85 Common Stock Market Terminologies for Dummies [Updated List for 2025]

Stock market terminologies are essential for individuals looking to move in the world of investing and trading. Stock market terminologies can help you understand the stock market, interpret the financial news, and make smart decisions. Without knowing the common terminologies, even the simplest concept such as buying, selling or evaluating a stock can be confusing. Learning them early gives you a strong foundation, reduces mistakes, and empowers you to grow as an informed investor. 

This list of 85 stock market terminologies commonly used is designed to make these concepts simple and easy to grasp for beginners.

1. Investment

An investment is the activity of buying assets with the goal of earning a return through capital appreciation, dividend or both. Common investment options involve stocks, bonds, mutual funds, and commodities. The goal of investors is to create wealth, to have financial security and to stay ahead of inflation. 

The concept of investment has existed since ancient times where people used to invest in land, livestock, and trade to grow wealth. Over the 18th and 19th centuries, stock exchanges were extended to London and New York and bonds emerged as a common method of financing projects. 

The 20th century saw the rise of mutual funds, pensions as well as insurance based investments where investing became available to the common people. Nowadays, with the power of technology, online trading, the ETF, and international investing, people are able to increase wealth more easily than ever.

Based on different asset types, investment can be of six major types.

• Stocks/Equities: Investing in a company with potential of return from dividends and capital gains.
• Bonds: Investing in debt instruments providing regular interest payments and return of principal at maturity.
• Mutual Funds/Index Funds: Pooled investments managed actively or passively to diversify risks.
• Real Estate: Investment in physical property offering rental income or capital appreciation.
• Commodities: This involves investing in physical goods like gold, oil, or agricultural products.
• Fixed Deposits: Low-risk deposits offering fixed returns for a lock-in period.

These different investment types give different returns such as stocks 10–12%, bonds 5–6%, mutual funds/ETFs 8–10%, real estate 8–12%, gold 6–8%, and fixed deposits 4–6%. Historically stocks have given higher return, but come with higher risk.

2. Stock

Stocks, also known as share or equity are financial security that represents the ownership in the company. Companies issue stocks to raise capital for growth and operations. In return investors get the opportunity to grow wealth as the company grows.

There are two major types of stocks

1. Common Stock: It allows ownership and voting power in a company.
2. Preferred Stock: It has no voting rights but gets preference in dividends.

These stocks are traded on stock exchanges where prices fluctuate based on supply, demand and future growth of company growth. Investors earn money from stocks in two major ways; 

• Capital Appreciation: when the stock price rises over time.
• Dividends: when companies share a portion of their profits.

The concept of stock began In Amsterdam, in 1602, when the Dutch East India Company issued shares for the first time. In India, informal trading began under a banyan tree in Mumbai which resulted in the Bombay Stock Exchange in 1875 and the National Stock Exchange in 1992.

However, stocks carry risk. The prices may go down due to bad earnings, market crashes or world events as seen in 2008 where most Indian stocks dropped more than 50%.

Reliance Industries, Infosys,TCS and HDFC BANK are few well known stocks in India, where MRF is the most expensive stock. The world’s most expensive stock is Berkshire Hathaway.

3. Exchange

An exchange is a regulated and organised marketplace where buyer and seller trade securities like stocks, bonds, and derivatives. Exchanges provide liquidity, transparency and a fair trading environment, allowing companies to raise capital and investors to trade efficiently. The two major exchanges in India are NSE (National Stock Exchange) and BSE (Bombay stock exchange). 

The concept of stock exchanges originated in the 16th century in Europe.

• 1531, Antwerp: The first formal stock exchange was established for trading government bonds and commercial shares.
• 1602, Amsterdam: The Dutch East India Company created the first modern stock exchange, introducing standardized share trading.
• 18th–19th century: London Stock Exchange and New York Stock Exchange were formed, laying the foundation of modern trading practices.
• Bombay Stock Exchange (BSE) in 1875, followed by National Stock Exchange (NSE) in 1992 which brought with it electronic trading and market transparency.

The Bombay Stock Exchange (BSE) has more than 5,500 listed companies with a market capitalization of about 300 lakh crore and a turnover of about 50,000 crore every day. Whereas, National Stock Exchange (NSE) has more than 2,000 listed companies with a market capitalization of approximately 300 lakh crore with a market turnover of approximately 70000 crore. 

Lets understand how exchanges like NSE and BSE works.

• Buyers & Sellers place orders through brokers.
• Broker Acts as Intermediary and sends the order to the exchange.
• The exchange matches buy and sell orders at the best available price.
• Once matched, the trade is executed instantly.
• Shares are transferred to the buyer’s account and money to the seller’s account (usually T+2 days).

BSE and NSE are the leading exchanges in India, controlling over 99% of the trading volume in the country.

4. Broker

A broker is the licensed financial professional or firm which acts as intermediary between buyers and sellers facilitating transactions. Brokers provide trading platforms (apps or websites) where investors can place buy or sell orders, since individuals cannot directly buy or sell shares on exchanges like NSE and BSE. A broker executes buy and sell orders on behalf of their clients, charging commission or fees. 

There are two main types of broker. A full service broker and discount broker. The difference between them is mentioned in the table below.

Feature	Full-Service Brokers	Discount Brokers
Services Offered	Research, advisory, personal assistance	Only trading facility, no advisory
Examples	ICICI Direct, HDFC Securities	Zerodha, Upstox
Cost	Higher brokerage & fees	Low-cost, flat fees
Mode of Operation	Branch network + online platforms	Primarily online platforms
Best For	Beginners who need guidance & hand-holding	Experienced traders who want low costs

Brokers must be licensed and registered with regulatory bodies such as the Financial Industry Regulatory Authority (FINRA).

The term broker originated in the mid-14th century from the Anglo-French word brocour, meaning small trader or wine dealer. It was initially used in reference to a person who sells wine, but later it extended to refer as intermediary in buying and selling. Eventually, it evolved into the modern sense of a stockbroker, an agent who facilitates the buying and selling in the financial markets.

As of 2025, India has over 4,898 SEBI registered stock brokers, where the top 5 are leading 66.61% of the market share. Groww has a client base of more than 13 million active users, followed by Zerodha and Angel One with approximately 8 million clients each.

5. Demat Account

A Demat account ( Dematerialised Account ) is an electronic account or digital locker which holds financial securities like stocks, bonds, mutual funds and ETFs in digital form eliminating the need for a physical share certificate, enhances transparency and enables easy and quick transfer of securities during transactions.

There are three main types of Demat accounts

1. Regular Demat Account: For Indian resident investors holding shares and securities.
2. Basic Services Demat Account (BSDA): To investors holding less than 2 lakh with lower maintenance fees.
3. Repatriable and Non-repatriable Demat Accounts: Based on the preference of Non-Resident Indians who rely on the preferences of foreign funds transfer.

In India, Demat accounts were first introduced by NSE in 1996 to streamline and automate the process of stock trading, where shares are electronically stored in depositories such as NSDL and CDSL. 

According to a report published by IBEF, India’s total number of Demat accounts reached 20 crore (200 million) mark in mid-2025, which indicated massive retail participation in equity markets. This has increased more than three times in the past 4 years.

6. Dividend

A dividend is a portion of earnings a company pays to their shareholders as a reward for investing. Dividend is paid in various forms including cash, stocks, property, scrips etc.

The word “dividend” comes from the Latin dividendum, meaning “a thing to be divided.” The dividend was first issued in the early 1600s when the Dutch East India Company began paying profits to its shareholders.

The amount of dividend paid to each share, DPS = Total Dividends Paid / Number of Outstanding Shares. If Infosys announces a ₹20 dividend per share, and you own 100 shares, then the dividend you will receive will be 100 shares x ₹20 dividend per share = ₹2000.

Here are 4 important dividend dates you should track as an investor.

• Announcement Date: The date the dividend is declared by the company.
• Ex-Dividend Date: To be eligible for the dividend, investors must own the stock before this date.
• Record Date: The date the company identifies eligible shareholders.
• Payment Date: The date the dividend is paid to eligible shareholders. 

7. Equity Income

Equity Income is primarily referred to an income earned from holding equity shares (stocks) of a company. These incomes are mostly in the form of dividend, along with capital appreciation. Equity income has several key benefits which include the following. 

1. Provides regular income for conservative investors.
2. Can reduce overall portfolio volatility.
3. Offers potential for long-term capital growth.

Equity Income is one of the oldest forms of income, dating back to the time when companies first started issuing shares. In the 19 th and early 20 th centuries, companies used to show their  dividends as financial stability and gain investor confidence.

Equity income is best suited for conservative and long-term investors seeking regular income or retirees who want a steady cash flow. It is also important to select better stocks as equity income also differs among stocks. 

8. Dividend Yield

The dividend yield is a key financial ratio that shows how much dividend a company pays out every year as compared to its stock price. It is a key indicator for investors who seek income from their stock investments. The dividend yield is computed as follows.

Dividend Yield = (Annual Dividend per Share ÷ Market Price per Share) × 100

Suppose a company pays an annual dividend of  ₹20 per share and its current market price is ₹400. Then the dividend yield of the company = ( 20/400) X 100 = 5%

During the rise of industrial companies and stock exchanges in the 19th and 20th century, investors began focusing on dividend payment. Over the time when the market matured more investors sought for regular income, dividend yield became key metrics for income focused investors. 

This ratio is expressed in the form of percentage. A higher dividend yield percentage is more attractive to income-focused investors, as the dividend paid by the company is high compared to its share price. 

