MASTER THE STOCK EXCHANGE JARGON

Stock Exchange Terminology

Till now we understood that shares are small pieces of the amount, a company wants to raise, and you can buy those shares from markets that are now available online just like other shopping websites. Let us now understand about these markets further.
A platform where shares (also known as stocks) are exchanged/ traded among buyers and sellers is known as STOCK EXCHANGE. When a company issues shares for the first time (known as Initial public offer-IPO) to public, it must get itself registered with Stock exchange which is commonly known as the process of LISTING. Persons who bought shares at the time of IPO can sell those shares anytime in stock exchange. The picture below depicts the popular stock exchange of various countries from where you can buy and sell shares.

FINANCIAL REGULATORS

Financial regulators are the institutions which regulates stock markets. Every market needs a regulator to protect the interest of buyers and sellers and monitor everything going in the market.E.g. Securities and exchange board of India (SEBI) is the financial regulator of Indian stock markets. These financial regulators are like “WATCHDOG” monitoring each and every transaction of stock market and preventing fraudulent activities.

TECHNICAL JARGON

• FACE VALUE 

At the time of IPO a company decides the price at which shares are to be issued. This price consists of 2 parts:

1. Face value

2. Premium value

Face value is the nominal amount per share which a company should charge from the public. It is normally Rs.10 per share or it can be Rs.100 per share depending from company to company. However a company having a good reputation and brand value issues shares to the public at a price higher than the face value. The value in excess of face value is called as premium value.

• MARKET PRICE

Once the shares got listed on stock exchange the value of share is determined by buyers and sellers.

But how buyers and sellers determine price of a share?

Well it is just like an AUCTION, The way price of an item is decided in auction, in similar way there are buyers who bid for a particular price they want, sellers also provide the price at which they are ready to sell a share. The price at which both buyer and seller agree is known as the market price of share.

EXAMPLE- FACE VALUE VS MARKET PRICE

SBI CARDS, a company that issues credit cards to public announced its IPO. The company wants to raise Rs.10354.77 crore to expand its business. It decided the nominal value equal to Rs.10 per share; this value is called as Face value. Now because of its good reputation and brand value it decided to issue shares at a price higher than face value amounting to Rs.750 per share. The difference between Face value and issue price is premium (750-10=740)

As soon as SBI CARDS issued shares to the public it gets itself LISTED with stock exchange. At stock exchange anyone can buy the shares from the persons who purchased them at the time of IPO.

Both buyer and seller negotiate for price. The price at which both buyer and seller agree to sell those shares is known as Market price of share.

• LONG VS SHORT POSITION

-Long in stock market means buying a share

-Short in stock market means selling a share

• BULL VS BEAR

Buyers in share market are often known as bulls and sellers as bear. Buyers are the reason for rise in price of share and sellers pull down the price. Market is said to be “BULLISH” when number of buyers are more than number of sellers, similarly when number of sellers are more than number of buyers, market is said to be “BEARISH”

• SQUARE OFF

It means cancelling your position by taking a reverse position, E.g. when you sell the shares you hold it will be technically called as squaring off your position.

Green arrow represents buying a share and red arrow represents selling that share

• INTRADAY VS DELIVERY
When you square off your position on same day it is technically called as “Intraday contract” E.g. You bought share of Reliance on 28 May 2020 and sold the share on the same day, it will be said as an “Intraday contract”
When you buy shares for long term it is technically called as “Delivery contract” E.g. You bought shares of Titan on 28 May 2020 and you kept those shares for long term, it will be said as “Delivery contract”

Always Remember,
"In order to succeed, 
your desire for success should be greater than your fear of failure"
Thanks for reading the article, in next article we will learn how to trade in stock market in practical life.