Stock Market Terminology And Market-Related Concepts

Stock Market Terminology And Market-Related Concepts:-

What Is Dividends:-

As we learned earlier, one part is a part of the company. When the company makes a profit, you often get a share of it. This is the idea behind Dividends. Every year, companies distribute a small number of profits to investors in the form of Dividends. This is the primary source of income for long term shareholders - those who do not sell stock together for years.

What Is Market Capitalization:-

Different companies issue different types of shares when they are listed. The value of stock varies from the stock of the other company. Market Capitalization makes these differences smooth. This is many times more market value than the total number of shares held by the public. Thus, it reflects the total market value of the stock, which takes into account both the size and value of the stock. For example, if the price of a stock is Rs. 20 per share, and public investors have 100,000 shares, its market capitalization is Rs. 20,00,000 Market capitalization is important when stacking stocks in different indices. It also determines the weight of any stock in the index. This means, the larger the market value of the company, its price fluctuation will affect the value of the index.

What Are The Rolling Settlements:-

Assume that your friend agrees to buy a book from you for a book shop, you will eventually have to pay for it. Similarly, after purchasing or selling shares through your broker, the business has to be settled. Meaning, the buyer has to get his share and the seller has to get his money. The Settlement is the process through which buyers are paid, and shares are distributed by vendors. Rolling Settlement means that all trades have to be settled by the end of the day. Therefore, the entire transaction - where the buyer pays for the securities purchased and the seller distributes the shares sold - it has to be completed in one day.
In India, we have adopted the cycle of T + 2 Settlements. This means that the transactions made on Day 1 are to be dealt with on the working day 1 + 2. This happens when money is paid and the securities are transferred. Thus, here 'T + 2' refers to today + 2 working days. Saturday and Sunday are not considered as working days. Therefore, if you do transactions on Friday, the business will be settled on Tuesday, but not on Sunday. Even the bank and exchange holidays are excluded.

What Is Short-Selling:-

An investor sells less when he estimates that the price of the stock may fall from the current price. Therefore, the investor lends one share and sells it. Once the stock price drops, it will buy the same stock for a lower price, and return it back while earning a profit in the bargain. Simply put, you sell it first at a high and then buy it for less. Merchants benefit from Short-Selling stocks and the fall in index prices. Since this is usually organized in anticipation of stock movement, short-selling is considered a risky offer. Let's take an example. Let's say that you expect Infosys shares that whatever tomorrow is the reason, you enter an order to sell Infosys shares at the current market price. Once the price of the stock falls substantially, you buy at a lower rate. Your advantage is the difference between sales and buying prices. However, if you increase the stock prices after selling at a lower price, then you end up with a loss.

What Are CIRCUIT Filters And Trading Bands:-

Some stocks are more volatile than others. Such volatility is not good for investors. To curb this instability, the SEBI circuit came with the concept of the filter. The market regulator has specified the maximum limit so that the stock price could rise someday. This is called the Price Trading Band. If a stock breaks this limit, then the stock is stopped for some time in the stock. There are three levels of boundaries. Each border leads to a progressive stance for a progressive long term. If all three circuit filters are violated, the trading is stalled for the rest of the day. NSE defines circuit filter in 5 categories, which does not include 2%, 5%, 10%, 20%, and no circuit filter. Apart from this, the prices on two exchanges - NSE and BSE may not be the same. So, the circuit filters for the shares of the two exchanges can vary.

What Is Bull&Bear Markets:-

The market is often described as 'bull' or 'bear' market. These names are taken in the way in which the animals attack their opponents. A bull bounces his horns into the air, and a bear presses his paws down. These actions are a metaphor for the movement of a market: If stock prices are rising upwards, then it is considered to be a bull market; If the trend is downward, then it is considered a bear market. The supply and demand of securities largely determine whether the market is in the bull or bear phase or not. The emphasis of investor psychology, government involvement in the economy and changes in economic activities, also drives the market up or down. Shares these investors

What Is Margin Trading:-

Many traders do business in the stock market using lending funds or securities. It is called Margin Trading. It's almost like buying securities at a credit. Margins can get returns over trading, but it can also be very risky. While this allows you to actively seize market opportunities, it also gives you subject to many unique risks, such as interest payments for borrowed money.

