A PERSON DEALING IN THE STOCK MARKET MUST KNOW ABOUT THESE IMPORTANT TERMS USED ACTIVELY IN THE STOCK MARKET IN 2024 (2024)

INTRODUCTION

• Indian stock market is at its all time high level and investors have gained better returns on their investment as in the year 2023.
• But 2024 is started and it is expected that Indian stock market will reach to new heights . However , today BSE SENSEX closed 535.88 points (0.75%) down and NIFTY closed 148.45 points (0.69%) down.
• There are many investors who want to start or started their journey in the year 2024 must do proper research about the stock market , , how it works before , risk and return factors etc.
• There are many important terms , which a person must know who is dealing in the stock market , these important terms will be discussed in this blog.
• If you are beginner in the stock market and you want to know about stock market then you can read herehttps://businessinfo29.blogspot.com/2023/11/stock-market-beginners-guide.html
• If you want to know online trading procedure in the stock market then you can know herehttps://businessinfo29.blogspot.com/2024/01/if-you-want-to-start-online-trading-in.html

• If you want to know what things should be kept in mind while doing fundamental analysis then you can read herehttps://businessinfo29.blogspot.com/2023/12/if-you-invest-in-stock-market-or.html

IMPORTANT TERMS USED ACTIVELY IN THE STOCK MARKET

Before you enter in the stock market you must know about the stock market such as what is stock market ? how it works ? and important terms which are used while trading in the stock market , so in this blog I am going to tell you about various important terms used in the stock market .Let's get started

1. MARGIN TRADING : When you want to buy any stock and you have to pay only a portion of the entire amount rather than full amount then it is called margin trading.

In this trading you can earn profits or maximise your earnings without investing enough capital.

Let's understand this through an example : Suppose A is the person who wants to buy 100 shares of Reliance and its price is Rs.2500 and then A need Rs.250000 for buying these shares but under margin trading A is required to pay only the margin money say 20% it is Rs.50000 .

So under margin trading A has the exposure of Rs.250000 by paying only Rs.50000 .Under margin trading , broker charges interest for providing the funds alongwith brokerage and taxes.

2. PRICE FREEZE : This is the another very important term which is used in the stock market. There are mainly 2 types of freeze in the stock market : Buying freeze and Selling freeze .

These are also popularly known as upper circuit and lower circuit. These freezes or circuits are decided in the advance . This freeze is the some % of share price.

In the buying freeze or upper circuit demand for the share is the high and a person desirous of buying that particular stock doesn't find the seller .

In the selling freeze or lower circuit there is no buyer available for the particular stock.

3. HAIR - CUT : This is the difference between the market value of shares and the loan that the lender or broker gives to a person or investor to trade in the stock market.

Hair - cut is generally expressed as a % the markdown on the total market value of stocks to be pledged.

4. SHORT SELLING : Short selling is the most commonly used term in the stock market . This concept is simple to understand let's understand this simple concept:

suppose you expect that a particular stock price will go down in the future , then you ask your broker to sell that particular stock on your behalf and when the price of that stock price falls then you buy it and gives that stock to your broker to whom you earlier told to sell that particular stock .

Difference between the selling price and purchase price is your profit.

EXAMPLE : B enterprises share price is Rs.100 and A expects that its share price will fall in the future then A asked its broker to sell 100 shares on his behalf and Rs. 10000 are credited to A's account and after few days B enterprises share price falls to Rs.80 and then A bought 100 shares at this price and he paid Rs.8000 for this and Rs.8000 will be debited from his bank account . In this case difference of Rs.2000 is the profit of the A.

5. MARKET WIDE CIRCUIT-BREAKERS : It is a regulatory instrument to stop trading temporarily or under the extreme situations to close the markets before the normal time of close of the trading session.

Its main object is to prevent stock market crashes . Circuit breakers are applied for both market indices and individual stocks.

6. INSIDER TRADING : This is the another very actively used term in the stock market . Insider trading is the trading by an individual or investor which means using the confidential information about the company in order to make profit on the shares held by that person .

SEBI is the regulatory body of the stock market which has made strict rules and regulations and imposes penalties for doing insider trading.

7. BLOCK DEALS: It is a transaction or trade which involves a minimum quantity of 5 lakh shares or a minimum value of Rs.5 crore between 2 parties to buy or sell shares at an agreed price among themselves.

Block deals in the Indian stock market are done at a separate trading window and it happens for 35 Minutes in the trading session between 9:15 a.m. to 9:50a.m.

8. BULK DEALS : This is the term which is used to describe the trade where the total quantity of shares bought or sold is more than 0.5 % of the number of shares of a listed company.

Broker who is managing the bulk deals is required to provide necessary details of the transaction carried to the stock exchanges , whenever the transaction happens.

Participants in bulk deals includes fund houses , foreign institutional investors ,banks , insurance companies etc.

9. ARBITRAGE OPPORTUNITY IN THE STOCK MARKET : This term refers to buying an asset at low price in one market and selling it at higher price in the another market at higher price .

This means exploiting the opportunity of making profit arising due to price differences in the different markets.

Arbitrage opportunity arises because of market inefficiencies and it would be totally absent in the efficient market. This opportunity exists in both cash and derivative markets.

So these were the important terms which are used in the day to day working of the stock market . I hope this blog proves useful and informative to you and if soshare this blog and do comment your views about it.

Thank You