Important Stock Market Terms in Alphabetical Order
Trading or dealing in stocks, bonds, debentures, and other kinds of securities is somewhat akin to gambling in a casino. However, the nature of speculation in a stock market is more protracted and sweeping in sharp contrast to laying bets in casinos where fortunes are made or lost overnight. Hence, in order to improve the chances of getting a good return on your investments in stocks, bonds, and other forms of securities, you need to have an in-depth understanding of stock markets.
Before you decide to invest your money in various types of financial securities, there are a few aspects you should keep in mind. For a start, you should realize that staking resources in stocks could be equally prospective and risky. First recognize why you want to invest-you could be looking to supplement your current income or attempting to build a nest egg for your twilight years.
You’ll have to register with a brokerage, open a trading account, and always maintain a minimum account balance for transacting on a continual basis. You’ll feel confident to enter the fray if you complete a refresher course or attend workshops, seminars and events where successful investors narrate their experience. Finally, opt for a trial offer and practice trading for some weeks before you feel self-assured to give your recommendations to the broker for buying or selling stocks.
Important stock market terminologies indexed alphabetically
- Agent-An agent could be a brokerage or securities firm you’ve registered with for stock trading or a stockbroker who buys and sells stocks on behalf of his or her customers. The agent merely acts as a middleman or mediator for facilitating the trade.
- All or None- AON or all or none is an order or call to sell or buy the entire lot of stocks held by a shareholder. The AON order stipulates that you have to either buy or sell the shares ‘en bloc’ instead of trading on a piecemeal basis.
- Bear Market-Stock markets tend to be bearish when there is a general decline in the prices of listed stocks.
- Best-Efforts Underwriting- Best efforts underwriting imply that your investment firm or broker will go out of the way to sell securities of a newly listed company. This underwriting is almost as good as a promise but falls short of a guarantee.
- Call option-Call option offers you the choice of purchasing a specified bundle of shares at a particular price and for a specific time period. However, the terminology clearly implies that the offer is an option or choice and not obligatory.
- Capital-The term capital generally includes the value of tangible and intangible assets like machinery, land, buildings, technology, and so on. However, in the context of stock markets, capital stands for assets/cash staked in different kinds of securities.
- DARTS (Daily Average Revenue Trades)-The median revenue generated by a broker on a day to day basis by way of number of trades placed successfully for which the professional has earned fees or commission.
- Day Order-A day order is a particular kind of order involving the buying or selling of a stock or security on a specific day. If the order is not honored on the specific day it stays valid, then the same expires automatically.
- Earnings Call-Call conferencing between and amongst a listed company, media, analysts, and shareholders for discussing about the organization’s financial performance.
- Equities-Preferred and common stocks comprising a stake in the company owned by an investor or shareholder.
- Equity Option-An agreement or indenture allowing the shareholder to trade in a prescribed lot (of shares) for a specific time period at a particular price.
- Fair Value-The consolidated financial statement of a firm’s liabilities and assets, including statements of the company’s subsidiaries.
- Fill or Kill-A specific type of order which necessitates the carrying out of a trade immediately comprising a large volume of shares. The FOK order stands cancelled if the same is not executed instantly.
- Floating Stock-The part of a company’s stock that is available for trading on the exchange. When you deduct a firm’s closely-held stock from its overall outstanding lot, you’re left with floating stock.
- Gilt-Edged Securities-High-value bonds and debt securities offered by blue-chip firms and national governments. Though gilt-edged securities have low yields but tend to be extremely secure. The terminology comes from paper certificates with gilded edges published by Bank of England.
- Growth Stock-Company stocks whose value have witnessed a significant and consistent appreciation over the past few years and expected to maintain the trend.
- Hedge/Hedge Fund-Hedge is a technique that is resorted for minimizing loss of investment where the investor executes a transaction for counterbalancing the status quo. When investors and their fund manager pool their resources for better management of the portfolio, the fund is called a hedge fund.
- Held Order-An order where the trader or stockbroker endeavors to promptly transact the most lucrative deal (ask or bid) for his clients.
- Imbalance of Orders-When a trader is beset with excessive orders of a specific kind (limit, buy or sell) but doesn’t have sufficient orders of other types, thereby leading to an imbalance.
- Income Stock-A type of equity share that has a well-established record of paying out gradually increasing or steady dividends on a consistent basis.
- Insider Trading-When company insiders, usually directors or management deal in their own stocks. This type of trading is legal if the insiders keep the securities commission (SEBI or USSEC) posted about the same or else the same is unlawful.
- Jackpot- When you sell stocks of a specific company or different firms at a record price that results in a windfall. The action is akin to winning the top purse in a lottery.
- Junior Equity-common stocks that yield low dividends on a regular basis.
- K-Ratio-A metric for calculating and estimating a particular equity’s performance vis-à-vis its risk over an extended time period.
- Laddering-The canvassing of hyped-up IPOs with a view to receive a higher share of the offering.
- Leverage-The strategy of exploiting borrowed capital for financing investments with the aim of broadening a company’s asset base. Investors, brokers, and traders take advantage of leverage for better ROIs.
It is beyond the scope of this article to enumerate all the stock market expressions that are used in day-to-day trading. After going through the above list, you can research on the net about the full list of stock market terminologies.