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Home/ Questions/Q 10310
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Anonymous
Anonymous.
Asked: September 29, 20212021-09-29T20:19:00+05:30 2021-09-29T20:19:00+05:30In: Finance

What are the important terms in stock market?

What are the important terms in stock market?

stock market
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  1. Weboptify
    2021-09-29T20:22:14+05:30Added an answer on September 29, 2021 at 8:22 pm
    This answer was edited.

    This answer will go over some of the most common ones to get you started on your path toward becoming a savvy trader or investor. When it comes to learning about investments, there is a lot of information out there and it can be very confusing for beginners. That’s why we have put together this list of basic investment terminology that every beginner should understand before they start making trades or looking at brokerages online . Some of these terms will be specific to stock market investments, while others can apply to other types of investment such as mutual funds and the like.

    • Stock Market: The stock market is a marketplace where traders buy and sell securities that represent ownership in publicly-traded companies (shares). It’s also known as the equity market or capital markets because it allows investors to trade stocks for cash – but there are many different kinds of securities available on stock exchanges…
    • Equity: Equity represents an individual’s share in any company by virtue of their stock holdings. In finance, equity has two common meanings: Shareholders’ equity , which refers to the value of all interests in a company at a particular time, including preferred stock; and net assets, which is the value of assets minus liabilities.
    • Annual Report: An annual report is a document that publicly traded companies are required to produce once per year. The purpose of the report is so stockholders and potential investors can see how well (or poorly) they performed over the previous twelve months. These reports contain information about sales, earnings, dividends paid out and more – as well as executive compensation and stock performance.
    • Markup: Markup is the difference between a product’s cost and its selling price . In other words, it’s how much you add to a stock or commodity in order to turn a profit on your investment . If you buy something at $20 that costs $15 then sell it for $25, your markup will be 25% ($20 – 15 = $+$35 * 0.25). The percentage goes down as prices increase because of volume discounts from suppliers and retailers (which means larger orders aren’t charged full retail), but if you’re buying items wholesale directly from manufacturers without any markdowns , your markup would be 100%. That’s why large companies have higher markups than small ones since they can negotiate bulk discounts from suppliers.
    • Broker: A stock broker is a person or company that assists stock traders and investors with the buying, selling, depositing/withdrawing of stocks as well as transferring stock ownership between parties. In some cases stock brokers may also be called equity brokers . Brokers typically make money by charging commission fees for each trade they execute on an investor’s behalf – although there are exceptions to this rule depending on what kind of brokerage service you’re using. Commission Fees  are usually based upon how many shares (or units) of stock are traded, but it varies depending on which brokerage firm is being used and where the transaction takes place..
    • Agency vs Principal Transaction: When someone invests in securities through a brokerage firm, stock is traded on a principal basis. This means the broker has full discretion to buy and sell stock at his own volition – even if it’s against their clients’ best interests . If you’re not aware of how much stock your broker or financial advisor owns in his personal portfolio , then you could be exposed to significant risk without your knowledge. That’s why strict rules have been put into place to prevent these kinds of conflicts-of-interest from occurring (known as an “Agency Transaction).
    • Brokerage Fees: Brokerage fees are charged by brokers for executing orders that involve either buying or selling securities such as stocks, bonds, options contracts etc.. These fees often come with additional charges depending on whether they’re charged on a per stock or per trade basis, and they may also be subject to minimums.
    • Leverage: Leveraging refers to using borrowed capital (including financial derivatives such as stock options) in order to increase potential returns . In other words, if you’re making an investment that will generate $200 in profits with your own money then leveraging it by investing $100 of somebody else’s money would mean the same $200 profit is now worth more because you have less risk associated with the position.. So while leverage can result in higher returns for investors , it comes at a price due to interest charges from brokerages who lend out margin funds – which means there are additional fees involved when borrowing money through brokerage accounts.
    • Stock Split: Stock splits are generally considered to be a good thing for stockholders because it increases the number of shares in circulation. The downside, however, is that stock prices have been known to fall when stock splits are announced – although there are exceptions depending on what kind of stock split is being used..
    • Ex-Dividend Date: Ex dividend date refers to when stocks will go up or down in value based upon the amount of dividends paid out by companies . This information becomes available over night after stock exchanges close and can create buying opportunities for traders who want to take advantage of price fluctuations before they happen.  Most investors try their best not to buy or sell ex dividend dates but instead invest knowing these changes could occur which means if they buy stock at one price and the next day it’s worth more because of an ex dividend date , they can still make money.
    • Split Adjusted Market Price: The split adjusted market price is simply when you divide the stock’s current share price by its split factor . For example, if a stock had a two-for-one stock split and was currently trading for $50 per share before the adjustment, then each new post-split share would be priced at $25 (i.e., 50/100). This means that every pre-existing shareholder now held twice as many shares than before, which generally results in higher liquidity while also reducing individual share prices..