Historically, large-cap companies tend to have an average dividend yield of 2-3%, but the range may vary depending on the industry, like utilities and FMCG tend to provide higher yields, whereas technology firms tend to provide lower yields. 

9. Capital Gain

Capital gain is the profit earned when the assets including stocks are sold at a price higher than the original purchase cost. Capital gains are considered as an income and are often subjected to tax, termed as capital gain tax. 

There are two main types of capital gain depending upon the holding time period. 

1. Short-term capital gain (STCG): The gain on the selling of stocks, which was held for less than one year. The short-term capital gains are taxed at 20%.

2. Long-term capital gain (LTCG): The gain on the selling of stocks, which was held for more than one year. The long-term capital gains are taxed at 12%.

The formula for calculating capital gain is given below.

Capital Gain = Sale Price − Purchase Price − Associated Costs

Associated costs may include brokerage, commissions, and any expenses incurred for transfer or improvement.

The concept of capital gain is as old as the concept of trade, where profits from the selling of the assets such as land, precious metals etc. were considered as the capital gains. With the rise of stock exchanges in the 17th century, investors started making profits not just from dividends but also from the appreciation of share prices. Due to the expansion of financial markets, governments began to treat capital gains as taxable income.

Suppose you buy 100 shares of a company at ₹500 each, paying a total of ₹50,000, with ₹500 in brokerage. After 1.5 years, you sell them at ₹700 per share for ₹70,000. The capital gain is ₹70,000 − ₹50,000 − ₹500 = ₹19,500. Since the holding period is more than a year, it’s a long-term capital gain (LTCG), taxed at 12%, which comes to ₹2,340. Your net profit after tax is ₹17,160.

10. Recession 

A recession is the period of significant and widespread downtrend in economic activity that lasts for months to even years. During this period, consumer spending reduces, unemployment increases and production decreases. Recession can be caused by various factors such as excessive debts, credit tightening, financial market disruption and economic bubble bursts.

Key Indicators of Recession

• Economic Output: GDP decreases for at least two quarters in a row.
• Employment: Unemployment rises as companies reduce their workforce.
• Production and Sales: Industrial output and retail sales decline.
• Consumer and Business Behavior: People and businesses spend and invest less, often leading to loan defaults and business closures.

The recession is a part of business cyclical which moves through different phases mentioned below.

• Expansion: The economy grows, jobs rise, spending increases.
• Peak: Growth overheats, inflation rises.
• Recession: GDP falls, unemployment rises, demand drops.
• Trough: Lowest point of slowdown.
• Recovery: Economy revives, spending and jobs return.

A prime example of recession is the 2008 economic crisis, triggered by the U.S. housing bubble burst, leading to worldwide banking collapses and a sharp GDP fall. The sensex fell from 21,000 (Jan 2008) to around 8,500 (Oct 2008), a drop of around 60%. 

11. Inflation

Inflation is a general rise in prices of goods and services over time, resulting in decreased purchasing power of money. It is measured by the inflation rate, which reflects how quickly prices rise, usually expressed as an annual percentage change in a price index like the Consumer Price Index (CPI). 

Inflation rate can be measured by using the formula given below.

Inflation Rate (%) = (CPI in Current Period – CPI in Previous Period) / CPI in Previous Period × 100

If a basket of goods costs ₹5,000 in one year and ₹5,500 the next year:

Inflation Rate = (5500 – 5000) / 5000 × 100 = 10%

Now, let’s discuss the four major different types of inflation.

1. Demand-Pull Inflation: Happens when the aggregate demand surpasses supply and it raises the prices as customers compete for limited goods.
2. Cost-Push Inflation: This happens due to increased costs of production (raw materials, wages), and producers are forced to increase their prices in order to stay profitable.
3. Built-In Inflation (Wage-Price Spiral): Results from adaptive expectations where workers want to be paid more in order to keep pace with the increase in prices and consequently increase the prices.
4. Structural Inflation: Arises from inefficiencies in the supply side such as poor infrastructure, bad technology and poor production capacity, and this is common in developing economies.

But what causes inflation? Inflation is mainly triggered by low interest rates and easy consumer spending.

The global average inflation rate is approximately 4% as of 2025. Whereas India’s CPI inflation of 3.09% means that, on average, the prices of goods and services purchased by households have increased by 3.09% compared to the same period last year.

12. Sector

A sector in the stock market refers to a group of companies working in the same segment of the economy or sharing similar business activities. For example, banks, insurance firms, and financial service companies all fall under the Financial Sector. 

The concept of sector originated in the early 20th century to group similar businesses such as railroads, banks, and industries. In the late 1990s, the Global Industry Classification Standard (GICS) categorized stocks into 11 primary sectors. 

1. Energy: Oil, gas, renewable energy.
2. Materials: Metals, chemicals, construction materials.
3. Industrials: Manufacturing, transportation, infrastructure.
4. Consumer Discretionary: Retail, automobiles, luxury goods.
5. Consumer Staples: Food, beverages, household essentials.
6. Health Care: Pharmaceuticals, hospitals, biotech.
7. Financials: Banks, insurance, asset management.
8. Information Technology (IT): Software, hardware, IT services.
9. Communication Services: Media, telecom, digital platforms.
10. Utilities: Electricity, water, natural gas providers.
11. Real Estate: Property developers, REITs

These sectors move differently in different economic conditions, based on which the sectors can be classified as defensive and cyclic.

• Cyclical sectors: Sectors which are sensitive to economic ups and downs such as Energy, Industrials, Consumer Discretionary, and Real Estate
• Defensive sectors: These sectors are stable in downturns, safer for conservative investing. It includes Consumer Staples, Health Care, and Utilities.

Grouping companies into sectors helps the investor to analyse the market trends, diversifying holdings and comparing performance of companies operating in related markets. 

13. Portfolio

A portfolio refers to a collection of financial instruments including stocks, bonds, commodities, cash and other investments held by a person or institutional investor. But why do we need a portfolio? Portfolios are mainly designed to achieve investment goals, balancing risk and return through diversification across asset classes.

The concept of portfolio started back in the 1950s when Harry Markowitz developed the Modern Portfolio Theory (MPT). He suggested that combining different assets can reduce risk without sacrificing on return, making diversification the key to portfolio management.

Now let’s discuss different types of portfolios. 

• Growth Portfolio: The portfolio is concentrated on high-risk, high-return.
• Income Portfolio: Constructed using dividend paying stocks or bonds as a source of income.
• Balanced Portfolio: Combination of growth and income assets to balance risk and reward.
• Speculative Portfolio: Small-caps or penny stocks will be considered as high-risk holdings.

A young investor who is willing to take risk may create a growth portfolio with 70% stocks, 20% bonds, and 10% gold as a maximizing return, whereas a retiree may choose a conservative portfolio with 40% stocks and 60% bonds for stability and income.

14. Bull Market

A bull market refers to a period when the stock prices increase consistently over a period of time, usually by 20% or more from its recent low. This bull market can last for months or even years. Bull market reflects investor confidence, good economic growth, and future earnings expectation. 

The term “bull” comes from the way a bull attacks, which is by throwing the horns upwards, symbolizing rising prices. This term has been in use since the 18th century London stock exchange. 

The bull market has different phases, such as accumulation (smart money enters), public participation (major growth), and excess (over-optimism).

But what triggers the bull market? 

• Economic recovery: Increase in GDP, creation of more jobs and boost in consumer expenditure.
• Better corporate income: Firms record more improved profits capturing investors.
• Positive sentiment: Investors change their minds and become optimistic causing a rise in purchasing.
• Liquidity and policy support: Reduced interest rates, government reforms, or good inflows of foreign investors.

A recent example of a bull market after the COVID-19 market crash in 2020, Sensex recovered from 25,000 to touch 62,000 by October 2021.

15. Bear Market

A bear market is a period in which stock prices fall consistently, usually by 20% from its last high. The bear market reflects pessimism, weak-economic trends, and low investor confidence. Bear markets usually last for several months to a year with an average of approximately 14 months. 

The term “ Bear” comes from the way bears attack, by swiping its paws down, symbolizing falling prices. This term has been in use since the 18th century London stock exchange. 

Like the bull market, bear markets also have phases. 

• Distribution: Smart money sells when the price is at the peak, and the price starts to fall.
• Panic/Capitulation Angst: Selling leads to steep drops in prices.
• Despair: Prices bottom out, confidence is lost, setting the stage for recovery.

When does the bear market start? There are four main scenarios for the bear market to start. 

• Slowdown in the economy: Decline in GDP, high unemployment or low corporate earnings.
• High inflation or interest rates: These reduce the level of spending and raise the cost of borrowing.
• Global crisis:  Wars, pandemics, or crises in the financial system (e.g., 2008 crisis, COVID-19).
• Overvaluation: Once the bull run is long, there can be overpricing in stocks which will result in corrections.

The prime example of a bear market is the 2008 financial crises where S&P 500 fell 57% and sensex dropped by 60% from its high.  

16. Index

An index is a statistical indicator that tracks the performance of a specific group of stocks or overall market. Indices reflect the combined price movement of stocks within the index, which helps investors to track the market trend. 

For example Nifty IT is an index of IT stocks, Nifty Bsk is Index of banking stocks, etc. 

• If the index is rising: It means the majority of the selected stocks are performing well reflecting a positive market sentiment.

• If the index is falling: it signals a broad decline in stock performance reflecting negative market sentiment.

The first index was created by Charles Dow in 1896 known as Dow Jones Industrial Average. In India, the Sensex was formed in 1986 and Nifty 50 in 1996 to track broader sets of companies and sectors.

Now, let’s understand why indexes are important?

