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- Stock Market Terminology: A Beginner’s Guide To Stock Trading
- 37 Stock Trading Terms Every Trader Needs to Know
- Stock Market in India : Meaning, Basic terms and more
Stock Market Terminology: A Beginner’s Guide To Stock Trading
Warren Buffet is one of the richest men and the G. T of the investing world. From his outstanding and phenomenal success, one can deduce the fact that It is never too early to start investing.
So, without wasting any more time, let us ride on the path of investing, and turn your income into massive wealth. However, to start investing, you must familiarise with certain stock market terms , that will help you understand the mechanics of the stock market before you dive deep into the bottomless pool of stock market. These stock market terms will establish a strong foundation on which you can build the fort of your portfolio. We cover an exhaustive list of stock market terms from the extremely basic to more nuanced stock market terms, that will help you create a trove of massive wealth.
These stock market terms will help your money make more money while you are not even paying attention to it, and ultimately make you wealthy. So let us begin our journey in the world of investing by understanding the stock market and the elaborated list of stock market terms.
A stock market is a highly organised and sophisticated set-up where investors or traders acquire or surrender a piece of ownership in the company by purchasing and selling of shares, in exchange for funds. Shares are indivisible units of ownership in the company or corporation that provide for the distribution of profits upto the proportion of the invested amount, declared in the form of dividends.
Just like a market is a place where an exchange of goods and services is undertaken for cash at a predetermined or bargained price, the stock market is a marketplace where the exchange of shares is being conducted at the market price under the aegis of a regulator.
The regulator monitors the stock market, lay down rules and regulations and ensures strict adherence to prevent any fraudulent activities, safeguard the interests of the investors, facilitates the development of capital markets, and ensures smooth functioning of the markets.
So lets explore the subject of stock market terms. A language is often a corridor to a new world, a new vision. Similarly, stock market terms constitute the language of the stock market universe. The stock market terms are the lexica of the financial world.
These are industry-specific jargons to describe the various phenomena of the stock market. These are the terms used by amateurs as well as the bellwethers of the financial world to explain an array of products in the stock market, market patterns, investing strategies, charts, indices, trading strategies etc.
The stock market terms are like a window to the securities market. The terms will help you to see and perceive the stock market through the broad lens of an investor.
If you want to make money, you need to know stock market terms. These stock market terms will open the doors to the fascinating world of the stock market. The stock market terminologies will help you understand the underpinnings of the financial world. The terms will hasten and expedite the learning process. It will help you understand the intimate relationship about the diverse events happening in the country and their repercussions on the stock market.
It will provide you with a snapshot of the financial world. These terms are necessary to gauge the financial health of the company. These terms also include terminologies and jargons often used to explain the economic state of the country. You will not only possess the domain knowledge of the stock markets but also enhance your business vocabulary, as some of these terms are used interchangeably in other markets as well, such as the real estate market.
The renowned doctrines, philosophies, and strategies of the trailblazers of the financial world will become more apparent through the study of these terms. It will give shape and form to your vague ideas.
The stock market terms will help you form financial goals and devise strategies to attain them. These terms can turn your obscure dreams into a tangible reality. A stock is the collection of shares of a single company or collection of shares of multiple companies. BSE is the oldest and the largest securities market in India and has been operational since Currently there stocks or shares which are traded on BSE.
Nifty or Nifty 50 Nifty 50 is the index employed by NSE to gauge the overall market sentiments of Indian stock market. Nifty 50 is the word meaning National Stock Exchange Fifty. Conventionally 50 stocks of companies are used to calculate Nifty. Presently there are 51 scripts used to calculate Nifty Sensex is the combination of words sensitive and index. Sensex 30 means that 30 stocks are used to calculate sensex Demat Account Demat or Demat Account is the term used to denote a repository where all information related to stock holding of any individual is held digitally.
Portfolio A collection of investments owned by the investor is called Portfolio. An investor may have just one stock or multiple securities in a portfolio. A portfolio may also contain a diverse range of financial instruments like shares, bonds, futures, options, etc. Derivative A derivative is a financial instrument that derives its value from a mutually agreed-upon underlying asset or group of assets.
Futures and options are examples of derivatives. Usually, underlying assets are market indexes, shares, commodities, currencies. Derivatives can be used as a leverage to magnify returns. Derivatives are contracts that provide you with exposure to a larger position than the capital you provide. Derivatives are often used to insure against price fluctuations commonly known as hedging, to gain exposure to otherwise hard-to-trade assets or markets or to leverage from price fluctuation of the underlying assets for the purpose of earning augmented returns.
Futures Futures are financial obligations to buy or sell an asset at an agreed-upon future date at a predetermined price. Futures are often used to protect against price fluctuation of the underlying asset or help prevent or minimise losses from such unfavourable price movements.
It can also be used as a leveraged to speculate on the price movement of the underlying asset and profiteer from it. Futures contract are traded in lot sizes having different expiry dates and set prices that are known to the investor at the time of the contract itself.
