School of Stocks - Logo
Home : Introduction to stock markets

Trading Process and its Terminology

Find explanations of basic price related terminologies which are used in trading/investing.

Gopal Kavalireddi
5 minutes read
comment
Comments
Users learning chapter

 

Any client who has a savings bank account linked with the trading account along with a demat account, supported by a stock broker, can trade in the listed securities on any of the stock exchanges either through an online or offline facility. It is advisable to select a stock broker who is a member of widely used stock exchanges, so as to provide the investor with the flexibility to trade in various stock exchanges. Also, a working mobile number and email ID has to be provided to the stock broker at the time of setting up the accounts, so as to inform the investor of the necessary transactional details and any other account related information from time to time.

Clients can trade in any of the 7000+ stocks listed on the BSE and 2000+ stocks listed on the NSE during the trading hours of 9:15 a.m. to 3:30 p.m. The process of online trading involves, placing an instruction for a buy order or a sell order, indicating the desired quantity and price. Upon matching the instruction with a counter party, the stock broker executes the trade and the information will be relayed to the investor immediately by the stock broker through the SMS facility. Hence, the process of trading involves placing the order, executing the said order and settlement of the order (either payment of money at ‘T+2’ or debit of investor held shares at ‘T’).

Online trading implies that the client uses a self-service based online trading platform offered by the selected broker for order execution, whereas offline trading implies that the investor relays the instructions through phone or email to the broker for order execution.

After the end of the trading day, the stock broker will email the client, a set of documents separately, consisting of a digitally signed contract note, the transaction statement for the DP account and a margin statement. The terms involved in this process will be explained in detail along with the understanding of the documents sent by the stock broker.

The terms commonly used in the trading process, as well as online platforms, are defined as follows:

Security Symbol

For all the listed companies on the stock exchanges, a unique number or a unique symbol is provided for specific identification of each company. This nomenclature is termed as Security Symbol or Ticker Symbol. BSE uses a 6-digit number for each company while NSE uses alphabets that are a short form or the best representation of the company name. Eg: Infosys Technologies Ltd is denoted as follows: BSE: 500209 | NSE: INFY

 

Exchange

As highlighted earlier, BSE has more than 5000+ stocks listed on its exchange, whereas NSE has close to 1600+ stocks only. Some of the stocks are listed on both the exchanges. Hence, clients should identify the exchange on which they would want to trade in the securities. Also, during the time of opening the trading account, investors need to check with their stock broker if he/she is registered to trade on both the exchanges or only on one exchange.

 

Bid Price

The buy price placed for any stock during trading is termed as the Bid Price. Only when there is seller for that particular price, will the order be executed. Upon execution of the highest buy price order, the next bid price will take the place as the highest bid price. This process continues as long as there are sellers available in the market. Simply put, the price offered by any buyer is the bid price.

 

Total Bid Quantity

The total quantity of shares being bid for, at a particular price is termed as the Total Bid Quantity or simply, Bid Quantity. For any particular price, there are many buyers placing orders continuously and all orders with the same price are grouped together, to reflect the collective quantity at any point during the trade.

 

Ask Price

The sell price placed for any stock during trading is termed as the Ask Price. Only when there is a buyer for that particular price, will the order be executed. Upon execution of the lowest sell price order, the next sell price will take the place as the lowest ask price. This process continues as long as there are buyers available in the market. Simply put, the price offered by any seller is the ask price.

 

Total Ask Quantity

The total quantity of shares being offered, at a particular price is termed as the Total Ask Quantity or simply, Ask Quantity. For any particular price, there are many sellers placing orders continuously and all orders with the same price are grouped together, to reflect the collective quantity at any point during the trade.

 

Open Price

The price recording by any stock at the time of opening of trade is termed as the Open Price. This price is not the bid price quoted during the pre-open but the price at which the first trade takes place, when the market opens for trading at 9:15 a.m.

 

Close Price

The price recorded by any stock at the time of closing of trade is termed as the Close Price. After a complete session of trading, the stock markets close at 3:30 p.m. (current timing) and the final price traded by the stock is published as the closing price of the stock.