• Helps investors to track the market trend (bullish or bearish).
• Acts as a benchmark to compare portfolio performance. 
• Represents overall economic condition.

In India, key indices include the Sensex (30 top BSE companies), Nifty 50 (50 leading NSE companies), Bank Nifty (banking stocks), and Nifty IT (IT sector companies).

17. Nifty

Nifty is the stock market index in India which represents the top 50 companies in India listed on NSE. It represents the broader market of India, if Nifty goes up, it usually means the overall market is doing well, and if it goes down, the market may be struggling.

The stocks in this index are given preference based on free-float market capitalization. Stocks with the highest free float market cap will have the highest impact on Nifty. All of these stocks are from 11 different sectors. Each sector holds specific weightage in index.

Financial services = 33%

Information technology = 14%

These two sectors have the largest weightage.

Nifty was launched by NSE in 1996 with the purpose to create a benchmark that represents the overall health of the Indian stock market. Nifty started at 1000 face value and is currently trading near 25,000. 

Why is Nifty Important? Nifty is important for three main reasons. 

• Market Indicator: Shows the overall performance of the Indian stock market.
• Investment Benchmark: Mutual funds, ETFs, and other investments often compare their returns against Nifty.
• Trading Opportunities: Traders use Nifty for buying/selling stocks or derivatives like futures and options.

Nifty has given an annualized return of 11% from the last 25% with the biggest decline in 2008 economic crises, falling more than 50%. 

18. Sensex

The Sensex, also known as the S&P BSE Sensex, is a stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange (BSE) in India. It is calculated based on free-float market-weighted index, and acts as a benchmark index for BSE.

The Sensex as an official index was published on 1 January 1986, with the base value of 100. Over time, its value has grown tremendously reflecting India’s economic growth, corporate growth, market liberalization, etc

Historically sensex has obtained  12-17% annualized returns with the all time high of 85,978.25 points in September 2024

19. India VIX

India VIX (India Volatility Index) is a measure of market volatility for the next 30 days which is derived from the Nifty index option prices. India VIX usually moves between 10 to 30. India VIX is derived from Black-Scholes option pricing model, based on bid-ask quotes of the near-term Nifty options. 

Let’s learn how to interpret VIX to gauge market sentiment. 

VIX > 15 = High VIX = High Volatility = High Fear / Uncertainty

VIX < 15 = Low VIX = Low Volatility = Market Stability / Confidence

The concept of vix was created by Chicago Board Options Exchange (CBOE) in the U.S. to measure expected volatility. It was adopted by India in 2008, when NSE introduced India VIX based on Nifty 50 options.

How is the VIX useful to traders? VIX is very useful to traders because it acts like a sentiment barometer.

• Measures market sentiment (fear vs. confidence).
• Helps in hedging decisions using options.
• Guides option buyers/sellers (premiums high when VIX is high, low when VIX is low).
• Useful for event risk analysis (elections, budgets, policy announcements).
• Supports risk management and portfolio protection.
• Often shows inverse relation with Nifty (VIX up, Nifty down).

The biggest India VIX move happened in the COVID-19 crash in March 2020, when it increased from 25 to more than 80 in several weeks. This massive spike pointed to great panic and confusion as world markets crashed and Nifty dropped almost 38% of its value.

20. Nasdaq

Nasdaq is one of the largest stock exchanges in the world, situated in the United States which mainly includes technology and growth oriented companies. Unlike traditional  trading platforms such as NYSE, Nasdaq is entirely electronic, i.e. all trading is done through a computer network.

The Nasdaq Stock Market was founded in 1971 by the National Association of Securities Dealers (NASD) to create the world’s first electronic stock exchange. Its goal was to improve transparency and speed in trading, moving away from traditional floor-based trading systems like the NYSE.

Today, Nasdaq tracks 3000 listed companies which include big names like Apple, Microsoft, Amazon, Tesla, Google (Alphabet), Facebook (Meta).

21. 52-week Range

The 52-week range is the range between highest and lowest price at which the stock has traded in the last one year. It is used as a significant element to evaluate volatility, market sentiment and also to determine trade opportunities. 

52-Week Low = the lowest point of the stock in 1 year.

52-Week High = the highest point of the stock in 1 year.

52-Week Range = 52-Week High−52-Week Low

Lets understand with an example. If a stock has a 52-week range of ₹800 – ₹1,200

₹800 = Lowest price in last year

₹1,200 = Highest price in last year

52-Week Range = 1,200−800 = ₹400

The concept of a 52-week range began in the early 20th century when financial journals such as The Wall Street Journal and New York Times started to publish the stocks data. By the 1950s-60s, most stock exchanges such as NYSE, Nasdaq, and brokers started reporting 52-week highs/lows as a standard feature. 

Now there are many traders and investors trading and investing using the 52 week range with their own strategies around it such as buying when stock breaks the 52 week range and trail the stoploss by 5%. 

22. Price Quote

A price quote (or quoted price) is the most recent price on which a security, like a stock, bond or commodity, was traded, in the stock market. It represents the latest transaction price at which the buyer and seller have arrived and usually keeps updating in real time.

Let’s take a look at some stock market price quotes.

Last Traded Price (LTP): The most recent price at which the stock was traded.

• Bid Price: The highest price a buyer is willing to pay.
• Ask Price: The lowest price a seller is willing to accept.
• Open Price: Price at which the stock started trading for the day.
• High & Low: The highest and lowest price of the day.
• Previous Close: Price at which the stock closed the previous day.
• Volume: Number of shares traded.
• 52-Week High/Low: Highest and lowest price over the past year.

Let’s understand it with an example of L&T Finance. 

• LTP: ₹268.63
• Open: ₹268.01
• High / Low: ₹271.99 / ₹267.45
• Previous Close: ₹268.17
• Volume: 37.30 lakh shares

This means LTF last traded at ₹268.63, opened at ₹268.01, and has been moving between ₹271.99 and ₹267.45 with the total volume traded 37.30 lakh shares. 

Price quote is available on NSE, BSE, broker platform, news and financial websites. But, for retail traders in India, the fastest and most reliable way is through your broker’s trading terminal (e.g., Kite by Zerodha) or directly from NSE/BSE websites.

23. Volume

Volume in the stock market is referred to the number of shares or contracts of a given security traded during a given period such as hourly, daily, weekly. Volume is the direct indicator of market activity and liquidity.

• High volume = Shows strong interest and participation, often confirming price trends.
• Low volume = Indicates weak interest, possible indecision, or lack of conviction in price moves.

During initial days, back to the early stock exchanges in the 17th–18th centuries, volumes were recorded manually. But, with the rise of electronic trading from 1970 onwards, exchanges started publishing real-time volume data.

How do traders interpret volume in their trading? Traders combine volume with price to gauge the market sentiment.

Price ↑ + Volume ↑ = Strong bullish move.

Price ↑ + Volume ↓ = Weak rally, possible reversal.

Price ↓ + Volume ↑ = Strong bearish signal.

Price ↓ + Volume ↓ = Weak selling, possible bounce.

The key point to remember is, if 100 shares are traded (bought and sold), the volume would be 100 not 200.

24. Liquidity

Liquidity in the stock market refers to how quickly and easily a stock can be bought and sold into the market without much change in its price. Liquidity can be categorised as high liquidity and low liquidity based on number of buyers and sellers.

• High liquidity: There are high numbers of buyers and sellers, and therefore trades occur fast, where the price (bid-ask) spreads are very small. Large-cap stocks such as Reliance, HDFC bank are high liquid stocks.

• Low liquidity: There are low buyers and sellers, high spread, and prices may fluctuate more. Small-cap or penny stocks have low liquidity.

The term “Liquidity” comes from the Latin word liquidus which means fluid or flowing. Economists and tradersIt started using it in the 19th century as a metaphor. Just like water flows easily, a liquid market will allow money, stocks, or assets to move freely.

Why does liquidity matter? 

• It ensures fast order execution. 
• Lowers transaction costs by offering low spreads.
• High liquidity reduces the risk of market manipulation.

High liquid stocks such as Reliance Industries have an average daily trading volume of 5-7 million shares. However, small-cap stocks have an average daily volume of 10,000 to 20,000 shares per day. 

25. Yield

Yield refers to the return or income earned from investment over a specific period of time. Yield is expressed in percentage of the invested amount. Yield helps investors to compare returns across different stocks or bonds and plays major role income focused investors

There are five different types of Yields that can be measured in different ways depending on whether we look at dividends, original purchase price, current price, or bond returns.

• Dividend Yield (Stocks): The amount of return received as dividends relative to the current price of the stock.
• Yield on Cost: Looks at return based on the price you originally paid for the stock which includes the dividends and increases in price.
• Current Yield: Calculates returns based on the current price of the stock or the bond.
• Bond Yield: Interest or coupon earned on bond’s face value.
• Yield to Maturity (YTM):  Total return from a bond if held until maturity, combining interest payments and the principal repayment.

Yield became the standard term in the financial market in the 17th and 18th century, especially after the rise of bond and dividend stocks. Over time, the concept evolved to include different types of yield.

But what’s the difference between yield and return? 

The yield is an expected income from an investment in most cases expressed in percent of the investment price. Whereas, return is the overall gain or loss, including both income and price changes.

The average dividend yield of S&P 500 companies is around 1.5–2%.  Whereas Indian markets (Nifty 50) have an average dividend yield of 1.2–1.6%. Government bonds (10-year Indian G-Sec) usually yield 6–7%.

26. Capitalization

Capitalization in the stock market also known as market capitalization means the total market value of companies outstanding shares. Market capitalization is the combination of two words i.e, market and capitalization.

