Top 10 Stock Trading Terms You Should Know
If you are interested in stock trading, there are a few trading terms that you need to know. Often, some people find it hard to invest in the share market because they are unaware of some of the most important stock trading terms.
This blog will present an elementary guide for stock market investors to help them understand the 10 basic stock trading terms to make their investments better.
Equity is a commonly used term in stock market trading. It refers to the number of shares owned by an organisation. As an investor, while buying the shares of an organisation, you will purchase a degree of ownership in that business. The stock market is where equity is purchased and sold. Often, the term ‘equity’ is replaced by‘stock’.
Also Read: What are Equity Shares?
This is an organisation's yearly report prepared to impress and inform the shareholders. The annual report consists of information about a business, its work structure, annual cash flow, etc. Before investing, an investor must read the companies' annual reports before investing in their stocks to infer their financial positioning.
For trading in stocks, the investor should have a mediator who helps him connect to the stock market of their choice. A stockbroker or a registered broker carries this intermediary function out. The broker doesn’t own any shares or securities in a company but usually sells or purchases stocks on behalf of the investors and charges a commission for it.
4.Bull and Bear Markets
If you follow the stock market trends closely, you must have heard about the terms bull market and a bear market. These two terms are generally indicative of the current stock market trends. Bull markets refer to a period where the stock prices are increasing consistently, and hence, the market is on a rising trend. Whereas a bear market refers to a slowdown in the economic condition and a higher unemployment rate due to a dip in stock prices.
If you wish to participate in stock trading, you need to have a trading account. Stock market investments have become digital now. An online trading account with a registered broker will help you execute your stock trading better and in a more streamlined fashion. Whatever stocks you will sell or buy will happen through your trading account.
Before investing, you should be aware of one of the most important features of a stock, i.e., its volatility. The stock volatility refers to the rate of fluctuations in the price of its share. For example, a volatile stock will experience a regular upheaval in its price in the stock market. A few traders can profit from the risks involved in such highly volatile stocks. At the same time, many others may prefer investing in less volatile stocks to reap benefits slowly.
An exchange or a stock exchange is where various stocks and equities are traded. An exchange in stock trading refers to one of the several stock exchanges in India or worldwide where shares are bought and sold. India’s most famous stock exchanges are the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE).
Market capitalisation refers to the value of a company as reported by the share market. It is the current value of the shares of an organisation put together. So, as an investor, when you think about investing in the shares of a company, you should learn about its market capitalisation to make your investment worth it.
An investor's portfolio is a collection of all the investments they have made, right from their first purchase of shares in the share market. So, therefore, it's usually better to have a diversified investment portfolio to save yourself from experiencing losses.
When a private company becomes a public company by issuing shares to the public for the very first time in the share market, it’s termed an IPO or Initial Public Offering. In the case of an IPO, as an investor, you can also buy the shares directly from the company.
Now that you have learned about these basic stock trading terms, you can finally begin your journey as an investor in the stock market. So, open an online trading account, do your research and start investing with the help of a reliable stockbroker.
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Frequently Asked Questions
Long-term investors are the ones who wish to invest in financial assets for over a year. Long-term investors can invest in stock market assets like equities, mutual funds, bonds, etc., which they think will give more return in the long term.
Market volatility refers to the price fluctuations of an equity share. The highly volatile shares witness major ups and downs during the market trading sessions. For skilled trades, these can be highly risky bets for skilled trades that can bring huge gains.
Nifty and Sensex are the standard index values used for gauging the overall stock market performance. The National Stock Exchange (NSE) uses NIFTY as its index value with its top 50 companies as the benchmark, and the Sensex Index value is used by the Bombay Stock Exchange (BSE) with its top 30 companies as the benchmark.