25 Common Terms on Stock Trading
The stock market is a very huge place and there might be some terms that are used that some beginners do not know of. Fortunately for you, I will give all the basic terms every novice trader should know before starting to invest in the share market or interested to be part of the stock trading company. Read on to find out what they are:
1. Assets- It refers to all of the company’s resources such as equipment, technology, cash, etc.
2. Agent- Also known as a Stockbroker, this is an agent that will act on your behalf and they will conduct all of the stock market transactions for you.
3. Ask- The minimum price of a stock which the owner imposes.
4. Beta- It is a term used to measure the relationship between a share’s price and the market movement.
5. Bear Market- Used to signify the falling of market prices.
6. Bonds- Acts as a promissory note issued by companies to their buyers that they will pay them in due time
7. Brokerage Firm- A place where you get a stockbroker or agent. They get paid through commissions for every trade conducted.
8. Bull Market– The complete opposite of Bear Market, it refers to market prices increasing frequently.
9. Trading Day- The stock exchanges’ working days (usually Monday-Friday)
10. Close Price- Acts as the total amount you need to pay for a stock.
11. Diversification- The purchase of stocks from different companies and industries to help hedge against company failures.
12. Dividend- A company’s payment to their individual shareholders. This money comes from the company’s earnings.
13. Equity- Also known as the Common or Preferred Shares
14. Hedge- A term used to safeguard or reduce the risk of negative price movements
15. Index- Measures any changes that are made in the stock market
16. IPO- Also known as the Initial Public Offering, it refers to the issuance of shares for the public to buy.
17. Mutual Fund- Money that comes from different investors to help improve their savings. Because it comes from different traders, their stock portfolio instantly gets diversified.
18. Portfolio- Your total number of stocks. Can be shares from one company or many institutions from different sectors.
19. P/E Ratio- The Price/Earnings ratio refers to the ratio between the company’s last trade stock price and 12 months of its earnings per share. For instance, if their share price is 60 and their INR is 3, (60/3) = is 20<– P/E Ratio.
20. Put Option- It gives an investor the right to sell some shares at a specified price given a specific time frame. Usually given when the price of a particular share drops dramatically from its fair value.
21. Risk- Refers to earning a profit that is off from the original calculation. In other words, you’re earning less than what you’ve anticipated.
22. Securities- It is a certificate of ownership of some stocks, bonds, and options which an investor holds.
23. Pre-Opening Session- A short time before the opening of the stock exchange. This is where modification, orders, and cancellations of orders take place.
24. Trading Session- The usual operational hours of the Stock exchange. It usually operates starting 9:15 AM till 3:30 in the afternoon.
25. Yield- A term used to refer to the measurement of return on investments that is based on a percentage.