Many people are familiar with the stock market. However, most people are still unfamiliar with terms like “stock,” “stock buying and selling,” “stock market charts,” and “bullish and bearish.” Even the term “stock market” remains a point of confusion for those with no financial background. There are times when you would scratch your head in bewilderment every time you heard your neighbors complain about low stock market prices or if a colleague suddenly gets a huge windfall from his investments in the stock market. What Most People Do Trading in the stock market can lead to booming businesses or bankruptcy if these companies have played the “stock market game” correctly. Simply put, stocks are representations of the company’s assets and earnings. of shares, this value is divided annually among shareholders in the form of a dividend. shareholders would receive a dividend of $5,000.
Stock Market Definition
A stock market, also known as a “stock exchange,” is a financial institution where licensed brokers trade company shares 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 initial public offerings (IPOs) and other new issues by sellers and buyers
• Secondary Stock Market = for the trading of existing shares in the market by buyers and sellers.
Common Stock Market Terms
Stock market “jargon” is not something to be confused or intimidated by. 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 stock market decisions.
Let’s take a look at some of the terms you’re likely to come across in the stock market…
Stock Price = This is the value for which shares are bought and sold. The factors that directly impact stock 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 stock 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 doing well, you’ll see stock prices skyrocket.
Reading Stock Charts = These charts and quotes provide the current state 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 consists of stock data over a 52 week period. On the reporting 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 company listed on the stock exchange 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 ticker symbols to 1-4 letters only (similar to heraldic symbols). on British stock markets). Any new company must register its own symbols, which must be different from the symbols already used by other companies. Some examples of ticker 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 Berkshire Hathway Company and is a lower priced “Class B” share.
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 dividend 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 listed price of the share on the closing day of the stock market
Net Change = The difference in stock prices since the last change that occurred. The 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, a bear market is indicative of a downward economic trend, so investors need to sell their shares 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 drop rapidly. 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).