Stock Market

Terms:

Some terms used in stock market

1. Arbitrage 

Arbitrage refers to purchasing an asset from one market and selling it to another market where the selling price is higher than what you paid for it, resulting in profit. 

2. Ask

An ask is the selling price that a trader offers for their shares. 

3. Asset Allocation

Asset allocation is an investment strategy that aims to balance risk and reward by dividing a certain percentage of investments—like stocks, bonds, real estate, cash, etc.—across different assets in an investment portfolio. 

4. Asset Classes

Asset classes are categories of assets, such as stocks, bonds, real estate, or cash. 

5. Averaging Down

Averaging down is an investing strategy that involves buying additional shares of an asset or stock after its price has fallen, resulting in a lower average purchase price. 

6. Bear Market

A bear market is a market condition in which prices are expected to fall. Typically, this entails major indexes or stocks decreasing by 20% or more compared to previous highs. 

7. Beta

Beta is the measure of an asset’s risk in relation to the market. A stock with a beta of 1.5 means that the stock typically moves 50% more than the market in the same direction. Generally, a higher beta indicates a riskier investment—if the market rises 10%, the stock will rise by 15%, but if the market falls by 10%, the stock will fall by 15%. 

8. Bid

The price a trader is willing to pay for shares of a stock or other asset. 

9. Bid-Ask Spread

Bid-ask spread is the difference between what buyers are willing to pay and the price sellers are asking for a stock. 

10. Blockchain

A blockchain is a record-keeping database in which transactions made in Bitcoin or other cryptocurrencies are recorded across multiple computers and distributed across the entire network of those computers.

11. Blue-Chip Stocks

Blue-chip stocks are common stocks of well-known companies known for their quality and history of growth. 

12. Bond

A bond is a type of security loaned by an investor to a borrower like a company or government used to fund its operations. 

13. Bull Market

A bull market is a market condition in which prices are expected to rise.

14. Buyback

A buyback is when a company repurchases outstanding shares to reduce the number of shares on the market and return profits to their investors, resulting in an increased value of the remaining shares. 

15. Capitalization

Also known as market cap, capitalization is the total market value of all a company’s outstanding shares. It’s calculated by multiplying the total number of shares by the current share price. 

16. Capital Gains 

Capital gains refers to the profit earned after selling an asset or investment for a higher price than you paid for it. 

17. Common Stock

This is one of the most basic stock market terms to know. Common stock is a type of security that represents ownership in a company. Holders of common stock are able to vote on matters like corporate policies and elect directors within that company. 

18. Current Ratio

The current ratio is a measure of a company’s ability to pay short-term debt. It’s determined by dividing current assets by current liabilities. 

19. Day Trading

Day trading is the practice of buying and selling shares of stock within a single day.  Also called intraday.

20. Debt-to-Equity Ratio

Debt-to-equity ratio represents a function of a company’s debt relative to its equity, or the value of its assets minus its liabilities. The ratio is found by dividing total liabilities by total shareholder equity. 

21. Diversification

Diversification is an investment strategy that divides investment funds across a variety of assets in order to minimize overall risk. 

 22. Dividend

“Dividend” is one of the most basic terms for the stock market. It’s simply a portion of a company’s earnings paid out to its shareholders. 

23. Dividend Yield

A dividend yield is a dividend expressed as a percentage of its stock price. 

24. Dollar-Cost Averaging

Dollar-cost averaging is an investment strategy in which you invest a fixed amount on a regular basis regardless of the price of the asset. 

25. Dow Jones Industrial Average (DJIA)

Also known as Dow 30, the Dow Jones Industrial Average is a stock market index consisting of the 30 most-traded blue-chip stocks on the New York Stock Exchange. It’s used to measure the performance of shares among the largest U.S. companies and gauge the overall direction of stock prices. 

26. Earnings per Share (EPS)

Earnings per share is a company’s profit divided by its number of outstanding shares, and is used to measure corporate profitability.

27. Economic Bubble

An economic bubble is a situation where asset prices surge to significantly higher levels than the fundamental value of that asset. 