Market = The stock market where the shares are traded. 

Capitalization = The total amount of capital raised by a company through issuing shares in the market.  

Market capitalization is calculated by multiplying the current market price of one share with the total number of outstanding shares. 

Market Capitalization = Current Share Price × Total Number of Outstanding Shares

If a company has 10 million shares outstanding and each share trades at ₹500

Market Cap = 10,000,000 × 500 = ₹5,000,000,000 = ₹500 crore.

Investors came up with the concept of market capitalization from the very beginning of the stock market to measure the size and the value of the company beyond just its share price. To understand companies overall size and investment profile, investors categorised companies based on market cap in 3 major types. 

Types of Market Cap

• Large-cap: Stable and blue-chip companies with market capitalization more than ₹20,000 crore
• Mid-cap: Growing companies with market capitalization between ₹5,000–20,000 crore (growing companies, moderate risk)
• Small-cap: Below ₹5,000 crore (high growth potential, high risk)

Globally NVDA has the highest market capitalization with $4.30 trillion. In India Reliance industries has the highest market cap with 19,04,500 crores followed by HDFC Bank 14,85,000 crores. 

27. Outstanding Shares

Outstanding shares refer to the total number of shares owned by all the shareholders including individual investors, institutional investors, the company directors and insiders, but excluding treasury shares which are owned by the company.

The formula to calculate outstanding shares is by subtracting issued shares from the treasury shares. 

Outstanding Shares = Issued Shares − Treasury Shares

So, if a company has issued 1,000,000 shares and has bought back 200,000 shares into treasury.

Outstanding Shares = 1,000,000 − 200,000 = 800,000  outstanding shares

Outstanding Shares are important to calculate key financial ratios such as market capitalization, earnings per share (EPS), and cash flow per share.

The concept of outstanding shares began with the rise of joint-stock firms in the 1600s. By the 20th century, with the introduction of modern financial reporting standards (such as GAAP in the U.S.), outstanding shares became the core denominator in financial ratios.

Indian blue-chip stocks such as HDFC Bank and Reliance Industries have 15.36 billion and 13.53 billion shares outstanding. 

28. P/E Ratio

P/E ratio which stands for price-to-earning ratio is the key financial ratio used to measure how much the investors are willing to pay for each rupee company’s ears. The formula to calculate P/E ratio is given below. 

P/E Ratio = Market Price per Share​ / Earnings per Share (EPS)

Lets understand with an example. If a company’s stock is ₹500 and its EPS is ₹25. 

P/E Ratio = 500 / 25 = 20

This means investors are willing to pay ₹20 for every ₹1 of the company’s earnings.

But how to interpret the value of P/E ratio? 

• High P/E: Market expects strong future growth or indicates overvaluation if too high.
• Low P/E: Could mean undervaluation or slower growth prospects.

P/E ratio became popular in the 1920s, where Benjamin Graham highlighted the importance of the price-to-equity ratio in valuing stocks. Since then, it has been extensively applied to compare stock prices and earnings and determine whether a stock is overvalued or underpriced.

How does P/E help in analysis? P/E helps identify whether the stock is fairly valued. Also it helps comparing the stocks within the same sector. 

Lets understand with an example. 

• Company A (Tech): Price ₹500, EPS ₹25 → P/E = 20
• Company B (Tech): Price ₹400, EPS ₹25 → P/E = 16

Company A’s P/E is 20, meaning investors pay ₹20 for every ₹1 of earnings. Whereas, company B’s P/E is 16, meaning investors pay only ₹16 for every ₹1 of earnings. This means company B is comparatively cheaper compared to Company A for the same earnings, so it may be a better investment choice.  

29. Beta

Beta is the measure of stock volatility in relation to the overall market, usually Nifty 50.

How is beta calculated? Beta is calculated as the covariance of the stock’s returns with market returns divided by the variance of the market’s returns. 

Βeta = Covariance(Re​,Rm​)​ / Variance(Rm​)

Where, Re  = return of the stock and Rm  = return of the market.

Beta (β) originated from Modern Portfolio Theory in the 1950s by Harry Markowitz. It became widely used with the Capital Asset Pricing Model (CAPM) by William Sharpe in 1964, linking a stock’s risk to its expected return relative to the market.

How to interpret the beta value in stock analysis

Beta (β)	Interpretation
β = 1	Stock moves in line with the market
β > 1	Stock is more volatile than the market
β < 1	Stock is less volatile than the market
β < 0	Stock moves opposite to the market (rare)

Suppose if Reliance has a beta of 1.5, if Nifty rises by 1% then reliance will rise by 1.5%, hence suggesting more volatility.  

30. Market Order

A market order is an instruction given by an investor to a broker to sell or buy a stock at the best current market price which is immediately available in the market. Market orders are more focused on speed of execution rather than price , ensuring the order is filled as quickly as possible. 

How does market order work? When you place a market order it immediately matches with the best offer available and executes the trade. 

The concept of market order started back in the 17th or 18th centuries, where investors would verbally instruct brokers to buy or sell shares immediately at the current market price. As the formalization of trading in stocks took place, in exchanges such as the London Stock Exchange and New York Stock exchange, market orders became a standardized way to ensure quick execution of trades, especially in active, high-liquidity markets.

But why to use market order? 

• Immediate Execution: Market order is useful if you want to enter or exit a position quickly.
• Simplicity: You don’t have to worry about specifying a price. You just want the trade done.
• High Liquidity Situations: In highly liquid stocks or assets, the difference between the expected price and actual execution is usually small, so you don’t lose much.
• When Timing Matters More Than Price: In case, if a stock is moving fast and you want to catch the breakout, a market order ensures you get in before the price moves further.

The reason it’s showing zero in the market, because the order will execute at market price. If you put value in the space, it will turn into limit order. One study of retail trading data of 19 active brokers in the U.S. has determined that limit orders represent about 25.5% of the total number of orders, which implies that the other 70.8% of orders are either market orders or marketable limit orders. 

31. Limit Order

Limit Order is an instruction given by a trader to either sell or buy a stock at a specific price. Unlike a market order where an order is immediately executed at the current price, a limit order can only be executed once the market reaches your given price.

• Buy Limit Order: This is where you set the maximum price you’re willing to pay. The order will execute at your price or lower.
• Sell Limit Order: You determine the lowest price you are willing to accept. The order is executed at your price or higher.

Let’s understand how limit order works?

• Decide the Type of Limit Order: Whether you want to place buy limit order or sell limit order.
• Set Your Limit Price: This is the price at which you are willing to buy or sell and place the order. 
• Order Enters the Market/Order Book: The exchange keeps your order in the order book, waiting for the market price to match your limit price.
• Execution: As soon as market price matches with your limit price, trade will get executed. It might happen where your order will be partially executed because only some quantity matched. 

When to use limit order? A Limit Order is best used when you want control over the price at which you buy or sell a stock. It’s useful in volatile markets, for targeting specific entry or exit points, avoiding slippage, and planning trades in advance.

32. Margin

Margin refers to the funds that an investor must deposit with a broker or exchange to cover credit risk when borrowing to trade or invest. Margin allows investors or traders to leverage their positions, which can magnify both gains and losses.

But, how does it work?

• You deposit a certain amount (referred to as initial margin) with your broker.
• The broker lends you money 4X or 5X of your initial margin to purchase securities.

If you are buying JSWSTEEL futures, you need to pay a margin of 1.45L for 675 shares instead of 7.47L.

The concept of margin originated in the 17th century when the investors on the early stock markets, such as Amsterdam and then New York, began to purchase shares on credit through brokers in order to achieve greater ownership than their own funds would permit. Today, margin trading is a regulated practice used across equities, futures, options, and forex, allowing traders to leverage their capital

Types of Margin

1. Initial Margin: Amount you must deposit to open a position.
2. Maintenance Margin: Minimum balance you must maintain to keep the position open.
3. Variation Margin: Additional funds required if your account falls below maintenance margin due to losses.

But, when to use margin? Margin should be used when you are confident about the market and want a big exposure for big profits.

33. Stop Loss

Stop loss is the pre determined price where traders and investors plan to exit the trade in order to minimize their loss. Stoploss acts as a safety net to protect your capital when the market moves against you.

How does it work? 

In a long trade, you place your stoploss below your entry price. If stock falls below this level your trade will be automatically cut off, limiting your losses. Whereas in short selling, its opposite, you place your stop loss above your entry point.

Let’s understand it with an example. 

• Suppose you have bought stock L&T at ₹237. 
• Set a stop loss at ₹233.

If Stock  drops to ₹233, the position is sold automatically, limiting the loss to ₹4 per share.

The concept of Stop Loss emerged with the growth of organized stock markets in the 20th century as traders sought systematic ways to limit losses. But it gained popularity with the rise of automated trading systems in the late 20th century, making risk management more systematic.

The purpose of stoploss is to limit financial loss in volatile markets, helps maintain discipline and prevents emotional decision-making and protects investment capital for future opportunities.

34. Order Imbalance

Order imbalance refers to a situation in the stock market where the number of buy orders and sell orders for a security are significantly unequal. This discrepancy prevents matching all the orders in one step, and causes volatility in prices.

Depending upon buyers and sellers dominance, imbalance can either be positive or negative.

• Positive Imbalance: When the number of buy orders exceed the number of sell orders, it often pushes prices up.
• Negative Imbalance: When the number of sell orders exceed buy order, it usually drives prices down.

If a stock has 5 lakh buy orders but only 2 lakh sell orders in the pre-market session, it creates a buy-side imbalance, resulting in gapping up opening.