What is Mahurat Trading:-

Every year, on the first day of Diwali the stock market is open for a few hours. On the auspicious occasion of Diwali, a special trading session is organized for one hour. Usually, this happens in the evening. Mahurat Trading has been operating for over 100 years at the Bombay Stock Exchange. This is a symbol of the beginning of a new financial year called 'Sawant'.

What Are Top-Down&Bottom-Up Approaches:-

These are the methods of selecting stocks from the thousands listed in the exchange.
The top-down approach takes into account the first macro-economy. You understand trends and perspectives for the overall economy. Using it, you select one or more industries which hope to do well in the near future. This is because each industry responds to inflation, interest rates, consumer demand, and similar economic conditions. After a thorough analysis, select one of the industries. After this, you understand the industry, players and competitors and other factors that affect this area. Based on this, you choose one of the companies in the industry.
The bottom-up approach is the opposite. You do not see the economy or do not choose an industry first, but focus on the company's core principles. You first understand what your priorities are - high growth or steady income through a high dividend. By using a fair proportion like value-to-income ratio or dividend-yield, you choose a bunch of shares. After this, analyze each of these companies; What are the factors for-profits, such as finding answers to questions? Is the company manageable? Is the company indebted? What is the vision of the future? And so on. Depending on the results, select the company that is most suitable for your needs.
The bottom-up approach is most favorable for the weak market conditions. That's because the underlying assumption is that these companies will perform well even after the economy is bad. They are thus discrepancies - companies that do not follow the normal market trend.

What Is Average Cost:-

The Rs-cost average is a concept when you buy stocks in small clusters instead of buying a lump sum amount. This helps in reducing the Average Cost of your investment. Let us use an example. Suppose you have Rs. Bought 100 shares of the company. 10 each, your total investment cost is Rs. 1000. Instead, if you Rs. To buy 50 shares. 100 and 50 95, the total cost of your investment will be lower. Not only that, even your average cost per share will be even lower. This is called rupee-cost average. This concept comes in handy when a stock falls after you buy it. The decrease in share price gives you an opportunity to invest more and reduce your average cost. In this way, when you sell shares at some time in the future, you earn more profit.

What Is Stock Volatility:-

Stock prices are constantly fluctuating. The reason for this is the change in the demand for the stock. As more stock changes hands, the price of its stock changes as well. This is called Stock Instability. Even the amount of volatility in the market varies from day to day. To measure this volatility, the National Stock Exchange introduced the VIX India Index, which is also called Fear Gage. VIX is often used as an indicator of stock price trends. This is because VIX increases when there are more fear and uncertainty in the market. This means investors experience an increase in risk. It usually follows the decline in the market

What Is Price-Targets&Stop-Loss Targets:-

As an investor, in order to maximize your profit, you need to get your pricing correctly - when it comes to buying and selling. However, occasionally, prices fluctuate more than expected. Therefore, it can be a bit difficult to guess whether to do business now or to wait a bit more. This is where stock recommendations help. Analysts have made price targets and stop-loss measures, which tell you how long you should keep stock. A price target indicates that there is no possibility of climbing above the price level of the stock. Therefore, once you touch the stock price target, you can sell it and get your profits. A stop loss, meanwhile, acts as a target on the lower end. This lets you know that you have to sell before the stock is sold and you will be damaged.

What Is INSIDER Trading:-

In your dealings with the world of stock, you will often come across the word 'Insider Trading'. In simple words, insider trading does not mean 'trade of shares based on the knowledge available to the rest of the world'. After obtaining the 'suggestions' of confidential securities information, it is illegal to do business. It applies to corporate personnel as well as traders and brokers. This is the reason that company management must report their trades to the exchange. For example, when corporate officers, directors, or employees trade the shares of the company after learning important, confidential corporate developments, it is considered an illegal form of internal trade. This applies to employees of law, banking, brokerage, and printing firms, who were given such information to provide such services to the corporation whose securities they traded. Even government employees who do business after obtaining such information are believed to have broken the law on insider trading. This is a penal offense.