A stock market is a venue for trading shares of publicly traded corporations between buyers and sellers. You take a stake in the business when you purchase shares. Before investing, it’s crucial to research and grasp certain key concepts.
From the most basic to the expert stage, we have covered a comprehensive list of stock market terminology here. If you’re new to the stock market, here are 25 stock market basics for beginners, to help you get started:
Stock
A stock is a unit of ownership in a company. When you buy a stock, you become a partial owner of the company.
Share
A share is a unit of stock. For example, if a company has 100 shares, each share represents 1/100 ownership of the company.
Stock exchange
A stock exchange is a market where stocks and other securities are traded. The Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) are the two stock exchanges currently operating in India.
Portfolio
Portfolio refers to an investor’s assortment of holdings. One stock or several securities may be included in an investor’s portfolio. It includes various financial securities, including stocks, bonds, futures, and options.
Demat Account
Demat account stores financial assets, including shares, ETFs, sovereign gold bonds, mutual funds, bonds, ULIPs, etc. You can create a Demat account with a broker.
Broker
An investor requires a broker who is a middleman who connects them to the exchange—to trade stocks. In exchange for a modest commission, they buy or sell equities on behalf of the investor, even if they do not hold any shares themselves.
Nifty 50 or Nifty
The Nifty 50 group is the 50 biggest and most active equities on the NSE. Investors might use it to determine the general market mood. National Stock Exchange and Fifty are combined to form the phrase “Nifty 50.”.
Sensex 30 or Sensex
Sensex is the BSE’s flagship index. It consists of the 30 largest, most traded securities on the BSE. The sensitivity index is what is referred to as “Sensex” informally.
Bear Market
A market where prices are falling. Bear Market denotes a falling trend in the total market values of the equities listed on the stock exchange. A certain stock is said to be “bearish” if its price rapidly declines.
Bull Market
A market where prices are rising. A bull market is the polar opposite of a bear market. It signifies that the market is rising. It indicates that the overall market values of the shares are increasing.
Bond
A bond is a debt from investors to borrowers, such as a corporation or the government. While the investor earns interest on their investment, the borrower utilizes the money to finance its activities. Over time, a bond’s market value may fluctuate.
Dividend
A portion of a company’s profits is paid out to shareholders. Dividend payments are frequently made quarterly and might take the form of cash payments or stock reinvestments.
Derivative
A financial product known as a derivative derives its worth from an underlying asset or collection of assets. Derivatives include things like futures and options. Typically, underlying assets include stock market indices, commodities, currencies, and shares.
Futures
They are financial agreements to acquire or sell a certain asset at a specified future date and price. They are frequently employed to safeguard against the underlying asset’s price fluctuations or to lessen or avoid losses caused by unfavorable price changes.
Options
Financial contracts, known as options, provide the buyer with the option, without the obligation, to sell or purchase the underlying asset at a specified price before or on the maturity date. Call options and Put options are the two categories of options.
Call Option
When purchasing a call option, the buyer has the choice of whether or not to purchase the underlying security at the specified price before or on the expiration date. A call option’s buyer assumes that the market is optimistic and that the underlying asset’s value may rise.
Put Option
When purchasing a put option, the buyer can choose whether to sell the underlying asset at the specified price before or on the maturity date. The person who purchases a put option anticipates a decline in the underlying asset’s value.
IPO
Initial public offering is when a company first sells shares to the public. Companies can raise funds through initial public offerings (IPOs) for future expansion and development. One of the primary reasons the stock market exists is because of initial public offerings.
Volatility
A measure of the fluctuations in the price of a security. For instance, a market is considered “volatile” when it fluctuates by more than 1% over an extended period. When pricing options contracts, an asset’s volatility is a crucial consideration.
Yield
The return on investment is expressed as a percentage.
Open Interest
The amount of outstanding derivative contracts that have not yet been resolved is called open interest. The contract is referred to as open from the moment the seller and the buyer commence it until the other party closes it.
Bid
The bid represents the highest price a buyer will spend to purchase a stock. Only when the value does not go over the bid price that the buyer has put is the stock eligible for purchase.
Ask
A security holder’s minimum selling price is the “ask.” If the bid and ask prices coincide or are higher, the seller will sell the security.
Spread
The price a seller requests for an asset and the price a buyer is prepared to pay is never the same. The ask-bid spread, often known as the spread, is the name given to this difference and is mostly influenced by supply and demand.
Leverage
In the stock market, leverage is the practice of taking out loans to purchase additional shares that someone can afford to increase profits. Leverage converts a relatively modest amount of investing force into a larger return.