You want to start your investment journey but you are not from a finance background. The information available out there on the stock market is overwhelming. At times, the technical jargon sounds like a foreign language.

 

To understand the stock market, knowing the basic terminology of the stock market is a prerequisite. In this article, we break down the basic stock market terms in the easiest way possible. Let’s dive in.

 

1. Share

As the name suggests, a share is basically a share in the ownership of a company. When you purchase a share of any company you become the owner of that company in proportion. If you hold 1 lakh shares of Nestle India Ltd, you have 0.001% approx. ownership in the company.

 

2. Stock

Stock is the term used for the certificate that indicates your ownership of the company.

3. Stock Exchange

Where stocks are listed and traded. Traditionally, people were required to physically go to the stock market. Now, the system is largely online.

 

4. Face Value and market price

The face value is the price written on the face of a share. Market value is the price at which the share is being traded in the market. For example, the face value of Nestle India is Rs. 10. As of 6th August 2021, its market value is around Rs.18000.

 

5. Dividend

The dividend is the share of profit that a company gives to its shareholders. Since shareholders are the owners of the company, they get a share in the profit of the company. But it is the choice of company whether they want to give dividend or not. The company may declare a dividend or may choose to re-invest the profit into the company.

 

6. Demat account

Your shares are stored in your Demat account. Think about it like your bank account, just like your money is stored in your bank account, similarly, shares are stores in the Demat account in digital format.

By digital format, we mean that these are not physical shares but shares in the digital form.

 

7. Trading account

A trading account is the one through which your shares will be traded i.e. the transactions of buy/ sell will be made.

 

8. Promoters

Promoters are the people who start the company. They are the people who were associated with the company when it was first formed. They were the ones who took the initiative to start the business and were the first owners.

 

9. Top Line & Bottom Line

These are just the technical terms used for revenue and profit. The total revenue is called the top line. The profit (or loss) left after deducting expenses from the top line is called the bottom line.

 

10. Market Cap

Market cap or market capitalization is the total market price of the company at a given point in time. It basically tells us the size of the company. It is calculated as:

No. of shares* Market price per shares

 

11. Trading hours

The time during which the market remains open. The trading hours are 9:15 AM to 3:30 PM, Monday to Friday.

 

12. Opening price

The price at which the share opens. Simply put, it is the price of a share at 9:15 AM when the market opens.

 

13. Closing Price

The price at which share closes. Simply put, it is the price of a share at 3:30 PM when the market closes.

 

14. Gap Up

When the share opens at a price higher than the previous day’s closing. It is represented by a green upward arrow.

 

15. Gap Down

When the share opens at a price lower than the previous day’s closing. It is represented by a red downward arrow.

 

16. Bullish Market

When investors expect the share price to go up and buy shares. Positive sentiment is seen in the market. This is called a bullish market.

 

17. Bearish Market

When the investors expect the share prices to go down and sell the shares. Negative sentiment in the market. This is called a bearish market.

 

18. Correction

Market prices coming down is called a correction.

 

19. Portfolio

A portfolio is the collection of all the investments the investor has made.

 

20. Intraday Trading

When you buy and sell the shares within the same day, it is called intraday trading.