Online Stock Market Trading - Common Stock Market Terms

Stock market novices can reduce the complexity associated with entering the market by familiarizing themselves with some common terms. These should form part of your basic knowledge before you attempt trading. Education is key to success in the stock market.

The following are common terms you will encounter:

Stocks

Stocks are shares in companies. These shares are sold and traded on the stock market. Purchasing stocks of a company means that the buyer then owns a proportionate amount of shares in that company. It is a form of business investment. After the buyer has purchased stocks, they are then known as stockholders. Stockholders are entitled to vote at shareholder meetings. They also receive earnings of the company in relation to the number of stocks they hold.

Company shares are one of the conventional items the stock market trades.

Broker

A stockbroker is an individual who conducts stock transactions. Stockbroker services can be available in different capacities: full-service, discount, online and auto-trade.

Stockbrokers negotiate the purchase and sale of stocks on behalf of their investment clients.

Bull Market

A bull market is positive. This is a situation in the market exhibits a prolonged uprise in stock values and stable growth. Investors feel confident when there is a bull market and are more likely to purchase stocks.

Bear Market

A bear market is negative. This is where the market has experienced substantial loss in a specific sector. Investors will not have confidence in these circumstances and are more likely to sell stocks.

Dividends

At the end of a quarter where a company has realized profits, shareholders are entitled to receive bonus payments. Many investors reinvest their bonus payments back into the company's shares to gain a higher percentage of stock.

Futures

Futures is another item traded on the stock market. Futures are purchased with the price of future commodities in mind. If the price of a commodity a future is purchased on increases in time, the investor will earn money. Conversely, if the price of the commodity drops below what the investor originally paid the investor loses money.

Day Trader

A day trader is an investor who makes several purchases and sales of stock in the course of one day. The day trader follows this procedure with the goal of realizing many small profit margins that will add up.

Trading on Margin

Trading on margin involves purchasing stocks for a fraction of the total cost of the share. The balance of the price is paid when the share is sold or on a subsequent date. Trading on margin is comparable to stock trading with the exception that borrowed money is utilized rather than payment in full at the time of purchase.

The above terms are just a few terms commonly used on the stock market. These descriptions are simplified explanations. An investor new to the stock market will need to acquire more indepth knowledge about these terms and others. The stock market is a complex investment option.

Take the time to learn as much as possible about terms and strategies before you become involved in the stock market. This will assist you in avoiding pitfalls and realizing profit from your venture.

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