28. Equal Weight Rating

An equal weight rating is a measure used by equity analysts to signify how well a stock is performing relative to other stocks. An equal weight rating suggests that a stock will perform similarly with the average of all the stocks being used for comparison.

29. Equity Income

Equity income is used to describe any income received from stock dividends. 

30. Exchange

An exchange, or stock exchange, is a marketplace where investors and traders buy and sell stocks. You’ve probably heard of the most well-known exchanges in India the BSE and the NSE. The US stock exchanges are the New York Stock Exchange (NYSE) and Nasdaq. 

31. Exchange-Traded Funds (ETFs)

Commonly known as ETFs, exchange-traded funds are a collection of stocks or bonds combined in a single fund that can be purchased and traded on major stock exchanges. Similar to mutual funds, they’re a pooled investment fund, meaning a “pool” of money is aggregated from multiple investors. 

32. Expense Ratio

An expense ratio measures the cost of owning a mutual fund, including expenses like the management of the fund, overhead fees, and any other costs associated with running the fund. It’s essentially an administrative fee paid to the company in return for owning the fund. The ratio is measured as a percentage of your total investment—for example, if you invest $10,000 in a fund with an expense ratio of .20%, you’ll pay $20 on top of your investment. 

33. Futures

A future is a contract that requires a buyer to purchase a specific asset, and the seller to sell that asset at a certain future date at an agreed-upon price. Futures are a way for investors to hedge current investments—a risk management strategy intended to offset potential losses in other investments.

34. Going Long

Going long refers to the act of buying stock shares with the expectation that the asset’s price will rise, resulting in a profit. 

35. Going Short

Going short—the opposite of going long—refers to the act of selling stock shares with the expectation that the asset’s price will fall. When an investor goes short on an asset, they borrow that asset, sell it, and hopefully purchase it later at a lower price if the price does decline, resulting in profit. 

36. Growth and Income Funds

This is a type of mutual fund or ETF that has both a history of capital gains (growth) and income generated from dividends (income). Growth and income funds have a two-sided strategy of both long-term growth and short-term income. 

37. Growth Stocks

A growth stock is a common stock of a company whose revenues are expected to grow at a significantly higher rate than what’s average for that industry. 

38. Head and Shoulders Pattern

The head and shoulders pattern refers to a specific chart formation seen on a technical analysis chart. It appears when a stock price reaches three peaks: when the price peaks then declines; rises above that peak and declines again; and rises a third time (but not as high as the second peak) and then declines again. The second peak represents the formation’s “head,” and the first and third peaks represent the “shoulders.” It’s generally considered to be an indicator of an impending bear market.

39. Index Funds

Index funds are investment funds that follow the performance of a specific benchmark or stock market index, like the BSE or NSE. When you invest in an index fund, your money is used to invest in every company in that index. This results in a more diverse portfolio than if you were hand-selecting individual stocks, for example. 

40. Inflation

Inflation is the rate of increase in prices for goods and services in the economy. 

41. Initial Public Offering (IPO)

An IPO refers to a previously private company that becomes public by selling stock shares on the stock market. 

42. Limit Order

A limit order is an order to buy or sell a stock at or below a specific price. Limit orders give traders control over how much they pay. 

43. Liquidity 

Liquidity measures how quickly and easily a stock can be bought or sold without impacting its price. Cash, for example, is the most liquid asset—no exchange is necessary to gain value from it, and it’s already in its most liquid form. On the other hand, a car is less liquid—regardless of its value, you might have to wait to sell it at its best price. 

44. Margin

Sometimes referred to as “buying on margin,” margin is when investors borrow money from a broker to purchase a stock, similar to a loan. 

45. Market Index

A market index tracks the performance of a certain collection of stocks, often grouped to represent a certain industry. They’re a tool for investors to gauge the health of the stock market by comparing current and past stock prices.

46. Market Volatility

Market volatility is a measure of how much and how often the value of the stock market fluctuates. 

47. Moving Average

A moving average is the average price of stocks or other assets over a specific period of time. Generally used in technical analysis charts, it’s calculated by averaging data from the previous time periods to help investors identify the current direction of price trends.