The concept of order imbalance emerged with the development of electronic order books in the 1970s-80s, where buy and sell orders are matched digitally, not by the floor traders.

What Causes Order Imbalance? Order imbalances often arise due to following reasons.

• Significant news of the company such as earnings or mergers.
• Huge institutional orders that either buy or sell the market in large quantities.
• With automated trading algorithms, hitting a key support or resistance, a wave of orders in a single direction is generated.
• Illiquid stocks with even modest order flow can break counterparties, the imbalances remain.

Image above shows that there are a total 22,510 buy orders but only 15,925 sell orders, indicating positive imbalance. This imbalance is tradable and only suitable for short-term traders such as scalping. Risk control (tight stop-loss) is crucial because imbalances can quickly reverse.

35. Ask 

In the stock market, an Ask refers to the lowest price a seller is willing to accept for a security like a stock, option, or commodity, at a given moment. It represents supply in the market. If a stock’s ask is ₹500, the seller is ready to accept up to ₹500 per share.

Few key features of Ask are mentioned below.

• It reflects the supply in the market.
• Asks are made by traders when they wish to sell shares at a certain price.
• The lowest ask in the market becomes the current ask price, which you often see quoted along with the bid price (the buyer’s offer).
• The difference between the ask and bid is called the bid-ask spread.

Example: The Ask for REPL stock is ₹141.44 and the bid is ₹140.91, It means buyers are willing to pay ₹140.91 while sellers want ₹141.44, and a trade will occur only when one side agrees to the other’s price.

36. Bid

In the stock market, a Bid refers to the highest price a buyer is willing to pay for a security like a stock, option, or commodity, at a given moment. It represents demand in the market. If a stock’s bid is ₹500, buyers are ready to pay up to ₹500 per share.

Few key features of Bid are mentioned below.

• It reflects the demand in the market.
• Bids are made by the traders when they wish to purchase the shares at a certain price.
• The highest bid in the market becomes the current bid price, which you often see quoted along with the ask price (the seller’s offer).
• The difference between the bid and ask is called the bid-ask spread.

Example: The Ask for REPL stock is ₹141.44 and the bid is ₹140.91, It means buyers are willing to pay ₹140.91 while sellers want ₹141.44, and a trade will occur only when one side agrees to the other’s price.

37. Bid-Ask Spread

Bid-Ask spread is the difference between the highest price a buyer is willing to pay for a security and the lowest price a seller is ready to accept for a security. It represents the transaction cost of trading and liquidity of the market.

Formula to calculate the Bid-Ask spread is given below

Bid-Ask Spread = Ask Price − Bid Price

It can also be expressed as a percentage:

Bid-Ask Spread (%) = (Ask Price − Bid Price / Ask Price) × 100

For example, if the bid price of a stock is ₹100 and the ask price is ₹101, the spread is ₹1 or roughly 0.99%.

In this case the highest bid price for REPL is 140.91 and lowest ask price is 141.44. The Bid-Ask spread is 0.53

How to interpret the Bid – Ask spread? 

• Narrow Spread: Indicates high liquidity, active trading, and low transaction costs. Narrow spreads are common in large-cap stocks.
• Wide Spread: Suggests low liquidity, low trading volume, or higher risk. Wide spread is common in small-cap or illiquid stocks, due to less number of buyers and sellers.

Institutional players and high-frequency traders monitor spreads for market-making, arbitrage, and liquidity provision strategies. One can avoid wide spreads by using limit order.

38. Blue-Chip Stocks

Blue-chip stocks are shares of established, sound and reputable companies with a record of stable performance, good earnings and high dividends payments. These companies are usually market leaders in their industries and have higher market-capitalization.

Let’s discuss key characteristics of blue chip stocks

• Financial Stability: Strong balance sheets and consistent revenue and profit growth.
• Market Leadership: Dominant in their industry or sector.
• Dividend History: Regular and often increasing dividend payouts.
• Low Volatility: Relatively less risky compared to smaller, speculative stocks.
• Reputation: Recognized brand with trust among investors and customers.

Why the term “Blue Chip”? The term “Blue-Chip” comes from poker, where chips have different colors and values. Blue chips traditionally represent the highest value. In stock markets, it started being used in the early 20th century to describe top-tier companies.

In India, Sensex and Nifty50 mostly consist of blue-chip stocks. Few examples of blue-chip stocks are Reliance Industries, TCS, HDFC Bank, Infosys, ITC. whereas globally Apple, Microsoft, Johnson & Johnson.

39. Risk Tolerance 

Risk Tolerance is the capability of an individual to bear the possible losses or changes in the value of his or her investments. It represents the financial ability (the amount of loss that a person can bear) as well as the psychological comfort (the amount of loss that a person can bear psychologically).

It can be high risk tolerance, moderate risk tolerance or low risk tolerance.

• High Risk Tolerance: An individual is comfortable with significant fluctuations; willing to invest in volatile assets like stocks, derivatives, or emerging markets for potentially higher returns.
• Moderate Risk Tolerance: How Prefers a Balance between Safety and Growth and invests in a mix of stocks, bonds, and mutual funds.
• Low Risk Tolerance: Avoids high volatility, prefers stable investments like fixed deposits, government bonds, or blue-chip dividend-paying stocks.

Understanding risk tolerance is important when developing an investment plan that aligns with the financial and emotive comfort of the individual, preventing panic selling during market swings. If an investor has a high risk tolerance, he can invest 70% of his portfolio in equity. 

40. Diversification

Diversification is the investment strategy that involves spreading investment across different asset classes, sectors, or instruments to reduce the risk of a portfolio.

Why does it matter? 

• If one of the investments is performed poorly, others can perform well and offset the losses.
• Helps minimize unsystematic risk, such as specific risk of the company or its sector.
• Gives less uncertain returns in the long run.

The idea of diversification dates back to ancient Mesopotamia, where merchants spread their investment to reduce risk. Later this concept was formalized in 1952 by Harry Markowitz’s Modern Portfolio Theory, demonstrating that risk can be minimised by investing in different assets without reducing the return.

Based on the different dimensions of investment risk that investors face, diversification has types where each type addresses a specific source of risk.

• By asset class: By mixing different asset classes like stocks with bonds, gold, and real estate.
• By sector: Spreading investments in different sectors such as banking, FMCG, tech, energy, pharma, etc.
• By risk level: Include both high-risk stocks and low-risk government bonds.
• By market cap: Combination of small-cap, mid-cap, and large-cap companies.
• By geography: Combination of Indian stocks and global ETFs

During the 2008 financial crisis, a portfolio of stocks invested in the U.S. banking stocks dropped by more than 60%, whereas a diversified portfolio of global equities, bonds, and gold dropped by about 30%. This demonstrates that diversification removes losses in the case of market shocks.

41. Asset Allocation

Asset allocation is the investment strategy of dividing a portfolio into various asset types, such as equities (stocks), fixed income (bonds), cash, gold or real estate. The goal is to balance risk and reward according to your financial goals, risk tolerance, and investment horizon. 

But how does asset allocation differ from diversification?

Asset allocation decides how much of your portfolio goes into each asset class. Whereas diversification is spreading investments within each asset class to avoid concentration risk. 

• Asset Allocation = Choosing the basket of eggs.
• Diversification = Spreading the eggs inside each basket.

The concept of asset allocation was formalized by Harry Markowitz in 1952 in his Modern Portfolio Theory where he mathematically demonstrated how spreading investment reduces risk without affecting the return.

Based on investors risk tolerance, time horizon and financial goal there are three common allocation strategies. 

Strategy	Equities	Bonds	Cash/Gold	Objective	Suitable For
Conservative	20%	60%	20%	Capital preservation, low risk	Short-term goals, low-risk investors
Balanced	50%	40%	10%	Mix of growth and safety	Medium-term goals, moderate risk tolerance
Aggressive	80%	15%	5%	Long-term growth, higher returns	Long-term goals, high-risk investors

Your age, financial goal and risk tolerance decides which strategy suits you. Usually aggressive strategy is used by young investors, whereas old investors mostly consider conservative strategy. 

42. Asset Classes

Asset classes are categories of financial instruments that have similarities in their characteristics, behavior and regulatory framework. 

Some of the common asset classes are mentioned below. All the asset classes have their unique risk, returns and liquidity and respond differently to the different market environments making them vital in diversification.

Asset Class	Description	Risk	Return	Liquidity
Equities (Stocks)	Ownership in businesses; potential for high returns but higher volatility	High	High	Medium
Bonds (Fixed Income)	Debt securities offering regular interest income; lower risk than stocks	Low–Medium	Medium	High
Real Estate	Physical property or REITs providing rental income and potential growth; less liquid	Medium	Medium–High	Low
Commodities	Physical goods like gold, silver, oil, agricultural products; used for hedging and diversification	High	Medium–High	Medium
Cash	Liquid funds held in savings or money market instruments	Low	Low	High

The term “asset class” wasn’t commonly used until the mid-20th century. Before that, investors simply referred to “investments” or “securities.” The concept of asset class was formalized by Markowitz who demonstrated that risk could be systematically handled by distributing it across a variety of classes instead of selecting individual stocks or bonds.

Historically, equities have returned around 9–10% annually, bonds and real estate 4–5%, gold about 5%, and cash 3%. These differences highlight the importance of diversifying across asset classes to balance risk and optimize long-term returns.

43. Time Horizon

Time horizon is the duration of time an investor anticipates staying in an investment before the person requires to withdraw the investment. It plays an important role in planning investment strategy, risk taking and allocation of assets.

The time horizon can be either short-term, medium-term or long-term.  

