Basic words of stock exchange

1. Stock exchange

It is a platform, where shares of pubic listed companies are traded. Its main function is that connecting investor and companies’ stocks, bonds, commodities and other assets purchased and sold via registered brokers. Nowadays, invent of IoT (Internet of things) made it electronically motivated platform. The Stock exchange is regulated by the government laws of the respective country. for example considering, NYSE (New York Stock Exchange) which is regulated by US corporate laws.

2. Index

A tool used to statistically measure the progress of a group of stocks that share characteristics. This can include a group of stocks, a group of bonds, or a group of other assets. For example: Nifty index in the SEBI (Stock exchange Board of India), which shows the progress of 50 companies of the stocks, accounting 22 sectors of the economy.

3. Broker

This is the entity or organization connecting investors and a stock market. It buys and sells the investments on the behalf of the investors. They are regulated by stock exchanges where they are registered as brokers. They may charge, as a fee for the investor to overlook their investing activities or services. They are of two kinds viz. discount broker and full-time broker. Discount broker offers limited services to investors where as full time broker offers, almost full services; those are offered by the stock exchanges of that nation.

4. Upfront fee or brokerage

it is the facility offered by the brokers of the stock exchanges. It is the fee or brokerage paid before the good is produced or a service is performed. It is generally a portion of the total fee that buyer must pay in advance. For paying Upfront brokerage, the broker would reduce the trading charges. For example: before investing in the stocks, the some of the fee has to be paid in advance and on the basis of the volume of stocks, remaining brokerage charge would be charged with the trading.

5. Registered Investment Advisor (RIA)

A financial investment advisor that has been through certain training, and that agrees to abide by certain rules, including ensuring that recommendations and trades made on your behalf are in your best interest.

6. P/E ratio

This is the ratio used to get the company’s financial for the upcoming years. A company often reports profits on a per-share basis. So a company might say that it has earned $4 per share. If that same stock is selling for $100 a share on the market, you divide $100 by $4 to come up with a P/E ratio of 20. The higher a P/E ratio is, the more there is expectations for higher earnings.

7. Earnings per share (EPS)

it is the indicator of the portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serve, as an indicator of a company’s profitability. Higher the EPS more is the return of that stocks.

Calculated as:

8. Short selling

This is a facility offered by the exchange to the intraday investors. Usually in stock exchange investor first buys the shares, and then sells whenever he gets desired profit. Like that here in short selling, the investor first sells the stocks and then buys the stocks whenever he gets desired profit. Short selling is the sale of a security that is not owned by the seller, or that the seller has borrowed. Short selling is motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit. Example Stock price of the company is $24.50, investor feel that stock price will come down at end of the day. So he sells the stock at $24.50 and then buys stocks at $24.00 thereby making a profit in his account.

9. Squaring off

It is a trading style used by investors/traders mostly in day trading, in which a trader buys or sells a particular quantity of an asset (mostly stocks) and later in the day reverses the transaction, in the hope of earning a profit (price difference net of broker charges and tax). For example: Person A buys 100 shares of ABC from the NYSE through a broker for a price or $10 per share. Later in the day, Person A sells all the shares for $12 per share and by paying broker charges of $10. The net profit A earns is $ (200-10)= $190.

10. Bull and Bear market

A bull market is a financial market of a group of securities in which prices are rising or are expected to rise. The term “bull market” is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, currencies, and commodities. Vice versa, a bear market is a financial market of a group of securities in which prices are declining or are expected to decline. The term “bear market” is most often used to refer to the stock market but can be applied to anything that is traded, such as bonds, currencies and commodities.

11. Blue chip stocks or companies

this term is commonly used by a trader in the exchanges, for those companies, which have been having a long history of good earning, good balance sheets, and increasing dividends. These are such companies provide the reasonable return to the investor over the time.

12. Buy Today Sell Tomorrow (BTST)

it is the intraday facility offered by the stock exchange. It can be used to invest in those company stocks which are having sine curve; here trader can carry forward his trade to the next day. A trader can utilize the rising price of stock by using BTST.

Author: Editorial staff of 70trades reviews blog 

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