To help you learn some of the common market terminologies

Commonly Used Jargons

 

The objective of this part is to help you learn some of the common market terminologies, and concepts associated with it.

 

Bull Market (Bullish) – If you believe that the stock prices are likely to go up then you are said to be bullish on the stock price. From a broader perspective, if the stock market index is going up during a particular time period, then it is referred to as the bull market.

 

Bear Market (Bearish) – If you believe that the stock prices are likely to go down then you are said to be bearish on the stock price. From a broader perspective, if the stock market index is going down during a particular time period, then it is referred to as the bear market.

 

Face Value of a Stock – Face value (FV) or par value of a stock indicates the fixed denomination of a share. The face value is important with regard to corporate action. Usually when dividends and stock split are announced they are issued keeping the face value in perspective.

 

52 week high/low – 52 week high is the highest point at which a stock has traded during the last 52 weeks (which also marks a year) and likewise 52 week low marks the lowest point at which the stock has traded during the last 52 weeks. The 52 week high and low gives a sense of the range within which the stock has traded during the year. Many people believe that if a stock reaches 52 week high, then it indicates a bullish trend for the foreseeable future.

 

All time high/low – This is similar to the 52 week high and low, with the only difference being the all time high price is the highest price the stock has ever traded from the time it has been listed. Similarly, the all time low price is the lowest price at which the stock has ever traded from the time it has been listed.

 

Long Position – Long position or going long is simply a reference to the direction of your trade. If you have bought the Nifty Index with an expectation that the index will trade higher then essentially you have a long position on Nifty. If you are long on a stock or an index, you are said to be bullish.

 

Short Position – Going short or simply ‘shorting’ is a term used to describe a transaction carried out in a particular order. This is a slightly tricky concept. To help you understand the concept shorting, I’d like to narrate a recent incident that happened to me at work.

 

In fact when you short a stock, it works so seamlessly that you will not even realize that you are borrowing it from someone else. All you need to know is that when you are bearish on the stock, you can short the stock, and the exchange takes care of borrowing the stock on your behalf. When you buy the stocks back, the exchange will ensure the stocks are returned back.

 

• When you short, you have a bearish view on the stock. You profit if the stock price goes down.
• When you short you essentially borrow from another market participant, and you will have to deliver these shares back. You need not worry about the mechanics of this. The system will ensure all this happens in the background
• Shorting a stock is easy – either you call your broker and ask him to short the stock or you do it yourself by selecting the stock you wish to short, and click on sell
• For all practical purposes, if you want to short a stock, and hold the position for few days, it is best done on the derivatives markets
• When you are short, you make money when the stock price goes down. You will make a loss if the stock price goes up after you have shorted the stock.

 

Square Off – Square off is a term used to indicate that you intend to close an existing position. If you are long on a stock squaring off the position means to sell the stock. Please remember, when you are selling the stock to close an existing long position you are not shorting the stock!

When you are short on the stock, squaring off position means to buy the stock back. Remember when you buy it back, you are just closing an existing position and you are not going long!

 

Intraday Position – Is a trading position you initiate with an expectation to square off the position within the same day.

 

OHLC – OHLC stands for open, high, low and close. We will understand more about this in the technical analysis module. For now, open is the price at which the stock opens for the day, high is the highest price at which the stock trade during the day, low is the lowest price at which the stock trades during the day, and the close is the closing price of the stock.

 

Volume – Volumes and its impact on the stock prices is an important concept that we will explore in greater detail in the technical analysis module. Volumes represent the total transactions (both buy and sell put together) for a particular stock on a particular day.

 

Market Segment – A market segment is a division within which a certain type of financial instrument is traded. Each financial instrument is characterized by its risk and reward parameters.

 

The exchange operates in three main segments:-

 

Capital Market – Capital market segments offers a wide range of tradable securities such as equity, preference shares, warrants and exchange traded funds. Capital Market segment has sub segments under which instruments are further classified.

 

Futures and Options – Futures and Option, generally referred to as equity derivative segment is where one would trade leveraged products. We will explore the derivative markets in greater depth in the derivatives module.

 

Whole sale Debt Market – The whole sale debt market deals with fixed income securities. Debt instruments include government securities, treasury bills, bonds issued by a public sector undertaking, corporate bonds, corporate debentures etc.

 

 

Also Bonds are good for Investment:-

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