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Most people run away from the stock market because of the trading terminologies that sounds alien to the ordinary public. Learning the trading terminologies doesn’t only make you sound smarter but it is also important to learn them if you want to take the stock market seriously.
The index is a basket of stocks of listed companies, carefully selected to represent the general movement of the stock market. In other words, it is the benchmark measuring the performance of the stock market in that certain country.
Each country has their own index and some have more than one. In the U.S., we have the main indices and these are the S&P5, Nasdaq and Standard and Poor’s, in Germany it’s called DAX and in the Philippines it’s called PSEi or Philippine Stock Exchange Composite Index.
Indices are usually divided into 6 sectors namely, Industrial Holding Firms, Financials, Mining & Oil, Property and Services.
- Trading Hours
Unlike the forex market, the stock market is not open 24 hours as it has a schedule of trading. Most stock markets are open 9am to 5:00pm in their time. It is usually based on their office hours.
- Board Lot
The board lot is the minimum number of shares one can purchase or sell a stock at a specific price range. This is usually provided by stock brokers so make sure to check on their tables.
If you have went to a trading floor or watched financial news you might have seen a board that has green, red or yellow colors. This board provide stock market updates and show stock information like the stock code, price, no. of shares, buying broker/selling broker. This is called the ticker.
Green – Up
Yellow – Unchanged
Red – Down
- Bull Market
Characterized by rising prices. There is a prolonged period of increasing stock price.
- Bear Market
Characterized by falling prices. The stock market is in downtrend. This is the opposite of bull market.
- Initial Public Offering (IPO)
Initial Public Offering or IPO is a process whereby a privately held corporation offers for sale its shares of stock for the first time to the public in order to raise capital to fund a certain investment or business expansion.
Dividends is the share of profits of shareholders, representing the earnings of the company. This usually happens when the company doesn’t reinvest all the profits back to the company. In general, there are two types of dividends: stock dividends and cash dividends.
Stock dividends are given to stock holders in form of stocks. As a result the stock holder will hold more stocks if these is the case.
Cash dividends are given to stock holders in form of cash. The stock holder will receive money from their stock shares. The more stocks that you hold the bigger cash you will receive.
- Fundamental Analysis
The analytical method of evaluating stocks and this is done by looking at the financial statement and news about the company.
- Technical Analysis
A form of market analysis that studies demand and supply for securities based on trading volume and chart patterns.
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