10 Terminologies to know in the stock market
The stock market is on the rise when it comes to winning big. People from all over the world are investing in the stock market, hoping to win big. But, unfortunately, the chances are high for big losses.
Since this is a highly volatile market, there are equal chances of winning as there are of losing money. That being said, with the right knowledge and grasp of the subject, you will surely be able to find the stocks that make you money more often than not.
To start with this process, the first thing you need to do is learn the terminology of the industry. You need to know everything you need to know. Before investing in the market, you rigorously research and understand the basic concepts. These are easy to learn.
If you are just starting out in the market, or want to make better choices, this article will be perfect. Here you will learn about the top 10 terminologies that you must remember before buying stock.
Perhaps one of the most commonly used and necessary terms in the market is equity. Without knowing what equity really means, there is no way you can succeed or even understand how the market functions. In the stock market, equity refers to the shares you hold of a particular company.
The second most significant term you need to know is bid. A bid is basically the highest amount a buyer is willing to pay for a particular share of the stock. If there are many buyers of the same stock, they will compete amongst themselves and the stock will end when one buyer bids the highest. Like in an auction, once no other buyer wants to match the said price, the stock is sold.
Also known as ‘ask’, an offer is the lowest amount of money that a seller will sell their stock for. These numbers are quite random and based on the valuation and potential of the company you are investing in. First, an offer is set, after which bids are placed if more than one buyer is interested.
What a seller starts the bid with and what the buyers agree on will always be different. This can be calculated as the difference between the offer and the bid. In the stock market, the bid is often lower than the ask. This difference is commonly known as the spread which is directly related to the demand and supply of the stock.
As is quite evident by the name, an exchange is when both the seller and buyer agree on a price and the stocks and securities get traded. This can be with one or many stocks and is applicable both in domestic and international trades/ in India, these stock exchanges are managed by the Bombay Stock Exchange and National Stock Exchange of India.
A broker is your friend in the stock market and the middle man in any stock exchange. Every investor needs a broker to trade the stocks and connect to the exchange. That is where brokers come in. they do not own any securities but trade them for you in exchange for a commission.
- Trading account:
Nowadays, stock markets are electronic. The trading account is an account you open on your behalf with a registered broker. From here you can execute all your trades electronically and all buying and selling orders are done here.
- Bear market/ Bull market:
These are terms that determine the current trend of the stock market. For example, if the stock prices are consistently increasing, it is known as a bull market. On the other hand, if the prices are decreasing at a rapid rate, it is a bear market.
This term mainly tells you the price fluctuations of a stock. A highly volatile market means that there are daily movements in the price of a stock. If you want to invest long-term, you should choose a less volatile stock.
Lastly comes the fruit of the deed, the yield. As in general commerce, yield is the return on investment from a particular stock. This value is expressed in percentages; the higher the yield, the better your market sense. For instance, the stock yield for Nifty financial services increased by 0.29% on 12th September.
With such information, you can easily understand the market better and have conversations about your trades.