Stock Market Terms and Jargon

Stock Market Terminology

We all are well aware about the fact that it’s a good practice to understand the basics of a field before entering into that particular field. So this time I have bring some basic Stock market terms and jargon which are used by those who are basically involved in stock market trading. Let’s have a look at these terms-

Stock market – A stock market is a place for trading of a company stocks and derivatives at an agreed price. In simple words we can say that stock market is the place where stocks are bought and sold.

Stock exchange- It facilitates trading for brokers and traders. A broker acts as a mediator between an exchange and a trader.

Stocks and shares- Stocks and shares are sometimes used interchangeably. Both of the terms refer to the share in the ownership of the company. The only difference is that stock is a general term describing the ownership certificate of any company while shares refers to the ownership certificate of a particular company i.e. if one says that he own stocks it refers to overall ownership in one or more companies but he says that he owns shares, It means he is referring to a particular company’s stocks.

Bull- The investors or trader who buys shares in the expectation that the Market price of the company’s share will increase.

Bear- A bear is the counterpart of the Bull. A bear sells stocks first at higher price and then purchases it at lower price to earn profit.

Bull market- When the market is rising and buyers are more than the sellers.

Bear market -Price of the securities falling for a prolonged period, the market is called bear market and this trend is called bearish.

Correction- A correction takes place when market indices rise rapidly for few days and then retrace these gains

Closing price-The last trading price of a security at the end of trading day.

Circuit breaker- When price of a stock increases or decreases by a certain percentage in a particular day, it hits the circuit breaker. When the stocks hits the circuit breaker, trading in that stock above (or below in case of decrement) is not allowed for that particular day.

Day trading or intraday trading- Day trading is buying and selling a security on the same day. In day trading the traders square off his or her position on the same day.

Long- If you buy a stock means you long the stock. Traders who thing that the price of security rise up, go for long.

Short- Short selling means selling of borrowed stock in a hope that the price will drop and then one will buy back it at cheaper rate.

Stop loss- Stop loss is used to limit the possible loss of trader. It’s a stock trading strategy to ensure that the trader will not incur huge loss. It suggests the traders to take off the positions when it hits the stop loss. A good stock advisory always provide stock tips along with the stop loss.