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"An investment in knowledge pays the best interest."

Benjamin Franklin

The Basics

 

Depending on your level of understanding, you may want to skip this section if you wish, but I felt it was worth going through this from a really novice point of view, so if you only recently joined the stock market, you might not be familiar with some key basic things such as:

 

IPO

 

When companies want to list on the stock market, they raise cash via an IPO (Initial Public Offering), the amount of Cash is usually determined by the company needs and certain Regs, the amount raised will be in Pounds and will also determine the number of shares in issue and of course Share Price

 

E.g:

 

A Company might already have 10million shares in issue. at £1 a share

 

At IPO they raise £5m at £1 a share (so 5m new shares)

giving the company a Total of 15m shares at £1 a share

 

Market Cap

 

The number of shares multiplied by the amount of shares is what is called a Market Cap (MC)

 

£1 a share x 15m shares in issue, gives the company £15m MC

 

Placings

 

At times, in fact most of the time, junior companies will look to raise funds to progress their project, develop a product or simply to fleece more investors and pay the Board wages, they do that via what is a called a placing or a fund raise (usually at a discount to the current share price) which is why the word "Placing" is likely the most hated word by investors.

 

There are specific brokers within the city that can offer access to these placings but they have certain criteria that need to be met.

 

Brokers

 

There are different types of brokers, the so called boutique PCB (professional Client Broker) these brokers can offer different services and one of those services are placings, their commissions are higher than a normal online trading account, but you get the benefit of having access to participates on placings, but most will only allow dealing over the phone, which might not be great if you are trying to day trade.

 

instead you can opt for an online trading platform, look for the ones that can offer cheap trading fees as it will make a huge difference over the long run and also wouldn't impact you if you have a relatively small portfolio (PF), the main account you should consider is the Shares Individual Saving Account (ISA) account as it is TAX free.

 

Market Makers

 

A market maker (MM) is a firm or individual who their sole role is to make a market, i.e quotes two-sides of the market (the buy side and the sell side) of the shares in the market, they are the ones that will take your shares off when you sell, before they sell them to the buyer, making their money on the spread.

 

Spread

 

Spread is the difference between the price you buy at (ASK) Vs the price you can sell at (BID)

 

RNSs

 

RNSs stand for Regulatory News Service, this is how companies shall communicate new information with their shareholders and the market

 

You can find the RNSs either on the London Stock Exchange, or sites like Investegate etc.

 

Level 2 (L2)

 

Level 2 (L2) provides a view of the order book, it helps give a view where the Market Makers are lined up, it also displays live trades (buys and sells) depending on where they are in the

 

 

Charts

Chart displays information that shows history of the price movement, using different indicators it can help you decide when to enter and exit a position.

There are many kinds of trading charts: bar charts, line charts, point and figure, market profile and candlesticks (See more about charts below)

 

The Lingo

 

As simple as it sounds, it is very likely you have come across some very simple terms, abbreviations, lingo that have been and will be used by everyone, yet might sound like total nonsense if you are new to it, so lets cover some of the mains ones here:

 

CoP: Close Of Play

CLN: Convertible Loan Notes

IMO: In My Opinion

IMHO: In My Humble Opinion

IPO: Initial Public Offering

MC: Market Capitalisation

MM: Market Makers

SP: Share Price

PF: Portfolio

TP: Target Price

YDWTBOOTW: You Don't Want To Be Out Over The Weekend

If you would like to learn more, Check the different tags below (coming soon) for more information

Technical Analysis
Trading
Level 2 Tutorials
Dictionary
Mining Industry
Oil&Gas Industry
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