Share: Ownership of the company is divided into a number of parts and each part represents a proportionate claim on the company’s assets, earnings and profits. The value of each share fluctuates depending on numerous market factors. The shares of those companies that are listed on the stock exchange can be traded i.e. bought and sold on that particular exchange. Acquiring more stock of a particular company means a greater ownership stake in the company.
Shareholder: A shareholder is any individual, institution or corporation that legally owns one or more shares of stock in a public or private company. Shareholders have a proportionate claim on the company’s assets, earnings and profits. A shareholder has rights on dividend, voting rights and all the decisions regarding the operations of the company are taken with a view to creating wealth for the shareholders and keeping their interests in mind.
Primary market: The primary market place is the market place where shares are issued for the public to be bought directly from the company, usually through an IPO. The company gets the amount on the sale of shares.
Secondary Market: It is the place where formerly issued securities are traded between investors and traders. The company does not get any proceeds out of the amount of sale of its shares.
Intraday: It is a type of trading activity where shares is bought and sold on the same day. Here the shares are not purchased for investing and hence not held for delivery, but to get profits by harnessing the short term movements in the market.
Bull vs Bear– It describes the direction of the market in general or particular security.
- Bull: A bull market is when the share prices are rising and the public is optimistic that the share price will continue to rise.
- Bear Market: When the share prices are falling and the public is pessimistic about the stock market, then it’s a bear market. The public is fearful and thinks that the market will continue to fall and hence, selling increases in this market.
IPO: When a private company offers its sharers the first time to the public to get listed on the share market, then it is called an initial public offering.
Blue-chip stocks: The stocks of those reputed companies who are in the market for a very long time, are financially strong and have a good track record of consistent growth and returns in the past many years. Their stocks have low risk compared to mid-cap and small-cap stocks.https://slmtax.home.blog/2020/04/24/blue-chip-stocks/
Broker: An investor cannot buy or sell shares directly from the stock exchange, they have to do so through a stockbroker. A stockbroker is an individual/organization who is a registered member of the stock exchange and are given license to participate in the securities market in place of its clients. Stockbrokers can directly buy & sell stocks in the share market on behalf of their clients and charge a commission for this service. They also provide advisory services to their clients.
Portfolio: A portfolio shows the different stocks and the quantities that you are holding. It’s important to build a good portfolio to maintain risk-reward in the stock market.
Stock Exchange: Exchanges act as a market/ platform/ intermediary where the stock buyers connect with stock sellers. There are two big stock exchanges in India- Bombay stock exchange (BSE) and National stock exchange (NSE).
Limit Order: Limit order means to buy/sell a share with at a fixed price that the trader/ investor wants.
Dividend: Whenever a company (whose shares you are holding) is in profit, the company can either reinvest the profit or distribute the amount among its shareholders. This share of the profit that you get from the company is called a dividend. The dividend is the return to the shareholders for investing in the company and for bearing the risk. It is a stable source of income.
Index: Since there are thousands of companies listed on a stock exchange, hence it’s really hard to track every single stock to evaluate the market performance at a time. Therefore, a smaller sample is taken which is the representative of the whole market. This small sample is called Index and it helps in the measurement of the value of a section of the stock market.
Market order: When you want to buy/sell a share at the current market price, then you need to place a market order.
Good till cancellation (GTC) order: This order can be placed when an investor is willing to buy/sell the shares at a specific price and the order remains active till it is executed or canceled.
Day order: This order can be placed when an investor is willing to buy/sell shares on a particular day and the order gets automatically canceled if not fulfilled on that day. The order does not get carried forward until executed.
Trading volume: It is the total number of shares being traded at a particular period of time. When securities are more actively traded, their trade volume is high. Higher trade volumes for a stock mean higher liquidity, better order execution and a more active market for connecting a buyer and seller.
Volatility: It means how fast a stock price moves up or down. More volatile assets are considered riskier than less volatile assets because the price is expected to be less predictable and may fluctuate dramatically.
Short selling: The trader sells the shares first (which he doesn’t even own at that time) since he is of the opinion that the price of that share will start falling. He will make a profit by buying back those shares at a lower price. Overall, both selling and buying are done here, however, its sequence is opposite to the regular transactions to get the profit of the falling share prices. It means Sell High, Buy Low.
Going long: It means entering or buying the security. This is buying the shares in expectations that the share price is going to increase. When a trader say I am “Going long…” or “Go long”, it indicates his interest is in buying a particular share. Squaring of an already held short position doesn’t mean going long.
Average down: To reduce the average cost or purchase price of the shares that they hold, investors buy more shares when the share price starts falling. They buy at a price that results in an overall lower average purchase price for that share. For example, you bought a stock at Rs 100. Then the stock price starts falling. You bought the stock again at Rs 80 and Rs 60. Hence, the average price of your investment will be lower i.e. Rs 80. This is the approach used in averaging down i.e. to effectively increase profits by bringing the purchase price lower
Public float (free float): Public float or free float represents the portion of shares of a company that is held by public investors, which are other than the company itself. It is available to be traded freely.
Market capitalization: It refers to the total value of the company’s share. Calculated by Market capitalization = the Total number of shares issued by the company * present market share price. They are divided or classified as large-cap, mid-cap or small-cap companies based on their market capitalization.
Bid: The maximum price that the buyer/buyers are willing to pay to buy a share.
Ask: The minimum price that the seller/sellers are willing to sell their shares at, is also called the Offer Price.
Bid-Ask spread: This is the difference between the ‘bid’ and ‘ask’ price of a share. Basically, its the difference between the highest price that the buyers are willing to buy a share for and the lowest price that the sellers are willing to sell their shares for.
Demat accounti.e. ‘Dematerialised account’: It is like a bank account to keep shares that you own just as money is kept in your savings account. It is different from a trading account.
Trading Account: It is a platform to buy and sell shares in a stock market.
Margin: Trading on margin means borrowing money from your stockbrokers to purchase stock. It allows the traders to buy more stocks than you’d normally be able to.
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