So here comes a basic understanding of daily use terms in money issues. The idea is to give an insight into the different technical terms that one comes across while going for online trading, in a layman’s language.
SENSEX: Sensex is the short form of Sensitivity Index, and like any other index, it is nothing but a measure of the average change in the share price of a group of selected companies over two different situations, generally the closing price of previous day and current price of the day.
In India, the index of Bombay Stock Exchange (BSE), which is compiled on the basis of 30 selected stocks, is called Sensex whereas that of National Stock Exchange (NSE), based on 50 selected stocks, is called NIFTY.
BULL: An investor who believes that a particular share or group of shares, or the overall stock market, is about to rise. When the Sensex, for instance, rises regularly it’s said to be a bull market.
BEAR: Opposite of bull, consistent declining trend of the Sensex. Bear believes in that the market will go down and down and down constantly.
MUTUAL FUND: Fund operated by an investment company, which raises money from the public and invests in a group of assets.
DEMAT: Demat means De-Materialize, something which is non-material. In share market, Demat means possession of share, but in non-paper form. Demat is the instrument which has replaced the earlier concept of holding of shares in physical form, i.e. in paper. Your Demat account will give you the details of share you possess at that point of time.
LTP: Last Traded Price (LTP) is that price on which the last transaction has taken place pertaining to that specified stock. From LTP, you get the idea, in what price you may get to buy/sell your stock.
Offer Price: Offer price is the price at what the seller is ready to sell the stocks. When you are going to buy the shares, this price is very important to you, because ultimately your deed will be executed only when your buying price will match the offer price.
Offer Quantity: The number of shares available at the Offer price.
Bid Price: It’s nothing but the buying price at which buyer is ready to buy.
Bid Quantity: The number of shares available at a certain Bid Price.
LIMIT: During online trading, Limit price gives one the facility of bargaining. The system (software for trading) needs to know the top or bottom price you are ready to afford while buying and selling respectively. There comes the concept of Limit price. While buying, Limit is the price on or below of which you are ready to buy. The same way, while selling, Limit is the price, on or above of which you are ready to sell.
MARKET PRICE: The current price of a stock at a certain point of time during the trading hour.
You need to sell/buy either in Market price or in Limit price. When you don’t have time to bargain, you can still do the trading in the Market price, where your deed is executed then and there.
MARGIN: Margin is a kind of leverage. Leverage, comes from the term Lever, is nothing but a tool to multiply effort to accomplish a bigger task easily. Margin, a kind of leverage, gives one the facility to trade bigger amount with less amount of money.
There are other kinds of leverages too in share market, like Derivatives, Future, Options etc., which we are not going to discuss in this article.
P-E RATIO: Price to Earning (PE) ratio of a company is the market price of the company’s share divided by its earning per share.
P-E Ratio= Market price per share/Earning per share
The range of P-E ratio varies from industry to industry. However within one industry group, a share with less P-E ratio is considered a better stock to invest.
