51 Important Stock market terms you should know

As a beginner in any field, it’s very important to know as much as you can before you start. Similarly, for stock markets it’s more than important for you to know all the frequently used stock market terms as your valuable time and money are involved.

Stock market is an ocean, and no one can certainly learn it in one go, it’s the time that you spend in stock market teaches you the various aspects of it but to even start that journey you need to know certain basic terms and what do they mean. Here are 51 important stock market terms used in everyday markets to get you started with.

51 Stock Market Terms with Definition:

1. Stock: It is a type of security in the form of equity that represents ownership in a company. Stockholders, also known as shareholders, are entitled to a share of that company’s profits and assets.
2. Equity: It is the ownership in an organization represented by stocks.
3. Market capitalization: This refers to the total value of a company’s outstanding shares of stock. It is a multiple of number of outstanding shares by the current market price per share.
4. Bull market: A bull market is characterized by rising prices and a positive outlook.
5. Bear market: A bear market is characterized by falling prices and a negative outlook.
6. Dividend: It refers to a portion of a company’s profits that’s distributed to its shareholders.
7. Initial public offering (IPO): This is the first sale of stock by a private company to the public.
8. Securities: Securities are financial instruments such as stocks, bonds and options that represent ownership of a company or a debt note.
9. Broker: A Stockbroker is a person or a firm that buys and sells securities on behalf of clients/ public.
10. Trader: A person who buys and sells securities to yield profits in a short time.
11. Technical analysis: It refers to the method of evaluating securities by analyzing statistical trends gathered from trading activity like past prices and volume of the stocks sold.
12. Fundamental analysis: It refers to the method of evaluating a security by examining the financial and economic factors that can affect its value. For e.g., a company’s financial statements & industry conditions.
13. Stock exchange: Stock Exchange is the marketplace where securities (stocks & bonds) are bought and sold. Some of major stock exchanges include the National Stock Exchange (NSE), New York Stock Exchange (NYSE) and NASDAQ.
14. Blue chip stock: A Blue-chip stock is a well-established and financially sound company’s stock with a long track record of stability, reliability, and strong performance.
15. Growth stock: It refers to a stock that represents a company that’s expected to experience notably good growth in the future, generally based on the company’s innovative products, technologies, or other growth drivers.
16. Value stock: It’s a stock that has the potential to deliver strong returns in the future.
17. Stock index: A stock index generally refers to a statistical measure of the performance of a group of stocks, such as the SENSEX, SGX NIFTY or S&P 500.
18. Stock split: It is a corporate action in which a company increases the number of outstanding shares by issuing more shares to existing shareholders. This is generally done to make the stock more accessible to smaller investors by reducing the stock’s price per share.
19. Short selling: short selling refers to the act of selling a security that the seller doesn’t own at the time of sale, with the hope of buying it back later at a lower price.
20. Margin: Margin is the borrowed money provided by the stockbroker to increase the buying power of the client. It allows investors/ traders to buy more shares than they could with their own cash.
21. Volatility: This is the measure of how much the price of a stock tends to fluctuate over time. Generally, High volatility means that the price can fluctuate significantly over a period and low volatility means that the price is more stable.
22. Earnings per share (EPS): This value of a company refers to the profit divided by the number of outstanding shares of that company. EPS is used to evaluate profitability of a company.
23. Price to Earnings ratio (P/E ratio): This is the measure of a company’s stock price relative to its earnings. P/E ratio is calculated by dividing the market price per share by the earnings per share. A high P/E ratio may indicate that the market is optimistic about the company’s future earnings potential.
24. Yield: This is the annual return on an investment, expressed as a percentage of the investment’s cost. Generally, the yield is calculated by dividing the annual dividends per share by the stock’s price per share.
25. Bearish: This is a sentiment with a negative outlook on the stock market or a particular security. A bearish investor believes that prices will decline soon.
26. Bullish: This is a sentiment with a positive outlook on the stock market or a particular security. A bullish investor believes that prices will rise soon.
27. Market maker: A person/ firm that stands ready to buy and sell securities always. These market makers are credited for provide liquidity to the market and facilitate trading.
28. Primary market: This refers to the market where new securities are issued and sold to investors.
29. Secondary market: This refers to the market where securities that have already been issued are bought and sold among investors. E.g., Stock market.
30. Ticker symbol: This is the unique series of letters that represents a particular publicly traded company’s stock. Ticker symbols are used to identify and track a stock’s price on stock exchanges and financial websites. For e.g., AAPL (apple), HDFC etc.
31. Insider trading: Insider trading is an activity referring to buying or selling of a security by someone who has access to nonpublic information about the security. This is illegal because it is based on information that is not available to the public and can give the insider an unfair advantage in the market.
32. Short interest: This is the number of shares of a security that have been sold short (before buying) but have not yet been repurchased to close the position.
33. 52-week high: This is the highest price at which a stock has traded in the past 52 weeks i.e., 1 Year.
34. 52-week low: This is the lowest price at which a stock has traded in the past 52 weeks i.e., 1 Year.
35. Market order: It refers to an order to buy or sell a stock at the current price at that time.
36. Limit order: It refers to an order to buy or sell a security at a specific price or better price that the seller can set.
37. Stop order: It refers to an order to buy or sell a security once it reaches a specified target price which is known as the stop price. A stop order becomes a market order once the stop price as the market reaches the same price.
38. Order book: A record of all outstanding orders of a stock.
39. Trading volume: This refers to the total number of shares of a stock that have been traded in a particular period.
40. Asset: An asset is something that has a value and can be owned like a property, gold or cash.
41. Bond: In general terms, Bond is a type of debt security that allows an investor to lend money to the issuing authority or government in exchange for periodic interest payments and the return of principal at the time of maturity.
42. Index fund: This is a type of mutual fund or an exchange traded fund that tracks the performance of a specific market index, such as NIFTY, S&P 500 etc.
43. Leverage: This refers to the use of borrowed money to increase the potential return on an investment.
44. Exchange Traded Fund (ETF): This is a type of investment fund that tracks the performance of a specific market index or asset class and is traded on an exchange like a stock.
45. Ask price:  This is the price at which a seller is willing to sell a stock.
46. Bid price: This is the price at which a buyer is willing to buy a stock.
47. Capital gain: This is the profit that is realized from the sale of a security that has increased in value since it was purchased.
48. Derivative: This is a financial instrument whose value is derived from the value of an underlying asset, such as a stock or commodity. Examples include options and futures.
49. Commodity: This is a physical good that is traded on a market, such as agricultural products, metals, and energy.
50. Day trading: This is the practice of buying and selling securities within the same trading day.
51. Non-Performing Asset (NPA): A loan or advance for which the principal or interest payment remained overdue for a period of 90 days is called as non-performing asset (NPA).

Conclusion

A basic Understanding of these stock market terms will certainly help investors to understand how the stock market works and help them have a successful and profitable stock market journey.