Common Terms to Know Before Beginning Stock Trading

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If you are a first time investor in the stock market, the sheer number of terms that are thrown about could cause you a lot of confusion. However, it is important that you know some of these terms in order to be able to understand stock trading better. Here are some of the most commonly used terms:

Stock Exchange

A stock exchange is a place where stocks are bought and sold by traders. The BSE and NSE are well-known stock exchanges in India.

Bear Market

This term means that the stock market is in a situation in which prices are falling.

Low

This is a term that is related to the bear market. This term signifies that the price of something has reached a record decrease in prices. The record could be for a single day or week or even a historic low.

Bull Market

This is the opposite of a bear market. The term bull market is used when the prices in the stock market are increasing.

High

A term that is related to the bull market. This term signifies that the price of something has reached a milestone. The high could be for a day, or a week, or a record high that means the value has not been seen before in history.

Business Day

This refers to the days the market is open for trading. Usually, Monday to Friday. Public holidays are not considered as business days.

Close Price

This is the final price at which a particular stock was traded for a given day.

Brokerage Firm

This refers to a firm that is a registered securities firm. This firm will enable the purchase and sale of stocks for its customers. The firm makes money through commissions that it makes on transactions for its customers.

Broker

A broker is a person employed by a brokerage firm who enables purchases or sales of stocks as specified by the customers of the brokerage firm. The broker is also paid commissions on transactions.

Execution

This term is used to confirm that a broker has completed a sale or purchase according to the wishes of the customer.

Assets

Put simply, the term assets refers to the total wealth of the company. The total wealth is calculated as a sum of the value of all the things owned by the company.

Ask Price or Offer price

This refers to the least price at which a person is willing to sell their stocks (not necessarily all at once).

Bid price

This refers to the highest price that a given buyer is willing to pay to acquire a stock from a seller. The term bid price is considered the opposite of an ask price or offer price.

Annual report

This is a report released by a company at the end of every financial year. This report will contain details of the financial position of the company including details of revenue, costs, profits/losses, assets, liabilities, and sometimes the challenges ahead and strategies to deal with those challenges.

Day Trading

This term refers to the practice of performing a purchase and a sale on the same day. This is highly time sensitive.

Day Traders

Those who engage in the practice of day trading are day traders.

Dividend

A dividend is an amount of money that is paid out to shareholders of a company. The dividend is derived from the earnings of the company. It is to be noted that all companies do not pay out dividends. In addition, dividend payouts need not necessarily be regular.

Initial Public Offering (IPO)

An IPO refers to the process of taking a company public. That is, the company decides to sell its stocks on the open market instead of holding them by itself. There are different criteria and regulations for taking a company public and a company must be aware of them before proceeding with the IPO.

While this is not an exhaustive list, these are some of the basic terms that are required in order to begin stock trading. Knowing these will help prepare to invest in stocks. They also serve as a useful guide in the event that you wish to follow news and reports regarding the stock that you intend on investing in. In order to learn more about companies that are traded on the Indian stock market you can visit BankBazaar.