Must Know Terms for Stock Market Beginners
If you’ve an entrepreneurial bent of mind and a yen for making money, then investing in stock markets could be a prudent option. However, given the volatile nature of stock markets around the world, putting your hard earned in stocks could be risky, particularly if you’re inexperienced. Anybody with a basic idea of stocks and shares knows that these units reflect the financial standing of a company.
A company’s rising or falling fortunes has a direct bearing on its stocks. So it follows that the value of a share-the basic constituting unit of stock-will go up with increasing revenues and subside when earnings plummet. And given the vicissitudes of the present-day commercial world, business can never be constantly smooth, not even for blue-chip companies.
A seasoned shareholder or experienced stockbroker has had to invest time and money as well as put in a lot of efforts for getting a good grasp on stock markets. Trading in bonds and stocks seem apparently easy as long as you’re on the sidelines-viewing and judging situations as a spectator. It is only when you jump into the fray that you start feeling the heat.
If you’re eager to try your hand at stock trading as a neophyte, the following stock market markets will go a long way in making you a stock market veteran.
Some Fundamental Stock Market Terminologies
Though it is beyond the scope of this article to mention each and every term or expression, an earnest attempt has been made to include as many significant jargons as possible.
Ask price or offer price or simply ask or offer
The stock market is like any other commercial market, where traders buy and sell shares according to their convenience. Ask price or offer price refers to the monetary value at which you’re willing to sell shares or stocks of a particular company. Now this ask price or offer price could be prefixed or negotiable.
A buyer might be willing to pay a very high price (called bid price) for the shares (much more than your asking price) if he or she feels that their value may rise in the near future. The variance in values of ‘ask’ and ‘bid’ gives rise to another term-‘spread’.
Stock markets throughout the world open and close at fixed times. However, it may not always be possible for you to trade during the official business hours. Nevertheless, you can still transact beyond the scheduled hours but your transaction will be recorded in the subsequent working day.
A company, especially during the end or beginning of a financial year, presents its annual report during the AGM (annual general meeting). The report contains a myriad of information ranging from investments, earnings, profit/loss, and so on. Shareholders present during the event, take significant decisions based on the annual report.
Assets include materials, goods, and equipment owned by a company as well as other tangible and intangible items like cash, land, buildings, trademarks, and copyrights.
The balance sheet reflects the company’s liabilities and assets outlined in the form of a statement. The assets are usually listed on the left side of the sheet while the liabilities appear on the right.
The stock market is said to be bearish when prices of majority of the stocks reflect a downward trend. On the other hand, a bull market predominates when prices of shares are on an upward spiral.
Blue Chip Shares/Stocks
Deriving its name from the premium chips used in gambling dens and casinos, blue chip stocks embody stocks of financially well-off companies and conglomerates.
Promissory notes brought out by the government and public limited companies specify a particular amount held by the purchaser for a prescribed period of time. Bonds tend to be as stable and exchangeable as legal tender.
As the terminology clearly indicates, call option offers the trader or investor the choice of purchasing stock at a predetermined price within a certain time period. However, the trader is under no obligation to exercise the option.
Commodities usually include natural resources and agro-based products traded separately on a distinct platform and called commodity trading.
The realm of stock trading is immense, both literally and metaphorically speaking. In order to learn the ropes and trade confidently in the stock market, you’d need to stay devoted and persevere without losing your patience. The least you can do to become a good trader is to master the trading tools and techniques and become aware of the fundamental stock market terms.