Stock Market Terminology and Definitions for Beginners

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The stock market is an everyday term we use to talk about a place where stocks and bonds are "traded" — meaning bought and sold. For many people, that is the first thing that comes to mind for investing. The goal is to buy the stock, hold it for a time, and then sell the stock for more than you paid for it. How long do you hang on to stock?

Investors who hold stock for 15 years or more usually succeed in share trading basics ppt market. Stocks are long-term investments. But there are no guarantees. So just as the federal government sells bonds to raise money, businesses raise money by selling stock. When you buy stock, you become a shareholderwhich means you now own a "part" of the company.

If the company's profits go up, you "share" in those share trading basics ppt. If the company's profits fall, so does the price of your stock. If you sold your share trading basics ppt on a day when the price of that stock falls below the price you paid for it, you would lose money. In the stock market, prices rise and fall every day. When you invest in the stock market, you are hoping that over the years, the stock will become much more valuable than the price you paid for it.

What is the Stock Market? Stocks are units of ownership in a company. Companies sell stock to get money to — Research better ways to make things Create new products Improve the products they have Hire more employees Enlarge or modernize their buildings So just as the federal government sells bonds to raise money, businesses share trading basics ppt money by selling stock.

How it works When you buy stock, you become a shareholderwhich means you now own a "part" of the company. Stock prices can rise and fall In the stock market, prices rise and fall every day. Ways to Invest Risk and Rewards.

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Securities market is a component of the wider financial market where securities can be bought and sold between subjects of the economy , on the basis of demand and supply. Securities markets encompasses equity markets , bond markets and derivatives markets where prices can be determined and participants both professional and non professionals can meet. Securities markets can be split into below two levels.

Primary markets, where new securities are issued and secondary markets where existing securities can be bought and sold. Secondary markets can further be split into organised exchanges , such stock exchanges and over-the-counter where individual parties come together and buy or sell securities directly.

For securities holders knowing that a secondary market exists in which their securities may be sold and converted into cash increases the willingness of people to hold stocks and bonds and thus increases the ability of firms to issue securities. There are a number of professional participants of a securities market and these include; brokerages , broker-dealers , market makers , investment managers , speculators as well as those providing the infrastructure, such as clearing houses and securities depositories.

A securities market is used in an economy to attract new capital, transfer real assets in financial assets, determine price which will balance demand and supply and provide a means to invest money both short and long term. A securities market is a system of interconnection between all participants professional and nonprofessional that provides effective conditions:. The primary market is that part of the capital markets that deals with the issue of new securities.

Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is a public offering. Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus.

Primary markets create long term instruments through which corporate entities borrow from capital market The secondary market , also known as the aftermarket, is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold. The term "secondary market" is also used to refer to the market for any used goods or assets, or an alternative use for an existing product or asset where the customer base is the second market for example, corn has been traditionally used primarily for food production and feedstock, but a "second" or "third" market has developed for use in ethanol production.

Stock exchange and over the counter markets. With primary issuances of securities or financial instruments, or the primary market, investors purchase these securities directly from issuers such as corporations issuing shares in an IPO or private placement, or directly from the federal government in the case of treasuries. After the initial issuance, investors can purchase from other investors in the secondary market. The secondary market for a variety of assets can vary from loans to stocks, from fragmented to centralized, and from illiquid to very liquid.

The major stock exchanges are the most visible example of liquid secondary markets - in this case, for stocks of publicly traded companies. Exchanges such as the New York Stock Exchange, Nasdaq and the American Stock Exchange provide a centralized, liquid secondary market for the investors who own stocks that trade on those exchanges. Loans sometimes trade online using a Loan Exchange. Over-the-counter OTC or off-exchange trading is to trade financial instruments such as stocks, bonds, commodities or derivatives directly between two parties.

It is contrasted with exchange trading, which occurs via facilities constructed for the purpose of trading i. OTC stocks are not usually listed nor traded on any stock exchanges, though exchange listed stocks can be traded OTC on the third market. An over-the-counter contract is a bilateral contract in which two parties agree on how a particular trade or agreement is to be settled in the future.

It is usually from an investment bank to its clients directly. Forwards and swaps are prime examples of such contracts.

It is mostly done via the computer or the telephone. For derivatives, these agreements are usually governed by an International Swaps and Derivatives Association agreement. The NYMEX has created a clearing mechanism for a slate of commonly traded OTC energy derivatives which allows counterparties of many bilateral OTC transactions to mutually agree to transfer the trade to ClearPort, the exchange's clearing house, thus eliminating credit and performance risk of the initial OTC transaction counterparts..

A promissory note , referred to as a note payable in accounting, or commonly as just a "note", is a contract where one party the maker or issuer makes an unconditional promise in writing to pay a sum of money to the other the payee , either at a fixed or determinable future time or on demand of the payee, under specific terms. They differ from IOUs in that they contain a specific promise to pay, rather than simply acknowledging that a debt exists.

A certificate of deposit or CD is a time deposit , a financial product commonly offered to consumers by banks, thrift institutions, and credit unions. They are different from savings accounts in that the CD has a specific, fixed term often three months, six months, or one to five years , and, usually, a fixed interest rate. It is intended that the CD be held until maturity, at which time the money may be withdrawn together with the accrued interest.

Bond - an issued security establishing its holder's right to receive from the issuer of the bond, within the time period specified therein,. The bond may provide for other property rights of its holder, where this is not contrary to legislation. Common shares represent ownership in a company and a claim dividends on a portion of profits. Investors get one vote per share to elect the board members, who oversee the major decisions made by management.

Over the long term, common stock, by means of capital growth, yields higher returns than almost every other investment. This higher return comes at a cost since common stocks entail the most risk. If a company goes bankrupt and liquidates, the common shareholders will not receive money until the creditors, and preferred shareholders are paid.

Preferred share represents some degree of ownership in a company but usually doesn't come with the same voting rights. This may vary depending on the company. With preferred shares investors are usually guaranteed a fixed dividend forever. This is different than common stock, which has variable dividends that are never guaranteed. Another advantage is that in the event of liquidation preferred shareholders are paid off before the common shareholder but still after debt holders.

Preferred stock may also be callable, meaning that the company has the option to purchase the shares from shareholders at any time for any reason usually for a premium. Some people consider preferred stock to be more like debt than equity. Professional participants in the securities markets - legal persons, including credit organizations, and also citizens registered as business persons who conduct the following types of activity:.

From Wikipedia, the free encyclopedia. This article does not cite any sources. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed.

June Learn how and when to remove this template message. The Little Crash in '62 , in Business Adventures: Economics , Financial Markets: The World's First Stock Exchange: Translated from the Dutch by Lynne Richards. The potential of repositioning the financial 'meta-economy'.

Futures , Volume 68, April , p. Retrieved from " https: Articles lacking sources from June All articles lacking sources. Views Read Edit View history. This page was last edited on 4 March , at By using this site, you agree to the Terms of Use and Privacy Policy.