Common Terminologies which Traders use
May 7, 2020
Whenever some new activities happen in the market, or some kind of movements happen in the stock market. The professional traders use some common terminologies to convey the message. Let us look at some of the common terms related to the stock market.
Bull Market (Bullish) – If you think that a certain stock price is going to rise or go up, then it is said that you are bullish for the particular stock. In other sense, if the stock market index is going up during a certain period of time, then it is said to be a bull market.
Bear Market (Bearish) – Similarly if you believe that the stock price is going to fall or go down, then it is referred that you are bearish for that stock. In other sense, if the stock market index is going down for a certain period of time, then it is said to be a bear market.
Trend – The term trend usually refers to the general market direction, as well as its associate strength. For example, if the market is falling fast, the trend is said to be bearish. If the market is trading flat with no movement then the trend is said to be sideways. Sometimes these common terminologies play a very important role.
52 week high/low – 52 week high is the highest point at which a stock has traded during the last 52 weeks (which also marks a year) and similarly 52 week low marks the lowest point at which the stock has traded during the last 52 weeks. Some people think that if the stock reaches 52 week high, then it indicates a bullish trend in the upcoming future. And if the stock is trading at the 52 week low then it might be a bearish trend in the future.
All-time high/low – This is similar to 52 week high and low, with the only difference being the all-time high price is the highest price the stock has ever traded from the time it has been listed. Similarly, all-time low is the lowest price at which the stock has traded from the day it has been listed.
Upper Circuit/Lower Circuit – The exchange sets up a price band at which the stock can be traded in the market on a given trading day. The highest price the stock can reach on the day is the upper circuit limit and the lowest price is the lower circuit limit. The limit for a stock is set to 2%, 5%, 10% or 20% based on the exchange’s selection criteria. The reason for these restrictions is to control excessive volatility when a stock reacts to certain news related to the company. Common terminologies also play an important role in the making of strategies.
Long Position – Long position or going long is simply a reference to the direction of your trade. For example, if you have bought or intend to buy HINDALCO shares then you are said to be long on HINDALCO or planning to go long on HINDALCO. If you are long on a stock or index, you are said to be bullish.
Short Position – Short position or going short is simply a reference to the direction of your trade. This is a process which is completed on the same day itself and is available for intra-day trading only. For example, if you have sold or intend to sell HINDALCO shares at a particular point of time then you are said to be short on HINDALCO.
So these were some of the most common terminologies used in the stock market.
