Stock markets or Share markets are public exchanges where individuals, traders and institutional investors come together to buy and sell listed shares.
With technological advancement, the exchanges are converted into electronic marketplaces. Share or Stock prices are devised on the action taken by the buyers and sellers depending on the supply and demand in the market.
To understand what is share market in simple manner, there are certain terms which an individual should be well acquainted with. The meaning of these share market terms would be different in non-trading scenarios so it is important to properly comprehend the context behind each term.
Share Market Terms
Buy – Purchasing a stock. It means to buy shares or take a trading position in a company.
Sell – Selling the stocks. This action depends on cutting losses or registering profits.
Limit Order – A limit order is a pre-defined type of order. It is placed at a decided price to buy or sell stocks.
Market Order – A market order is a is a pre-defined type of order. It is placed at a market price to buy or sell stocks.
Intraday Order – An intraday order is the request given to a broker to place a trade and buy or sell before end of the day.
Ask – Ask is the price traders are looking for their stock.
Bid – Bid is the price a trader is willing to pay for the stock.
Bull – A bull is a scenario, a definite period of market condition where investors expect share prices to rise.
Bear – A bear is a scenario, a definite period of market condition where investors expect share prices to fall.
Volatility – It is an indicator for risky stocks. It shows changes in a stock prices; moves up or down.
Authorised Shares – This is the total number of allocated shares that a company can trade.
IPO – It is an Initial Public Offering that happens when the private company becomes a publicly traded company.
Secondary Offering – This is another offering in order to sell more stocks and to raise more money from the public.
Averaging Down – Buying stocks at lower price to increase the purchasing price.
Capitalisation – Market valuation of a company.
Float – Open market shares after reducing the number of shares held by the insiders.
Dividend – Portion of the company’s earning which is paid to the shareholders.
Broker – A broker is a person who buy or sell stocks on the behalf of a trader.
Exchange – An exchange is a place where different types of investment are traded.
Portfolio – A collection of different investments owned by the trader.
Margin – Margin account allows a trader to borrow money from the broker to buy shares.
Sector – A group of stocks in the same sector.
Stock Symbol – Usually 1 to 3 character alphabet is the symbol which represents a company listed on the exchange. If one to three character alphabets of a company are overlapping with other listed company, then it is extended to more characters.
Premium: The cost associated with a derivative contract, referring to the combination of intrinsic value and time value.
Spot: The price in the cash market for delivery using the standard market convention. It is different than broking charges.
Strike Price: The price at which the holder of a derivative contract exercises his right.
Remembering these share market terms at tip of the tongue will make you understand the stock trading better.
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