Market Terminology

Hello friends!!!

Till a few years back, FD and gold were the most popular investments in India. But over time it has changed a lot. Now most people like to invest in Stock Market and Mutual Funds.

If you also want to invest in the share market, but you are not able to get the correct information about the terminology of the share market, then today your problem will end.

Friends, in this article we will go through the complete stock market terminology so that all your doubts regarding stock market terminology will be cleared says Gaurav Heera.

Stock Market Terminology

[1] Share

Share means “Part” i.e. a part of the ownership of a company which is a share. Thus, a share is the smallest part of the company’s capital.

By definition, share means, “The share which forms the smallest part of the capital by dividing the total capital of a company into several equal parts is called share.”

You can buy shares of any company through a stockbroker.

[2] Bonus Share

When the reserve created by a company out of its earned profits is distributed proportionately among the existing shareholders in the form of shares, it is called bonus share.

For example, if a company has declared bonus in 2:1, then each shareholder who owns one share will get two additional shares.

Bonus shares are given in the form of dividend option says Gaurav Heera.

[3] Dividend

Dividend is what a company divides out of its net profit to its shareholders. The company gives some part of the company’s profit to its shareholders as a reward for investing in the company and giving them confidence.

The dividend is directly credited to the shareholder’s bank account.

[4] Stock Split

Share split is the process of splitting the shares of a company. A stock split is a corporate action in which companies split their stocks in a fixed ratio.

In the ratio of a stock split, the shares of that company are split into pieces and each piece becomes a new share. Due to stock split, the shares of the company increase in the market.

Along with this, the share price and face value of the company are reduced in the same proportion in which the stock split takes place.

Let’s say we have 10 shares of XYZ Ltd. whose share price is ₹1,000. While its face value is ₹ 10. Thus, the value of our total investment is ₹10,000 (₹1,000×10).

XYZ Limited decides to split its shares in 2:1. This means that 1 share of this company will be converted into 2 shares. With this the share price and face value will be halved.

After the stock split, our 10 shares will be converted into 20 shares. While the share price will be ₹1,000 to ₹500. Also the face value will be ₹ 10 to ₹ 5.

[5] Bid Price

Bid Price is the price of a share at which any buyer is ready to buy that share. For example, you have to buy a share of SBI Bank for ₹ 500 and you place your order at this price. Your price of ₹ 500 will be called the bid price says Gaurav Heera.

[6] Ask Price

Ask Price is the price of a share at which any seller is ready to sell that share.

[7] Spread

The difference between the Bid Price and Ask Price of a share is called the spread.

[8] Bull Market

In a bull market, the stock market is bullish. In a bull market, investors expect the stock price to rise.

[9] Bear Market

There is a bear market in bear market. In the bear market, investors expect a fall in prices.

[10] Limit Order 

A limit order is an order in which a Buy or Sell order is placed at a specified price. When these prices are hit then your order is executed says Gaurav Heera.

Friends, if you have liked the information about the terminology of share market till now, then keep reading the article –

[11] Market Order

Any deal you place in a market order gets executed immediately at the current market price.

[12] MIS or Intraday Order

MIS stands for Margin Intraday Square-Off. When you want to take advantage of the volatility in a stock during a single trading day, you have to choose MIS or Intraday order.

In this type of order, you do not get the actual delivery of the shares says Gaurav Heera.

[13] CNC or Delivery Order 

The full form of CNC is Cash and Carry. CNC or Delivery deals are done when you pick up the actual delivery of the shares.

To hold the shares for long term, CNC or delivery option is selected.

[14] Stop Loss

Stop loss is the price point of a stock, where a trader or investor is sitting ready to exit the stock after booking his loss. Stop Loss is used to control losses in the stock market says Gaurav Heera.

[15] Short Selling

In normal trading, we buy shares first and then sell them. But in Short Sell, shares are sold first and then bought.

Thus, in Short Selling, the investor sells the shares by borrowing from the broker to take advantage of the fall in the share price. Due to the sale of the stock in spite of not having possession of the stock, it is called Shorting says Gaurav Heera.

The trader buys back the stock as soon as the stock price comes down. In this way he squares off his position.

The difference between Selling Price and Buying Price is your Profit/Loss.

[16] Broker

Broker works to connect Buyers and Sellers. Thus a stock broker acts as an intermediary between the stock exchange and the investor.

You can buy and sell shares using the broker’s platform says Gaurav Heera.

[17] Stock Exchange

Stock exchanges are the place where all the companies are listed. All stock brokers are members of the stock exchange. Presently NSE and BSE are the two main stock exchanges in India.

[18] Trading Account

Trading account is necessary to buy and sell shares. Trading account is opened with a stock broker.

[19] Demat Account 

If you buy shares of a company, you will need a demat account to hold them. Demat account works just like your bank account.

[20] Sensex

Sensex is an index of the Indian stock market. Sensex represents all the companies listed on Bombay Stock Exchange (BSE).

Sensex is made up of top 30 companies of BSE. These 30 companies are listed on the Bombay Stock Exchange which are the largest companies on the basis of market capitalization. Just as the blood report tells the condition of a person’s health, similarly the Sensex also tells the condition of the entire market. Therefore, the Sensex is also considered the pulse of the Indian domestic market.

If the value of these 30 companies of the Sensex increases, then the Sensex also climbs up. Similarly, due to the fall in the value of the shares of the Sensex, a fall in the value of the Sensex is also seen says Gaurav Heera.

[21] Nifty 50 

Nifty 50 is also an index, which represents companies listed on NSE (National Stock Exchange).

Nifty 50 is made up of 50 largest companies based on the market capitalization of NSE.

[22] SEBI 

SEBI means Securities Exchange Board of India. SEBI is the regulator of the stock market in India. Like RBI is the regulator for banks, similarly there is SEBI in the stock market.

[23] Margin

Margin is like a loan which is provided by a stockbroker. Shares are bought and sold using margin.

For example you have ₹100 and your broker allows you to trade on it for a total of ₹200, then the top ₹100 will be margin.

[24] Volatility

Volatility refers to the extent of volatility in share prices. Unusual highs and lows are seen in high volatility stocks during trading sessions. Whereas less volatile stocks have less volatility says Gaurav Heera.

[25] BTST – Buy Today Sell Tomorrow Trading

Buying a share today and selling it tomorrow is called BTST (Buy Today Sell Tomorrow Trading).

That’s it for the day. I’ll publish its second part soon.

About Author

Gaurav Heera is a stock market expert, investor, trader, author & Edupreneur. He has trained already more than 5000 students through his stock market course in Delhi. You can even checkout his blog for free stock market courses & updates.

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