There are various stock market terminologies related to trading strategies, indices, and trends of the stock market. Some of the commonly used terminologies are explained below. Let us start with basic terms.
- Buy: To take a position in a company through ownership of shares.
- Sell: Selling the ownership of shares.
- Ask/Offer: The lowest price at which a shareholder wants to sell his shares.
- Bid: Bidding is the price at which you can buy a stock.
- Bull Market: A market condition where share prices are expected to rise further.
- Bear Market: A pessimistic market condition where share prices are expected to fall consistently.
- Volatility: The fluctuations in stock price.
- Market Cap: Market Capitalization refers to the company’s worth in the market.
- Dividend: A part of the company’s profit payable to its shareholders.
- Beta: Measures volatility of a stock in comparison to ups and downs in the general stock market.
- Delta: Is the multiple of the change in the value of an underlying asset to the change in the value of its derivative.
- Floating Stock: Shares available in the market for trading after removing the shares held by the insiders/promoters in a company.
- Price-to-Earnings Ratio: It is used by investors to know what they can expect to earn per share from a company. A high P/E ratio can also be due to an overvalued stock price and high growth rates in the future. It is also known as P/E Ratio and Earnings per Share.
- Stock Exchange: Organisations such as National Stock Exchange of India Ltd (NSE India) and Bombay Stock Exchange Ltd (BSE) where you can trade stocks. .
- Limit Order: The instruction given when you want the trade to execute at a given price. This is given to either a broker or the trading platform.
- Buy limit orders – Here the trade is fulfilled only at the limit or lower price.
- Sell limit orders – Here the trade is fulfilled only at the limit price or a higher one.
- Broker: An individual or a firm that buys and sells your stocks on your behalf and charges a brokerage fee for its services. Investors need to open Demat account with a broker to start stock trading.
- Investment Portfolio: The collection of investments where you have allocated your funds.
- What is Intraday Trading: Intraday trading is Day Trading where the financial securities are bought and sold within the same trading day.
- Market Order: One of the simplest order types where buy or sell orders are executed quickly at the current market prices. Here the priority is trade execution as against the price of execution.
- Day order: This instruction is given to sell stocks by the end of the day. It shows that your order is good for the same day only.
- Arbitrage: Market arbitrage is a technique to earn profits by taking advantage of a price discrepancy in the stock market. It is the practice of buying and selling an equal number of shares in different markets at the same time. Traders buy the shares in the market where the price is lower and at the same time sell those shares in the market where the price is higher.
Sometimes minor price discrepancies come into existence for a short time due to some inbuilt efficiencies of the stock exchanges and traders utilize the discrepancies to make profits.
- Short Selling: Short selling is a popular trading strategy utilised for a declining stock. Short sellers are allowed to sell the stock at the current market price and buy it back when its market price comes down.
You need demat account and trading account to trade in the stock market. You can consider Bajaj Financial Securities Limited (BFSL) trading account as it allows you to save big on brokerage. You have to pay a flat brokerage fee per trade with BFSL as against volume-based brokerage charged by full-service brokers.