Basic Terms of the Stock Market Every Beginner Should Know

Basic Terms of the Stock Market Every Beginner Should Know

“Learn the language of the markets, and you’ll never feel lost again.”

When you start learning the stock market, the biggest problem is not risk or money — it is understanding the words people use. News channels, apps, and social media are full of market terms. If you don’t understand them, everything feels confusing.

Let’s explain these basic stock market terms in detail, one by one, in a way that even a complete beginner can understand.

Stock (or Share)

A stock, also called a share, represents ownership in a company. When a company needs money to grow, it divides its ownership into small parts called shares and sells them to the public.

When you buy a share, you become a part-owner of the company. If the company grows, the value of your share increases. If the company performs badly, the value of your share decreases.

Think of it like owning one slice of a big pizza — if the pizza becomes popular, your slice becomes more valuable.

Equity

Equity is just another word for stocks or shares. It simply means ownership in a company.

When someone says they invest in equity, it means they invest in company shares. Equity investments usually offer higher growth potential but come with higher risk.

IPO (Initial Public Offering)

An IPO happens when a company offers its shares to the public for the first time.

Before an IPO, a company is privately owned. After an IPO, anyone can buy its shares through the stock market.

It is like turning a private shop into a public mall.

Stock Exchange

A stock exchange is a marketplace where shares are bought and sold.

In India, the two main stock exchanges are the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

Stock exchanges provide fair pricing, transparency, and safety to investors.

Broker

A broker is a middleman who helps investors buy and sell shares.

You cannot directly trade on the stock exchange. You need a broker such as Zerodha, Groww, or Upstox to place your orders.

Demat Account

A Demat account is a digital account where your shares are stored electronically.

Earlier, shares were held in physical paper form. Today, all shares are stored digitally in a Demat account.

Without a Demat account, you cannot hold shares.

Trading Account

A trading account is used to place buy and sell orders in the stock market.

Your trading account is linked to your Demat account. The trading account is used for action, and the Demat account is used for storage.

Bull Market

A bull market is a phase when stock prices keep rising and investor confidence is high.

People feel optimistic and invest more during a bull market.

Bear Market

A bear market is a phase when stock prices keep falling and fear dominates the market.

This usually happens during economic slowdowns or global crises.

Market Capitalization (Market Cap)

Market capitalization shows how big a company is.

It is calculated by multiplying the share price with the total number of shares.

Companies are classified as large-cap, mid-cap, or small-cap based on market capitalization.

Blue Chip Stocks

Blue chip stocks belong to strong, well-established companies with a long history of stable performance.

These companies usually perform well even during tough economic conditions.

Dividends

Dividends are a part of a company’s profit shared with shareholders.

If you own shares of a dividend-paying company, you may receive regular income in addition to price appreciation.

Portfolio

A portfolio is the collection of all investments you own.

A good portfolio includes different types of assets to reduce overall risk.

Volatility

Volatility shows how fast and how much stock prices move up or down.

High volatility means higher risk and higher opportunity. Low volatility means stable price movement.

Liquidity

Liquidity refers to how easily a stock can be bought or sold without affecting its price.

Highly liquid stocks are easier to trade.

Intraday Trading

Intraday trading means buying and selling the same stock on the same day.

This type of trading requires quick decisions and carries higher risk, especially for beginners.

Delivery Trading

Delivery trading means buying shares and holding them for more than one day.

This method is suitable for beginners and long-term investors.

Sensex and Nifty

Sensex and Nifty are stock market indices that show the performance of top companies.

They act as indicators of overall market direction.

P/E Ratio (Price-to-Earnings Ratio)

The P/E ratio helps investors understand whether a stock is expensive or cheap compared to its earnings.

It should always be used along with other factors.

Volume

Volume shows the number of shares traded during a specific period.

High volume indicates strong interest in a stock.

Why These Terms Matter

Understanding these basic stock market terms helps beginners read market news confidently, reduce fear, and make better investment decisions.

In the stock market, knowledge protects money.

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Author: @nkit

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⚠️ This is for learning purposes only. Please do your own research before making any investment decisions.

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