STOCK MARKET TERMINOLOGY

Basics terms which you must know before you enter in stock market:

Ø  Open Price: The opening price is the price at which a security first trades upon the opening of an exchange on a trading day

Ø  High Price: Today's high refers to a security's intraday high trading price. Today's high is the highest price at which a stock traded during the course of the day

Ø  Low Price: Today's low is the lowest price at which a specific stock trades over the course of a trading day.

Ø  CMP: Current market price is the current market price of stock or security it is last traded price on which one buyer and one seller have exchange their securities

Ø  Close Price: The final price at which the stock is traded on a given particular trading day.

Ø  Volume: The number of shares of stock traded during a particular time period, normally measured in average daily trading volume. Volume can also mean the

Ø  Equity: Common and preferred stocks, which represents shares in the ownership of a company.

Ø  Ask/Offer: The lowest price an owner is willing to sell the stocks.

Ø  Bid/Buy: It is the highest price a buyer is willing to pay for a stock. It is opposite of ask/offer

Ø  Trading session: The period of time from 9:15 AM to 3:30 PM is open for trading for both sellers and buyers, within this time frame all the orders of the day must be placed.

Ø  Market order: is an order to buy or sell a security immediately. This type of order guarantees that the order will be executed, but does not guarantee the execution price. A market order generally will execute at or near the current bid (for a sell order) or ask (for a buy order) price. However, it is important for investors to remember that the last-traded price is not necessarily the price at which a market order will be executed.

Ø  Limit order: is an order to buy or sell a security at a specific price or better. A buy limit order can only be executed at the limit price or lower, and a sell limit order can only be executed at the limit price or higher. Example: An investor wants to purchase shares of ABC stock for no more than Rs 10. The investor could submit a limit order for this amount and this order will only execute if the price of ABC stock is Rs 10 or lower.

Ø  Stop order/Stop-loss order: is an order to buy or sell a stock once the price of the stock reaches the specified price, known as the stop price. When the stop price is reached, a stop order becomes a market order.

Ø  Buy stop order: is entered at a stop price above the current market price. Investors generally use a buy stop order to limit a loss or protect a profit on a stock that they have sold short. A sell stop order is entered at a stop price below the current market price. Investors generally use a sell stop order to limit a loss or protect a profit on a stock they own.

Ø   Beta: A measurement of the relationship between the price of a stock and the movement of the whole market. If stock ABC has a beta of 1.5, that means that for every 1 point move in the market, stock ABC moves 1.5 points and vice versa.

Ø  Execution: When an order to buy or sell has been completed. If you put in an order to sell 100 shares, this means that all 100 shares have been sold.

Ø  Margin: A margin account lets a person borrow money (take out a loan essentially) from a broker to purchase an investment. The difference between the amount of the loan, and the price of the securities, is called the margin.

Ø  Volatility: The price movements of a stock or the stock market as a whole. Highly volatile stocks are those with extreme daily up and down movements and wide intraday trading ranges. This is often common with stocks that are thinly traded or have low trading volumes.

Ø  Spread: This is the difference between the bid and the ask prices of a stock, or the amount someone is willing to buy it and someone is willing to sell it.

Ø  Assets: Everything the company owns on its name, including the cash, equipment’s, land, technology etc. which shows the total wealth of the company.

Ø  Bear Market: A market in which stock prices are falling consistently.

Ø  Bull Market: A market in which the stock price is increasing consistently.

Ø  Blue Chip Stock: Stocks of large, well-established and financially-sound companies.

Ø  Broker/Brokerage Firm: A registered securities firm are called broker/brokerage firm. Broker’s acts as an advisor for purchase and sell of listed stocks, they do not own the securities at any point of the time. But they charge a commission for their service.

Ø  Diversification: Reducing the investment risk by purchasing shares of different companies operating in different sectors.

Ø  Dividend: A portion of the company's earnings decided to pay to its shareholders in return to their investments.

Ø  Face value: It is the cash denomination or the amount of money the holder of the individual security going to earn from the issuer of the security at the time of maturity. It is also known as par value.

Ø  Hedge: A strategy or an attempt in reducing the risk of adverse price movements of assets.

Ø  Index: A statistical measurement of change in the economy or security market.

Ø  Portfolio: Holding of any individual or institution. A portfolio may include various type of securities of different companies operating in different sectors.

Ø  Stock Split: An attempt to increase the number of outstanding shares of a company by splitting the existing shares. It is usually done to increase the availability of shares in the market. The usual split ratio is 2:1 or 3:1, i.e. one share is split into two or three.

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