Table of Contents
The term ‘stock market’ itself is very confusing for someone who doesn’t know much about the stock market terms. First, we have to know, what is a stock market. In simple words, the stock market is the place where a person and organization buy and sell shares publicly to various trade companies. When you buy a share you become a part of that company.
Here, are the 30 stock market terms every investor should know.
1. Bull Market:
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A market condition in which the stock prices are rising, and investor confidence is getting higher. Here, a bull is an investor who hopes prices rise, on this assumption he buys a commodity hoping to sell in the future to get a profit.
2. Bear Market:
This term is opposite to the bull market. A bear market is a condition where the stock prices are falling. In simpler words, a trend of falling stock prices for an extended period is a bear market.
2. Blue Chip Stocks:
A company that has a stable earning history and reliable dividend payments.Not only that it also has strong balance sheets. These are the reasons many investors want to opt for blue-chip stocks.
4. Capital Gains :
This is one of the stock market terms, the profit earned by selling of a stock. It further splits into two parts, short-term and long-term capital gains.
5. Circuit Limit:
A circuit limit is a safety mechanism set up by the exchange to keep aside the dramatic movements at a stock price in a short time interval.
6. Demat Account:
It is commonly known as Dematerialised account. A Demat account helps investors keep shares and securities in an electronic format. For example, it is needed to purchase and sell in India.
7. Dividend :
A dividend refers to a portion of the profit, that a company gives to its shareholders. Dividends can be issued in multiple forms, like, cash payment, stocks, and many other forms.
8. Defensive Stock:
This term refers to a stock that gives consistent dividends and stable earnings irrespective of the state of the overall stock market and it is considered a safe investment.
9. Derivative:
A financial tool whose worth is based on the value of an underlying asset. The value derives from stocks, indices, commodities, currencies, exchange rates, etc.
10. Earnings Per Share (EPS):
It is a significant financial measure. This is one of the stock market terms which indicates the profitability of a company.
11. IPO:
Initial Public Offering is the process of selling stocks to the general public. It could be the young or old company, that decides to be listed on an exchange and hence goes public. Companies can raise with the help of an IPO by issuing new shares to the public.
12. IPO Grading:
Credit rating agencies give a rating to evaluate the necessary strength of a company before its IPO. It can help the investor to assume risks and potential Reuters of investing.
13. Inflation:
The rate at which general prices of goods and services increase. High inflation means high prices.
14. Intrinsic Value:
The inherent value of an investment is the difference between the current price and the stick price of an article.
15. Limit Order:
Limit Order is different from market order. It deals primarily with the price which means an order to buy or sell a stock at a specific price or better.
16. Liquidity:
In stock market terms, liquidity refers to how quickly shares of a stock can be bought or sold without harming the stock price.
17. Market Capitalization:
Market Capitalization is the total valuation of the company based on the current share price and the total number of outstanding stocks. The calculation technique is to multiply the current market price of the company’s shares by the total outstanding shares of the company.
18. Market Order:
It is one of the important stock market terms. A market order deals with the carry-out of the order. In simple words, an order to purchase or sell a stock at the current market price.
19. Margin Trending:
In the stock market, margin trading means the process whereby individual investors buy more stocks than they can afford to.
20. Margin of Safety:
The margin of safety (MOS) is the difference between your gross revenue and the market price is known as the margin of safety.
21. Moving Average:
This is one of the tools that technical analysts use. The price of a stock often fluctuates and creates lots of noise for analysts. It helps to remove the noise and gives a smooth data set for analysts to make trade decisions.
22. Nifty:
Nifty is one of the important stock market terms that everyone must know. It refers to Nifty 50, which is a stock market index. It measures the performance of 50 companies listed on the national stock exchange.
23. P/E Ratio:
The P/E ratio refers to the earning multiple. It is basically a technique that helps to calculate if a company is overvalued or undervalued. In simple words, you get to know how much a market intends to pay for a stock based on the company’s past and future earnings.
24. Penny Stocks:
Penny stocks refer to the trades that are at low prices and have low capitalization. These are mostly liquid and are usually listed on a smaller exchange.
25. Resistance Level:
A price level that a stock has obstruction of rising upon due to selling pressure.
26. Stock Split:
It is the process of splitting a company’s existing shares into multiple shares but the market cap remains the same. As the share increases, the market price goes down.
27. Sensex:
Sensex is the stock market index. It evaluates the performance of the top 30 companies listed on the Bombay Stock Exchange. It is one of the most important stock market terms you need to know.
28. Stock Exchange:
A Stock Exchange is a centralized platform where shares of public companies are purchased and sold.
29. Securities and Exchange Board of India (SEBI):
SEBI is basically a statutory body of the Indian Government that was established on the 12th of April in 1992. It was introduced to increase transparency in the Indian investment market.
30. Volume:
A volume acts as an indicator that means the total number of shares that have been purchased or sold in a specific time.
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