𝐈𝐧𝐯𝐞𝐬𝐭𝐢𝐧𝐠 𝐈𝐧𝐬𝐢𝐠𝐡𝐭𝐬: 𝐖𝐞𝐞𝐤𝐥𝐲 𝐐&𝐀 𝐅𝐨𝐫 𝐒𝐭𝐨𝐜𝐤 𝐌𝐚𝐫𝐤𝐞𝐭 𝐍𝐞𝐰𝐛𝐢𝐞𝐬- Part 3

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Hello readers, we are happy to announce that our team of MoneyWiseMind.com launched a new section “Investing Insights: Weekly Q&A For Stock Market Newbies”, to spread the basic stock market knowledge to the beginners.



This is your go-to resource for demystifying the stock market from the scratch. Each day, we will present 10 carefully curated questions with answers that will cover essential concepts, strategies, and terminologies. Whether you have just entered into the market, or trying to starting your stock market journey, or looking to strengthen your foundation, our weekly post will guide you through the basics and beyond, making investing accessible and understandable for everyone. Happy reading.


Day 3: Basic Stock Market Concepts

1. What is a Limit Order?

 

A limit order is a type of order to buy or sell a stock at a specific price or better. It ensures that the investor does not pay more or sell for less than the desired price. Such type of order is advisable to track share prices. 


2. What is a Market Order?

 

A market order is an order to buy or sell a stock immediately at the current market price. It guarantees execution but does not guarantee the price. Several traders don't go with the market order, because trade price in such order remains volatile. 


3. What is Stop Loss Order?

 

A stop loss order is a type of buy or sell order used by the traders to limit losses when there is a possibility that prices may move against the trades. For example, if a stock is bought at Rs. 200 and the trader wants to limit the loss at Rs.180, then an order to be placed to sell the stock, immediately reaches at Rs.180.Such an order is placed to limit unlimited loss. 


4. What is Diversification?

 

Diversification is an investment strategy that involves spreading investments across various assets to reduce risk. By diversifying, investors can minimize the impact of any single asset's poor performance on the overall portfolio.


5. What is Short Selling? 

 

Short selling is an investment strategy where an investor or trader sells shares with the intention of buying back at a lower price to profit from a decline in the stock's price on the same day. He can sell shares of his existing portfolio or can sell fresh shares to buy them at lower price on the same day. Because, short selling of stocks is not allowed in positional trading. It can be done in day trading. 

 

Short selling involves a significant risk and requires a margin account. It is not recommended to the newbies to indulge in short selling. It needs an upper level of skills, technical knowledge, and solid experience in the stock market. 


6. Long Position

 

Long position means going long in a stock or buying a stock in expectation that the stock price will rise in future and it will give profits. Going long means buying the security to make profits from price appreciation. It is the opposite of short selling or short position. 


7. What is a Blue-Chip Stock? 

 

A blue-chip stock refers to shares of well-established, financially sound, and historically stable companies with a track record of reliable performance. Examples include all the 50 companies in Nifty 50.Besides, Microsoft, Coca-Cola, Johnson & Johnson, are world famous companies. 


8. Face Value

 

The term face value is used to indicate the nominal value of the stock. We can also call it par value. It is very important in respect of corporates perspective. When the companies announce dividends, bonuses, stock splits, they mention the face value of the share prices at the time of executions of announcements. 

For example, suppose the face value of TCS share is Rs.10 each, TCS announces a dividend of Rs.125 per share. Then, the dividend paid is 125% (125÷10).


9. What is a Stock Split? 

 

This is a process of the corporates activities. A stock split occurs when a company divides its existing shares into multiple shares to boost liquidity. For example, in a 2 :1 split, each shareholder receives 2 shares an additional share for every share they own, and consequently the stock price is halved.


10. What is a Reverse Stock Split?

 

This is another action by the corporates,the opposite concept of stock split. A reverse stock split happens when the existing shares transformed into fewer, more valuable shares. For example, in a 1:5 to reverse split, five existing shares are merged into one, and the stock price increases proportionately.


If you have any other questions in your mind relating to stock market basics or need any clarification, please put your query into the comment box, We will try our best to clarify the same.


Disclaimer: The information provided on MoneyWiseMind is for educational and informational purposes only. It is not intended to be financial advice, and you should not rely on it as such. Before making any financial decisions, you should consult a licensed financial advisor.


𝐈𝐧𝐯𝐞𝐬𝐭𝐢𝐧𝐠 𝐈𝐧𝐬𝐢𝐠𝐡𝐭𝐬Last Week's Topic

Weekly Q&A For Stock Market Newbies: Part - 2


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