- Date : 17/08/2021
- Read: 3 mins
Understand the basic glossary of stock market terminologies so that you can trade successfully and become an informed investor.
Understanding the share market can be a challenging task. Often, those who have a keen interest in stock trading lack the basic domain knowledge of the market. So, whether you are a beginner or a seasoned investor, getting familiar with the basic terms used while making a stock market investment is essential.
Yes, it is imperative to equip yourself by learning some key terms. Without going into the technicalities, here’s a small glossary with the key terminologies that you should know before you start trading in the stock market. Read on to expand your vocabulary and become a better investor and successful investor!
1. Stock market / Share Market
Stock market is a platform where shares of all listed companies are traded (that is, purchased and sold).
The BSE-30 Sensitive Index or Sensex is an index comprising 30 select stocks listed on the Bombay Stock Exchange. It is an indication of the relative share prices listed on the exchange. This is the prime stock index used to evaluate the performance of India’s stock market.
The NSE-50 Index or Nifty is a primary index comprising 50 select stocks from 12 different sectors listed on the National Stock Exchange. This is the second prime stock index that gives an indication of the movement of relative share prices in India’s stock markets.
4. Initial Public Offering (IPO)
When a private company turns into a public limited company, it issues its shares through an Initial Public Offering or IPO to the public (investors). This way, investors can buy the shares directly from the company before it gets listed on the stock exchanges.
5. Intraday trading
Intraday trading implies buying a stock and selling it the same day to ensure that all the trading positions will be closed the same day.
A portfolio is the collection and aggregate value of all the investments that an investor has made till date.
7. Face value
Face value, also known as par value, relates to the fixed value of a share before it is listed on the stock market. It is the value listed in the company’s books and share certificates. The company fixes the face value at the time of issuing shares.
8. Market value
Market value is the current value of a stock or share. This is the price at which the market values the stock. For example, if a stock is trading at a share price of Rs 500 on the stock market, that is its market value per share.
9. Market capitalisation
Market capitalisation indicates the total valuation of a company on the stock market – the current market value of all the shares put together. This is calculated by multiplying the number of outstanding shares by its current market value.
A stockbroker is a person who makes a purchase or sale of stocks on your behalf, in exchange for a certain commission or fee.
11. Trading volume
Trading volume refers to the number of shares traded on a particular day.
12. Bull market
Bull market is a scenario where the stock market shows an upward trend and the prices of multiple stocks keep increasing.
13. Bear market
This is a scenario where the stock market shows a downward trend and the prices of stocks are declining.
When a company earns a profit, it distributes a portion of its earnings among the shareholders on a quarterly or annual basis.