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Understanding Stock Market

TrafficSwarm member since April 2012

The term Stock and Share are interchangeable and represent ownership in a piece of a company. When someone owns a stock/share, he/she owns a piece (whatever the size may be) of a larger company. Now what does a stock market mean? This is the place where the actual buying and selling of stocks of larger or smaller companies take place.

A company’s stock price is the current market value of that particular company’s stock. The most familiar stock exchange markets are New York Stock Exchange (NYSE) and the National Association of Securities Dealers Automated Quotations (NASDAQ). Millions of stocks are traded on these two stock exchanges alone.

When we talk about Stocks, we need to understand some basic concepts. Of these concepts, the most useful ones are defined below:

Bid Price:This is the price the buyers are willing to pay to acquire thestock Ask Price:This is the price thestocksellers are willing to get to release thestock Last Trade Price:This is the current price which a buyer and a seller agreed upon to complete a stock trade, hence the market stockvalue. Day range:This represents the lowest and highest price that astockhas traded for any particular time of the day. 52 Week Range:This represents the lowest and highest price astockhas traded for in the past year. This range immediately gives an investor a picture of how much thestockprice of a company has fluctuated in the past year. Market Volume:This is the number ofstocksof a single company being traded over any period of time. (Note: Unusual large increase inMarketVolume indicates that people are currently heavily trading on the basis of news or information about the particular company). Market Capitalization:This represents the total value of a company as determined by thestock market. Outstanding Shares:This represents the number ofstocksthat a company has issued. ThusMarketCapitalization=Current Stock/Share price X Outstanding Shares/stock Market Cap: The marketcap of a company interprets its size. Generally, larger and more established companies have less volatility in theirstockprice but less room for growing. On the other hand, smaller and newer companies usually have a greater volatility but greater potential for growth.

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