Understanding Stocks Lingo
Ok, youve got your online trading and demat accounts all set up and theres the Indian share market live on your TV set or on computer. But before you click on the buy/ sell button, there are a few things you must know about stocks. Here are some of them.
Earning per share (EPS): EPS is the portion of a companys profit allotted to each share. It is a fairly good indication of a companys profitability, and if you want to invest in the Indian share market today, its one of the things you should be looking at. Basically, its calculated as net income minus dividends on preferred stock, divided by average outstanding shares.
Price-earning (PE) ratio: The PE ratio is calculated as a stocks current share price divided by its earnings per share (EPS) for a 12-month period. If youre wondering what shares to buy today, it may be a good idea to look at their PE ratios. A high PE ratio may indicate that the stock may be overpriced. But that depends on how the company will perform in the future. For instance, you can make money from a scrip with a high PE ratio if the company performs well above expectations. So when youre checking out those online share prices, dont forget the PE ratios.
52-week high/ low: This is one of the things youll always find in any Indian share market live commentary. Many stock traders like to buy when a stocks price exceeds its 52-week high, or to sell when price falls below its 52-week low. The reasoning being that if a stocks price has gone up so high, the company must be doing something right and it may be a right time to buy the share. When a company is doing so badly that its stock price drops below the 52-week low, it may be time to sell it.
Stop loss: Theres no telling what happens in the Indian share market today, so the stop loss option is your best bet to cut losses when youre doing online trading. A stop-loss order basically is an order to buy or sell a stock once its price has reached a specified price, called the stop price. Ideal if you dont want to lose your shirt in volatile markets.
Beta: This is a measure of the relative volatility of a stock compared to the entire market. A beta of above 1.0 indicates that a share is more volatile than the overall market. When youre considering what shares to buy today, you might want to pick those that arent so volatile.
Stock futures: Stock futures are financial contracts where the underlying asset is an individual stock. A stock futures contract is an agreement to buy or sell a specified quantity of underlying equity share for a future date at a price agreed upon between the buyer and seller. If you want to invest in the stockmarket and reduce your risk, this is what you want.
Earning per share (EPS): EPS is the portion of a companys profit allotted to each share. It is a fairly good indication of a companys profitability, and if you want to invest in the Indian share market today, its one of the things you should be looking at. Basically, its calculated as net income minus dividends on preferred stock, divided by average outstanding shares.
Price-earning (PE) ratio: The PE ratio is calculated as a stocks current share price divided by its earnings per share (EPS) for a 12-month period. If youre wondering what shares to buy today, it may be a good idea to look at their PE ratios. A high PE ratio may indicate that the stock may be overpriced. But that depends on how the company will perform in the future. For instance, you can make money from a scrip with a high PE ratio if the company performs well above expectations. So when youre checking out those online share prices, dont forget the PE ratios.
52-week high/ low: This is one of the things youll always find in any Indian share market live commentary. Many stock traders like to buy when a stocks price exceeds its 52-week high, or to sell when price falls below its 52-week low. The reasoning being that if a stocks price has gone up so high, the company must be doing something right and it may be a right time to buy the share. When a company is doing so badly that its stock price drops below the 52-week low, it may be time to sell it.
Stop loss: Theres no telling what happens in the Indian share market today, so the stop loss option is your best bet to cut losses when youre doing online trading. A stop-loss order basically is an order to buy or sell a stock once its price has reached a specified price, called the stop price. Ideal if you dont want to lose your shirt in volatile markets.
Beta: This is a measure of the relative volatility of a stock compared to the entire market. A beta of above 1.0 indicates that a share is more volatile than the overall market. When youre considering what shares to buy today, you might want to pick those that arent so volatile.
Stock futures: Stock futures are financial contracts where the underlying asset is an individual stock. A stock futures contract is an agreement to buy or sell a specified quantity of underlying equity share for a future date at a price agreed upon between the buyer and seller. If you want to invest in the stockmarket and reduce your risk, this is what you want.
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