This chapter is designed to give you an introduction to some of the more frequently used market terms and their meanings.Let’s begin!
Bull Market (Bullish)
If you anticipate that stock prices will rise, you are expressing a bullish sentiment on the market. Generally speaking, if the share market index increases during any given period, it is known as a bull market. For instance, the market saw positive growth from mid-2020 to early 2022.
Bear Market (Bearish)
A bear market implies that stock prices are downward trending. From a bigger picture, if the share market index diminishes over a period of time, it is known as a bear market. For example, we saw this between 2008 and 2009.
A trend typically refers to the market’s general direction and momentum. A bearish market indicates that it is falling rapidly, while flat trading implies a sideways trend.
Face value of a stock or (FV)
The face value of a stock is a nominal amount which is essential when it comes to corporate action. This topic will be explored in another chapter. When dividend, stock splits or bonuses are declared, they usually take into consideration the FV.
The 52-week high and low provide a valuable metric for investors, illustrating the range in which the stock has traded during the past year. If a share price reaches its yearly peak, this may be perceived as a bullish prediction for what lies ahead, while hitting the yearly low could be construed as bearish. Both indicate to some extent whether an upswing or downtick may be expected in the foreseeable future.
All-time high and low is a concept similar to 52 weeks high and low. Rather than considering only the last year of trading, the all-time highs are the highest prices the stock has ever reached since its listing, while the all-time lows are the lowest it has ever traded in the same period.
Upper and Lower Circuit
The exchange implements price bands to control volatility within a single trading day. The upper circuit limit signifies the highest stock value, while the lower circuit denotes the lowest. These restrictions are based on criteria set forth by the exchange, adapting per derivatives and index. Such an approach enables them to regulate potential market reactions stemming from corporate news.
Taking a long position refers to the direction of your trade. For instance, if you have bought or intend to buy Biocon shares, you are betting on an increase in their value. Similarly, when you have purchased the Nifty Index with expectations that it will go up, this indicates a bullish outlook on the index.
Going short, or ‘shorting’, is a term used to describe an order of transaction. To help demystify this concept, I’d like to recount a situation that occurred at the office in approximately mid-2014.
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