48. Mutual Funds

Mutual funds are pools of investments from shareholders used to “mutually” buy securities like stocks, bonds, and other assets. 

49. BSE and NSE

BSE Bombay Stock Exchange and NSE National Stock Exchange, are an electronic exchange where investors can buy and sell stocks through an automated network of computers. 

50. Non-Fungible Token (NFT)

A non-fungible token, more commonly known as an NFT, is a blockchain-based financial security. Each NFT represents a unique digital asset. “Non-fungible” indicates that it can’t be replicated or replaced with something else. 

51. Order Imbalance

An order imbalance occurs when orders of one type of stock aren’t offset by opposite orders, resulting in an excess of orders for that specific stock and sometimes volatile price changes. 

52. OTC Stocks

OTC stocks, or over-the-counter stocks, are securities that are traded on a broker-dealer network instead of on a major stock exchange. They’re often used by smaller companies who don’t meet the requirements to be listed on a formal stock exchange.

53. Outstanding Shares

Outstanding shares refers to the total number of a company’s shares that have been issued to shareholders, including restricted shares. 

54. P/E Ratio

Used to value a company, the P/E ratio, or price-earnings ratio, is the ratio of a company’s share price to the company’s earnings per share. 

55. Preference Stock

Preferred stock is a type of stock that combines characteristics of both common stock and bonds. Owners of preferred stock receive different rights than common stockholders, like receiving dividends before common stockholders, but they generally don’t come with corporate voting rights like common stocks do. 

56. Price Quote

A price quote is the price of a stock or other security as quoted on an exchange. Price quotes usually come with important supplemental information to help traders make more informed investment decisions. 

57. Profit Margin

Profit margins are used to gauge the profitability of a company. It’s expressed as a percentage and is calculated by dividing the company’s net profit (total revenue minus total expenses) by total revenue. 

58. Recession

A recession is defined as a period of decline in economic performance throughout the economy, generally lasting for at least several months. 

59. Risk Tolerance

Risk tolerance is a measure of the level of risk you’re willing to accept on your investments. Someone with a lower risk tolerance typically sees lower returns on their investments in exchange for lower overall risk in periods of market decline. 

60. Scrip: A share certificate. It is a Stock Exchange term and is a shortened form of 'subscription'. It also refers to types of shares. 

61. Sector: The stock market includes shares from thousands of different companies, which are broken into 11 different sectors. A sector is a group of companies with similar business products, services, or characteristics. 

62. Shares: Shares are units of ownership in part of a company’s total stock. 

63. Stock Market Holidays: While this isn’t necessarily a term or definition, it’s important to know what days you can and can’t buy or sell on the stock exchange.

64. Stock Option: A stock option is a contract that gives an investor the right to purchase or sell a specific number of stock shares at a predetermined price within a specified time period. 

65. Stock Portfolio: A stock portfolio is an individual’s collection of investments, including stocks, bonds, mutual funds, and other financial assets. While a portfolio refers to all of your investments, they might not be contained in one single account. 

66. Stock Split: A stock split occurs when a corporation increases the number of its outstanding shares by distributing more shares to current stockholders. By splitting existing shares into multiple new shares, the stock becomes more affordable. 

67. Time Horizon: Time horizon refers to the period of time an investor expects to hold an investment, which will vary based on personal investment goals and strategies. For example, investing in a retirement account like a 401(k) has a longer time horizon, since the funds won’t be withdrawn until you reach retirement age. Generally speaking, longer time horizons correlate to more risk potential in a portfolio, and shorter time horizons correlate to a more conservative (less risky) portfolio. 

68. Value Stocks

Value stocks are shares of companies selling at bargain prices that investors expect to rise because the company’s financial fundamentals suggest the shares are actually worth more than the current value.

69. Volume

Volume is a measure of how much a certain stock or other investment has been traded over a certain period of time. Volume is a critical component of strategically analyzing stock market trends, and is often used to determine market strength.  

70. Volume-Weighted Average Price (VWAP)

Volume-weighted average price (VWAP) is a measure of the average trading price of a stock or other asset, adjusted for volume. It’s calculated by dividing the total dollar value of trading in that asset by the volume of trades. 

