Starting Your Trading Journey? Here’s Some Stock Market Terminology You Need to Know!

By Ruchi Sharma

Are you planning to start a new chapter of venturing into the stock market world for your funds management? Well, great decision! Go for it! Women are definitely considered a pro at everything they do and even research suggests that they are better investors. Gone are the days when people believed women are limited to only investing in gold. Well, we might still love doing that, but now it’s the world share market that’s our new calling! You might have had a long chat with family or friends on how to begin or even searched up a few articles or watched a few videos on where to start from. Understating the basics of trading can help you in making better informed decisions. But if the stock market terminology has you lost, we totally understand and here’s the article we spruced up to cover the basic yet important share market terms that you must definitely know.

So here we go!

Some Basic Stock Market Terminology:

Share Market vs Stock Exchange: Confused between the two? Stock Exchanges are specific places where you can either buy or sell stocks, while share market can be any place where you can buy or sell shares that includes stock exchange but is not limited to it.

Share vs Stock: Next obvious one, a stock refers to ownership in a company, example if you say you own 500 stocks, it can even be in 500 different companies while share refers to stock certificate of a particular company only, example when you are buying 500 shares it means they are of same company.

Bull Market vs Bear Market: As a novice, one may have heard of this in news related to recession or depression in the economy. But when it comes to trading particularly, a bear market refers to when the prices of stocks are declining while a bull market means the opposite that is prices of stocks are rising.

Ask vs Bid: Ask (also called Offer) is the lowest price on which one would be willing to sell his/her stocks or security while Bid is the highest price one would be willing to pay to buy the stock. You can also think in this way that Ask is the price you want in exchange of selling your share while Bid is the price you are willing to pay for buying a share.

Blue Chip Stock: These refer to stocks of well-established and large companies which are stable in the long run and bounce back fairly quickly in times of market volatility.

Call vs Put Option: As the name suggests it’s an option not an obligation. A call option is when an investor gets the right to buy a particular stock at a pre-decided price within a specific time interval. While the Put option is opposite, that is, it is the right to sell a stock at a pre-decided price during a time period.

Close Price: Once the stock market closes for the day, the final price at which the stock was traded refers to as the close price.

Convertible Bonds vs Warrants: Wondering how convertible bond work? They give the holder the option to convert them into common stock at specified prices in specific duration. While warrants are like an inducement to investor given with bonds to buy a stock at a specific price anytime.

Day Order: This is an order that can be executed only during anytime between the particular trading day. If not executed, it gets cancelled.

Dividends: In return for the investor’s investments, when a company pays a part of its earning to them, it’s called dividends.

Equity Shares vs Debenture: Equity shares refers to shares in the ownership of the company while debentures are debt instruments that get you a fixed rate of interest but are not backed by any collaterals or assets of the company. If you hold debentures of a company, you are like a creditor to it.

Face Value (also known as par value): The price of a share or stock at the time of its issuance is called face value.

Hedge: The effort or attempt to reduce the risk of volatile price changes in assets is known as hedging.

Intra Day Trading: The buying or selling of stocks done on the same day before the stock market closes.

IPO: Heard recently about much in news Nykaa IPO? Known as Initial Public offering, this is the first time the company puts up its shares for sale.

Limit Order: When you set a price on which the shares can be bought or sold, it is called a limit order. Due to the volatile nature of stock prices, this is often preferred by people instead of market order.

Market Order: This is an order for buying or selling any security at the prevailing prices in the market.

Over the Counter: If you are dealing with the trade of any security that is not listed in the stock exchange that means you are indulging in an over the counter trade.

Portfolio: This is the collection of all investments an investor has made or holds.

P.S.: You might have heard or read this already but once again we would like to reiterate, share market investments are risky and you should invest amounts very carefully and always start with very small amounts till you are comfortable and understand the market better.

Are you feeling lost looking at the truckload of things? Don’t worry! Once you start off with your journey, it will become super easy for you. And to ensure you stay in the loop, we hope the above share market terms lend a helping hand. There are many more terminologies that we will try to cover in the next part of our topic, do you have some suggestions on the same for us? Please drop them in the comments section below.