• Short run (less than 3 years): Focused on low-risk assets such as cash, fixed deposits or short term bonds.
• Medium-term (3-10 years old): A moderate strategy with a combination of a fixed income and equities.
• Long-term (10 or more years): Increased investment in equities or growth funds to get the greatest returns as the time to overcome volatility in the market remains.

A younger investor can have a time horizon of  30 years and can afford to take large proportions in equities whereas someone intending to purchase a house in 2 years will need to look at investments which are not as risky.

Historically, longer time horizons have allowed equities to outperform over fixed income and cash with an average annual performance of stocks at about 10-12% as compared to bonds at about 6-7% in the previous few decades.

44. Mutual Funds

A mutual fund is an investment vehicle managed by professional fund managers that pools money from multiple investors to collectively invest in a diversified collection of stocks, bonds, money market vehicles or other securities. Your ownership is measured in NAV (Net Asset Value), which represents the value of one unit of the fund.

Why are mutual funds popular? They provide diversification, professional management, affordable entry, and easy liquidity, making them ideal for both beginners and long-term wealth creation.

Lets understand the basic working of mutual funds. 

Mutual funds originated in the US in the 1920s and reached India in the late 1960s with UTI being the first fund. MFs have ever since become a popular preference among small investors and large investors.

Based on asset allocation mutual funds can be classified in five major types. 

• Equity Funds: It consists of mostly stocks, high risk, high return.
• Debt Funds: Bonds and fixed income with less risk and consistent returns.
• Hybrid Funds: Consists of stock and bonds.
• Index Funds: Track an index in the market such as Nifty 50.
• Sector/Thematic Funds: Specializes in a certain field such as technology or energy.

In India, the number of investors in MFs has increased to more than 12 crore. Historically, long-term results of equity funds have been about 12-15% CAGR, debt funds have been about 68% and hybrid funds have been about 812%.

45. Bond

A bond is a fixed-income debt instrument where an investor lends money to a government, corporation, and other entities for a certain time period at specified interest rate, known as a coupon. The issuer guarantees to return the principal amount ( initial value invested) at the maturity ( end of contract ).

Let’s understand the working of bonds with an example. 

• You buy a ₹10,000 bond with a 6% annual coupon and 5-year maturity.
• You receive ₹600 every year for 5 years.
• After 5 years, you get back your ₹10,000 principal.

Bonds allow entities to raise capital and investors to get stable income with generally lower risk compared to stocks. 

The term “bond” comes from the word “binding” or “to bind”. Buying a bond is an agreement that binds the issuer to pay you interest (coupon) at regular intervals and return the principal at maturity. In India, government bonds have been issued since the 19th century, and corporate bonds became popular after the 1990s financial reforms.

Bonds are of different types based on issuer, coupon and convertibility.

Bond Type	Issuer	Risk Level	Features	Example
Government Bonds	Government	Very Low	Safe, regular interest payments, principal returned at maturity	Indian Government 10-year bond
Corporate Bonds	Companies	Moderate to High	Higher returns than government bonds, higher risk	Reliance Industries 5-year bond
Zero-Coupon Bonds	Government / Companies	Low to Moderate	No periodic interest, sold at discount, redeemed at face value	Any 5-year zero-coupon bond
Convertible Bonds	Companies	Moderate	Can be converted into company shares after a set period	Tata Motors convertible bond
Tax-Free Bonds	Government / Institutions	Low	Interest income exempt from taxes, popular with conservative investors	NHAI Tax-Free Bond

Who should invest in bonds? Bonds are best suited for conservative investors who are looking for steady and fixed income with low risk or the investors looking for diversification. 

46. Exchange Traded Funds (ETF)

An Exchange Traded Fund (ETF) is an investment fund, which contains a diversified portfolio of securities, including stocks, bonds or commodities, and trades on a stock exchange like an ordinary share.

What’s the purpose of an ETF? 

The purpose of an ETF (Exchange-Traded Fund) is to give investors an easy and cost-effective method to invest in a diversified portfolio of assets without necessarily investing in the assets separately.

The first ETF was launched in 1990 called Toronto Index Participation Shares (TIPS), which tracks the Toronto Stock Exchange 35. ETFs were initially designed to track stock index, but later on it diversified into bonds, commodities, sectors, and international markets.

Lets understand the key features of ETFs.

• Traded Like Stocks: You may trade the units on an ETF as if it were a stock at any point throughout the market hours.
• Diversification: with just one ETF, one may have exposure to many assets, which lowers the individual stock risk.
• Low cost: ETFs are characterized by lower management fees than mutual funds.
• Transparency: Holdings are normally reported on a daily basis.
• Flexibility: It is appropriate both in long term investing and short term trading.

Popular ETFs include GOLD ETFs, SPDR S&P 500 ETF (SPY) and Nifty 50 ETF etc. 

47. Index Funds

An Index Fund is a type of mutual fund, or exchange-traded fund (ETF), specifically designed to track the performance of a given market index such as Nifty 50, Sensex, or S&P 500. They do this by investing in the same securities as the index, in the same proportions, thereby offering broad market exposure and diversification. 

The purpose of index funds is to offer investors low-cost, diversified, and market-average returns without the risk and expenses of active fund management. It aims at long-term wealth creation with minimal effort.

The index began in 1976 by John C. Bogle of Vanguard which tracks S&P 500. The first index fund was launched in India in 1998 with the UTI Nifty Index Fund. Since then, it has become one of the most preferred and reliable investment vehicles in the world.

Key features of index funds. 

• Passive Management: It replicates the index without active stock selection.
• Cost-Effective: Extremely low expense ratios relative to actively managed funds.
• Diversified Exposure: Single investment spreads risk across multiple companies/sectors.
• Large Transparency: Easy to monitor since holdings mirror the underlying index.
• Wealth Builder: Designed for steady, long-term, market-matching growth.

Due to these features, index funds have become extremely popular worldwide. By 2024, index funds and ETFs held almost half of all U.S. mutual fund and ETF assets in international assets across the globe, equaling over $15 trillion. Passive investing is also increasing at a very rapid rate in India where index funds and ETFs have overtaken ₹2.5 lakh crore AUM.

48. Growth Stocks

Growth stocks are shares of a company which are expected to grow at a higher rate as compared to the market. Such companies tend to concentrate on growth, innovation and market control rather than paying dividends. Investors usually buy these shares expecting share price to increase by a wide margin in future.

Few examples of growth stocks are Tesla, Amazon, Netflix, Apple, Nvidia, Avenue Supermarts (DMart), Info Edge, Zomato, Nykaa, and HDFC Life. 

The Key Characteristics of Growth Stocks are mentioned below. 

• High Revenue & Earnings: Strong, consistent growth year after year.
• Reinvestment of Profits: Money is used to expand rather than pay dividends.
• High Valuation: Investors pay more today for expected future earnings.
• Innovation & Disruption: Often market leaders in new industries.
• Volatility: Prices can swing widely due to future growth expectations.

Investors buy growth stocks primarily for three main reasons. 

• High Return Potential: If the company keeps growing, stock prices can multiply.
• Capital Appreciation: Great for wealth building over the long term.
• Exposure to Innovation: You invest in businesses shaping the future.

But, who should invest in growth stocks? 

Growth stocks are well suited for long-term investors who have a horizon of 5 years or more and have the ability to withstand market fluctuations. 

49. Preferred stock

The preferred stock (or preference shares) is a type of ownership in a company that has characteristics of both, equity and debt. Preferred stock holders are given priority over common stockholders in both the dividends payment and the distribution of assets in case the company is liquidated. But they normally lack the right to vote as common shareholders.

The concept of preferred stock originated in the 1600s with companies like the Dutch East India Company. It gained prominence in the 1800s railroad boom in the U.S., where companies needed massive funding and offered fixed dividends to lure investors who wanted safety with some equity exposure.

Let’s discuss different types of preferred shares.

• Cumulative Preferred: Unpaid dividends have to be paid out first before the common stockholders.
• Non-Cumulative Preferred: Missed dividends are not carried forward.
• Convertible Preferred: Can be changed into common stock.
• Callable Preferred: Company may redeem (buy back) the stock after some date.

Where to buy preference shares? Few companies list their preference shares on exchanges, where you can buy them as normal stocks. Preference shares usually have “PREF” or “PS” symbols. These preferences often have fixed dividend rate of 8%

50. Dollar-Cost Averaging

Dollar-Cost Averaging is a form of investing that involves investing a fixed amount of money at each cycle (weekly, monthly, or quarterly) irrespective of the price of the asset. DCA smooths out  the impacts of volatility by buying more at low prices and less at high prices.

How does it help investors? It helps by spreading risk over time and builds wealth gradually. This strategy is ideal for beginners and salaried investors.

Suppose you decide to invest ₹5,000 every month in a mutual fund:

• Month 1: Price per unit = ₹50 – You buy 100 units.
  
• Month 2: Price per unit = ₹25 – You buy 200 units.
  
• Month 3: Price per unit = ₹100 – You buy 50 units.

In 3 months, you invested ₹15,000 and bought 350 units at an average cost of ₹42.86 per unit, which is lower than the simple average price ₹58.33.

51. Long term investing

Long-term investing is a strategy in which investors buy financial instruments like stocks, bonds, mutual funds, ETFs or real estate with the aim of holding it for at least 5 -10 years and longer, to enjoy the effects of compounding, growth and wealth building. This focuses on fundamental analysis. 

Let’s understand it with an example. 

