Many people are familiar with the stock market. However, most people are still unfamiliar with terms like “stock”, “buying and selling stocks”, “stock market charts” and “bulls and bears”. Even the term “stock market” remains a point of confusion for those without financial experience. There are times when they would scratch their heads in bewilderment every time they heard their neighbors complain about low stock prices in the market or if a colleague suddenly makes a big windfall on their stock market investments. What most people Stock market trading can lead to booming businesses or busts if these businesses have played the “stock market game” correctly. Simply put, shares are representations of the company’s assets and earnings. of the shares, this value is divided annually among the shareholders in the form of a dividend. shareholders would receive a dividend of $5,000.
Stock Market Definition
The stock market, also known as a “stock exchange,” is a financial institution in which authorized brokers trade shares of companies and other securities, including privately traded securities, that are approved for trading on the exchange. Exchanges can occur physically or virtually. Brokers buy and sell shares based on the needs and requirements of the people and/or companies they represent.
The two types of stock markets are…
• Primary stock market = for trading of initial public offerings (IPOs) and other new issues by sellers and buyers
• Secondary Securities Market = for the negotiation of existing shares in the market by buyers and sellers.
Common Stock Market Terms
Stock market “lingo” is not something to be confused or intimidated by. In order to understand trends in the stock market, you need to learn certain commonly used terms and be able to evaluate stock market charts. By taking the initiative to learn the basics of the stock market, you will become an informed investor and be able to make good trading decisions.
Let’s take a look at some of the terms you’re likely to encounter in the stock market…
Stock price = This is the value for which the stock is bought and sold. The factors that directly impact share prices are the position and performance of the company issuing the shares. Another term related to stock price is market capitalization, or simply market capitalization, which is the price of the stock multiplied by the number of shares. Other factors that affect share prices include current performance and future expansion and growth. Let’s put it in simpler terms. If a company is doing poorly in the stock market, its share prices decline in value. Conversely, if these companies are performing well, you will see stock prices soar.
Stock Chart Reading = These charts and quotes provide the current status of stock performance. These stock changes can be reflected as “day to day” or “intraday”, depending on the trading on that particular day.
52 Week High and Low = This is stock data over a 52 week period. On the report date, you will be able to see the stocks with the lowest and highest prices during this 52-week period.
Stock Type = Preferred stock would have specific symbols written after the company name. If no such symbols are indicated, the share is an ordinary share.
Stock Symbol = Each publicly traded company is assigned a specific abbreviation or letters. These ticker symbols are used so that all companies can be listed on the ticker tape. All major US stock exchanges, such as the New York Stock Exchange, NASDAQ, Dow Jones, and the American Stock Exchange, restrict stock symbols to 1-4 letters only (similar to heraldic symbols). on UK stocks). Any new company must register its own symbols, which must be different from the symbols already used by other companies. Some examples of stock symbols include AAPL for Apple Computer Inc. and INTC for Intel. You will probably notice that some symbols have a period followed by 1 or 2 additional letters. A good example is BRK.B. This means that the stock is being offered by the Berkshire Hathway Company and is a lower priced “Class B” stock.
Dividend per share and dividend yield = On a stock market chart, a company is said to be issuing dividends if both columns with these headings are filled. The dividend yield is calculated by dividing the annual dividends per share by the price per share. This dividend yield means that the shareholder has a return on their dividends.
Price/Earnings Ratio or P/E Ratio = This value is calculated by dividing the latest stock price by the average earnings per share for the last 4 quarters.
Trading Volume = Total buy and sell transactions that have taken place during the day.
Closing = Last trading price of the stock on the closing day of the stock market
Net Change = The difference in stock prices since the last change that occurred. Net change allows you to see the direction the stock price is heading, with a plus symbol for a positive direction and a minus symbol for a negative direction.
Bulls and Bears = The terms “bulls” and “bears” are economic indicators of the stock market. You have a bull market when stock values go up. This is an indicator of good health in the economy. In a bull market, investors can make substantial profits from stock sales. Rather, the bear market is indicative of a downward economic trend, so investors need to sell their stocks before prices drop much lower. During a bear market, many investors and companies tend to lose a lot if they haven’t been quick to buy good stocks and sell them before they quickly drop. The general rule of thumb to follow in the stock market is to buy when prices are low and sell when prices are high (before prices go down).