50 Commonly Used Basic Words Meaning Related To Stock Market – Every Beginner Should Know

The stock market has its own set of idioms and expressions. And, if you want to invest in the stock market, you must be familiar with the fundamental terms of the stock market.

Why you should know about Stock Market Basics Words ?

Knowing the fundamental terms of the stock market will help you better comprehend the market and make the best investing decisions.

You will be able to comprehend market swings and maintain correct control over your investment. You would be able to grasp Experts speaking on TV if you know Share Market Basics Words.

You will be able to read and comprehend the news since there is a lot of usage of fundamental terms in these news, and if you don’t know what they mean, you won’t be able to understand them at all, and you won’t be able to make the proper investment.

Here is a list of crucial Stock Market Basics Terms that you should be familiar with:

Bull Market

A bull market occurs in the stock market when the price of a stock rises over time. Investors are typically more ideal during such rises. And the stocks are performing admirably. At this point, we refer to the market as being in a Bullish Market Phase.

Bear Market

The word “bear market” refers to a long-term drop in the value of Consistent Shares. The markets are in a bearish phase when stock prices fall by 20% or more from recent highs owing to unfavourable investor sentiment.

A bearish market can be triggered by a variety of internal and external events, including changes in government policy and economic contraction.

Face Value

Each share has a face value when a firm issues them. It refers to the stock’s worth at the moment of issuance. The face value of a stock is determined by the corporation that issued it.

Bonus Share

A bonus share is an additional share given to a company’s stockholders. And, sure, they are available at no additional expense. Let’s look at how to obtain Bonus Share.Consider the following scenario: you own 100 shares of a corporation.

Now, if the company announces Bonus Share in the ratio of 2:1, it means you will receive 2 Shares for every 1 Share, which means if you had 1 Share, you would receive 2 Bonus Shares for a total of 3, but your total would be 3 but your total would be 3 but your total would be 3 but your total would be 3 but your total would be 3 but your total would be 3 but your total would be 3 but your total would be 3 but your total would be 3 but your total would be 3 but your If you hold 100 shares, your 100 shares will be multiplied by three to become 300 shares.

Trend

The direction in which the stock market or an individual stock moves is referred to as the trend.

For example, if the market has been bullish for the previous month, the market is said to be on an uptrend. If the market has been bearish, then it is in a downward trend. A trend does not have a particular time limit. A trend can be short-term, medium-term, or long-term in nature.

Dividend

A dividend is a payment made by a corporation to its shareholders from its earnings. They might be given out in the form of cash, shares, or any other type of asset. Many businesses pay out generous dividends to their stockholders. It is not obligatory for a company to pay dividends on its profits. Many businesses reinvest their revenues in their operations in order to expand and flourish.

Bottom/Peak

A bottom in the stock market refers to the lowest price a stock has attained in a given time period. A peak, on the other hand, is the highest price reached by a stock in a certain time period. Both of these principles are frequently used by technical analysts to forecast the stock’s future price.

Overvalued Stock

An overpriced stock is one in which the current market price of a share exceeds its market worth. You may use statistical indicators like the Price-to-Earnings Ratio to determine if a company is expensive or not. If a stock is regarded expensive, the price of the stock is projected to fall in the near future.

Underrated/Undervalued Stock

An undervalued stock is one that has a current market price that is lower than its internal market value.

Assume that a share’s internal market value is Rs 100, but it is currently selling at Rs 50 a share. Investors attempt to purchase these shares in the hopes of receiving a high return at a low cost in the future.

Market Breadth

Market breadth indicates the broad direction of the stock market’s movement.

Market Breadth Extract Formula

*Market Breadth = Total Number Of Rising Shares / Total Number Of Falling Shares 

If the investor’s attitude is favourable or the market is bullish, the Ratio 1 is bigger than one. If the ratio 1> is less than one, it indicates a negative price or a market in recession.

Overweight

In compared to an Investment Portfolio, the word Overweight is used when the Benchmark Portfolio holds more than one security. Assume Abhinav maintains 25% of his investment in the metals industry.

