Understand Common Stock Market Terms And Processes
For most people, stock market lingo is an alien language
. When you watch the news, you often get to hear words like latest trends, shares, dividends, and even bulls and bears, without understanding a thing or two. When the news anchor starts to present a completely weird sets of graphs that spell Martian in your face, thats when you lose it.
Dont fret. Even though the stock trading industry seems like one big complex concept for you, the truth is, it is simple enough to be understood by an Average Joe. Not everyone would become an expert overnight obviously, but even ordinary people like you can understand the basics of stock trading with the right attitude and frame of mind.
So without further adieu, here are some of the terms you would want to get to know about the stock market to understand it more clearly.
What is the stock market?
A stock market is a place where people can buy and sell stocks and shares and other forms of investments such as government bonds. In the United States, New York exchange floor is the main stock market. Other major exchanges all over the world include Japan, London, Germany, Paris, Hong Kong, and China.
What are indexes?
Indexes refer to the lists of companies produced daily to give a quick guide to how the sections of the stock market are performing. Each of these indexes is composed of a collection of companies. Often it reflects the biggest stock-market listed companies in each country.
What are shares?
When you say shares, you refer to pieces of a public limited company. If you have a share in a particular company, you are entitled to a share in its profits and growth. You will be supplied with the companys reports and accounts. You also have voting rights which you can exercise during general meetings to determine important business decisions that the company should make.
What does share certificate mean?
After you have bought some shares from a company, you will be issued with a share certificate that will serve as a proof that you own the shares. In the certificate, you will find the nominal or par, value of shares at the time the certificate was issued. It does not have any relevance to the current market value of your shares but it is required to be printed on the share certificate for legal purposes.
What does a dividend refer to?
Many companies share the profits with the shareholders in what is commonly referred to as dividends. Twice a year, you will be paid an amount depending on your share. If the company has no profits for that year, you will receive no dividend. The level of dividend is to be determined by the company superiors and approved by the shareholders. Aside from this, you can also earn money from the capital growth. A rise in the companys value will also increase the value of your shares but you will only be able to benefit from this if you sell your shares.
How about market capitalization?
Market capitalization refers to a companys worth or value on the stock market. This can be determined by multiplying the current share price by the total number of shares in issue.
What is meant by bid or offer?
The bid price is the price which you can sell the shares while the offer price is the cost by which you can buy shares. The difference between the two terms is called the spread.
What does bull and bear market stand for?
Bull market refers to the prolonged increase in the index over time while a constant downward slope is called the bear market.
Getting your way around the stock market starts with familiarizing yourself with the basics of this industry including the terms and processes. You can further advance your knowledge by taking courses on stock market trading and day trading courses.
by: Shane D. Engle
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