If you want to start your journey as an investor or trader in the Indian stock market, it is necessary to aware of basic terms used in the stock market.
All the vocabulary given here is very essential to grow your carrier in the stock market industry as well.
Very Basic Stock Market Terms
1) Stock Exchange
It is an organized market for buying and selling industrial, financial, corporate, government and other securities as per certain well-defined rules and regulations. It provides an easy and safe platform for transactions in different securities. Here, Securities means Shares, ETF and debentures issued by the government bodies, public companies.
Example:(i) Bombay Stock Exchange (BSE) (ii) National Stock Exchange (NSE)
2) Bombay Stock Exchange (BSE)
It is the oldest stock exchange of Asia established in 1875 at Dalal Street, Mumbai, Maharashtra. More than 5500 companies are publically listed on this stock exchange.
SENSEX is the barometer on the BSE Exchange.
3) National Stock Exchange (NSE)
NSE is the leading stock exchange of India located in Mumbai. It was established in 1992. It was 1st fully screen-based electronic trading platform in India. More than 2000 companies are publically listed on this stock exchange.
NIFTY is the barometer on the NSE Exchange.
It is also an index of Asia’s oldest stock exchange and that is BSE. It is the barometer (benchmark) of BSE. This index consists of 30 Heavyweight companies listed on the Bombay Stock Exchange.
It is an index of the Indian equity market. Nifty is a barometer (benchmark) of NSE. The term Nifty originated from two words (National and Fifty). This index consists of 50 heavyweight public listed companies from different sectors in India. The valuation of Nifty is determined based on the performance of the top 50 Stocks.
A Share is a single unit of ownership in a company or a financial asset. It is essentially an exchangeable piece of the value of a company that can go up or down depending on different market factors. Share is also known as Stock/Security.
It means buying shares or takes a position in a company. The buying position is also known as a long position.
It means selling shares or exit your position from the company that you purchased. It is also known as a short position.
9) Share Trading
Buying and selling shares in the stock market known as share trading.
10) Market Timing
Indian stock market timing is 9:15 AM to 3:30 PM from Monday to Friday except for National Holiday.
11) Open Price
Open price is the first traded price in the morning when the stock market opens.
12) Close Price
Close price is the last traded price in the afternoon when the stock market closes.
13) Day High
It is the highest trading price throughout the day during a single trading session.
14) Day Low
It is the lowest trading price throughout the day during a single trading session.
Little Advance Stock Market Terms
Simply the number of buyers and sellers exchanges shares over a period of time, mostly the time is daily.
16) Bid Price
The bid price is the price at which you want to purchase a stock.
17) Ask Price
The Ask is the price at which you want to sell a stock.
Bull is a market condition in which investor or trader predicts that stock price goes up or the market will rise.
Bear is a market condition in which investor or trader predicts that stock price goes down or the market will fall.
Volatility means how fast a stock moves up or down.
21) Short Sell
First selling and then buying is called short selling. It is applicable only in intraday trading. If you do not buy shares on the same day then a heavy penalty will be imposed on you.
One complete cycle of buying and selling (Selling and buying) of shares is considered as one transaction.
23) Intraday Transaction
The number of shares buys and that shares sold with the same quantity on the same day is called an intraday transaction.
24) Delivery Transaction
Any transaction not complete on the same day is called a Delivery transaction. Means If you buy shares and not sell that share on the same day is called a Delivery transaction.
25) Squaring off
This term is used to complete one transaction. Means if you buy then you have to sell (means squaring off) and if you short sell then you have to buy (means squaring off).
26) Limit order
The buying and selling price on which traders want to put bid and when that price comes to the order will execute.
27) Market Order
The current market price of the share at which a trader wants to execute buying or selling order.
28) Stop Loss Order (SL Order)
SL order is the limit price set by traders at which the order automatically enters or exits the trade. As per the name, a stop-loss order is used to stop or limit those losses in the market.
It is a firm, organization or person authorized by stock exchange(NSE, BSE) that provide a platform to perform buying and selling transaction to an investor. The broker is also known as a depository participant (DP).
Example: ShareKhan, Motilal Oswal, HDFC Securities, ICICI Direct, and many more.
It is a fee that paid by the trader or investor to a broker to perform intraday and delivery transactions. There are various charges include with a brokerage.
31) Averaging Down
An investor or trader buys more shares when a stock price goes down. Due to that, the average price of holding stock goes down.
When a company makes a profit then it distributes some amount to its shareholders in the form of a dividend.
A bonus is also a type of dividend but in the form of shares allotted by the company to its shareholders.
Example: If you have 20 shares of XYZ company and company declared 1:2 ration of bonus, then you are eligible to get 1 share on every 2 shares. So, you will get 10 free shares on your 20 shares.
Portfolio is a collection of shares you hold in your Demat account.
35) Trading Account
The trading account is used to perform buying and selling transactions in the stock market.
36) Demat Account
This account is used to hold your purchased shares in the electric form. In simple terms, if you want to make Fixed Deposit (FD) having a savings account with a bank is the necessary same way if you want to hold your stock which you buy that deposited in your Demat account. You can open a Demat account with a broker.
37) Initial Public Offering (IPO)
When any private ltd company wants to become a public limited company in any stock exchange then it brings IPO.
38) Securities and Exchange Board of India (SEBI)
SEBI is regulatory of the Indian equity and commodity market owned by the government of India. In a simple term, We can say Reserve Bank of India (RBI) monitor all the bank in India same way SEBI work for the stock market in India.