41 Basic Terms Used in the Stock Market and Their Meanings

The stock market provides opportunities for long-term passive income as well as short-term incomes that are becoming more and more popular day by day.

In this article, we have listed nearly 41 terms used in the stock market to help users who are just trying to understand the stock market, and we have made short explanations about what they mean.

Knowing the basic terms in order to understand and trade the stock market will make your work easier while trading. You can have an idea about the language of the stock market by browsing the terms below.

Trading: It is the basis of the transactions made in the stock market. Investors buy and sell their assets, thus making a profit on price differentials.

Price: The value that indicates how valuable an asset is in the market at a given moment. Prices may vary according to supply and demand in the market.

Investment: A financial transaction made to acquire future returns by purchasing an asset. Investors want to increase the value of assets by making long-term investments.

Portfolio: It is the sum of the various assets an investor has acquired. Investors reduce risk by diversifying their portfolios.

Leverage: It is a tool that traders use to earn higher returns when trading with leverage. The leverage ratio determines the size of the position that the investor can take with the money deposited as collateral.

Short position: A position opened by selling before buying the asset, thinking that the price of an asset will decrease. Short positions are used to take advantage of price drops.

Risk management: It is the actions you can take to minimize possible losses while making your investments. Risk management can be done by diversifying the investors' portfolios, using stop loss orders, etc.

Futures: These are transactions made at a certain price in a certain time period. Futures allow traders to predict future price movements and reduce their risk.

Stock: A financial instrument that represents part of a company's capital. Stocks are one of the ways companies use to raise capital from investors instead of borrowing money.

Market price: The price at which an asset is currently worth in the market. The market price can constantly change according to supply and demand.

Transaction volume: It is the amount of transactions executed in a certain period of time. Trading volume indicates market activity and liquidity level.

Spread: It is the difference between the buy and sell price. The spread shows the liquidity level and transaction costs in the market.

Margin: It is the amount of money invested by the investor as collateral when trading with leverage. Margin allows traders to earn higher returns, but also comes with higher risks.

Technical analysis: It is a method for predicting future price movements using price and volume data. Technical analysis helps traders identify price trends and support/resistance levels.

Dividend: A company distributes a portion of the profits to its stockholders. The dividend is an additional source of income for investors.

Payment options: Payment methods traders can use to purchase assets. Payment options may include cash, credit card, bank transfer.

Transaction fee: The fee paid for transactions made in the stock market. Transaction fees show traders' transaction costs.

Profit/Loss Ratio: Comparing the profit rate of the investor's transactions with the loss rate. The P/L ratio shows how profitable traders' trades are.

Fund swap: The ability of an investor to exchange assets in one mutual fund into other mutual funds.

Market Maker: Financial institutions that provide liquidity and carry out transactions in the stock market. Market makers stock assets to meet buy and sell orders, thereby providing liquidity in the market.

Profitability: The return on an investment. The profitability shows how profitable the assets investors invested are.

Volatility: The sudden volatility of an asset's price. Volatility is used by investors to evaluate their risks.

Option premium: The fee paid when purchasing an option. The option premium is the cost that investors pay to purchase options.

Trading hours: Hours when the stock market is open. Trading hours determine when traders can trade.

Call option: Gives the option buyer the right to buy the asset at a specified price or time frame. This right is not obligatory for the option buyer to purchase the asset, but gives the option to buy it.

Put option: Gives the option buyer the right to sell the asset at a specified price or time frame. This right is not obligatory for the option buyer to sell the asset, but gives the option to sell.

Long position: A position opened to buy the asset and take advantage of the future price increase. Long positions are intended for investors to profit from price rises.

Short position: A position opened to sell the asset and take advantage of a future price decrease. Short positions are intended for investors to profit from price drops.

Overbought/sold: When the price of an asset is excessively high or low due to the balance of supply and demand in the market. Overbought/sold helps investors predict future price movements of the asset.

Cross rate: The mutual values of two different currencies. Cross rates are used for traders' transactions in international markets.

Market liquidity: Availability of sufficient assets to invest in the market. Market liquidity refers to the ability to trade in the market and the ability to take and sell positions quickly.

Financial reporting: Actions taken to disclose a company's financial position to investors and other interested parties. Financial reporting includes the company's assets, liabilities, profit and loss, and helps investors evaluate the company's financial soundness.

Market professionals: Experts who work and trade in the stock market. Market professionals include institutions such as brokerage houses, investment banks, portfolio managers, and professionals.

Market monitoring: It is the process of following the latest situation in the stock market, price movements, important news, factors such as economy and politics. This tracking plays an important role in making traders' decisions and buying and selling positions.

Stop loss: It is the type of order that automatically closes the position when the market prices fall at a certain level. This order is used to minimize the loss of investors.

Take Profit: It is the type of order that automatically closes the position when the market prices rise at a certain level. This order is used to maximize the profits of the traders.

Hedging: Transactions made to reduce risks. Hedging can be done in ways such as diversifying the portfolios of investors, using options.

Arbitrage: Transactions made to take advantage of price differences in different markets or different assets. Arbitrage allows traders to seize opportunities in the market.

ETF (Exchange Traded Fund): It is an exchange traded mutual fund. ETFs can contain many different assets and allow investors to diversify their portfolios. ETFs can be traded like stocks and are valued at market prices.

Futures: Futures are the buying or selling of an asset at a predetermined price on a specified maturity date. Futures allow investors to reduce their risk and take advantage of price movements.

Swap: An agreement between two parties on a predetermined maturity date on variables such as interest rates, exchange rates or commodity prices. Swap allows traders to reduce their risk and take advantage of price movements.

Knowing the basic concepts and terms is important for investors who decide to invest in the stock market. These concepts and terms help traders better understand the market, predict price movements and make their decisions.

It is especially important in subjects such as trading operations, portfolio management, risk management. In this article, 41 basic terms used in the stock market and their meanings are summarized. If traders learn these terms, they will understand the market better and be more informed when making their decisions.

Thanks for reading our article on stock market terms. We hope this article was helpful for those who decided to invest in the stock market. To share more information about the market or ask a question, please write in the comments section.

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