Stock market beginners who are enthusiastic about entering the stock market often lack knowledge of market-related terminology. This terminology is essential to understand the functioning of the stock market. It also helps the investor in researching stocks, reading reports, analysing charts, and understanding the experts’ views on the stock market.
Knowing about the stock market better, an investor can reap higher benefits of a Demat account in the stock market. Read on to know more about the essential stock market terms that every investor should know.
Stock Market Terminology for Investors
- Agent: It is a brokerage house that buys and sells shares and securities on the behalf of the Demat account and Trading account holder. The brokerage firm does not get ownership of the stocks at any point during the buying or selling transaction and acts on the behalf of the client.
- Ask / Offer: The minimum price at which the stock owner is ready to sell his stocks.
- Assets: These are all the belongings a company owns in its name. Assets include cash, raw material, land, technology, plant & equipment, etc. Assets show the entire wealth owned by a company.
- At the money: It happens when the options strike price is exactly the same as the price of the underlying securities. At a time when options are at the money, options trading increases in the stock market.
- Bear Market: It is a market situation where stock prices are falling continuously.
- Beta: It is the correlation between the market price of a given stock and the entire stock market’s movement.
- Bid: It is the opposite of Ask / Offer. The bid is the maximum price a buyer is willing to give for a particular stock in the stock market.
- Blue chip stocks: These are shares of well-reputed companies. These companies show consistent growth over time and have a history of paying high dividends to shareholders over the years. The market capitalization of such high-performance stocks is usually in thousands of crores of rupees.
- Board lot: The exchange boards decide the standard unit of trading on a particular exchange. It is known as the board lot and is usually derived from the per-share price of a stock. Usually, board lot sizes are in the denomination of 50, 100, 500, and 1000 units.
- Bonds: A bond is a promissory note a company or the government issues to the bondholder, promising to pay the bondholder the principal and an interest payout at the end of the bond term.
- Book: It is an electronic record of all the purchase and sale orders for a particular stock that is still pending.
- Broker / Brokerage firm: It is a registered securities firm that advises the investor on the sale and purchase of shares. Leading brokers allow free Demat account opening and charge only a nominal commission for their services.
- Bull market: A market condition where the stock prices are consistently rising.
- Business days: All working days between Monday and Friday, except public holidays.
- Call option: It gives the right but does not obligate an investor to buy a given stock at a stated price within a defined timeline.
- Close price: The price at which the trading of a given share happens on the trading day under consideration.
- Commodities: These are products, like agricultural products and natural resources, traded on an authorized commodities platform, separately from usual stocks.
- Convertible securities: An issuer’s securities that can be converted into other securities of the same issuer. These may be bonds, debentures, or preferred stocks. It may take place at the option of the holder or the issuer.
- Debentures: An unsecured debt instrument that is not supported by collateral but only by the reputation of the issuer.
- Dividend: A part of the company’s earnings, decided by the company’s board of directors, paid to the shareholders for investing in the company.
- Listed stocks: Stocks of an issuer listed on a stock exchange.
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These stock market terms can help the investor get comfortable with the stock market and trade confidently.