There are many Jargon in Stock Market. For the great number of returns it offers, investors are attracted to the stock market. Investments in stocks, however, aren’t easy to make. Stock market trading requires patience, discipline, and a solid understanding of the Jargon in Stock Market along with a great deal of research.
Simply put, the stock market is the process of buying and selling shares of publicly traded companies. Investors and traders are the two types of participants in the stock market. A long-term investor invests in the stock market to gain capital appreciation. A trader, however, hopes to earn quick profits by taking advantage of the small price changes in equity shares. A few minutes or an entire trading day can pass before prices change.
Now that you know what a share market is, you need to know some of the jargon in stock market, so that you can be more successful in trading. The lack of confidence about their understanding of some stock market terms makes many traders hesitant to enter the market.
It is possible to use certain Jargon in Stock Market to determine the real value of stock while providing enough information to make an informed decision about whether to buy a particular stock.
Financial Jargon in Stock Market
1. Stock price
The stock price refers to the amount of money a trader must pay to buy a single share of stock. You have made money from the stock if its price rises after you buy it. Alternatively, if the stock price drops after you purchase it, you are making a loss. While traders continuously track a stock’s price, there is very little information it communicates about the stock itself. Stocks are therefore always studied along with other metrics, such as earnings.
2. Stock-price chart
As the name implies, a stock price chart plots the daily movement of stock prices. Traders use stock-price charts to observe trends. Over time, these charts show how the stock price has progressed. A stock’s 52-week trend shows the highs and lows a stock price touched during a particular year. In the 52-week chart, the price plot is related to several economic and social factors and how they influenced stock prices.
3. Market Capitalization
A company’s market capitalization, or market cap, tells us how big it is. Stock market price multiplied by several outstanding shares is what makes up the price of a stock. Small-cap companies are those with a market capitalization below Rs.5,000 crore. Mid-cap companies have a market cap of Rs.25,000 crore or more. Large-cap companies have a market capitalization beyond Rs.25,000 crores. Traders can compare the size of companies using market capitalization.
A stock’s volume is the average of the number of shares that are traded. A specific stock’s trading volume indicates how many people buy and sell it. Traders should invest in stocks with high volumes since they are easier to buy and sell.
5. Long Position
The long position or going long as it is sometimes called reflects the direction of a trader’s business. When the trader has bought Tata Motors shares, he/she is said to belong to Tata Motors or to plan to go long on Tata Motors.
6. Short Position
Traders can sell first and buy later on the market. Shorting is the process of doing this. An example would be a trader selling a share at Rs.500 and then buying it back at Rs.450. The trader makes a profit of Rs.50 by doing so. When seen in another way, the trader is selling the share at Rs.500 and buying it at Rs.450, with the reverse order of transactions.
7. Bullish or Bull Market
Market bulls or bullishness is a sign of positive market trends. In a bullish or bull market, traders anticipate that the stocks’ prices will increase. An uptrend in the stock market indices can be described as a bullish market if viewed from a greater perspective.
8. Bearish or Bear Market
Bear Markets or Bearish are projections of a downward trend in the stock market indices as opposed to Bull Markets. When the prices of the stocks decline during a particular period, it is called a bear market or bearish.
9. Earnings Per Share (EPS)
A company’s Earnings Per Share, or EPS, is the percentage of its profit distributed to each share of stock. Investors will be willing to pay more for a share with a higher EPS since they hope to earn more profit. Divide the company’s total profit by its total shares to calculate earnings per share.
10. Price to Book Ratio (P/B)
In price to book terms, the ratio represents the relationship between the book value of equity and the share price of an organization. A stock’s market value is compared to the company’s book value, therefore. Divide the stock price of a share by its book value to arrive at the price to book value. In addition to the P/B ratio, the price equity ratio is sometimes used. An undervalued stock is one with a P/B Ratio below one. However, it can also suggest that the fundamentals of the company are flawed.
11. Dividend Yield
The company shares its profits with its shareholders in the form of dividends. Divide the dividend per share by the stock price to find the dividend yield. The company pays out a greater amount as a dividend to the trader if the dividend yield is higher. It is an indication of future growth prospects that a company reports a low dividend yield percentage.
An investor’s portfolio consists of his or her investments. A portfolio can contain as few as one stock, or it can contain an infinite number of stocks.
The latest stock price is the quote for the stock. The delay can be as much as 20 minutes unless you’re using a broker trading platform.
A stock’s price movement or the overall price movement of the stock market. Those stocks with extreme day-to-day movement and wide intraday trading ranges are considered highly volatile. In stocks with low trading volumes or thinly traded stocks, this is often the case.
15. Annual Report
Companies prepare an annual report to impress their shareholders. From cash flow to management strategy, it includes tons of information about the company. You judge a company’s solvency and financial standing when you read its annual report.
Arbitrage is the act of buying and selling the same security at different prices in different markets. A trader can, for example, buy X shares for $10 and sell them for $10.50 on another market, pocketing the difference if stock XYZ is trading at $10 on one market and $10.50 on another.
17. Averaging Down
As the price of a stock falls, an investor buys more of it. You will see a decrease in your average purchase price as a result. Using this strategy could be useful if you believe the consensus about a company is incorrect, so you expect the stock price to rebound later.
18. Blue Chip Stocks
Holdings of companies with large market capitalizations. A blue-chip stock’s dividend history is consistent and it is well managed fiscally. Casino chips of the highest denomination, blue, are thought to have originated as the expression.
It’s a little confusing to understand this term in the stock market. It is technically just another name for the stock market, which originated in a house where wealthy men gathered to exchange shares. Usually, when this is referenced in today’s stock market conversations, it refers to a stock exchange outside the U.S. or the Paris exchange.
A person who buys or sells investments for you in return for a fee (a commission).