Have you ever felt lost while opening up the newspaper’s business column and wondered what’s that strange language Wall Street follow, and what exactly they are talking about? The stock market is too fascinating and the phrases and words used by the insiders get most of us to the question- How Stock Markets Work – What is a Stock Market? If you want to try your hands in this money making (which is relative) market, you first must be aware of the lingo used on regular basis.
Not knowing the stock market jargons can be damaging for not just investors but also for people who hold a social repute. Stock market trend is the most discussed topic amongst professionals and businessmen. So, if you don’t want yourself to look like a fool by not understanding the discussion, know the common terms below.
- “Market is up/down 100 points”: When someone says so, here “the market” only represents top 500 biggest stocks listed on the stock exchanges, also commonly addressed as S&P 500. Market movement is not decided by all the listed stocks which is 6000 plus in numbers. The list of the top 500 stocks is referred as index and because it represents the stock market, people call it market index.
The ‘points’ here is basically the price of market index. So if market index is at 1500, it is 1500 points and of it jumps to 1600 then you will say today market is up by 100 points.
- Bulls and Bears: Don’t take it by its literal meaning, these are not zoo animals…
A bull market signifies a market that has investors’ confidence, which means a bear market is just the opposite where investors sense high risk of the stock price going down. When you hear someone saying I am bullish on Microsoft, it talks about the speaker’s expectation about the stock price of Microsoft likely to rise. Similarly, a bull market is stock index likely to increase.
- Market Timing: What you may be thinking right now by reading these two words is not true. It is not about the market’s opening and closing time.
Market Timing is a trading strategy that works on predictions. Investors sell or buy their stocks by predicting the future prices of the stock. You must have heard someone say – buy low and sell high. So this strategy is about buying the stock at its lowest and selling at its highest. Of course, one cannot be too sure about the lowest and highest point of a stock so it all works on predictions.
- Double Dip: No one wants this situation to arise because double dip is when an economy is hit with recession followed by another recession before recovery. So if the economy has just begun to recover from first recession and then another recession strikes back, we call it a double dip.
- Market is crashing or rallying: These are frequently used terminologies in stock trading. When people start selling off a company’s stock very rapidly, fearing a bearish market, it is said that market is crashing. On contrary, when people again start buying stocks rapidly assuming a bullish market ahead, the market is rallying.
These are just few of the many jargons that are commonly used in stock trading. You can take help from someone who deals in stock market to have a better understanding.