Online Trading involves buying and selling of companies shares. The aim to participate in online stock trading can be to earn profits over the short-term or long term. Investors generally infuse their capital into stocks of different companies to earn profits out of capital appreciation. This happens over a considerably long period. On the other hand, traders are the ones who have their eyes set on small price differences and the potential profits that can be made.
What are some of the stock market terms that every investor must know before trading?
Every stock market enthusiast or an experienced stock market investor must know basic terminologies used in online stock trading. If you are able to not only understand but also implement the knowledge gained, it will help you to improve your online trading vocabulary and grow as an investor.
- Agent: Agents are the firms that charge brokerage as commission to conduct buying and selling of shares for their clients (investors).
- Offer: An offer is an asking price quoted in the stock market by the equity share owner. It is the lowest price at which the stock is available for purchase.
- Bear Market: When the share price of the stocks falls consistently to as high as 20% for a period of time, it is known as a bear market.
- Bull Market: Bull Market is a situation that is the total opposite of the bear market. It is a situation wherein the price of a share has been on an increasing spree for a long time.
- Beta: Beta is a measure of association between the overall movement of the stock market and the price of a share. The Beta of a market is considered to be 1.
- Bid: The highest share price that a buyer is willing to pay is known as a bid.
- Blue-chip stock: Stocks of financially sound companies with a large market size and market capitalization are known as blue-chip stocks.
- Bonds: Bonds are generally issued by the government as a fixed income instrument. The investor will lend a specific amount to the bond issuer in return for a fixed or variable interest rate for a specific period. The interest rate in such a case is called the coupon rate.
- Book: An electronic record of buying and selling of pending stocks.
- Call Option: The buyer of the option herein will have the right but not any obligation to purchase the underlying asset at the time or at a specified price.
- Closing price: It is known as the final price at which a share is sold or traded on a specific trading day.
- Convertible securities: Securities such as debentures preferred stocks issued by an issuer carrying capacity to convert into other securities of the issuer are called convertible securities.
- Debentures: Another example of fixed income instruments are Debentures. These are not backed by any security or collateral of the issuer.
- Defensive stocks: Shares that offer stable dividends and earnings irrespective of the stock market position. Examples are IT and FMCG Stocks.
- Face value: The value in cash that the holder of a security is entitled to get when the security matures on the maturity date.
- One-sided market: A situation where both potential sellers or buyers are not present simultaneously. Condition when the market is headed in a particular direction.
- Spread: The difference between the asking price and the bid price of a share is called a spread.
- Volatility: Online Trading is driven and affected by several components of the economy. The fluctuations of the share price are called volatility.
- Volume: Average number of stocks that are traded during a particular time.
- Dividend yield: The returns/payouts given by the company in comparison to its share price.
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