CONCEPTS AND TERMS THAT ALL TRADERS SHOULD BE FAMILIAR WITH
If you envisage yourself as a future stock market genius, then you will need a sound base of understanding behind you. Trading on the stock market can be incredibly complicated to those who are not savvy to its bullish and bearish markets. So, to help you navigate your way around the markets with a little more confidence, here are some basic terms that every trader should be familiar with if they are looking to gain a foothold in the stock markets.
Averaging down is a strategy that investors use to decrease their average purchasing price. It essentially entails purchasing more of a stock that is already held by the investor as the price goes down. Averaging down can be a good strategy if you are expecting the price of a stock to increase, otherwise it might actually be best to sell off those that show no promise.
Blue Chip stocks are those that represent established, industry leading companies on the stock exchange. They are generally a good bet for cautious investors since they offer minimal investment risks. They are generally very slow in terms of profits, often making them a better bet for shareholders who expect dividends.
A bear market is generally characterized by the panic and flurry of falling stock prices over the entire market. During times of bear markets, stocks are generally sold more often as people try to unload them; while those who know how to play into the fear with greed, generally stand to make the most by risking the most by buying up stocks when everyone else is selling them.
A bull market is the exact opposite of a bear one, and is characterized by price inflations and a general atmosphere of greed. This means that investors generally hang on to their stocks in the hopes that they will raise in value, while some investors look to unload theirs for a profit by enacting on fear while others are acting on greed.
Initial Public Offerings (or IPOs) occur when a previously privately-owned company opens up its availability of stocks to the general public, for the first time. Generally, they occur amongst smaller companies that are looking for additional investment to expand, however larger, more successful companies have been known to offer their shares to the public as well.
A portfolio is a collection of an investors financial assets, and is not limited in terms of minimum or maximum numbers. They may include stocks, shares, bonds or cash equivalents. They are held by their investors and are generally managed by brokers or financial institutions that handle investments.
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