20 vocabularies on stock exchange with explanation
1. Stock Exchange: A marketplace where stocks, bonds, and other financial instruments are bought, sold, and issued. It enables companies to raise capital by issuing shares to the public and provides investors an avenue to trade their securities with others.
2. Stock: A financial instrument representing partial ownership in a company. Owning a stock gives the investor a claim on a portion of the company's assets and earnings.
3. Dividend: A payment made by a corporation to its shareholders, usually as a distribution of profits. Dividends can be issued in the form of cash or additional shares of stock.
4. Market Capitalization: The total value of all outstanding shares of a publicly-traded company's stock. It is calculated by multiplying the stock's current market price by the total number of outstanding shares.
5. Initial Public Offering (IPO): The process by which a private company becomes a publicly-traded company by issuing shares of stock to the public for the first time.
6. Ticker Symbol: A unique combination of letters assigned to a security, used to identify a public company on a stock exchange.
7. Bid Price: The highest price a buyer is willing to pay for a security on a stock exchange.
8. Ask Price: The lowest price a seller is willing to accept for a security on a stock exchange.
9. Trading Volume: The number of shares or contracts traded for a specific security during a given time period, usually one day.
10. Blue Chip: A term used to describe well-established, financially stable, and reliable companies with a long track record of strong performance and paying dividends.
11. Bear Market: A market characterized by a significant decline in stock prices, typically 20% or more from recent highs, across most sectors and indices.
12. Bull Market: A market characterized by a sustained increase in stock prices, typically led by investor optimism and strong economic growth.
13. Market Order: An order to buy or sell a security immediately at the best available current market price.
14. Limit Order: An order to buy or sell a security at a specific price or better. The order is only executed if the specified price is reached.
15. Margin: The practice of borrowing money from a broker to buy stocks, using the purchased stocks as collateral. This amplifies both potential gains and losses.
16. Short Selling: A strategy to profit from a decline in a stock's price, by borrowing shares, selling them, and later repurchasing them at a lower price to return to the lender.
17. Stop-Loss Order: An order to sell a security when the market price reaches a specified level. It is designed to limit an investor's potential loss on a position.
18. Financial Ratios: Quantitative measures used to assess the performance of a company, such as the Price-to-Earnings (P/E) ratio, which compares the price of a stock with its earnings per share.
19. Index: A statistical measure of the performance of a group of stocks, usually representing a specific market or sector. Examples include the S&P 500 and Nasdaq Composite.
20. Exchange-Traded Fund (ETF): A type of investment fund that holds a diversified portfolio of assets, such as stocks or bonds, and trades like a stock on a stock exchange. Investing in an ETF allows investors to buy a basket of securities in a single transaction.