Basic Stock Market Terms that Every Retail Trader Must Know About

The share market, also referred to as the stock exchange market is a regulated but transparent marketplace where people buy and sell the shares of public companies. The share market works as the primary market for companies to raise funds by issuing their shares and stocks for sale and as the secondary market where investors can transact them at the prices based on the market forces. Online trading platforms are the most popular secondary market space for retail traders. Investors can download metatrader 5 for a seamless and efficient trading experience.

Every trader must conduct a fair amount of research and develop a thorough understanding of the basic concepts and workings of the market before launching an investment. The stock market world is no different. Certain terminologies pop up during the trading process, no matter the platform. Here are the basic terms that new traders must familiarise themselves with.

Equity

One of the most basic terms in the stock exchange market is equity which refers to the number of shares a company owns. It means that when a trader or an investor buys those shares, they purchase an equal degree of ownership of the company. As the investors exchange these stocks and shares in the stock market, hence the equity, sometimes they use equity interchangeably with stocks.

Ask, Offer and Bid

In stock trading, an ask or offer, refers to the lowest amount that the company is willing to sell the share of their stock. Therefore, traders must look out for the asking price if they are interested in buying shares of any company. On the other hand, bid refers to the highest amount that buyers, traders and investors are willing to pay for the shares of a particular company. If the stock is in demand with multiple bidders, they each offer their maximum price or a bid to buy the shares or the stocks. It sometimes leads to a bidding war which ends when a buyer places an amount that the others cannot out-bid.

Spread

When a company puts up shares in the stock market, a difference exists between the prices they offer and the buyers bid for them. Generally, the offer prices are higher than the asking price. This difference between the offer and the bid is the ask-bid spread or the spread. The demand and supply of the stocks, the company growth and its popularity determine the spread. Download metatrader 5 to find information about all the stocks and shares and their ask-bid spread available in the market today.

Bull and Bear Market

The bull market refers to situations when the stock market is on an exponential increase with stock prices for a prolonged period. A bear market is when the stocks and share values are downward, leading to a long period of plummeting stock prices. Specific stocks can also perform in a bullish or bearish trend. The news about the market status has these terms at any given time.

Exchange

The exchange refers to the secured marketplace where companies and investors trade securities. When it comes to stock trading, the exchange refers to the transaction of company stocks within the country or globally where traders buy and sell them. In Australia, the Australian Securities Exchange or the ASX and Chi-X are the two main stock exchange markets that every broker must provide access to.

Broker

Investors must connect with an intermediary person or a platform who can provide access to information about stocks and shares and trade them. Brokerage firms or registered brokers generally perform this intermediary process for a small commission. They do not necessarily own the company securities, but they sell and purchase stocks on behalf of the investor using their knowledge and skill about the market.

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