Stock Market Terminology

Stock Market Terminology

• Stock market: A stock market is a place for trading of a company stocks and derivatives at an agreed price. It is the place or a platform 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 commonly interchanged terms. While both of the terms refer to the share in the ownership of the company, there is a small distinction. ‘Stock’ is a general term describing the ownership certificate of any company, while ‘shares’ refers to the ownership certificate of a particular company. For instance, if one says that he own ‘stocks’ it refers to the overall ownership in one or more companies but when he says that he owns ‘shares’, he is referring to a particular company’s stocks.
• Bull: The investor or trader who buys shares in the expectation that the market price of the company’s share will increase.
• Bear: The investors or traders who sell stocks first at higher price and then purchases it at lower price to earn profit.
• Bull market: Market condition when the market is rising and buyers are more than the sellers. This trend is called ‘bullish.’
• Bear market: Market situation where the price of the securities is 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 the gains.
• Closing price: The last trading price of a security at the end of trading day/session.
• 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 circuit breaker is hit, trading in that stock is ceased for some time or that whole particular day depending on the fluctuation.
• Day trading or Intraday trading: Day trading is buying and selling a security on the same day. In day trading the traders square off their positions on the same day.
• Long: Buying a stock means to go long on the stock. Traders, who expect the price of security to rise up, go for long.
• Short: Short selling means selling of borrowed stock in an expectation that the price will drop and then one will buy it back at cheaper rate.
• Stop loss: Stop loss is used to limit the possible loss of trader. It is the price where a trader exits his or her position in case of adverse price movement. A good stock advisory always provide stock tips along with the stop loss.

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