 

High Price/Low Price

The highest/lowest price reached by any stock during the course of an intraday session is termed as the High Price/Low Price for that stock. Depending on the momentum of the stock and the stock market, the high price/low price can sometimes be the opening price or the closing price or any other price higher/lower than the opening price.

 

Total Buy / Total Sell

The total number of shares of a particular scrip, bought or sold by all the investors in a particular trading session is termed as Total Buy or Total Sell for that particular stock.

 

Total Traded Quantity (TTQ)

The sum total of all the shares of a particular company, bought and sold in a particular trading session is termed as the Total Traded Quantity of that company. It is also referred to as ‘Volume of Trade’ of that stock or simply, Traded Volumes of that stock.

 

Total Traded Value (TTV)

The value arrived at by multiplying the total traded volumes and the price of that particular stock is termed as the Total Traded Value of that stock. It is also referred to as ‘Value of Trade’ of that stock or simply, Traded Value of that stock.

 

52 Week Price (High / Low)

The highest/lowest price reached by any stock during the course of an entire year or 52 weeks of trading is termed as the 52 Week High Price/ 52 Week Low Price for that stock. These prices are essential to track the trends followed by that stock during the course of 4 financial quarters of trading activity.

 

Next Chapter

Order Types

13 Lessons

Get an understanding of the various order types. Traders/Investors can use order types as per their requirements.

Understanding Your Company

Learn how to monitor/study the performance of companies using financial statements and understand relevant time frames.

Comments & Discussions in

FYERS Community Learn More...

Responses

Alpha commented on March 5th, 2019 at 5:27 PM  
What is the difference between bid and ask?


yashas commented on March 5th, 2019 at 5:44 PM  
Bid Price = The price a buyer is willing to pay to buy the stock
Ask Price = The price at which the seller is willing to sell the stock


Samika commented on April 23rd, 2019 at 11:07 AM  
Is there an upper limit on the total traded volume or quantity?


tejas commented on April 23rd, 2019 at 5:06 PM  
Upper limits are based on:

1. Circuit Breakers (These are price limits set by the exchanges for certain stocks).

2. Market Wide Position Limits are imposed for derivative contracts where the aggregate open interest exceeds 95% of the market wide position limits set by the exchanges.

3. Position limits are applicable for very large volume traders just to moderate the level of activity. This can be imposed by the broker (TM) for their clients and it can be changed based on company policies. Generally speaking, it is not applicable for retail traders as the traded volumes per person is not too high. Position limits also help manage risks.

4. Order Value Limits - As a risk management measure, brokers have order value limits just to ensure that there are no fat finger trades. It's a risk check which is implemented by the Trading members (TM) / Brokers.

5. Order Quantity Limits - Same as the above except that there are limits placed on the maximum order quantity per order. These limits can change from time to time as per the RMS policies of the broker.


Akshaya commented on May 27th, 2019 at 6:15 PM  
Stocks which are listed on both NSE and BSE does the price vary or they are listed at the same price?


Gopal commented on May 27th, 2019 at 6:52 PM  
Stock prices of a company are not necessarily same across stock exchanges - BSE and NSE, in this case. The difference arises due to buyers and sellers (volumes included) affecting the prices. Buyers want lower prices, sellers want higher prices.

Let us assume that you wanted to buy HDFC Bank today. On May 27th morning, the stock opened at Rs.2406 on BSE and at Rs. 2378.90 on NSE. Where would you prefer to buy? Obviously, on NSE, since the price is lower. You would place your bid at that price.
Similar to you, there would be many buyers who would notice the price difference and place their bids either at the same price or at a little higher price. Due to higher demand of shares at those prices, within no time, the ask price would rise higher and get equal to or more than the ask price on BSE.
At that time, buyers would check the prices on both stock exchanges and shift either to BSE or NSE to buy at a lower price and the same happens all through the trading sessions as buyers & sellers keep shifting between the stock exchanges for better prices.
The difference is pricing of a share between the two stock exchanges gives rise to an arbitrage opportunity.


Gopikrishna Swarangi commented on April 11th, 2020 at 12:27 PM  
Pl. check the definition of Closing Price. There seems to be an error.


Mahendra Pal Singh commented on April 14th, 2020 at 1:41 PM  
पढ़ा और समझने का प्रयास किया
धन्यवाद


introduction-to-stock-markets