Decoding Dalaal Street: Essential Stock Market Terms You Must Master

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The stock market is an open playground; anybody can get into it without any barriers (but you must be at least 18 years old). If you are interested in trading, you don’t need a finance degree; you just need to know what people are talking about when they discuss the share market terms and definitions.  

But there are some of the terms you must understand before making decisions. To help you cut through the confusion, we’ve compiled a glossary of stock market foundational terms that every new investor must know. 

Part I: The Fundamentals 

Below you can see the terms that are the basic building blocks and structure of the market; 

Terms	Definition
Stock/Share	It means a unit of ownership in a company. If you buy a share market term, you are becoming a part-owner of that company.
Equity	The value of ownership interest in a company, typically in the form of common or preferred stocks. It refers to the capital invested by shareholders.
Market Cap or Market Capitalization	The total value of a company’s share means the company’s total worth in the open market. According to the value, the stocks are classified into large-cap, mid-cap and small-cap.
Index (Nifty & Sensex)	It’s a statistical measure that tracks the performance of a basket of selected stocks. The Sensex tracks major stocks on the BSE and Nifty track top 50 major stocks of NSE.
Initial Public Offering (IPO)	If a company sells shares of its stock to the public to raise capital for the first time, that was an IPO.
Dividend	A portion of a company’s profit is distributed to the shareholders, that are usually paid quarterly or annually.
Bond	A fixed-income instrument that represents a loan made by an investor to a borrower.

Part II: The Market Conditions

These terms describe the overall sentiment and direction of the stock exchange, and these are the crucial part of the share market glossary.  

Terms	Definition
Bull Market	A market condition characterized by rising stock prices and general confidence.
Bear Market	A market condition characterized by falling stock prices and market decline.
Volatility	A measure of the speed and frequency of price changes in a stock or the market.  High volatility: Swing dramatically  Low volatility: Stable
Liquidity	How easily and quickly a stock can be bought or sold without affecting its price.
Blue-Chip Stocks	Stocks of well-established, financially stable, and leading companies with a long history of reliable performance.

Part III: The Trading Mechanism

If you understand this share market terminology will help to execute trades correctly.  

Terms	Definition
Bid and Ask Price	Bid: The highest price a buyer is willing to pay for stock.  Ask: The lowest price a seller is willing to accept for a stock.
Bid-Ask Spread	It is the difference between the highest bid price and the lowest ask price.
Market Order	It’s like an instruction to immediately buy or sell a stock at the best available current market price.
Limit Order	This instruction is to buy or sell a stock only at a specific price that you set.
Portfolio	A collection of all the investments owned by an individual.
Broker / Brokerage Account	A firm or person that executes your buy and sells orders. They will hold your money and securities used for trading.

Part IV: The Analysis & Performance

If you want to evaluate a company’s financial health, you can utilize these terms.  

Terms	Definition
Price-to-Earnings Ratio (P/E Ratio)	This valuation metric is calculated by dividing the stock’s current price by its Earnings Per Share (EPS).
Earnings Per Share (EPS)	A company’s net profit is divided by the total number of outstanding shares.
Capital Gain / Loss	The profit (gain) or deficit (loss) is realized when you sell an investment for a higher or lower price than you bought it for.
Volume	The total number of shares of a stock that has been traded during a specific period.

The Bottom Line

This stock market glossary is like your foundational dictionary. For any successful output, it is necessary for a better foundation, right? But you don’t need to memorize every formula; you must understand the meaning of these terms. After understanding these fundamental definitions, it not only helps you to make good investment decisions, but also focuses on financial news, and follow analyst reports too.  

The language of the market is no longer a secret, now that you know, so the next movement is to understand the conversation.  

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DISCLAIMER: Investment in securities market are subject to market risks, read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Full disclaimer: https://bit.ly/naviadisclaimer.