If you are trader or investor it’s important to know about some basics terms which are used in the stock market. So here we discuss about three important terms in share market those are:
- Stop-Loss Targets
Stock-Quotes: Stock-quote is numerical data. It is used to for informing the market and traders about the price or value of particular stock or share of a business or firm.
Stock: When a company or an organization decides to raise capital from the market by allowing common public and investors to buy certain part of the company’s ownership, then such a part is called “share” or “stock”. This enables the buyers to command an ownership of company’s profit and assets.
People enter trade market for profit making. So, traders buy and sell their stock in order to gain profit through the day during trading hours. Now, for a trader to maximize profit and/or minimize loss he/she must be well informed about the prices of stock on a real-time basis. This real-time price of share or stock is represented by numerical data called stock-quote.
Price-Targets: These are the various method employed by traders and shareholders to maximize their profits and minimize losses during a trading day. But the task is complicated since it is difficult to predict the nature of the stock movement.
However, some experts after their extensive research, often try to predict the top and bottom price which a stock a can achieve. So, trading companies and broker advise their clients to sell or buy a stock when it reaches a certain price level. This pre-fixed price of the stock is called price-target.
Price-target is probabilistic data hence nobody can guarantee their predictions on them with 100% accuracy. Price target can sometimes act as limiting parameter to your profit as you may sell your stock or shares before they reach the top points.
Setting a price target is a tough task since you can be deprived off profit because sometime they may reach the close to your price target and fall down ripping off you of your potential profit.
Stop-Loss Targets: Trading or investing is a risky business where one wrong decision can lead to a very big and disruptive loss to the owner. To minimize these risks in stock market traders and brokers have defined certain parameters such as stop-loss target.
Stop-loss target has two parameter that is ‘long’ and ‘short’ term. Stop-Loss is used to avoid losses during trading.
Benefits and needs of employing Stop-Loss:
- It enables traders to define the amount of risk that he and/or his firm has to go through if trading turns out to be negative. This enables smalls firms to plan their funds and minimize their losses.
- When a trade goes exactly in opposite direction you have to have patience and not try to panic because in order to recover that money you may be thinking of selling or buying stocks may be lead to incurring further losses.
- Stop-loss can be used here effectively since it allows traders to avoid losses when they are trading inactively. This also provides them with an opportunity to trade in the most favorable scenario without even actively participating in the trading.