BASIC TERMS YOU MUST LEARN
STOCK MARKET TERMINOLOGY
Stock markets terminology is important to learn as experts and amateurs use these terms very frequently and regularly. So to understand the trading strategy, terminology and patterns you need to aware of these terms in order to trade and perform well in stock market.
Basic terms you must learn
An agent is a brokerage firm which do buying and selling on behalf of the investors in stock market.
It refers to the price at which the shareholder of a company is ready to sell his shares in stock market.
- At the money:
Under this scenario, the strike price of an option is equal to the price of the underlying asset which it represents.
- Broker :
The person who is selling and buying in stock market on behalf of trader and investor and in lieu gets commission.
- Bear Market :
It refers to scenario where stock market and its shares are continuously falling.
- Bull Market:
It refers to scenario where stock market and its shares are increasing for a prolonged period of time.
It measures the association between price of one share and the overall movement of stock market. Beta of stock market is assumed to be 1 (One). A stocks beta of more than 1 (One) shows a higher risk than that of stock market. A beta of less than 1 show that stock is less riskier than the stock market.
Price which buyer of a stock is ready to pay for a particular stock.
- Blue Chip Stock:
These are equity shares of companies which are well-established and financially stable. These generally have a relatively huge market capitalization.
A bond is a fixed income investment which is issued by the government or a company to its buyers. It shows a specified amount which an investor lends to the issuer of the bond for a specified period of time at a variable or fixed interest rate.
It is an electronic book/record which contains all the buy and sell order history of a particular stock which have remained pending.
- Call Option:
In this, the buyer of the option gets a right not an obligation to purchase the underlying asset at a specified price and time.
- Close Price:
This is the final price of a stock in stock market at end of a trading day at which stocks of a company are traded or sold.
- Convertible Securities:
It is a security like preferred stocks, bonds, debentures which are issued by an issuer capable of being converted into other securities of that issuer.
It is a form of fixed-income instrument which is not backed by security of any physical assets or collateral of the issuer.
- Defensive Stock:
These are stock that earns a constant amount of dividend even at the time of recession.
A delta relates to the ratio of change in the price of a derivative in response to change in the price of the underlying asset. A higher delta suggests higher sensitivity of the delta to the price changes in the underlying asset.
- Face value:
It relates to the amount of money or the value in cash that the holder of a security will obtain from the issuer of the security when the security matures at the specific date.
- Moving Average
It refers to the average price of an equity share with respect to a specific period of time. Some popular time frames emphasis on 30 day and 200-day moving averages.
- One-sided Market:
It refers to a situation where in a market only contains potential sellers/ buyers instead of both being present simultaneously. Market makers show only the bid price or an offer price indicating that market is heading in one direction.
- Spread :
It refers to the difference between the bid and the ask prices of an equity share. You may perceive it as the difference between the amount at which you would like to buy and the amount at which you would like to sell a stock.
It refers to the fluctuations in the price of an equity share. Highly volatile stocks witness severe ups and downs during trading session.
It shows the no. Of shares traded upto a particular point of time in stock market for a particular stock.
You may use the yield to calculate the return on an investment which you get after receiving dividend on a share. You can find the yield by dividing the annual amount of dividend by the price paid for the stock.