    • Initial Public Offering (IPO): An initial public offering (IPO) is a stock that’s initially offered to the public for sale. This process involves either an underwriting firm or investment bank which helps ensure there are buyers ready to purchase new stock issues when they first become available..
    • Market Cap: Market capitalization refers to the total dollar market value of a company’s outstanding shares. In other words, it’s how much money investors would theoretically be willing to pay in order acquire all outstanding stock . Companies with high market caps tend have higher valuations and can often make up large portions of entire stock indices such as the S&P 500 – while companies that have low market cap levels generally don’t get included on major stock indices until their values rise significantly enough to meet the market capitalization standards.
    • Stock Index: stock indices are a group of stock prices that have been combined into a single index to demonstrate their collective value or performance – such as benchmarking how well an individual stock is performing compared with other stocks in its industry sector, region , etc.. The most popular stock indices include the Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite.  The DJIA tracks only 30 companies but has traditionally been seen by many investors to be symbolic of overall US stock market conditions while also being one of the oldest stock indexes . There’s no real reason why there have to only be 30 components on this list either since it was created back in 1896 when there were just 12 major stock companies .
    • Stock Exchange: stock exchanges are where stockholders buy and sell securities such as stocks, bonds , etc.. Each stock exchange has its own unique rules which govern buying and selling stock including how orders should be placed, executed or filled. For example, the New York Stock Exchange (NYSE) is one of the most famous stock exchanges in America but it only deals with larger cap US blue chip companies while other regional stock exchanges deal in small to mid-sized firms that aren’t listed on NYSE.  Another major difference between different types of stock markets is whether they’re electronic or open outcry – although there’s also some hybrid systems used by smaller venues around the world today. Because they act as intermediaries for buyers and sellers when stock is traded, stock exchanges are sometimes referred to as stock market makers .
    • Portfolio: stock portfolios are simply a collection of stock held by an individual or institution . For example, you could have a stock portfolio containing many different shares – which is also sometimes referred to as equity. A stock portfolio can be made up entirely of one particular stock , in which case its known as being 100% invested in that company’s stock alone.
    • Short Selling: Short selling stock is a speculative technique where traders sell stock that they don’t own in the hope of buying it back later at a lower price and then returning it to the original owner . The short seller assumes that stock prices will decline so this transaction can be profitable – although there’s also unlimited risk involved which could result in significant losses if stock prices rise instead.
    • Market Maker: A market maker is an individual or firm who quotes both bid and ask (offer) prices simultaneously, with the intention of making a profit from the difference between them.. This means that stock exchanges rely on market makers for liquidity because when buyers want to buy stock but no one wants to sell, quoting bids and offers allows them to quickly purchase what they need without having to wait.
    • Stock Futures: stock futures are simply a contract to buy or sell stock at a future date , which means that the parties involved in this agreement have agreed on what price they will pay when stock is delivered . This also means there’s no physical stock involved itself since it only exists as an obligation between two stockholders – although some stock market participants including brokers and exchange specialists do hold stocks for their customers. Stock futures can be used both by hedgers who want to minimize risk associated with adverse changes in prices of products being produced, sold or purchased but also speculators who hope to profit from trading activity around movements in stock index levels during short time periods.
    • Options Market: The options market is where traders buy and sell put s (contracts giving stockholders the right to sell stock at a set price during a given time period) and call s (contracts which give stockholders the option to buy stock from another party for an agreed upon price within that time frame). Calls are where investors have bought these options in anticipation of stock prices increasing while puts are used by speculators who believe they will decline.
    • Day Trading: stock prices can fluctuate significantly throughout a course of any given trading session, which means that stock day traders usually engage in multiple trades within the same stock market day . In general, stock price movements are dependent on many factors including newsworthy events as well as overall economic conditions.
    • Margin: stock margin is a way for stockholders to borrow money against the value of stocks they already own, which means that it’s also sometimes called stock loan . Margin can be used as part of a strategy to buy stock with borrowed funds , although there are risks involved including interest charges and potential losses on equity.
    • Volatility: stock prices can change quickly and significantly, which means stock market volatility is the degree to which stock price movement may occur over a given period of time. This creates uncertainty in stock markets because it’s difficult for stockholders who are holding long positions (buying stock with the expectation that its value will rise) or short selling (selling shares you don’t own hoping they’ll decline so you buy them back at lower cost) to accurately predict whether their investments will be profitable before transactions have been completed.
    • Short Interest: Short interest refers to volume traded on particular stock against available shares , meaning investors may sell 100% of all stocks that are held by lending – but this doesn’t mean there aren’t any more buyers willing to purchase those same stocks .
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