Glossary of trading terms

114 plain-English definitions, from every chapter in the course.

A

Ask: The lowest price a seller is currently willing to accept for a share. It is the price you pay when you buy right now.
ATR (Average True Range): An indicator that measures how much a stock typically moves in a day. A bigger ATR means bigger price swings.
Averaging down: Buying more of a stock after its price has fallen, to lower your average cost. It can help or hurt, so it must be planned, not emotional.

B

Backtesting: Testing a trading idea against past price data to see how it would have performed before risking real money.
Balance sheet: A snapshot of what a company owns and owes at one point in time. It shows assets, debts, and what is left over for owners.
Bearish: Expecting prices to fall. A "bear" thinks the market is heading down.
Bid: The highest price a buyer is currently willing to pay for a share. It is the price you get when you sell right now.
Body: The thick, rectangular part of a candlestick, showing the range between the open and close prices.
Bollinger Bands: An indicator that draws bands above and below the price to show whether a stock is unusually high or low compared to its recent average.
Bracket order: A single order that sets your entry, a target to book profit, and a stop-loss to limit loss, all at once.
Breakout: When price pushes past a support or resistance level it had been stuck at, often starting a new move.
Broker: The licensed company or app you use to buy and sell shares on an exchange. You cannot trade directly on the exchange yourself.
Brokerage: The fee your broker charges for each trade. Small fees add up, so they matter over many trades.
Bullish: Expecting prices to rise. A "bull" thinks the market is heading up.

C

Candlestick: A single bar on a chart that shows the open, high, low, and close prices for one time period. The main building block of price charts.
Capital gains tax: The tax you pay on the profit when you sell a stock for more than you bought it. Rates often differ for short-term and long-term holdings.
Cash flow: The actual money moving in and out of a company. Strong, steady cash flow is a sign of a healthy business.
Channel: A pair of parallel trendlines that price moves between, one along the highs and one along the lows.
Close: The final price of a stock at the end of a chosen time period. Often the most watched of the four candle prices.
Confluence: When several separate signals point to the same conclusion at once, giving you more confidence in a trade.

D

Debt-to-equity: A ratio comparing how much a company has borrowed against how much its owners have put in. High debt can be risky.
Demand zone: A price area where buyers have stepped in strongly before, so price may bounce up when it returns there.
Demat account: A digital account that holds your shares electronically, the way a bank account holds your money.
Divergence: When price and an indicator move in opposite directions, hinting the current trend may be weakening.
Dividend: A share of a company's profit paid out to shareholders, usually as cash.
Dividend yield: The yearly dividend expressed as a percentage of the share price, showing how much income the stock pays relative to its cost.
Doji: A candlestick with almost no body, where the open and close are nearly equal. It signals indecision between buyers and sellers.
Double bottom: A "W" shaped pattern where price hits a low, bounces, then hits about the same low again before rising. Often a bullish signal.
Double top: An "M" shaped pattern where price hits a high, drops, then hits about the same high again before falling. Often a bearish signal.
Downtrend: A series of lower highs and lower lows, meaning price is generally falling over time.
Drawdown: The drop from a peak to a low point in your account or a stock. It measures how much you were down at the worst moment.

E

Edge: Any repeatable reason your trades make money over the long run. Without an edge, trading is just gambling.
EMA (Exponential Moving Average): A moving average that gives more weight to recent prices, so it reacts faster than a simple average.
Engulfing: A two-candle pattern where a large candle completely covers the previous one, signaling a possible change in direction.
EPS (Earnings Per Share): A company's profit divided by its number of shares. It shows how much profit belongs to each share.
ETF (Exchange-Traded Fund): A basket of many stocks (or other assets) bundled into one, which you can buy and sell like a single share.
Exchange: The marketplace where shares are bought and sold, such as the NSE or BSE. It matches buyers with sellers.
Expectancy: The average amount you expect to win or lose per trade over many trades. Positive expectancy means your system makes money over time.

F

Fakeout: When price appears to break a level but quickly reverses, trapping traders who acted on the false move.
Fibonacci retracement: A tool that marks likely pull-back levels (like 38.2% or 61.8%) where a price move might pause or reverse.
Flag: A short pause after a strong price move that looks like a small rectangle or channel, often before the move continues.
FOMO (Fear of Missing Out): The urge to jump into a trade just because price is running, usually leading to buying too late.
Fundamental analysis: Studying a company's business, finances, and value to decide if its stock is worth owning.

G

GTT (Good Till Triggered): An order that waits patiently until your chosen price is reached, sometimes for months, instead of expiring at the end of the day.

H

Hammer: A candlestick with a small body and a long lower wick, showing buyers pushed price back up after a drop. Often a bullish signal.
Head and shoulders: A pattern with three peaks, the middle one highest, that often warns a trend is about to reverse.
High: The highest price a stock reached during a chosen time period.

I

Income statement: A report showing a company's revenue, costs, and profit over a period. It answers "did the business make money?".
Index: A number that tracks the overall performance of a group of stocks, such as the Nifty 50 or Sensex.
Indicator: A calculation based on price or volume, drawn on a chart to help spot trends, momentum, or turning points.
Intraday: Buying and selling within the same trading day, closing all positions before the market shuts.
Intrinsic value: What a stock is truly worth based on the business behind it, which may differ from its market price.
IPO (Initial Public Offering): The first time a company sells its shares to the public, letting ordinary investors buy in.