Benchmark Portfolio, on the other hand, claims that the Index Fund only includes 15% Metal Sector Stock. This indicates Abhinav’s portfolio is 5 percent overweight in the metals sector.

Underweight

Overweight and Underweight are diametrically opposed. In comparison to the Benchmark Portfolio, a Low Weight Portfolio does not contain enough holdings of any given security.

Assume Abhinav’s in-banking stock is worth 5% of his whole portfolio. Banking stocks account for 10% of the Midcap 100 Index. As a result, Abhinav Ka Portfolio is 5 percent underweight.

Buy/Sell/Hold

In the stock market, the term ‘BUY’ refers to the act of purchasing shares in exchange for money.

SELL, on the other hand, refers to the act of selling existing shares in your portfolio for a profit.

HOLDING a stock indicates that you do not purchase or sell it. HOLD is the phrase used when you buy a stock for an extended period of time.

Support/Resistance

When it comes to stock market trading, the notion of support and resistance is well-known.

This notion states that when the price of a stock hits a certain level, it can go in the opposite direction from there, or it can continue the trend if the level is broken.

The upper level is referred to as Resistance, while the lower level is referred to as Support.

Assume that you paid Rs 50 for 200 shares of the firm. You anticipate a rise in pricing. However, the stock is unlikely to rise over Rs 60 in the next months. To put it another way, the stock has reached the resistance level. From here, the stock has the potential to rise to Rs 50.

In the same way, if the stock price does not go below a certain level, it has reached a support level. If a Resistance Level is broken, the stock will rise in value until it reaches the next Resistance Level.

Benchmark

A benchmark is a baseline against which any stock’s performance may be judged. Aids in gaining a better understanding of any stock’s performance. There are a variety of benchmarks that may be used to determine this. The benchmarks are the BSE Sensex and the NSE Nifty.

Demat Agent

Your stockbroker, often known as an agent, is a person who buys and sells stocks on your behalf. Your agent with the Market Regulator SEBI is not the owner of your shares at any stage throughout the transaction.

Large brokerage businesses have their own teams of researchers and analysts that keep track of every market change and give you with the same data.

Traditional brokers take a commission on each transaction, whereas Discount Brokers charge a flat fee based on the number of Discount Transactions. Both sorts of services are now provided by brokerage firms. If you’re enrolled in the Traditional Plan,

If you wish to work, you will be provided all of the services for free, but whatever you trade, you will be paid commission, and if you work in discount, you will be given a discount. So, whenever you use a service, you will have to pay a fee.

Assets

Assets are the sum total of a company’s cash, property, and equipment. Assets show a company’s wealth, and the greater the assets, the higher the company’s market worth. Every business accumulates assets over time.

Stock Beta

The link between a stock’s price and the general market movement is measured by stock beta. It should be noted that the market’s Beta 1 is evaluated.

If a stock’s beta is more than one, it indicates a significant level of risk in the market. On the other side, if a stock’s beta is less than one, it indicates that the stock has low risk.

Bluechip Stock

Bluechip Stocks are stocks that are fundamentally sound and have strong financials. These stocks are better suited to market volatility and are less impacted by unfavourable market conditions.

Bluechip Stock has a consistent long-term return, and they are the first to rebound after a market downturn.

Lot Size

The standard number of shares or indices set by the stock exchange as a trading unit is referred to as the lot size. For example, this 100 Shares is a Fixed Unit, often known as a 100 Lot Size.

Bonds

Bonds are government or organization-issued fixed-income securities. It makes a Fixed Repayment to the investor at the end of the term.

Bonds can be issued by governments or enterprises when they want funds to fund new projects or commercial activities. Bonds are also offered as Mutual Fund Units and provide investors with a stable source of income.

Call Option

It is a Derivative Contract between two parties in which the Buyer receives the right to purchase the Underlying Assets at a pre-determined price and time.

When the buyer exercises the call option, the seller has no choice but to sell the assets at the agreed-upon price.

Convertible Securities

Convertible securities, as the name implies, are securities that may be exchanged into other securities. A common convertible security is the Convertible Preferred Share. It is possible to convert it into a common share.

