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Let’s start with some basic terms used in financial markets.
As in the previous post we talked about the technical and fundamental analysis , so here we will discuss the terms used in common.
These terms will help you understand the market better.
So let’s begin with the word stock market : It is a place where there is buying and selling of equity shares of the companies.
What is a bull and bear market ?
BULL MARKET : When the stock market is at rise and the stock prices are rising is called a bull market.
BEAR MARKET : This is the opposite of a bull market , when the stock market and the stock prices are generally falling is called bear market.
BID: Amount that you want to pay or you are willing to pay for that particular share.
ASK: Amount for which you want to sell the particular share.
The following terms are generally used to sell or buy shares
MARKET ORDERS: This is an order to buy/sell shares at the market price. Market prices are generally volatile.
LIMIT: This is an order when you want to buy the shares at a lower price than market price or you want to sell at a higher price. Limit order saves you from market volatility.
DAY ORDER : The order that is only applicable/good till the end of the trading day. If the order is not executed till the end of the day ,the order gets cancelled.
LIQUIDITY: Liquidity refers to how quickly or easily you can sell your shares. If we have high volume in a particular stock of a company that means there is high liquidity thus we would not face a problem in selling our shares.
MARKET CAPITALISATION : This simply refers to the value of the company decided by the stock market. That is , the current value of all its shares put together.
INDEX : A stock market index is a way to measure the performance of the stock market . It shows all the changes that have taken place in the market. Nifty and sensex are the main index of India.
INTRA – DAY TRADING : Intra day trading means to buy and sell the shares on the same day and close all the positions before the market gets closed.
AVERAGING DOWN : When the price of the stock starts going down and as the price is going down you buy more and more shares. This decreases the average of your stock price.
BETA : This is the measurement of the relationship between the stock and the whole market.
BROKER: The person who sells or buys shares for you in exchange for a fee.
PORTFOLIO : This is the collection of the investments or stock that you want. The no of stocks can be as low as 1 and also infinite.
VOLATILITY: This is the movement of the stock price or the whole market. This is mostly used in intraday trading.
SHORT SELLING : When you short sell the shares and make a promise to the broker to return them till the end of the day.