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6 Trading Terms You Should Know Before Investing In The Stock Market

The stock market is a great place for business enthusiasts to begin their money-making adventures in the trading world. Investors go on the stock market to buy or sell stocks of their companies in order to make a profit. Working in the trading business can be incredibly rewarding for investors who know what they are doing. It is not that hard to make it in the trading field as long as you do enough research and understand all the fine details that come with buying and selling shares to make money. Here are some trading terms that every professional trader should be familiar with before they start investing in the stock market. 

01. Annual Report

One of the most common terms in the trading business is the annual report. This is what companies entering any stock market prepare in order to attract shareholders and impress them enough to invest in said company so that it has a bigger value on the market. The more shareholders invest in a company, the higher its value and profit. Annual reports hold all the necessary information shareholders need to know about the business including its management strategy and financial status. Interested shareholders take copies of the annual reports to study and analyze before deciding on investing in the company that provided the report to see if it is worth investing in or not. 

02. Brokers

Making deals on the stock market can be a time-consuming and tricky task for certain investors or business professionals. That is why many investors resort to the helping hand of brokers. As mentioned by the experts from PublicFinanceInternational.org, the term broker describes a professional whose job is to buy or sell shares in the stock market on behalf of a company or investor in exchange for a fee or a commission. Brokers are very popular in the stock market as they tend to have a lot of experience in trade deals and know when to make the right calls for selling or buying stock to make their customers the biggest possible profits. 

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03. Bear VS Bull Market

The state of the stock market can be described by either the term bear or bull market. When the trading starts plummeting and the stock prices take a hit, this is what is known as a bear market. Whereas when the stock market reaches an all-time high and the trading prices start increasing in a way that is completely opposite to the bear market, this is what is known as the bull market. Those two terms are incredibly popular in trading talks and any trader needs to be familiar with them as they are likely to come up a lot during trading sessions. 

04. Arbitrage

The way investors make money in the stock market depends on the tactics they use to buy shares for a reasonable price that they can then sell for a good profit. The term arbitrage refers to that exact process where it describes how traders can buy and sell the same shares for different prices in different markets. So for example, if an investor buys a share for $10 in one market, they can then sell it for $11 in another market and make a profit margin of $1 for themselves. 

05. Bid-Ask Spread

Trade deals are not always straight forward and simple to get done in a short period of time. Sometimes, traders reach an impasse where one of them is trying to sell their shares for a set price and the other would only buy the shares for a lower price. When a situation like that takes place where there is a difference between the spending price and buying price on certain shares, this can be called a bid-ask spread. Resolving a bid-ask spread requires compromise from both ends of a trade deal where the seller would need to lower their price and the buyer would need to put in a little extra cash in order to complete a successful stock exchange. 

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06. Liquidity

When you are trading in the stock market, you do not actually have cash on hand to deal with. Instead, you trade with assets and commodities that have a cash value. Transforming assets and commodities into a cash flow is called liquidity. Attractive shares are those that can be liquidated easily once bought off the stock market, and those usually have the highest value. 

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Trading in the stock market can be incredibly rewarding. You do not need to be an established businessman or an experienced investor in order to make it in the trading business. All you need to do to break into the stock market is familiarize yourself with the most popularly used terms and learn all about trade deals by doing research and talking with experienced brokers. 

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