Closed Price

The last price at which the stock trades is known as the closing price. Stock exchanges have a set time for trading to end.

The price at which a share or security’s deal is completed becomes its closing price. Similarly, the Opening Price is the price at which the market opens at the time of opening.

Current Ratio

The current ratio is a measure of a company’s liquidity. With a greater current ratio, a corporation can better satisfy its short-term obligations.

In other words, the corporation will go about its business as usual, free of the constraints of Enough Backup and Working Capital.

Current Ratio = Current Liablities ÷ Current Assets

Debenture

Debenture is a fixed-income instrument that is not backed by any of the Issuer’s assets. Companies frequently utilise it to make loans, and as a Debenture Holder, you become the company’s creditor.

In a Debenture, the interest rate is fixed, and the amount of interest is paid half-yearly or annually. The corporation avoids any problems with its equity ownership by issuing it. In addition, the corporation profits from the interest money.

Defensive Stocks

It is a sort of stock that, regardless of the condition of the stock market, delivers stable income and consistent dividends. Non-cyclical stock is another term for defensive stock.

The beta of defensive stocks is smaller than one. They may not provide significant returns, but they do pay out dividends on a regular basis.

Stock Delta

The ratio that relates the change in asset price to the change in derivative price is known as delta. Depending on the time of the choice, it might be favourable or negative. It runs from 0 to 1 for call options and from -1 to 0 for put options.

Whenever the price of the Underlying Assets rises, the price of the Call Option rises as well. Conversely, when the price of a Put option rises, the price of a Put option falls.

Diversification

Diversification — Buying shares in a variety of good firms in various industries. It lowers investment risk by dispersing hazards across several sectors.

The failure of one sector hides the failure of the other. In other words, losses sustained by businesses in one industry are offset by profits earned by businesses in another.

Debt-To-Equity Ratio

This ratio indicates how much outside capital is utilised to run the business instead of the company’s own cash. In general, the lower the Debt-to-Equity Ratio, the better for the firm.

Debt-To- Equity Ratio = Total No. of Shareholders Equity ÷ Total Liabilities

Equity Shares

Equity shares, often known as common shares, indicate a company’s fractional ownership. As an equity shareholder, you have voting rights in the firm, which is a fantastic method to raise funds.

Hedge

Hedge is a method for limiting the risk of assets in bad times without lowering your portfolio’s return.

Dividend Stock

Most firms with stable cash flows and established financial infrastructure issue Income Stocks, which pay regular dividends to investors. Aside from that, these businesses have a sizable market capitalization.

The price of an income stock continues to be inversely proportional to interest rates. When the interest rate rises, the stock price falls, and when the interest rate falls, the stock price rises.

Index

The Share Market Index is a statistical indicator of how the stock market has changed over time. It is made up of shares of the same sort from securities listed on the exchange that have been grouped together.

The criteria for stock selection are determined by the industry, market capitalization, and business size. The two most extensively used stock indexes in India are the BSE Sensex and the NSE Nifty.

Initial Public Offering

The process through which a privately held firm becomes public is known as an initial public offering, or IPO. An IPO is a method of acquiring capital in which a firm offers its shares to the general public for the first time.

These shares are sold in the secondary market after being issued in the main market. Companies considering an initial public offering (IPO) engage a team of underwriters and an investment bank to oversee the process.

Internet Trading

It’s a trading platform that allows you to trade via the internet. The traders are sent to the Exchange Trading System via an Order Routing System, which executes the orders.

Investors may trade from anywhere in the globe thanks to the Internet Trading System. In the year 2000, the market regulator SEBI gave its approval to this type of trading.

Limit Order

It’s an order to purchase or sell a securities at a certain price. Only the Specified Limit Price is used to execute the order.

Although a Limit Order helps restrict the Execution Value, you may lose opportunities if the market moves too quickly. It can also be used with a Stop Loss Order to prevent big losses.

Market Capitalisation

Market Capitalisation = Total Number Of Issued shares * Share Price

For example, a company’s market capitalization is Rs. 200 crores if it has 20 million outstanding shares with a current market value of Rs. 100 per share.

