Young people with an interest and enthusiasm for stock investing sometimes might lack fundamental market knowledge. Although trading doesn't take a lot of time and money, some basic tools and training are still needed to make the proper judgments. There's a small dictionary with a few important terminologies before investing in the trade market before you dive into too many technical aspects.
Agent
A brokerage company is called an agent when it purchases or purchases shares on behalf of the customer. The agent will not own the shares at any moment during the entire transaction.
Ask/Offer
The lowest price an owner is willing to sell the stocks.
Assets
Everything that is in the company's name, including cash, equipment, land, technology, and so on that reflects the company's overall wealth.
At the Money
A circumstance where the prices of options are similar to the prices of the securities underlying them. Trading choices are likely to be high if money is available.
Bear Market
A market where stock prices are constantly decreasing.
Beta
Measure the link between stock price and whole-market movement of any single stock.
Bid
The purchaser is prepared to pay the top price for an item. It's the opposite of ask/offer
Blue-chip stock
Stocks of big, well-established and financially stable corporations that possess records that dividends are paid to their stockholders over decades at a steadily growing pace. Blue-chip stocks typically have a market capitalisation of thousands of crores.
Board Lot
A standard commercial unit as established by the exchange board. The size of the batch usually depends on the price per share. The batch size of the common board is 50, 100, 500, 1000.
Bonds
They are promissory notes offered to their purchasers by companies or the government. It refers to the quantity of money kept by the buyer for a certain period of time.
Book
An electronic record of all pending orders for the purchase and sale of specific stocks.
Broker/Brokerage Firms
A securities company that is registered is termed as a brokerage firm. Brokers function as consultants for the acquisition and sale of the shares listed, and at no point do they hold the securities. But for their service, they demand a commission.
Bull Market
A market that constantly increases stock prices.
Business Days
They include all days from Monday to Friday, excluding public holidays.
Call Option
An option that allows the investor to buy a specific stock at a certain price within a specified time period, but not an obligation.
Close Price
The final price of the stock on a certain trading day is traded.
Commodities
Product for trade traded on a separate, authorised marketplace for commodities. Farm products and natural resources are included in commodities.
Convertible Securities
Securities that can be converted to other securities of the issuer (bonds, debentures, preferred stocks), or convertible securities, are called convertibles. The conversion normally takes place at the holder's option, although it may take place at the issuer's decision.
Debentures
A kind of debt instrument not secured through tangible or collateral assets. The overall creditworthiness and reputation of the issuer are only supported in the debenture. A debenture is a form of investment without any guarantee.
Defensive Stock
Even in times of economic depression, even in extreme catastrophic bond situations, these companies continue to pay dividends at a constant rate. A share that offers steady dividends and dependable incomes.
Delta
The ratio of the price change of the underlying asset compared to the corresponding price change of the derivative. It is also known as the hedge ratio since it is used for a hedging strategy. The range is between 0 and 1.
Derivatives
A security that has one or more basic assets as the basis for its price. Stocks, bonds, goods, currencies, interest rates and market indices are the most common assets underlying the programme.
Diversification
Reducing the risk of investment by the acquisition of shares of other companies in various areas.
Dividend
In return for its investment, some of the company's income chose to pay its shareholders. It is normally stated by the board of directors of the company as a percentage for the current share price or a certain INR value.
Equity
Common and favourite shares representing interests in a company's ownership.
Face Value
It is the money name or money, which will be earned on the expiry by the issuer of the security by the individual securities owner. It is also referred to as par value.
Hedge
A technique or an attempt to reduce the risk of adverse asset price shifts.
Income Stock
A security with a strong record of dividend payments and a dividend higher than ordinary stocks.
Index
Economic or security market statistical measurement of change. Indices have their own method of calculation and are commonly measured over time as a percentage change in the base value.
Initial Public Offering
The initial public share offering of a firm is an invitation to the public to buy shares. Smaller, younger firms that want to expand and grow issue IPOs.
Internet Trading
Internet Commerce is a medium-sized Internet platform. Internet trading is carried out using an order routing system that routes traders to the system of trading exchanges. Through their Internet Trading System brokers, traders in all parts of the world can trade. Internet Trading was permitted by the Securities and Exchange Board of India (SEBI) in January 2000.
Limit Order
An order for shares to be purchased or sold at a given price. The order is executed at or rather better than at the given limit price. A limit order sets the seller's willing price, and the buyer's willingness to pay the maximum price.
Listed Stock
The shares of an issuer are traded on the stock bourses. In order to maintain the listing privilege, the issuer shall pay fees that are listed in the stock exchange and conform to the rules of the stock exchange.
Market Capitalisation
The total worth of all outstanding shares of a corporation. The calculation is made by multiplying all remaining shares with the existing one share market price. In terms of wealth, it determines the size of the company.
Mutual Funds
An expenditure pool managed by specialists in order to improve savings by investing in stocks, bonds and other securities. These professionals will establish from these funds a diversified portfolio.
Odd Lot
A number of shares that are less than or greater than but not equal to the board lot size. For example, if the board lot size is 100 shares, an odd lot would be 95 or 102 shares. Usually odd lots are difficult for trading and it is not accepted easily in the market.
One-Sided Market
This is a market with just potential vendors but not both prospective purchasers.
Out Of The Money
The stock price is below the strike price, or call options. This signifies that the stock price is higher than the strike price for options. The pricing of non-money alternatives includes "time value" only.
Portfolio
Any person or institution holding different securities of various companies operating in different sectors are included in the portfolio.
Positions Limit
The maximum amount of futures contracts and options held by any particular investor at any given moment.
Pre Opening Sessions
For 15 minutes, i.e. from 9:00 am to 9:15 am, the pre-open session is held. Changes and cancellations occur during pre-open session order entry.
Price-earnings (P/E) Ratio
A recently traded stock pricing assessment of firms reported earnings per share over the last 12 months. For instance, if a firm X's latest trading share price is ₹40 and its profit for the last 12 months per share is INR 2, then the company X's P/E ratio will be 20 (40/2)
Put Option
An option that allows an investor to sell a certain stock at a predetermined price within a certain period of time. The option of placing is bought by those who believe that the stock price will drop below the price specified.
Risk
Probable chances of investments actual returns will be reduced then as calculated. Risk is usually measured by calculating the standard deviation of the historical price returns. The default deviation is proportionate directly to the corresponding risk level.
Securities
A transferable investment certificate representing property in things such as inventories, bonds, futures contracts and options held by individuals.
Strike Price
The price that the holder may buy or sell the securities that the holder holds when the option is executed (if the call option is selected).
Stock Split
It implies splitting the existing shares into more outstanding shares of a corporation. The availability of shares in the market is frequently increased. The normal ratio of division is 2:1 or 3:1, i.e. one share is divided into two or three parts.
Thin Market
A market when the quantity of offers to purchase and sell is comparably low. The price is quite erratic as the number of transactions is limited.
Trading Session
The term is available for both sellers and buyers from 9:15 a.m to 3:30 p.m. All orders must be placed within this time limit for the day. All orders submitted in pre-opening sessions are matched and executed here.
Yield
It is the percentage measure of return on investment. The share yield is determined by dividing the company's current share price by the annual dividend paid for the share. When the current share prices are ₹100, for example, and if the dividend paid each share is INR 5 per annum, the share returns are 5 per cent.
Stock market understanding can be considered a difficult undertaking. Some difficult terms and concepts can frustrate you, but you will certainly be helped by knowing these terms. These terms will enhance your vocabulary and help you become a better and successful investor.