If you invest ₹1,00,000 in an equity fund growing at 12% CAGR

• In 10 years, it will be = ₹3,10,000.
• In 20 years, it will be = ₹9,64,000.
• In 30 years, it will be = ₹29,95,000.

This is the power of long term compounding. The more the time period of holding, the more the compounding works in your favour. 

Key Features of long term investing.

• Concentrate on wealth building in the long run and not in the short run.
• Benefits from the power of compounding, reinvested earnings generate their own earnings.
• Eliminates market risk due to market volatility, as markets tend to be upward  in the long-term.
• Encourages disciplined investing by avoiding panic selling during downturns.

Examples of some long term assets include Stocks of quality companies,  Index funds, ETFs, Mutual funds, REITs, Government bonds & PPF.

52. Day Trading

Day trading is the practice of buying and selling financial instruments such as Stocks, options, futures, forex, cryptocurrencies within the same trading day to make profits from short-term price movements. Trades can last from seconds to hours, depending on strategy.

Lets understand it with simple example

• On 8th August, 12:20 PM you short sold Tata Motors at 670.
• The stock drops up to ₹634 by afternoon.
• You sell it on the same day at 03:00 PM and earn 36 profit per share (before charges).

This approach requires fast trade execution, technical analysis, and disciplined risk management to limit losses and capitalize on intraday market movements. 

Day trading began with floor trading in early stock exchanges but became popular in the 1980s with electronic trading. The 1990s internet boom allowed individual traders to trade stocks in real time, making day trading widely accessible. 

In the stock market, day trading consists of a significant portion of trading activity. Approximately, 20 percent of retail traders in America are day traders, executing multiple trades every day, and they contribute about 12 percent of the daily volume of trade.

53. Swing Trading

Swing trading is a speculative trading strategy where a trader holds a position from short to medium term, typically from a few days to several weeks, aiming to profit from price swings. 

Unlike day trading where you have to square off the position within a day, swing allows you to hold the trade more than a day. 

Tools used in swing trading.

• Technical Indicators: Such as RSI, MACD, Bollinger Bands, Fibonacci retracements.
• Price Action Patterns: Head & Shoulders, Double Tops/Bottoms, Flags, Pennants, support and resistance.
• Volume Analysis: Helps confirm strength of a swing. 

How to do swing trading? There are five major steps to do swing trading.

• Trend Identification: Identify the trend using dow theory or tools like Moving averages (EMA, SMA), trendlines, and Relative Strength Index (RSI).
• Entry Points: Plan for an entry point such as in an uptrend enter when price pulls back to its support.
• Exit Points: Plan exit before entering the trade, usually resistance levels, trend reversal signals, or profit targets.
• Time Frame: As swing trade lasts for more than a day, the timeframe is typically 1-hour, 4-hour, or daily charts.

Swing trades are generally held for 2 to 14 days, depending on market conditions and individual strategies. The chart above shows the buying date of 4 Aug and Exit date after 30 days. Experienced swing traders often achieve a win rate between 35% and 50%, with returns ranging from 12% to 45% per trade.

54. Profit Margin

Profit margin is one of the financial ratios that measures how much of a company’s revenue is converted into profit. It shows the efficiency of a company in managing its expenses relative to its revenue. Increased profit margins are associated with increased profitability and cost management. 

There are three main types of profit margin. 

• Gross Profit Margin: Calculates the portion of revenue remaining after the deduction of the cost of goods sold (COGS).
  Gross Profit Margin (%) = (Revenue – COGS / Revenue)×100
  
• Operating Profit Margin: Measures profit after subtracting operating expenses like salaries, rent but before interest and taxes.
  Operating Profit Margin (%) = Operating Profit / Revenue×100
  
• Net Profit Margin: Measures the final profit after all expenses, taxes, and interest. This is the most commonly used profit margin.
  Net Profit Margin (%) = Net Profit / Revenue×100

How to interpret profit margin for analysis? 

• High Profit Margin: Indicates strong cost management and pricing power.
• Low Profit Margin: May indicate high costs, low pricing, or inefficiency.

Profit margins differ across sectors such as IT, pharma, software, FMCG usually have high profit margin, whereas, Retail, auto, commodities, infrastructure has low profit margin. 

55. Current Ratio

The Current Ratio is a liquidity ratio which indicates the capability of a business to fulfill its short-term liabilities (debts and liabilities payable within a year) with its current assets (cash, inventory, receivables, etc.). It tells the investors and creditors whether the company possesses sufficient short-term liabilities to meet the short-term obligations.

The formula to calculate the current ratio is as follows.

• Current Ratio = Current Assets​ / Current Liabilities

Where:

Current Assets = Cash + Accounts Receivable + Inventory + Marketable Securities + Other Short-term Assets

Current Liabilities = Accounts Payable + Short-term Debt + Accrued Expenses + Other Short-term Liabilities

Lets understand it with an example. Suppose, a company has a current assets of ₹50 lakh and  current liabilities of ₹25 lakh

Current Ratio = 50 / 25 = 2

The company has ₹2 of current assets for every ₹1 of current liabilities, indicating strong short-term financial health.

How to interpret the current ratio for analysis.

Current Ratio	Interpretation
> 1	The company can cover its short-term obligations comfortably.
= 1	The company’s current assets are just enough to cover short-term liabilities.
< 1	Companies may struggle to meet short-term obligations.

Usually 1.5-2 current ratio is considered healthy, but it varies across industries. A lower ratio may be acceptable for Retail or FMCG companies due to faster inventory turnover. Whereas higher ratio may be preferable for Manufacturing companies due to larger inventory and receivables.

According to the RBI Annual Report 2024, the average current ratio for Indian listed companies is around 1.6.

56. Debt-to-Equity Ratio

The Debt-to-Equity Ratio (D/E) is a financial metric that compares a company’s total debt to its shareholders’ equity. This ratio indicates how much debt a company uses to finance its assets relative to the owner’s equity. 

Formula to calculator Debt-to-Equity Ratio = EquityTotal Debt ​/ Shareholders

Lets understand it with an example,suppose a company has total Debt of ₹50 crore and shareholders’ Equity of ₹100 crore

D/E Ratio = 50/100 = 0.5

For every ₹1 of equity, the company has ₹0.50 of debt

How to interpret the D/E ratio for analysis?

D/E Ratio	Interpretation
<1	The company uses more equity than debt, considered low risk.
=1	Balanced use of debt and equity financing.
>2	The company relies heavily on debt, higher financial risk.

Debt-to-Equity Ratio varies significantly across sectors depending upon their requirement. The Financial Sector typically exhibits higher D/E ratios, whereas technology and healthcare maintain low Debt-to-Equity Ratio. 

57. Earnings per Share (EPS)

Earnings Per Share ( EPS ) is an important financial ratio representing the portion of a company’s profit allocated to each outstanding share of common stock. It shows the profitability of a company on a per-share basis and investors largely rely on it as a measure of financial performance and comparison of companies.

Formula to calculate

EPS = Net Profit after Tax – Preferred Dividends​ / Weighted Average Outstanding Shares.

For example, if a company has a net income of Rs. 10 lakh, preferred dividends of Rs. 2 lakh, and 4 lakh common shares outstanding.

EPS = (10,00,000-2,00,000) / 4,00,000 = Rs.2 per share

Why does EPS matter? It shows profitability per share and helps investors compare companies of different sizes. It is also used in valuation metrics like Price-to-Earnings (P/E) ratio

EPS emerged as a key factor in financial metrics in the 20th century, when stock markets and corporate reporting became more structured.

There are two types of EPS.

• Basic EPS: Uses the actual number of shares outstanding in their calculation.
• Diluted EPS: Accounts for potential dilution from convertible securities like options, warrants, and convertible bonds. This gives a more conservative measure.

EPS is widely used as a fundamental indicator, but using EOS alone is not reliable, always combining it with other aspects such as P/E ratio, P/B ratio, etc. 

58. Expense Ratio

Expense ratio is the annual fee that fund charges to its investors for managing their portfolio. It is expressed as a percentage of the fund’s assets under management (AUM). It includes costs such as management fees, administrative expenses, marketing, and legal fees.

The formula to calculate expense ratio is as follows.  

Expense Ratio (%) = (Average Assets Under Management/Total Fund Expenses)​×100

There are two main types of expense ratio.

• Gross Expense Ratio: Total expenses before any fee waivers or reimbursements.
• Net Expense Ratio: Actual cost to the investor after fee waivers or reimbursements.

Higher expense ratio reduces the profit. In long term investment, even small changes have significant impact. 

Typical expense ratio range in India. 

Fund Type	Expense Ratio Range
Equity Mutual Funds	1% – 2.25%
Debt Mutual Funds	0.8% – 2%
Passive Index Funds	Usually below 0.5%

SEBI has set maximum expense ratios based on the fund’s assets under management (AUM). Equity funds with an AUM exceeding ₹500 crore have a maximum expense ratio of 1.25%, whereas those with an AUM between ₹100 crore and ₹500 crore have a cap of 1.75%.

59. Fundamental Analysis

Fundamental analysis is a method to determine the real value (intrinsic value) of a stock by examining the financial health, industry position and the economy of the company. The goal of fundamental analysis is to check if a stock is undervalued or overvalued allowing investors to make informed decisions for the long-term.

There are two major types of fundamental analysis.

• Qualitative Analysis (Soft Factors): It focuses on quality of management, business model, competitive advantage (moat), and the general situation in the industry.

• Quantitative Analysis (Numbers & Data): Focuses on financial statements like the balance sheet, income statement, cash flow and uses ratios and metrics like EPS, P/E, P/B, ROE etc, to evaluate profitability, efficacy, and valuation.

