The stock market refers to an arrangement over which companies’ equity shares are traded (purchased or sold) by participants (traders and investors). An investor differs from his trader counterpart in the way that the former usually has a longer investment horizon in mind and thereby seeks to earn returns through capital appreciation over a particular period of time.

Conversely, traders benefit by tapping into the series of significant price changes (of stocks), something that can happen over the entire trading session.

In India, the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) constitute the two major stock exchanges that host a lion’s share of the trading. It follows a T+2 trade settlement cycle, essentially implying that trades are carried out on Day 1 with the buyer receiving his shares and the seller his sales proceeds two working days after completion of trading.

The comprehensive stock market glossary

Much like any other field of work, the stock market has its own share of industry-specific jargons, ones that are used on a regular basis. As a trading enthusiast, it is advisable that you know these terms like the back of your hand in order to make the most out of the markets. Arming yourself with these terms would help you navigate the stock market farm with much ease.

Agent

It refers to a broker that executes the trades – on behalf of the investor -- over the stock market, in lieu of a commission.

Offer/Ask

This refers to the lowest price at which the seller agrees to sell his shares to the buyer.

Bid

This refers to the highest possible price that a buyer agrees to pay for a particular stock.

Bear market

This refers to a lean patch in the stock market that is marked by a consistent downward spiral of stock prices, thereby encouraging selling. A bear market is pervaded by low investor confidence and negative sentiments, factors that make them occupy a short position in a bid to sell off their shares at maximum possible prices and earn a profit. Investors participating in a bear market are called ‘bears’ and their sentiments ‘bearish’.

Bull market

In a bull market, prices of securities are on an upward curve, or at least, anticipated to increase. This motivates buying behaviour on part of the investors. A bull market, quite contrary to a bear market, is infused with positive investor sentiments, a surge of confidence and a general air of optimism.

Investors occupy a long position in a bull market, essentially implying that they step up purchase of securities in the hope that prices would be favourable, paving the way for subsequent gains. Those participating in a bull market are called ‘bulls’ and their sentiments ‘bullish’.

Beta

This denotes the relation between the price of a stock and overall movements exhibited by the stock market. In case of the market, this figure is assumed to be 1. It follows that a stock, with a Beta of more than 1, is deemed riskier in comparison to the market; and vice versa.

Blue chip stock

These are generally issued by established and financially stable companies that have been in operations for a considerable period of time. Market capitalization for blue chip stocks often runs into lacs of crore.

Call option

This grants a buyer the right, but not the obligation, to purchase underlying assets at a particular price and within a specified period of time.

Close price

This refers to the price – at which a particular company’s stocks are eventually traded – at the end of one trading day.

Spread

Simply put, spread refers to the difference between the amounts at which you’d want to buy and sell a stock.

Volatility

This refers to the degree of fluctuations in the prices of stocks. While highly volatile stocks are risky, they also present a good opportunity for the intra-day trader to make a formidable profit on his investment. In conclusion, getting a hang of these basic stock market terminologies can go a long way in ensuring that your investment is an informed one, rather than being a shot in the dark.

Click here to get started with your stock market investments.

DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



Trending Articles

Article Links

Equity Fund

Financial Derivatives

What is Demat Account

What is Share

What is Stock Market

Latest Articles

stocks-and-securities
stocks-and-securities

What Is Trade Price In Stock Market & How Does It Work?

Read More
Posted on 18 February 2020
stocks-and-securities
stocks-and-securities

What are the Trading Hours for World's Major Stock Exchanges?

Read More
Posted on 18 February 2020
stocks-and-securities
stocks-and-securities

What is Sensex and Nifty? How are they Calculated?

Read More
Posted on 18 February 2020