71. Yield 

Yield refers to the income earned on an investment over a set period of time, expressed as a percentage of your original investment. 

72. 52-week Range

The 52-week range is a technical indicator that measures the lowest and highest price of a stock traded during a 52-week period. Traders use this measure to analyze current stock prices and predict its future movements. 

Some more terms

Account or Account Day or Settlement Day: In the speculation market, brokers buy and sell from other brokers or persons on behalf of their clients. So the payment has to be made some day. That day is duly fixed per month or twice a month by the Stock Exchange authori-ties. The brokers settle their clients' accounts with other brokers on that day. So clients either sell or buy, whichever is convenient to them, to avoid Badla charges. In short all accounts have to be settled on that day and dues, if any, have to be paid on that day.

Adjustment of Positions: Brokers and dealers have to scrutinize book positions often, and find out if they have overbought or oversold. If a broker finds that he is in an overbought position, he may start settling and thus normalise the position. This is usually done on the day previous to the account day.

Advance: Advance in prices; e.g. 'There was strident advance in Tata Power'.

All In: 'All in' is a situation in which the prices are falling in the case of securities.

All Out: A situation in which the prices of securities are rising.

Backwardation (Back): This is an extreme case when the 'bull' operators (these who believe that prices will go up) are scarce, and 'bear' operators are in the field; it means that the bear operator, if he wants to adjust his position, has to give a rate instead of taking it. 

Badla Transaction: This means carrying forward a speculative transaction beyond the Day of Account, into the next accounting period. For this, a speculator has to pay charges which are called 'Badla' charges.

Bear: A 'bear' operator is a speculator who operates with the assumption that the prices are going to fall at a later date. It means that he would start selling short or selling in advance and would buy, later on, the same shares at a cheaper rate. When he buys later on, this later transaction which a 'bear' operator carries out to balance his earlier selling is called "Bear covering" or Short covering.

Bottom fell out: When prices collapse suddenly and when there is no support, we say "the bottom has fallen out".

Brisk trading: Quick transactions of buying and selling.

Bull: An operator who believes that the prices are going to go up at a later date. Such an operator starts buying certain shares with a view to selling them when prices go up. When bulls start buying actively, the prices, in consequence, go up. This buying is called "bull support." If, contrary to the expectations of the "bulls", prices start falling, the bull operators either pay the "badla" charges and carry forward their existing deals, or sell with a loss. Such selling by bulls is called "bull liquidation" or "bull unloading".

Buoyant market: This is a market in which prices are steadily rising.

Clearing House: The settlement department of the Stock Exchange is called the Clearing House or even simply clearing. It settles the ac-counts between brokers. It thus brings together the ultimate buyer and the seller.

Commission: Brokerage.

Contango: Contango is an extension of time beyond a fixed date for the completion of a deal. Such shares or securities are said to be “Carried over", for which a consideration, termed "rate", has to be paid by such a client.

Cornering: A large scale buying of shares or a commodity by an operator with a view to affecting prices is called cornering.

Counter: A particular type of share; it also refers to a particular section of the market: e.g. 'the textile counter', etc.

Cum-dividend: With dividend.

Ex-dividend: Without dividend.

Cum-right: With right shares.

Ex-right: Without right shares.

Dalal Street: Bombay Stock Exchange.

Dead market: A market with absolutely no trading activity.

Depressed: Falling in price.

To dip low: Falling low of prices.

At a discount: A share traded at a price lower than its issue price is said to "be at a discount".

Easier market: The market is called 'easier', when the current price level is slightly lower than the previous level.

Equities: The ordinary shares of a Joint Stock Company are called "equities" or "equity shares".

End-of-Account: Settlement date. The day when speculators have to settle their accounts is fixed by the Stock Exchange. Before such a day many people try to adjust their position by buying or selling.

Featureless: Having dull trading. For example, a featureless market.

Flat market: Extremely weak market.

