A useful list of share market terminology in India, handy for new traders in the long run.
It's always a good idea to increase your knowledge about stocks, especially in the areas you plan on investing. It's your hard-earned money, and you should know everything about stocks and trading if you want to be good at it and you are a beginner in trading
Most people invest and then pray that their investment will yield. But it's best to do the opposite. Learn all you can - right from stock market jargon to the history of trading to everything about the company you are going to invest in. Do your research, hang out with like-minded people and make a calculated decision.
Understanding Stock Market Jargon is Crucial for Your Success
When you start investing, you might start with your own research or take the help of a family member. Or a friend who knows a lot about the share market in India. As you continue your journey you may come across many stock market jargon used by individuals or publications which track markets. There is no need to get overwhelmed nor remain ignorant about these words used. In fact, the best thing to do is keep creating a list of the terms every time you come across something you didn't understand. It will make more sense to focus on those terms that are crucial to your industry.
Here is a handy glossary with common stock terms or as everyone calls it 'share market terminology', created for beginners. If there are any terms that you need help with, please type them in the comments section of this blog so we can respond.
Is your notepad ready? Let's begin with this interesting stocks' terminology dictionary from A to Z...
Averaging down refers to the purchase of additional units of a stock held by an investor after the price has dropped. Averaging down results in a decrease of the average price at which the investor purchased the stock.
Bull and Bear Market
You call it a bull market when the stock prices in a market are rising. A bear market is the exact opposite. When the stock prices in a market are falling, you can call it a bear market.
A convertible security is a bond or a preferred stock that converts into a different security. For example - shares of the company's common stock. In most cases, the holder of the convertible determines whether and when to convert.
A defensive stock is one that provides consistent dividends and stable earnings regardless of the state of the overall stock market. There is a constant demand for their products. Defensive stocks tend to be more stable during the various phases of the business cycle.
An ETF, short for exchange traded fund, is like a stock. It is a 'basket of securities' that trade on the stock market as well.
This stock market jargon stands for Fill or Kill Order. This is an order that requires an immediate purchase or sale of a specified amount of stock though not necessarily at one price. If the order isn't filled immediately it is automatically cancelled or killed.
An order that will stay open till it is either executed or manually cancelled. Such orders may stand for a week if no shares are available to trade in the price range specified.
Some stock market jargon have two different meanings. Like 'haircut'. The term haircut is the percentage difference between an asset's market value. The amount that can be used as collateral for a loan is also known as a haircut.
An IPO or (Initial Public Offering) is the first time a company offers its shares for trading on a stock exchange. Typically, one buys shares from the previous owner and not the company. In this case, you get to buy the shares directly from the company.
Know more about the Best Broker for IPO Investment
A Jobber holds stocks on their own accounts and aids market liquidity by identifying buy and sell orders via their brokers
KISS traders believe that the simplest solutions are the best ones, and they follow the generic principle of “keep it simple, stupid!”.
Long & Short Positions
This is one stock market jargon that is self explanatory. In the trading of assets, an investor can take two types of positions - Long and short. An investor can either buy an asset (going long) or sell it (going short).
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.
NIM (New Issue Market) is a primary market. It is the marketplace for issuing new shares, and the public buys shares directly from the company, usually through an IPO. The company gets the amount on the sale of shares.
This is a situation in which a market only has potential sellers or only potential buyers rather than having both at the same time. In this case market makers display only the bid or offer price, indicating that the market is moving in one way.
Preference shares or preferred stock, are shares of a company's stock with dividends. These dividends are paid out to shareholders before common stock dividends are issued. Preferred stockholders are entitled to company assets before common stockholders in the case of bankruptcy.
A quoted price is the latest price for trade in an investment (or any other type of asset).
A run consists of a prolonged uptrend or downtrend. If a stock's price increased each day for five trading sessions, you could call it a bull run. A bear run would consist of consecutive down days.
It is the place of trade for formerly issued securities. The second market involves indirect purchasing and selling of shares among investors. Brokers are intermediaries and the investors get the amount on the sale of shares.
The number of shares traded on a given day is called trading volume.
The upstairs market is a network involving large firms and institutional investors. This market involves high volumes of trade, which are made off the trading floor.
An investment style in which you can attempt to buy underpriced stocks that have the potential to perform well in future.
A wolf market is sometimes used to describe the acts of various individuals working together to manipulate the market.
X dividend is used as jargon for without dividend.
YTM is short for Yield To Maturity. It depicts the rate of return applicable on a bond if it is held till the date of maturity.
A zero-coupon bond is a discounted investment that can help you save for a specific future goal. No interest is paid on such bonds in intervals until maturity.
For those who are indeed beginners, hopefully this blog from A to Z proved useful. You can also learn more from our Sharepa - The best Discount Broker in India. For those who are already good at trading, hope this list triggered some new ideas for you as well.
Do share some interesting stock market jargon you have come across, in the comments below.
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