On the previous article, I shared 15 stock market terminologies a beginner should know. And I am so honored that other newbies like me found it very helpful and informative.
It’s good to know that more and more Filipinos are eager to learn about investing and striving to be more financially educated. This is the main goal of this blog, to share simple financial literacy to everyone.
I’m hoping that by sharing simple article like this can provide additional information to other beginners in their financial journey.
Today, I will add more basic stock market terminologies that can help widen our knowledge in our stock market journey. You may knew or have heard this terms but for others who don’t, I hope you will find it useful.
15 stock market terminologies for beginners
1. Bid and Ask Price
Bid price is the highest price that a buyer is willing and able to purchase for a share of stock.
Ask price is the lowest price that a seller is willing and able to offer for sale for a share of stock. It is also called the “offer price”.
Here’s a snapshot of Bid and Ask price from my COL’s account.
2. Opening Price
Opening price is the first price the stock traded for the trading day
3. Closing Price
Closing price is the last traded price of the stock at the end of the trading day.
As you can see on the example above, we have the opening price (Open), closing price (Last), and the High and Low price. This is the price of DNL as of today.
4. High and Low Price
High price is the highest price the stock traded for the trading day.
Low price is the lowest price the stock traded for the trading day. See the image above for illustration.
Volume is the number of shares traded in the stock market during a given period of time.
To give us more detailed illustration, I’m attaching the image below from my COL account. This is what you can see when you check the main board lot of a stock (DNL in this sample).
It’s a real snap shot of DNL as of today 4/20/2015. From this image, you can see a lot of information that can help you familiarize those terms mentioned above as well as ont Part I list. Some of the terms are not explained as they are advance for a beginner like us. We are focusing on the basic for now.
6. Odd Lot
An order to buy/sell fewer than the board lot of the stock. Usually the price is a bit lower than the price of the same stock in the main board lot. You may have or get no. of shares which doesn’t fall on the main board lot because of dividends issued to you by your company stock.
Butal or Putal sa tagalog. You can buy additional shares on the odd lot board to backfill your odd shares or sell them to follow the main board lot allotment.
7. Stock Certificate
A piece of paper that certifies a person’s share ownership in a corporation.
8. Stock Rights
Stock rights are basically the right to purchase additional shares of the company. This right is only given to existing shareholders as of the ex-date, and is not available to non-stockholders. It is a company’s way of raising additional capital.
9. Trading band
It is the limit on the price fluctuation of a security. It intends to provide investors protection in case prices change drastically, especially if there is no relevant information that should cause dramatic price fluctuations.
In PSE, they limit the stock prices from rising more than 50% in value (Ceiling Price) and from declining more than 40% in value (Floor Price) from the previous closing price.
Let’s assume that the stock of Ayala Land Inc. or ALI (Stock Code: ALI) closed yesterday at P40.00. Today, ALI’s price can only increase up to 50% and can only decrease to 40%.
Specifically, ALI’s ceiling price today can only go to P60.00 (up 50%) or P16.00 as the floor price (down 40%). However, the ceiling and floor prices are still governed by the PSE Board Lot Table (explained on the Part I tutorial), which identifies the minimum increments a price can fluctuate. usually, ceiling and floor price are being rounded to the nearest and correct price that falls on the board lot table.
10. Averaging Down
This is when an investor buys more of a stock as the price goes down. This makes it so your average purchase price decreases.
11. Day Trading
The practice of buying and selling within the same trading day, before the close of the markets on that day. Traders that participate in day trading are often called “active traders” or “day traders.”
This refers to the price movements of a stock or the stock market as a whole. Highly volatile stocks are ones with extreme daily up and down movements and wide intraday trading ranges. This is often common with stocks that are thinly traded, or have low trading volumes.
13. Market order
A type of transaction order placed with your stockbroker to buy or sell shares of stock at the current market price.
14. Limit order
A type of transaction order placed with your stockbroker to buy or sell shares of stock at a specified buying or selling price.
15. Good-til-cancelled order
A type of transaction order placed with a stockbrokerage firm to buy or sell shares of stock which remains outstanding for seven calendar days until cancelled by the investor or trader.
16. Day order
A type of transaction order placed with a stock brokerage firm to buy or sell shares of stock that is only valid for one trading day.
There you go. We have new 16 basic stock market terminologies added on our list. It is good to know these terms to increase our knowledge and become more familiar when we start investing in the stock market.
We don’t need to memorize these terms, I’m just sharing them so that when we attend seminars, read books, watch videos or even talk to someone about stock market, we can have some basic idea what they are.
Knowing these stock market terminologies can provide us more understanding on our stock market investment. I hope this article helped you. If you knew other stock market beginners, please share this to help them as well.
Let’s start small and take one step forward in achieving our financial goals. Let’s spread financial literacy, one blog at a time!