Top 10 Trading Terms Every Beginner Trader Must Know in 2024

The stock market allows traders to build wealth and get high returns, but it is not without extensive terms that make up the entire market. If you are new to the stock market investment, understanding these terms is important to navigate through investment.

These terms help traders with building confidence, informed decision-making, risk management, and effective communication. Discover the top trading terms every beginner trader should know to get the right direction toward the stock trading implications.

What is the Stock Market?

The stock market is a public market that issues, buys, and sells stocks, which trade on a stock exchange. It refers to a market where investors and traders can buy and sell the ownership of stocks or equities. Stocks (equities) represent fractional ownership in a corporation.

Individuals frequently confuse the terms stock market and share market. A share market is where shares are issued and traded. The fundamental distinction between the two is that the stock market allows individuals to trade bonds, mutual funds, derivatives, corporate shares, and so on. A stock exchange, on the other hand, solely allows for share transactions. 

Top 10 Trading Terms New Traders Must Know

Knowing stock market terms empowers you to improve financial literacy and helps overall market performance. Here are the top trading terms you must know as a beginner in trading:

1. Ask/Offer

The price at which a trader or investor offers to sell their shares is known as the ask/offer price. It refers to the lowest amount of money that the seller accepts to acquire a share of that stock.

2. Bid

The highest price a prospective stock buyer is willing to pay for a share of some particular stock or other assets is referred to as a bid. When there are several purchasers for a single stock, a bidding war concludes when one of them makes a bid that the other buyers are unable or unwilling to match.

3. Broker

A broker acts as an intermediary between a trader and the stock market. Brokers also enable traders to purchase and sell shares and charge a commission for their services.

4. Bull/Bear Market

Bull and bear markets show the stock market's trend. The bull market refers to when the stock market increases and most stock prices increase. Conversely, a bear market occurs when stock prices drop, and the market declines gradually. Generally, major indexes or stocks decrease by 20% or more than the previous upswings. 

5. Equity

The terms "stock" and "equity" are interchangeable. It is the amount of shares that a firm owns is referred to as equity. Purchasing shares of a corporation grants you, as an investor, a corresponding level of ownership in that firm. These firms’ shares, or equity, are bought and sold by investors in the stock market.

6. Exchange

A stock exchange, often known as an exchange, is where brokers and investors purchase and sell equities. The most well-known exchanges in India are the National Stock Exchange of India (NSE) and the Bombay Stock Exchange (BSE).

7. Spread

Spread in the stock market refers to the difference between the ask and bid prices. In this case, the asking price is typically higher than the bid price.

8. Demat and Trading Account

In today’s world, trading (buying and selling shares) takes place online. A person needs to open a demat account which is responsible for holding/storing the stocks or equities of a company digitally. Trading accounts, on the other hand, facilitate buying or selling shares digitally.

9. Volatility

Listed stocks on the stock exchanges often experience changes or fluctuations in their prices. These fluctuations in the prices of the stocks are referred to as volatility or market volatility. It quantifies the extent and frequency by which the stock market's value fluctuates.

10. Yield

The income received on an investment over a predetermined period of time, represented as a proportion of the original investment, is referred to as yield. In short, it is the return that a stock offers to the investor over a given period of time. But it’s important to know how to select the best stocks for trading or investment because not every stock gives you high yields.

Conclusion

Understanding these stock markets and trading terms can feel overwhelming. However, this guide to stock trading terms can help develop your finance knowledge and enhance your trading skills. Keep yourself familiar with these top stock market terms and try your hands on trading until you’ve mastered them.

If you still feel stuck somewhere, consider taking aid from Almondz Trade, a leading online broker in India. You can start your investment journey effortlessly by opening a free Demat account with Almondz Trade. We will also accelerate your trading journey through unlimited financial education and tech-driven trading and investment platforms.