JARGONS IN STOCK MARKET
JARGONS, might have heard of this word? Isn’t it? If not, then just stay with us, after reading this blog you can proudly say that you know what jargon really is. We will discuss about Jargons in this blog. In the previous blog of Vyolvepaisa, we discussed about Stock Brokers and its types, and how the settlement process takes place in the Stock Market. So today we will have a detailed discussion on Jargons, and why do we need to know about Jargons.
So without taking much of your time, let’s get started!
Think this way, in whichever field you are, there are often some technical terms, that helps you in understanding that field. Even in our everyday life, we use a lot of technical terms. For ex., when we are purchasing something, we specify the quantity, say, 1kg, 2kg, these are the technical terms. So jargons can be said as a bucket with a lot of Technical terms into it. So the same way, there are a lot of technical terms in the stock market as well. So why is it necessary for us to know this? If we are entering in the stock market, then WE SHOULD KNOW the terms that are used in the stock market, to understand the things more clearly. Let say, an expert is telling you to play Intraday the next day, it will be best, but the problem is you don’t even know the meaning of Intraday, so how will you play, how will you be benefitted by the expert advice? This is the reason, why we should at least know some of the important terms of the stock market.
Okay, let’s get into a little detail. ‘Buy’, as the name suggests, refers to the buying of stocks or shares in the stock market, i.e., when we invest money and ‘Sell’ refers to the selling of the already purchased shares or stock. By the way, sometimes we invest money in both cases when we ‘buy’ or ‘sell’ the shares or stocks( we know it might be little confusing right now but bear with us, till the end you will understand what exactly, we are talking about). Next is ‘Intraday’, say you have to invest in the stock market, then you can invest for 1 hour, 1 day, 1 week, 1 year, 10 years, and so on. So the time period of your investment depends upon you. So Intraday is, you purchased the stock on a day and sold it on the same date, it involves less brokerage charge, but there are certain rules and guidelines to it, that we will discuss in the coming episodes of Vyolve Paisa, about how actually the work gets carried out.
Next is, Square Off, this technical term refers to, let say you purchased 100 stocks of a company, and you sold those 100 stocks, this means that the shares had been squared off, i.e., you have ended the whole process, in a way that buy+sell=0(total number of stocks remaining with you), this is said as square off.
Price, if someone says Stock Price, then they refer to the price at which the stocks of a company is traded at.
Before going further, let me ask you something. Suppose a company is listed in the stock market at a price of 100 rupees. So will the stock price of that company after 1 year remain the same or will it change?
Face value is also known as the par value. It is the value of a company listed in its books and share certificates. The face value is decided by the company when it offers shares at the time of issuance. The face value is important with regard to a corporate action. Usually, when dividends and stock split are announced they are issued keeping the face value in perspective.
Then comes Trader, Trader is someone who is constantly involved in the selling and buying of the shares. Now, Investor, Investor is someone who invests in the stock market for a longer period of time. Now Scalper is another term, a scalper is someone who purchases the stock in large quantities. Let’s put it this way, you purchased a stock in large quantity, then when you sell the stock even with the slightest increase in the price, it will lead you heavy profits, because you are holding the stocks in large quantity. So this is the work of a scalper, he purchases the stock in large quantity, and immediately sells the stock even with the slightest increase in the stock price.
Next, we have in the stock market is Volume, what do you think volume here means? Volume here tells the quantity of stock that is being purchased. How many transactions of a particular stock took place on a particular day, because you are not the only one purchasing that particular stock. Like, we discussed in our previous episodes, that if someone is buying then there will be someone who will be selling the same stock. In the same way, say someone purchased 100 stocks and sold the 100 stocks, that doesn’t mean that the volume is 200, it just shows the trade of 100 volumes.
Next is Swing Trader, who is basically a trader, that attempts to capture the profits in a stock over a period of a few days to several weeks. Then comes the Open-High-Low-Close (OHLC) chart(also referred to as the candlestick chart), which is a chart used to illustrate the movement in the price of the financial instruments over time. The stock market pre-opens at 9:00 and the actual transactions starts from 9:15, then the stock market closes at 3:30. O and C here states you the Opening and Closing stock prices in the market. H and L denotes the highest and lowest price of the stock in the entire opening to closing period of the market. Let’s understand this with an example, the price of a particular share started with Rs.5 at the opening (O) and closed © at Rs.7, and the highest bar that it reached was 8 (H) and the lowest turned out to be 4 (L). A little effort in understanding and you will be clear about this. We will go into much details, we will also talk about Candlestick, which is a base of Technical Analysis, showing how we read the Technical chart, and things will be more clear to it.
There is another term ‘Stop-loss’ (the most important and crucial term in the stock market), Stop-loss turns out to be the most profitable one when you want to play like a trader in the market. Stop-loss means when you buy a stock assuming that its price will rise in the future, then you will set a target that if the stock rises to such an extent, then I will sell the particular stock. But what about when your prediction turns out to be wrong. Let say the stock price was supposed to rise, but on the contrary, there came a fall in the price, then how much loss can you actually bear, so in order to prevent the loss as much as possible stop loss is being used. One considers that the idle ratio of target and stop-loss should be 1.5 or more precisely should be above 2.
Then another thing to be noted is, say, you feel that the price of your stock is about to fall, then in such a case what you can do in the stock market is, when you know that the price is about to fall, then you try to sell the stock beforehand, thinking that you would buy the stock after its price falls. It’s a little tricky, think this way, say the stock price is running at Rs.100 and you know that the stock price is about to fall to Rs.90 or Rs.80. then what you did is, you sold 10 stocks for Rs.100 beforehand. Now what happened, when the price of the stock fell down to Rs.90 then you purchased back those 10 stocks for 90 Rs., then this became profitable to you, isn’t it? This is just a reversed way of making out profits. At the first place, you are selling, and as the price of the stock is falling you are purchasing the stock, this process is known as ‘Shorting’ or ‘Short selling’. We will go into much detail of this, in the upcoming episodes of Vyolve Paisa.
So that’s all from Vyolvepaisa for today. Stay tuned because with the coming episodes we are about to bring more technical terms that you need to know for YOUR INVESTMENT.
Till then keep following Vyolve Paisa and keep believing that we can Evolve with Vyolve.
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