Three stock broker terms you should know before investing in shares

Julie Brownlee, Fsp Invest, 24 Jul. 2015

Tags: investing in shares, stock broker terms, stock broker, liquidity, volume, market depth,



When investing in shares, it pays to know the key definitions stock brokers use to describe shares trading on the stock market.

So what are these stock broker words you should know about?

Read on to find out…



Stock broker term #1: Liquidity


When investing in shares, ideally you want to buy liquid shares.

When a share’s liquid it means there’s active buying and selling taking place. Under normal market conditions, you should easily be able to buy shares and sell shares.

On the other hand, if a share’s illiquid, the opposite is true. Illiquid shares don’t trade very much. And you may struggle to sell illiquid shares due to this.

If you decide to buy an illiquid share, your stock broker may point this out to you when you place your order.


Stock broker term #2: Volume


Volume is the quantity of shares that trade in a single day. You’ll be able to find the daily volumes for each share on the Johannesburg Stock Exchange online.

You may also be able to view the offer volume and the bid volume:

  • The offer volume is the number of shares investors offered to sell at a specific price.
  • The bid volume is the number of the shares investors offered to buy at a specific price.


Stock broker term #3: Market depth


Market depth describes the number and level of the bid prices and the offer prices on a particular share.

Most stock brokers quote the best five bids to buy a share and the best five offers to sell a share.

If you look at this online, your stock broker may list bids from the highest bid to the lowest bid. This includes the price of the bid, the numbers of shares bid at that price and the number of orders making up a particular level.

For example, if ten investors are each trying to buy 1,000 shares at 500c, you would see:

  • Bid volume: 10,000;
  • Orders: 10;
  • Bid price: 500c.

So there you have it. Three stock broker terms you should know before investing in shares

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