Introduction To Stock Related Important Terms
Hello friends, in this particular video we are going to talk about important terms related to stock trading. So, in this video the point that we are going to talk about is ask price which is also called offer. Bid-ask spread, limit order, market indicator and market order. To start with ask-price, which also called offer, so, let us first explain what is ask price? Ask price is lowest price a seller of a stock is willing to accept for a share of that given stock. So, it is the opposite of bid and ask price will always be higher than the bid.Bid price is price that buyers want to pay. And again, this ask price is the price that seller of the stock is willing to accept. So, this is completely opposite to this bid price and we really need to understand it carefully. Let us explain it with an example, for example, Mr Ram owns shares of company XYZ, but is now interested in selling them. So, now, Ram is interested in selling them. Lately, shares of XYZ company have been trading around INR2000 throughout the day, but Mr Ram would prefer not to sell for any price under INR2400. So, he will execute that trade from that minimum price only, so if we talk about this INR2400 this is the ask price, this is exactly the same ask rice that Mr Ram has ask for his shares. So, this is the way ask price is defined. Coming to the next point, now we are going to talk about what is bid ask spread? So, the difference between a security’s bid price and ask price is called bid ask price. For example, let us take an example, let us assume you are watching Company XYZ’s stock, again let’s take company xyz, if the bid price is INR5000 and ask price is INR5150 then the bid ask spread is INR150. So, this is the difference between this value and this value. The difference between ask value and bid value so that is going to be a bid ask spread. So, let us understand how it is calculated. Only the best bid that is the highest price offered for a security and the best ask that is lowest price asked for security are used to calculate the bid ask spread. So, that is how this bid ask spread is calculated and this one bid ask spread is very important use in your trading because you are going to deal with higher bid ask spread as well as lower bid ask spread and you need to make your trading decisions accordingly. Now, coming to the next point, we are going to talk about limit order. What is this limit order, an order to buy or sell a stock within price limits is called limit order. So, you are going to declare the maximum price you are willing to pay or the minimum price at which you are willing to sell o the individual security. So, let us explain it with an example, let us say, there is buy limit that stipulates the buyer is not willing to pay more than INR300 per share, while a sell limit order may require the share price to be at least INR300 in order for the sale to take place. So, if you try to be differentiate here, the buyer is not willing to pay more than INR300 per share and then if we talk about seller he’s not going to, he’s not going to sell the stock at least INR300 and around. So, here you are going to see the limit order. Now, coming to the next point, which is market indicator. What is market indicator? A technical, sentimental, fundamental or economic indicator that give signals to future market direction, is called market indicator. So, this term is being used more frequently in stock market because whenever you are going to analyze any kind of stock or you are going to analyze any kind of trend then you always have to understand these market indicators. First, we are going to understand thess market indicators, and you are going to have a trading even more effectively. So, this is technical part and collectively these indicators are called market indicator which has been explained over here. Now, the last term that we are going to explain over here is market order. An order to buy or sell stock at the current market price, is called market order. So, this is another technical term that we are going to use in stock trading. These terms are very important so these terms will help you while you are doing day to day trading. So, to summarize this video, let us see what we have covered over here, we have talked about ask price, we talked about bid ask spread, we talked about limit order, we just explained market indicator and market order. We hope this video has been very useful for you. See you in the next video, have a good day, buh-bye.