What are stock market and share trading?
A stock market consists of exchanges and other institutions where all the transactions like buying and selling of shares and stocks of public-held companies will happen. There will be companies in need of money for purposes like the expansion of their operation, repayments of debts, or other reasons. To raise capital in a short time, these companies will release their shares in the stock market or the share market for the general public. An investor is a person who has some money and willing to buy or sell these shares. The companies will release an IPO (Initial Public Offering). It is the process of releasing the first set of shares into the market from which they are going to raise the capital. After that, the shareholders will decide to buy more stocks or sell the stocks they have. If you need to sell your shares, you can do it with other traders in the market looking for buying stocks at the current share price of the company. There will be some brokerage firms that act as middlemen between the investors and the stock exchanges to carry out all the transactions at ease. You can download a mobile application to access the markets. The prices of all the stocks along with several supplemental information will be available in these applications. There will be some charges for these brokerages. In this article, let us discuss some of the terms to know before entering the stock market world.
Terms to know before entering the stock trading
Annual report – Every year, a public-held company will release an annual report that contains all the information about the organization’s process, gains or losses, cash flow, management strategies, etc. Each shareholder will get to see the annual report of the company.
Arbitrage – It is the process of buying and selling the same stocks in different markets at a time. Since there are several markets in action, you can invest in the same security in two different markets at two different prices.
Averaging down – Some investors will buy more stocks when their price goes down. It is the strategy with the thought of the stock price getting rebound later as the current understanding about the company is wrong among the masses.
Broker – A broker in stock trading is the person who buys and sells shares on behalf of you in the stock exchange for a small commission or fee.
Dividend – It is the small amount of money a publicly-traded company will give to its shareholders from the profits earned in the financial year. Not all the companies in the market will pay dividends, and not all the stakeholders in a dividend-issuing company will get them.
Stock exchange – It is the place where all the transactions with various securities will happen. Each country will have one or two central stock exchanges.
Initial Public Offering – An IPO is the first release of shares from a company that has decided to turn the public from private ownership.