If you’re a beginner to the world of equities and would like to invest in the market, then it is extremely important that you be aware of the various terms used in the stock market. This way, you can get a better understanding of not only the market, but also how it works. So, in this article, we’re going to take a look at some of the most commonly used terms in the stock market that you need to be aware of. Let’s begin.
1. Market trend
The market trend is the direction at which the stock market is currently moving. For instance, if the stock market has been moving up over the past few weeks, then the market is said to be in an upward trend. Conversely, if the market has been moving down, then the market is said to be in a downward trend.
2. Bullish market
When the market trend is positive, i.e., moving upward, the market is termed to be bullish in nature. The word was coined from the way bulls generally attack - by charging forward and lifting up and throwing the target.
3. Bearish market
When the market trend is negative, i.e., moving downward, the market is termed to be bearish in nature. The word was coined from the way bears generally attack - by using their paws to strike the target down.
4. Dividend
Occasionally, companies distribute the profits earned by it during a year to its equity shareholders. This distribution of profits is what is termed as dividends and is usually represented as ‘x’ amount per share.
5. Support levels
The level beyond which the price of a stock refuses to fall down is termed as a support level. Usually, stocks that touch their support levels tend to bounce back up. However, there have been many cases where stocks have continued to fall down breaking their support levels as well.
6. Resistance levels
The level beyond which the price of a stock refuses to rise up is termed as a resistance level. Generally, stocks that touch their resistance levels tend to reverse and fall back down. However, stocks can continue to rise up, breaking their resistance levels as well.
7. Blue-chip stocks
The stocks of companies that have robust fundamentals and strong financials are termed as blue-chip stocks. These stocks are not prone to wild swings in their price and are generally very stable in nature. Also, they tend to distribute dividends regularly to their shareholders as well.
8. Limit order
When you place an order by clearly specifying the price at which you wish to buy or sell a stock, the order is termed as a limit order. Such orders are executed only when the stock price touches the price specified by you.
9. Market order
When you place an order without specifying any price at which you wish to buy or sell a stock, the order is termed as a market order. Such orders are executed as soon as they are placed and at the current market price, whatever it may be.
10. Index
An index is a collection of top stocks in the stock market and is used as a way to measure the movement of the stock market. Two of the most popular indexes in the Indian stock market are Nifty 50 and Sensex. These two indexes track the top companies on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) respectively.
Conclusion
With this, hope you’re now aware of a few of the many terms used in the stock market. Now, before you go ahead and invest in the market, it is important to first open a demat account. And to do that, you can visit the website of Motilal Oswal, where you can open a demat account online within just a few minutes.
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