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10 Important Stock Market Terms Every Investor Should Know

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10 Important Stock Market Terms

There are plenty of terms being used when it comes to the stock market and some newbie investors might have a hard time understanding them.

Luckily for you, I happen to know a lot about them and I will explain them briefly in this article. So huddle up and learn these 10 important stock market terms that every investor should know if you are interested to be part of the stock trading in Malaysia:

1. Arbitrage

This term refers to buying the same set of stocks in the same industry and selling them on another market which offers a higher price.

So for instance, if you bought some shares from Company X for $10 and you found that Company Y is buying those shares for $12 each, you can sell all of the stocks you bought from company X and sell them to company Y for a much higher profit.

In other words, Arbitrage is where you buy things for cheap and sell them for a relatively higher price, pocketing all of the profit in the process.

2. Beta

This is just a measurement of the relationship between the price of a certain share relative to the movement of the entire market.

Suppose that the beta of a certain company is 2, when the market value increases by 1, that company’s share would improve by 2.

3. Blue-Chip Shares
This is when an investor puts their money on a company that is already well-established. It provides a steady and stable income since these organizations will not be gone in the next couple of years.

4. Close

This basically refers to the closing time of trade during the day. Major stock exchanges close at 4 PM, however, there are still some after-market trades that can last until 8 PM.

5. Index

It simply refers to the measurement of the price movements in a certain sector of the share market. Popular examples would be the Dow Jones and the Standard & Poor 500.

6. Leverage

In essence, it refers to buying money from your broker to help increase your assets. You can use this borrowed money to buy more shares, but doing this will mean that you get yourself into a more risky situation.

7. Margin

A necessary account that is needed before one can start “leverage trading” by borrowing money from their brokers. It also talks about the difference between the price of the stock and the amount of loan that the investor needs to pay the broker.

8. Portfolio

Also known as the Stock Portfolio, it just refers to the total number of stocks a person has that is available for trading.

9. Volatility

The stock market is unpredictable. Volatility just refers to the erratic behavior of the prices of shares in the market.

10. Yield

This is basically a percentage of your earnings coming from a company’s dividend. This is based on the annual dividend payment divided by the price of the stock.

Conclusion

Learning the basic stock market terms is crucial so that you will know how to perform really well when it comes to trading.