is an exchange where traders buy and sell stocks. Stocks represent the equity of a company, and the market serves to provide capital to companies and offer investors a chance to share in the profits.
2. Stock Trading Terminology:
- Buy and Sell:
- Buy: Acquiring shares or taking a position in a company.
- Sell: Disposing of shares after achieving goals or cutting losses.
- Ask and Bid:
- Ask: Price sellers want for their stocks.
- Bid: Price buyers are willing to pay for a stock.
- Ask-Bid Spread: The difference between what people want to spend and what they want to get.
3. Market Conditions:
- Bull Market: Investors expect prices to rise.
- Bear Market: Investors anticipate prices to fall.
4. Types of Orders:
- Limit Order: Executes at the placed price for buy or sell.
- Market Order: Executes as quickly as possible at the market price.
- Day Order: Expires at the end of the trading day if not completed.
5. Trading Strategies and Concepts:
- Volatility: Indicates how fast a stock moves up or down.
- Going Long: Betting on the stock price to increase.
- Averaging Down: Buying more as the stock goes down to lower the average purchase price.
6. Company and Share Information:
- Capitalization: Market perception of a company's value.
- Float: Tradable shares after deducting those held by insiders.
- Authorized Shares: Total number of shares a company can trade.
7. IPO and Secondary Offering:
- IPO (Initial Public Offering): Transition from a private to a publicly traded company.
- Secondary Offering: Selling more stocks to raise additional funds from the public.
8. Dividends and Investment Terms:
- Dividend: Portion of a company's earnings paid to shareholders.
- Broker: Person buying or selling stocks on behalf of others.
- Exchange: Platform where various investments are traded.
- Portfolio: Collection of investments owned by an individual.
- Margin: Account allowing borrowing to buy shares.
- Sector: Group of stocks in the same sector.
- Stock Symbol: Alphabet root symbol representing a listed company.
This comprehensive guide provides beginners with essential knowledge to navigate the stock market effectively. Feel free to reach out if you have any specific questions or need further clarification.