One of the most essential variables that helps investors determine the level of risk and return in a share is market capitalization.

Portfolio

The term “portfolio” refers to an individual’s or company’s total holdings. It comprises a variety of securities from a variety of corporations in various industries.

A well-diversified portfolio can help you ride out market volatility and absorb market shocks more effectively. As an investor, you should construct your portfolio based on your risk tolerance and investing objectives.

Price-To-Earnings Ratio

This is the Company’s Valuation Ratio, which compares the current share price to its per-share income. The Price Multiple or Earning Multiple is another name for this ratio.

A high PE Ratio might suggest one of two things: either the business’s stock is overvalued, or investors expect the firm to expand at a fast rate in the future. The PE Ratio is calculated by dividing the current stock price by the earnings per share.

Put Option

A put option, like a call option, is a derivative contract between two parties in which the buyer has the right to sell assets to the seller.

When the Buyer exercises this option, the Seller has no choice except to purchase the Assets at the agreed-upon Strike Value. The buyer of a Put Option anticipates a fall in the value of the underlying asset, allowing him to purchase more at a reduced price.

Position Limit

It refers to an investor’s maximum amount of Futures and Option contracts at any particular moment.

To prevent an Investment Limit from Monopoly and remove Exertion Control, a Position Limit is constructed. The goal is to prevent investment firms from manipulating pricing for their personal gain at the expense of others.

Risk

Risk refers to the possibility that an investment’s return will differ from what was expected. It is analysed using Standard Deviation after taking into account Historical Behavior.

The associated risk is directly proportional to the standard deviation. Risk Assets differ from one class to the next. While the danger of investing in stock is significant, the risk of taking out a loan is minimal.

Return On Equity

Return on Equity (ROE) is a metric that assesses a company’s total earnings performance as well as the profit of other firms in the same industry.

A high return on investment (ROI) shows that management is doing a good job of developing the firm while also increasing the assets of its shareholders.

Standard Deviation

It is a statistical measure of the market’s volatility. When prices fluctuate, the standard deviation increases. This indicates that the investment is high-risk.

When the standard deviation is low, however, it indicates that prices are stable and that the investment is less risky. As a result, you may utilise Standard Deviation as one of the measures to determine the risk associated with your investment.

Stock Split

Divide Current Shares Reflects the Increase in the Number of Remaining Shares. This is done by companies to raise the number of shares they have on the market.

A general division ratio of 2:1 or 3:1 denotes that a share is divided into two or three parts. The price of a stock can also be affected by share splitting. As the number of outstanding shares grows, it lowers.

Strike Price

The Strike Value of a Derivative is the price at which it can be bought or sold. The striking price of a Call Option is the price at which the option holder purchases the security.

The strike price for a Put Option, on the other hand, is the price at which the security is sold. Exercise Price is another name for Strike Value.

Trading Session

The period when the stock exchange is open for trade is referred to as a trading session. The session in Indian stock markets runs from 9:15 a.m. until 2:30 p.m. All orders should be placed within this time frame.

Additionally, all pre-session orders are matched and executed throughout the trading session. Trading sessions are held at different times on different stock exchanges throughout the world.

Thin Market

The term “thin market” refers to a period of time when there are fewer buyers and sellers for any given stock, industry, or market.

Because the number of securities in the thin market is small, there is a lot of value fluctuation and little liquidity. It is difficult to deal in the Thin Market since the quantity of Bid and Ask is low.

Yield

It’s a percentage-based metric of return on investment (ROI). Divide the current price of a share by the yearly dividend paid by the corporation to calculate the stock yield.

It’s worth noting that a high yield is seen as a sign of minimal risk and great earnings. However, this isn’t necessarily a good indicator because there’s a rationale for a drop in stock value when the dividend yield rises.

Conclusion

Knowing these terms will aid you much in your financial endeavours. They may not make you a better investor, but they can help you grasp the world of investment. So the next time someone mentions “market breadth,” you’ll know precisely what they’re talking about.

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