There are many types of futures contracts, such as commodity futures, stock futures, currency futures, etc. Options Options are financial contracts that are derivatives that provide the buyer of the contract the right but not the obligation to buy or sell the underlying asset at a predetermined price on or before the maturity date.
Options are traded in lots. The specified price is known as the strike price. The amount paid in exchange for acquiring the right to buy or sell the underlying asset is known as option premium.
In case the buyer does not exercise this right, his loss is limited to the option premium, he has paid. In case of the seller, the potential losses that can be incurred by him are limitless; however, the profit is limited to the option premium paid by the buyer in case the buyer refuses to exercise his right. There are two types of options: Call options and Put options.
Call Option A call option gives the buyer the right but not the obligation to buy an underlying asset at the strike price on or before the expiry date. The buyer of a call option speculates that the market is bullish, and the prices of the underlying asset will increase. If at the expiry date, the price of the underlying asset is below the strike price, the buyer loses the premium paid.
If the price of the underlying asset is above the strike price, the profit is the current stock price minus the strike price, multiplied by the lot size, with the premium deducted as a cost of the call option. Put Option A put option gives the buyer the right but not the obligation to sell an underlying asset at the strike price on or before the maturity date. The buyer of the put option expects the price of the underlying asset to go down.
If the price of the underlying asset is below the strike price, the gain is the difference between the strike price and current price of the stock, multiple by the lot size. In case the strike price is above the stock price, the buyer loses the premium paid. Open Interest Open interest refers to the total number of outstanding derivative contracts that are yet to be settled. From the time the buyer and seller initiate the contract until the counter-party closes it, the contract is termed to be open.
Open-interest provides an accurate picture of the derivatives trading activity and whether the money rolling in the derivative market is rising or declining. Annual Report Annual Report is the financial assessment of the company.
The annual report provides a sneak peek at the financial condition and operations of the company. The corporate document is intended to provide shareholders with the in-depth knowledge of various parameters that constitute the performance of the company in a specified financial year.
The annual report is scrutinised by investors to determine the future potential of the company based on past performance. It can be described as the resume of the company with reference to the previous financial year.
Arbitrage Arbitrage is the risk-free return earned due to market inefficiencies leading to price differences for the same security between two distinguished markets. It involves simultaneous purchase and sale of the same securities in different markets to benefit from the momentary price variations prevailing in different markets. Arbitrage ensures that the minor price differences in the same securities in different markets are eliminated, leading to uniformed prices across market exchanges.
Averaging down Averaging down is carried out when the investor acquires more stock as the price of the stock steadily declines after the initial purchase, resulting in lower average cost per share. It is undertaken by an investor when he feels that the share is trading lower than the perceived value, and the general consensus of the market is wrong. Bear Market Bear Market is the industry-specific jargon which indicates a downward trend in the overall condition of the market.
It means that the cumulative market prices of the stocks listed on the stock market are declining. It means that the market is on an upward spiral. It means that the aggregate market prices of the stocks are rising. Active Return Active Return refers to the excess returns generated by the portfolio as compared to the portfolios benchmark, index or market as a whole.
Volatility Volatility refers to the degree of or the extent in fluctuation in the prices of the stock. Highly volatile stock witness abnormal highs and lows during the trading session, while low volatile stocks experience ups and downs to a lesser degree.
The highs and lows are not ridiculously far-flung from each other. Investing in highly volatile stocks are high-risk stocks that can result in enormous gains or tremendous losses. Beta Beta measures the volatility in the prices of the stock as compared to the overall movement of the market.
It measures the extent of the relationship between the prices of the stock and the movement of the whole market. If the stock has a beta value of 2, it means for every 1 point change in the entire market, the prices of the stock change by 2 points.
So if the stock market declines by 1 point, the price of the stock will decrease by 2 points and vice-versa.
37 Stock Trading Terms Every Trader Needs to Know
Find printable worksheets, lessons, and digital activities. The economy and stock market are heavily influenced by seasonal factors. There are other sources for worksheets also. Comedy A theatrical work that is intentionally humorous. Students choose which stocks to "buy" and then use a roll of the die to simulate the ups and downs of the stock market.
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Stock Market in India : Meaning, Basic terms and more
Warren Buffet is one of the richest men and the G. T of the investing world. From his outstanding and phenomenal success, one can deduce the fact that It is never too early to start investing. So, without wasting any more time, let us ride on the path of investing, and turn your income into massive wealth.
When I first entered the investing world, I spend a lot of time googling the key terms in share market. Definitely, Investopedia was my favorite website to learn the meaning of those words. This basic domain knowledge of these terms is really important if you want to enter and succeed in the share market.
As you start your investment journey, you would hear a lot of new terms.
Whether you are a beginner at investing or seasoned investor being familiar the basic term of the stock market is essential. Expanding your stock market vocabulary will enable you to be a better investor, so that you can trade successfully. Given below is a basic glossary of terms that you must know as an investor In the stock market, an agent refers to a brokerage firm which buys or sells shares on behalf of the investor.
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