May 19, 2024

The Domestikated Life

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Stock Trading Terms That Novice Traders Must Be Aware of

There are several stock trading terms that are frequently used in the day trading market. If you are not a trader, it will be very difficult for you to understand what these terms actually mean unless you study them specifically. If you are considering entering the mystic world of stock trading, it is very important for you to be well aware of these terminologies first. You must be a good learner. You must know how to make the best use of every single opportunity to increase your knowledge about the market. Following is a brief rundown on some of the most common stock trading terms.

Trader
Traders refer to the individuals who transact financial instruments (such as, stocks) in financial markets. They sometimes do it on behalf of someone else, but most of the times, traders do it for themselves only. There can be different types of traders, such as head traders, pattern day traders, and commercial traders. A commercial trader is the person whose primary task is to use the future markets. The head trader is the one who works in a trading firm and supervises all the traders working for that firm. Pattern day traders on the other hand are primarily involved in trading securities 4-5 times a day over a period of five days.

Stock
“Stock” obviously is one of the most common stock trading terms. It mainly refers to a security or equity that entails ownership in a firm or company.

Current Market Value
The current market value indicates the actual value of a stock on the basis of the current market trends.

Capital Loss And Capital Gain
“Capital loss” and “capital gain” are two serious terms that traders and investors must be thoroughly aware of. Capital loss is often termed as CL, which refers to the loss that traders or investors have to suffer when they sell stocks at a price lower than the initial purchasing price. On the other hand, CG indicates capital gain, which refers to the profit resulting from the sale of the stocks at a price higher than the initial purchase price.

Volatility
Volatility, as it may sound, has nothing to do with the trader’s temper. This is also one of the most-heard-of stock trading terms that is used to indicate the movement of securities. You have to calculate the annualized standard deviation of the daily changes in stock prices in order to determine the volatility.

Securities and Exchange Commission
In the United States of America, there is a specific administrative agency that regulates and governs the stock trading market – this agency is known as Securities and Exchange Commission.

Reaction And Rally
When the price of a stock suddenly decreases after seeing a rise, it is called reaction. On the other hand, rally refers to the increase in the prices of stock.

Tender Offer
When a company makes an offer to another company to buy their shares from their stockholders, this activity is referred to as tender offer.

Overall, having knowledge of these stock trading terms will definitely make things much easier for the novice traders.