10 Common terms in Stock Market for beginners

10 Common terms in Stock market

Common terms in Stock market are discussed on this page. These terms will help you understand the terms used in the market daily reports or conversations about the market conditions. 

1. Bull Market

Bull market is one of common terms in stock market or in financial market. Bull market refers to the market condition where the prices increase or are expected to increase. It is basically a colloquial term used to describe the market condition.

2. Bear Market

It is another colloquial term, which is opposite to the bear market. It refers to the marketing condition where the prices of shares decrease or are expected to decrease.

3. Trading Rights Entitlement Certificate (TREC) Holder

Before anyone invests in stocks, he/she would need to open an account with a TREC holder. TREC holder or a Brokerage firm provides an opportunity to invest in the stock market. The TREC holders charge a minimum amount of commission from the client and in return give services to the client. (Check the commission slab of RT Securities)

The services from a TREC holder include:

  • Daily Market Update
  • Equity trading service
  • Back-office Support
  • Provide expert guidance

4. Day trading

Day trading is also one of the common terms in stock market referring to the type of trading activity that is executed on the same date. For example, buy and sell a share on the same day. Those traders who usually trade on the same day are called active traders in the stock market and their trading activity is referred to as day trading. 

5. Dividend

Dividends are an additional income for the investors in the stock market. To attract investments, the board of directors of the companies announce additional amounts to be paid to the shareholders. 

There are some of the important dates to remember in order to get eligible for the dividends. 

  • Board meeting date
  • Announcement date (Dividend announcement date – After the board meeting)
  • Excluding dividend date or Ex-date (the day before which holding the share will be required in order to get dividend)
  • Payment Date (the date on which the dividend payment will be added to the shareholder’s account) 
Tip: The price of the share is affected after the dividend announcement because of the instant increase in the demand for the shareholding. The price of the share drops on the ex-date because the shareholders will then be eligible for the dividend even after selling the stock on the Ex-Date. 
Dividend thumbnail | Common terms in stock market

6. Blue Chip Stocks

A blue-chip stock is another common term in stock market, which refers to a large company with a great reputation in the market. Blue chip stocks are financially strong companies. These companies have been operated for many years and have dependable earnings. They are most commonly paying dividends to investors.

7. Initial Public Offering (IPO)

It is the first offering of shares by any organization to the public. It usually happens when a company moves public despite being solely owned by internal investors.

8. Trade Volume

Trade volume is the count of the trades for a single day for a particular stock. It is used to analyze the market activity and liquidity of the shares.

9. Liquidity

Liquidity refers to the type of stocks that can easily be sold and converted to cash. These stocks have enough trade volume that one can sell them at any time. The liquidity is considered high when there are enough buyers available at any time for the stock to buy. 

10. Circuit Breaker

The circuit breaker in the stock market is the limit on stock prices which controls the panic-selling in the stock exchange. The circuit breaker pops when the limit reaches, whether on the upper side or on the lower side. In Pakistan Stock Exchange the limit is ~7.5%. The circuit breaker is used to save investors from the instant price drops.

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