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15 trading terms every day trader should know
Intraday trading means that all trades are conducted within a single day. Whether the trader generates a profit or a loss depends on minute price movements. Most day traders look at intraday trading as a full-time job. To be a successful trader, it is necessary to understand everyday trading terms.
Common stock trading terms
- Ask price: The ask price, also known as offer price or ask, is the lowest price at which an owner is willing to sell stocks.
- Assets: An asset is any resource that a company owns in its name. This includes cash, land, technology, or any other kind of resource that contributes to its total wealth.
- Broker/brokerage firm: A brokerage firm or an agent is an institution that acts as an intermediary between the client and the stock exchange. Brokers buy and sell shares on behalf of the client. Their job is to place orders and not to keep stocks.
- Bear market: When the share prices are down for a certain period, it is called a bear or bearish market.
- Bid: In contrast to ask price, a bid is the highest price that a trader is willing to pay for a stock.
- Bull market: A bull market refers to a market where stock prices are on the rise. The moving share prices show market prospects and encourage buying.
- Dividend: A dividend is a payment made from a company’s profits to its shareholders as a reward.
- Initial public offering (IPO): An IPO is the process whereby a business entity offers shares to the public for the first time. This helps a company to raise capital from external investors and continue its growth. Investors, in turn, receive shares in the form of equity.
- Market trend: This refers to the general direction of the market. A stock trend can go in an upward or a downward direction.
- Profit/loss ratio: The profit/loss ratio shows the average profit made on winning trades by comparing it with the size of the average loss on losing trades.
- Swing trading: In swing trading, stocks are held for a couple of days or weeks before selling. This forms a contrast to day trading, where stocks are bought and sold in a single trading day.
- Secondary offering: A company can announce an IPO only once. Any subsequent offering would be a secondary offering.
- Share buyback: A share buybackrefers to a process where a company repurchases shares it had sold via an IPO. This increases the share value by reducing the number of shares being traded in the open market.
- Short selling: The process of selling shares that you do not own is known as short selling. After selling short, a trader buys shares at a lower price and the difference in price is the profit earned.
Trading session: The stock market has fixed timings. The trading session in India begins at 9:15 a.m. and ends at 3:30 p.m. from Monday to Friday. All traders need to place their orders within this timeframe.
Summing up
A successful intraday trading stint requires extensive study and analysis. Keeping this list of terms handy will help you trade more efficiently. If you want to know more, organizations like Kotak Securities provide brokerage facilities and have a host of articles for you to read before you try your hand at day trading.