With MoneyWiseMind's beginner's guide, learn the basics of stock market terminologies. An elementary guide to understand the basic stock market terms used in stock market. Read now!
Beginners who have entered into the stock market having great interest and energy for stock trading and investing usually lack the basic concepts about the market. It is essential to be well equipped before jumping into the market with some basic knowledge of the market to make the right decisions for trading and investing. As you start your investment journey you will hear a variety of new terms used in the stock market. Beginners find it difficult to understand the technicalities. Well, you need not to worry as we have come up with a useful guide with a glossary of stock market Jargons in this post aims to help you understand the basic terms easily.
1. What is the Stock Market?
The stock market is a kind of exchange that allows market participants to buy and sell stocks electronically and enables the companies to issue stocks. A stock is an equity of the company.
The stock market has two objectives.
Firstly, it provides capital to companies so that they can use this fund to expand their business in future.
Secondly, the stock market gives the investors an opportunity to be entitled as a partner of the company to share profits, dividends bonus shares, rights issues of companies that are listed on the stock exchange.
2. What is a Stock?
A stock is the collection of shares of a particular company or collection of shares of different companies.
3. What is a share?
A share represents a unit of ownership of a particular company. As a shareholder of a company you are entitled to a percentage of ownership of the company and profit and loss also.
4. Bid
The bid is the highest price a buyer is willing to pay to acquire the stock. A buyer places the bid price because he doesn't agree to pay higher than the bid price.
5. Ask
Ask is the minimum price offered by a holder of a security at which he is willing to sell. He will sell only if the bid price matches or above the ask price.
6. Portfolio
Portfolio is consists of various stocks in which the investor purchased. He may have one stock in his portfolio or multiple stocks in the portfolio. It may contain of different instruments like shares, bonds, futures and options etc.
7. Bull Market
It is common knowledge that when a stock price goes up we call it bullish stock. If we consider in broader perspective, if the stock market index goes up in any particular time we call the market is bullish during that period. The market was bullish in 2020 to early 2022.
8. Bear Market
When a stock price goes down we call the stock is bearish. If the stock market index goes down in any particular time we call the market is bearish in broader perspective during that particular period. The market was bearish in 2008 to 2009.
9. Trend
Trend refers to the momentum in the market. Usually it indicates the general market direction. If the market going up fast the trend is bullish and if the market coming down sharply it is a bearish trend. When the market going sideways or stays in a range with little movement, then we call the trend is in range bound.
10. Long Position
Long position means making long position in a particular instrument. It indicates the direction of a trade. If you buy any particular company's stock in hope that it will go higher
or intend to buy that company's share you are going long on the particular company's stock. If you buy nifty index expecting the index will increase,you are making a long position in nifty. So you are bullish on nifty.
11.Short Position
Short position or shorting is generally used in describing a transaction in relation to stock market. It is slightly tricky to explain because in our practical life we don't use this word except in stock market. When we short we have a bearish view of the instrument. We make profit when the price goes down, if price goes up we make loss.
When we short a stock we have to buy it on the same day before the market closes. Otherwise we can use derivatives to create short position,
12. Square Off
Squaring off means when you want to close a position which you already have in your portfolio. If you are long in an instrument and want to square off means you want to sell it. When you want to close an existing long position, you have to sell the stock and remember this sell will not be considered as a new short position. Here you are just closing your existing position.
Squaring off a short position means you are repurchasing the stock. When you repurchase the stock you are just closing an existing short position, you are not going long on the instrument.
13. OHLC
OHLC in stock prices represents open, high, low, close. We have already discussed this concept in our candlestick series. Just try to grab in simple language. Open is the price at which the stock opens on the day, high is the highest price at which the stock trades during the day, low is the lowest price during the day, and close is the last traded price for the day.
14. Volume
Volume is an important concept which we will discuss in our future posts. It has a great impact on stock prices. Volume refers the total transactions or total numbers of buy and sell together for a particular stock. Increase and decrease in volume create a great movement in stocks.
15. Volatility
Volatility refers to the extent of fluctuations of a stock. High volatility stock means price fluctuates in an abnormal way. High volatility stock may see abnormal profits as well as abnormal losses. Beginners are advised to avoid such high volatility stock trading.
We have covered 15 terms of stock market to help you understand the basic terminology used in the stock market. There are many terms you should learn to equip yourself to be ready for trading and investing. We will create another posts exploring more important Jargons in future. Be with us.
