Knowledge of basic terms of stock market is extremely crucial to the aspiring traders who aim to invest in the near future or are already a part of the stock market. Below is the glossary consisting of certain important stock market-related terms.
Shares, also known as stocks or equities, represent ownership of a particular company. Investors purchase shares in order to attain ownership of that company and this investment allows for capital building/ growth for that particular company. Moreover, shares are considered to be the highly traded products in the stock markets.
The investment can be done by the investor themselves or the investor can take aid from any brokerage services. If called for the services, the broker acts as an agent who carries out the entire trading on behalf of the individual.
Despite the given price of the stocks, there is a possibility of a bargain in the price to a certain extent. Ask/ offer refers to the lowest price that the share seller is able to confirm.
All the company-owned resources such as cash, inventory, technology, etc come under the category of an asset.
A bear market is the period of the market when the stock market indices tend to decline.
In contrast to the bear market, the bull market is the period of the market when the stock prices tend to rise rapidly.
There exists a relationship between the stock price of a particular stock and the movement of the whole market. Beta is put to use for the purpose of measuring such relationships.
Every investor settles on a certain price to purchase a particular stock. So, the highest price the buyer is willing to pay or the final price of that stock is called a bid.
Blue Chip Stock
Blue Chip Stock is a stock of a company that is well established and stabilised.
Every individual stock exchange has the right to decide its own standard trading unit and this is called a board lot. Besides, the board lot is considered to be dependent on the per-share price.
Bonds play a key role in acting as financial aid to the companies. The bonds of a company are sold to the investors in return for money in order to run the company. Bonds can also be considered as the affirmations given to the buyers.
Book is a record that consists of all details regarding the pending purchase and sale orders of stocks.
Every stock has a specific closing price. The closing price is the one on which the particular stock has been bought or sold on a particular day.
There exist different forms of securities like bonds and debentures. So, if one security can be converted into another security by the same issuer, then they are called convertible securities.
A form of debt instrument which is not secured by physical assets or collateral.
During a rough economic situation, many stocks don’t yield many dividends but the defensive stock is the one that gives the investor dividends despite any economic downturn.
Face value simply is the value assigned to a stock by the company that issued the shares. The stock changes hands between a buyer and a seller at a value, known as market price, which is usually far higher than its face value.
Usually, stock markets act as a platform where connections between buyers and sellers can be established. Conversely, a one-sided market either has the sellers or the buyers but not both.
Understanding the meaning of these terms is paramount if you want to start making investments. Though not all these will be relevant for everyone, one should know the basic nuances.