Forward List or Cleared Securities: In the market reports there is one section under the heading of "Forward List" or "Cleared Securities". The Stock Exchange permits forward trading (speculation) in certain type of shares. The list of such shares is called "Forward List" or the list of "Cleared Securities". Only important shares are usually included in such a list; the rest are on the "Cash list".

Gilt-edged Securities: These are government bonds and securities.

Gravelled market is a market in which prices have reached the bottom.

Hammered: Declared a defaulter. A member who cannot pay his dues on the due date and is declared a defaulter by the authorities is said to be hammered'. A hammer is actually struck on the table to declare him a defaulter.

Industrials: Shares of industrial companies.

Interim Dividend: Dividend declared in the middle of the account-ing year.

Jobber: Members of the Stock Exchange are of two types: brokers and jobbers. The jobbers are not allowed to deal with the public. He is a dealer in stocks and shares who acts on his own account with other jobbers and indirectly with the public through brokers.

Kerb rates: Whatever transactions are carried on after the official closing hours of the market are called 'kerb' transactions; and such rates are 'kerb' rates.

Liquidation by Longs: It is one type of 'bull' liquidation when a bull operator waits and waits for the prices to go up and when after. long waiting he at last starts to sell, it is called 'liquidation by longs'.

Lyons Range: Calcutta Stock Exchange.

Margin: The Stock Market has checks and checks to keep specula-tion under healthy control. A speculator has to deposit a certain amount called "margin" against each transaction. If speculation in any type of shares becomes undue the Stock Exchange authorities raise the margin i.e. ask for more deposit against each transaction and thus discourage speculation.

To nurse the shares means to hold shares and securities waiting for a favourable price improvement.

Opening quotation Price of a particular share at the opening of the market similarly the closing quotation is the price at the close of the business hours.

Outsiders: Outsiders are non-professionals or members of the public who buy or sell stocks and shares though their brokers. Outside support means purchase of particular share by such out-siders.

Packet: Large amount of shares.

At par: At the same price as the issue price of the share. Above par' means at a higher price than the issue price of the shares.

Pari Passu: Ranking equally in all respects.

Premium: Price above the issue price. For example, a share with the issue price of Rs. 100/-, when sold at 120 is said to have been sold at a 'premium' of twenty rupees.

Profit-taking: Realising or collecting profits by completing the transaction.

Proxy: One appointed to vote for another. Proxies are also docu-ments of authorization. A shareholder's 'proxy' can attend a meeting and vote on his behalf but cannot address the meeting.

Rally: Shares "rallied" means "improved after a weak period". To recover.

Rate: When a speculator carries over a deal beyond the day of account, he has to pay a consideration which is called "rate".

Rig (the prices): To keep the prices artificially at a higher level.

Sentiment of the market: The tone or tendency of the market. The 'sentiment' or 'tone' or trend of the market is called 'firm' or 'steady' if the prices maintain their level; it is 'weak' or 'subdued' if the prices start going down; it is 'cheerful' or 'buoyant' if the prices start going up. 'Jittery' sentiment means that prices had uncertain move-ments due to nervousness.

To sell short: The 'bear' operator who is out of stock or short of the shares he sells.

Short covering: A 'bear' operator expects the prices to fall so he sells shares or securities which he does not possess. This is done because he expects the prices to go down; he can have a clear profit by buying what he has sold earlier, if the prices fall. The activity of selling shares without actually possessing them is 'short selling. And buying the same quantity back at the right time is 'short covering'.

Speculative attention: When speculative buyers concentrate their transactions on certain shares, they are said to have received 'specula-tive attention'.

Stag: A person who subscribes for all new issues of shares wtih a view to selling them when the prices rise.

Stagged: When a new issue of shares has too many applications by people who apply for all new shares, and when it is thus oversubscribed it is said to be heavily 'stagged.

Throgmorton Street: London Stock Exchange.

Top heavy (Toppy): When the prices are too high and when a set back is expected, the market, as well as the price, is called 'toppy'

Turnover: The total number of transactions in a fixed period.

Undertone: The tendency of the market or the undercurrent indicating the future tendency of prices.

Unquoted: Unquoted shares and securities are those that do not appear on the official list of the Stock-Exchange.

Wall Street: New York Stock Exchange.