Have you ever tried reading an annual report or a stock market bulletin, but found the stock market terms too complex?
Would you believe if you were told that these stock market terms are as complicated as you thought they were?
Yes! All you need to do is go closer to them, understand them and try to see how to apply them to stock trading.
These stock market terms are meant to help stockbrokers and investors know how to navigate the market.
So, if you have developed a phobia or lost interest, you can start today after reading this article.
First, the stock market is a financial marketplace that connects investors and traders who want to buy and sell publicly traded company shares.Â
Stocks, also known as equities, represent partial ownership of a company. The stock market consists of many stock exchanges, such as the Nasdaq or Nigerian Stock Exchange (NGX).
It also includes over-the-counter (OTC) marketplaces where investors trade securities directly.
The Gen-Zs are interested in the stock market but don’t understand the terms and concepts.
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So, they just back out because some of these terms are difficult to understand.
Some of these terms and concepts will frustrate you, but once you get to know them, they will help you navigate the market.
To start investing in the stock market, you must have a basic knowledge of the stock market.
Again, a good understanding of the stock market terms will make your trading better and more effective.
These terms will improve your stock market vocabulary.
Understanding The Stock Market TermsÂ
Annual Report
An annual report is a yearly report that every company prepares to impress the shareholders of their company. The annual report carries various information about a company, from cash flow to management strategy.
Several people read the annual report to weigh the company’s solvency and judge their financial position.
Arbitrage
Arbitrage means purchasing something like foreign money from one place and selling it to another place where the price of the foreign money is higher than buying it.
For example: if stock is trading out ₦‎2000 from one market and ₦‎2100 on other markets, the trader must buy shares at ₦‎2000 from one market and sell them for ₦‎2100 on a different market.
By so doing he gets the difference in the amount between the market prices.
Averaging Down
Averaging down means the investor buys more stock when the price of a particular stock goes down.
This decreases the average purchase price of your specific stock.
Several investors use this strategy if they feel that consensus about a specific company is wrong, so they expect the stock price to jump back and earn profit.
Broker
A broker is a person who buys and sells investments on your behalf and, in exchange, takes a certain amount of money called a commission or fee.
Dividend
A dividend is a return that shareholders get when the company makes profit.
The company shares a portion of its earnings to shareholders on a quarterly or annual basis.
Not every company pays dividends, so, if you’re after penny stocks, you’ll likely not get any dividends.
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Quote
The stock’s latest trading prices contain information that is given in a quote.
Sometimes, the quote is delayed by 20 minutes, and only a stockbroker working in an existing trading platform can see them.
Share Market
A share market is a market in which shares of a particular company are on sale for prospective buyers to buy.
The stock market is a definite example of a share market.
Bear Market
It is a market where investors talk about the stock market performing in a downward trend, or it is a certain period where the prices of multiple stocks are falling.
Bull Market
It is a market where investors talk about the stock market performing in an upward trend, or it is a certain period where the prices of multiple stocks are increasing.
Bid Price
A bid price is the amount you desire to pay for a particular share.
Other Major Terms You Should Know
Ask Price
Ask price is a specific price at which you are looking to sell a share.
Order
Order means the purpose of buying and selling shares in a given range of price.
For example, you have placed an order to buy 200 shares from company A, at a maximum price of Rs 50 per share.
Trading Volume
Trading volume means the number of shares that are traded on a particular day.
Market Capitalisation
It simply means the value of a company according to the stock market. The current value of all the shares of a company put together.
Intra-Day Trading
Intraday trading means buying and selling your desired stocks on the same day before trading hours is over.
Market Order
A market order is an order to buy and sell shares at the market price. Several investors don’t go with this Order because the trade price in the market order remains volatile.
More Terms For Stock Market
Day Order
A day order is an order that remains good till the end of the trading day. Day Order will be canceled if it does not perform by the time the market closes.
Limit Order
A limit order is to buy shares below a fixed price and sell shares above a fixed price. It is advisable to use a limit order to trade shares.
Portfolio
The portfolio is a collection of all the investments that an investor has made right from purchasing a share for the first time.
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Liquidity
Liquidity means how we can quickly sell stocks off the market. Shares that we sell on time consist of high trade volumes quickly and are called highly liquid.
IPO
IPO means a private company is turning into a public company by issuing its shares to the public for the first time. In the case of an IPO, the investor can buy the shares directly from the company.
Knowing these stock market terms will help you understand the stock market and make you a good trader.