L

Lagging indicator: An indicator that confirms a move after it has begun, based on past prices. Slower but more reliable.
Leading indicator: An indicator that tries to signal a move before it happens. Faster but gives more false alarms.
Leverage: Borrowing money to trade a larger position than your own cash allows. It multiplies both profits and losses.
Limit order: An order to buy or sell only at a specific price or better, so you control the price but not whether it fills.
Liquidity: How easily a stock can be bought or sold without moving its price much. High liquidity means lots of buyers and sellers.
Low: The lowest price a stock reached during a chosen time period.

M

MACD (Moving Average Convergence Divergence): An indicator that compares two moving averages to show a trend's strength and direction.
Margin of safety: Buying a stock well below your estimate of its true value, so you have a cushion if you are wrong.
Market cap: The total value of a company's shares, found by multiplying share price by the number of shares. It shows the company's size.
Market order: An order to buy or sell immediately at the best available price. Fast, but you do not control the exact price.
Moat: A lasting advantage that protects a company from competitors, like a strong brand or hard-to-copy product.
Moving average: A line showing the average price over a set number of periods, which smooths out noise to reveal the trend.

O

OHLC: Short for Open, High, Low, and Close, the four prices that define each candlestick.
Open: The first price of a stock at the start of a chosen time period.
Order book: A live list of all the buy and sell orders waiting at different prices, showing where demand and supply sit.

P

Paper trading: Practising trades with pretend money to test your skills and system without any real risk.
P/B (Price-to-Book) ratio: Compares a stock's price to the value of the company's assets on its books. It hints whether the stock is cheap or expensive versus what it owns.
P/E (Price-to-Earnings) ratio: Compares a stock's price to its earnings per share. It roughly shows how much you pay for each rupee of profit.
Position sizing: Deciding how many shares to buy so that a single trade risks only a small, safe part of your money.
Positional trading: Holding trades for weeks or months to catch larger moves, checking charts far less often than a day trader.
Profit: The money left over after all costs are paid. For a trade, it is your selling price minus your buying price and fees.

R

Range: A period when price bounces sideways between a floor and a ceiling instead of trending up or down.
Resistance: A price level where selling tends to appear and stop price from rising further, like a ceiling.
Retest: When price returns to a level it just broke through, to check if that level now holds, before continuing.
Revenge trading: Making rushed, emotional trades to win back money right after a loss. It usually makes things worse.
Revenue: The total money a company earns from sales before any costs are taken out. Also called the "top line".
Risk management: The rules and habits that protect your money, so no single trade or bad streak can wipe you out.
Risk-reward ratio: A comparison of how much you might lose against how much you might gain on a trade, such as risking 1 to make 2.
R-multiple: A way of measuring a trade's result in units of the amount you risked. Making twice your risk is a "2R" win.
ROCE (Return on Capital Employed): Shows how much profit a company makes from all the capital it uses, both equity and debt. Higher is usually better.
ROE (Return on Equity): Shows how much profit a company makes from the owners' money. It measures how well the business uses shareholder funds.
RSI (Relative Strength Index): An indicator scored 0 to 100 that shows whether a stock may be overbought (too high) or oversold (too low).

S

Scalping: A fast style of trading that grabs many tiny profits from very short price moves, often within minutes.
Share: A single unit of ownership in a company. Owning shares makes you a part-owner of that business.
Slippage: The gap between the price you expected and the price you actually got, common in fast or thin markets.
SMA (Simple Moving Average): A moving average that treats every period equally, giving a smooth, steady view of the trend.
Spread: The gap between the bid and the ask price. A narrow spread means lower cost to enter and exit.
Stock: A general word for ownership in a company, made up of individual shares.
Stop-loss: An order that automatically sells your position if price falls to a set level, capping your loss.
Supply zone: A price area where sellers have stepped in strongly before, so price may fall when it returns there.
Support: A price level where buying tends to appear and stop price from falling further, like a floor.
Swing high: A peak on the chart with lower prices on both sides. It marks a short-term top.
Swing low: A dip on the chart with higher prices on both sides. It marks a short-term bottom.
Swing trading: Holding trades for a few days to a few weeks to catch the "swings" in price between highs and lows.

T

Target: The price at which you plan to sell and book your profit, decided before you enter the trade.
Technical analysis: Studying charts, price patterns, and indicators to decide when to buy or sell.
Timeframe: The length of time each candle on a chart represents, such as 5 minutes, 1 hour, or 1 day.
Trading journal: A record of your trades and the reasons behind them, used to learn from your wins and mistakes.
Trading plan: Your written set of rules for what, when, and how you trade, so decisions are calm and consistent.
Trailing stop: A stop-loss that moves up as price rises, locking in gains while still giving the trade room to grow.
Trend: The general direction price is moving over time, either up, down, or sideways.
Trendline: A straight line drawn along a series of highs or lows to show the direction and strength of a trend.
Triangle: A pattern where price swings narrow into a point, often before a strong breakout in one direction.

U

Uptrend: A series of higher highs and higher lows, meaning price is generally rising over time.

V

Valuation: The process of estimating what a company or its stock is really worth.
Volatility: How sharply and quickly a price moves. High volatility means bigger, faster swings and more risk.
Volume: The number of shares traded in a period. High volume shows strong interest and confirms price moves.
VWAP (Volume-Weighted Average Price): The average price over the day, weighted by volume, used mainly by intraday traders as a fair-value line.

W

Watchlist: A saved list of stocks you are keeping an eye on for possible trades.
Wick (Shadow): The thin lines above and below a candle's body, showing the highest and lowest prices reached during the period.
Win rate: The percentage of your trades that end in profit. A high win rate is nice, but not the same as making money overall.