Fundamental Analysis began after the 1929 crash, when speculation had ruined many investors. In 1934, Benjamin Graham and David Dodd introduced it through their book Security Analysis, teaching how to discover the true value of a company based on its earnings, assets, and balance sheets. It was later made famous by Warren Buffett who was the student of Graham when he used it to select good businesses to generate long term wealth.

Key Steps in Fundamental Analysis

• Economic Analysis: Review macroeconomic indicators such as GDP growth, interest rates, inflation, and policy changes that affect sectors and companies.
• Industry Analysis: Compare the business sector trends, market shares, and competitive position, taking factors such as the growth opportunities and regulatory environment.
• Company Analysis: Examine the financial status using key statements and assess metrics like earnings per share (EPS), profit margin, return on equity (ROE), and debt ratio.

Studies show that over the long term, stocks selected using fundamental analysis have historically outperformed speculative picks. Nifty 50 has returned around 12–13% annually since its inception in 1996, again reflecting the power of investing in fundamentally sound businesses.

60. Technical Analysis

Technical analysis is a method for forecasting future prices of securities like stocks, currencies, or commodities based on past trading history of the price and volume, typically displayed on a chart. The purpose of technical analysis is to identify opportunities using charts, patterns, and indicators.

How does technical differ from fundamental? 

Feature	Technical Analysis (TA)	Fundamental Analysis (FA)
Focus	Price, trends, and charts	Company financials and intrinsic value
Goal	Predict short-term price movements	Identify long-term investment opportunities
Tools	Charts, indicators (RSI, MACD, Moving Averages)	Financial statements, ratios, earnings reports
Timeframe	Short to medium-term	Long-term (years)

But how did the concept of technical analysis start?

• The idea of technical analysis began in the late 19th century by Charles Dow when he realized that prices move in patterns. 
• Later in the 1920s and 1930s, Richard Schabacker and Ralph Nelson Elliott added to it and developed the concepts of chart patterns and the Elliott Wave Theory. 
• Candlestick charts that have become extremely popular were invented in Japan during the 1700s.

Technical analysis has since developed along with technology, modern traders employ computer usage and complex indicators,

Lets understand three core principles of Technical Analysis. 

• Price Discounts Everything: All news, fundamentals and psychology are reflected in market price.
• Prices Move in Trends: Markets either move upwards, downwards or in a sideways way.
• History Repeats Itself: The psychology of human beings (fear and greed) gives rise to repetitive chart patterns.

To apply these principles, traders use tools and techniques such as support, resistance, trendlines, chart pattern, candlestick pattern, indicators, dow trend and different timeframes. 

Study shows that more than 70% of active traders depend on technical analysis as the main tool when making a trading decision. Although it will not guarantee profit, it will assist traders to determine high probability setups and risk management in a much better way.

61. Moving Average

A Moving Average is a tool used in technical analysis that shows the average price of a stock or asset over a set period, smoothing out short-term ups and downs to make the overall trend easier to see. The term moving average is used because the average keeps moving forward as new prices are added and old prices drop out, showing the trend over time.

There are three main types of moving averages based on importance given to recent prices in the calculation. 

• SMA (Simple Moving Average): All prices weighted equally; smooths trends, slower to react.
• EMA (Exponential Moving Average): More weight to recent prices; reacts faster, good for short-term trading.
• WMA (Weighted Moving Average): Custom weights with more importance to recent prices; precise and responsive.

Moving Averages have been used for over a century to help traders identify trends. They started in the early 1900s as simple averages to smooth price data, became popular after the 1929 crash, and evolved with tools like the Exponential Moving Average (EMA) in the 1970s. Today, they are a standard tool in both short-term and long-term trading strategies.

How do traders usually use moving averages?

As trend identification tool

• Price above MA = Uptrend
• Price below MA = Downtrend
• Price around MA = Sideways market

As support and resistance: MA can act as dynamic support in uptrends and resistance in downtrends.

Crossovers entry signals: 

• Golden Cross: Short-term MA crosses above long-term MA → Bullish signal.
• Death Cross: Short-term MA crosses below long-term MA → Bearish signal.

The popular moving averages used by traders include 5, 10, 20, for short-term 50 for medium term and 100, 200 for long term. Studies have shown that using the 200-day SMA can accurately indicate long-term trend direction 70–80% of the time in major stock markets.

62. Head and Shoulders Pattern

The Head and Shoulders pattern is a technical analysis chart pattern used to predict trend reversals. It signals that the current trend is likely to end and a new trend may begin.

There are two types of Head and Shoulders pattern. 

• Head and Shoulders Top (Reversal from Uptrend to Downtrend)
• Inverse Head and Shoulders (Reversal from Downtrend to Uptrend)

The Head and Shoulder pattern was first documented in the early 20th century during development of technical analysis. In the 1920s and 1930s, traders started to study the stock charts to determine the repeating patterns that could determine the reversal of the trend. It gained popularity by the theories of Charles Dow and subsequently of Ralph Nelson Elliott and other pioneer technical analysts who defined chart patterns.

Components of the Head and Shoulders Pattern

Head and Shoulders Top: This pattern forms on top and indicates trend reversal from bullish to bearish.

• Left Shoulder (LS): Price rises to a peak and then retraces.
• Head: Price rises higher than LS, forming a new peak, then retraces again.
• Right Shoulder (RS): Price rises again but does not exceed the head before falling.
• Neckline: A line connecting the lowest points of the two retracements (between LS & Head, Head & RS) which can be horizontal or slightly sloped.

Inverse Head and Shoulders: This pattern forms on bottom and indicates trend reversal from bearish to bullish.

• Left Shoulder: Price falls to a low, then rises.
• Head: Price drops further, forming a lower low.
• Right Shoulder: Price rises, then falls to a level similar to LS.
• Neckline: Connects highs between LS-Head and Head-RS.

What is the psychology behind this pattern? On top when buyers’ optimism starts fading, buyers lose control and sellers take over making the price reverse. Whereas, it is exactly opposite in inverted head and shoulder where buyers take control.

How do traders actually trade this pattern? 

By taking a long or short position after the break of the H&S pattern neckline.

Step	Head and Shoulders Top (Bearish)	Inverse Head and Shoulders (Bullish)
Entry	Price breaks below the neckline → enter short/sell	Price breaks above the neckline → enter long/buy
Stop Loss	Place above the right shoulder	Place below the right shoulder
Target Price	Measure distance from head to neckline and project down from breakout	Measure distance from head to neckline and project up from breakout

Studies by tradervue  indicate that the H&S pattern has a success rate ranging between 60% and 80%. The variation depends on factors such as market conditions, time frames, and asset classes

63. Volume-Weighted Average Price (VWAP)

Volume-Weighted Average Price (VWAP) is a technical indicator used in trading and investing to measure the average price at which a security has traded throughout a day, weighted by the volume of each trade. It gives the ratio of the total value traded (price times volume) to the total volume traded over a specific time period, typically one trading day.

VWAP was introduced in the 1970s to institutional traders to measure the efficiency of trade. It grew through electronic and algorithmic trading in the 1980s and became a standard across the world in the 1990s and is commonly used nowadays in intraday trading and execution.

Let’s discuss the key features of VWAP

• Volume-Weighted: Calculates the average price based on both price and trade volume.
• Intraday Indicator: Resets daily, hence used mainly for intraday trading.
• Benchmark Tool: Helps traders measure execution efficiency and market impact.
• Trend Indicator: Price above VWAP = bullish, price below VWAP = bearish.
• Support & Resistance: Acts as dynamic intraday support or resistance.
• Widely Used: Popular among institutional and retail traders, and in algorithmic trading.

VWAP serves as both a trading benchmark and a trend indicator, helping traders of all sizes balance execution efficiency with market direction, making it an essential tool for effective intraday decision-making.

64. Stock Option

Stock options are financial instruments that give an investor the right, but not the obligation, to buy or sell a stock at a predetermined price within a specified period. They are widely used for trading, hedging, and speculation.

There are two main types of options

• Call Options: Gives the holder the right to buy the stock.
• Put Options: Gives the holder the right to sell the stock.

Stock options date back to the 1600s in the Netherlands, when merchants used contracts to buy and sell tulip bulbs at future dates. Modern options trading began in 1973 with the establishment of the Chicago Board Options Exchange and the development of the Black-Scholes pricing model, which standardized option valuation. In India, stock options were introduced in the early 2000s on the NSE, opening the market to regular investors.

Why Investors or Trader Trade Options? There are four main reasons to trade options. 

• Hedging: Protecting a stock portfolio from price declines by using put options.
• Speculation: Profiting from stock price movements without buying the stock.
• Leverage: Options allow executing large positions with small capital.
• Income Generation: Selling options (writing calls or puts) to earn premiums.

Different strategies involved in stock options include straddle, strangle, spreads, butterfly and iron condor. 

As of FY24, the number of options traders in India was estimated to be 85.7 lakh (8.57 million), which is much higher than it was in FY22 (42.2 lakh), whereas FnO market turnover reached a record ₹8,740 lakh crore (approximately $1.1 trillion) in March 2024. 

65. Futures

Futures are financial contracts where two parties agree to buy or sell an asset such as stocks, commodity, currency  at a fixed price on a future date. Futures contracts are traded on regulated exchanges like NSE, CME, NYSE which standardize the contract size, expiry. Futures are used by traders for hedging and speculation.

Based on different asset types, the futures can be classified as follows.

• Commodity Futures: Oil, Gold, Silver, Wheat, Coffee.
• Currency Futures: USD/INR, EUR/USD.
• Index Futures: Nifty, S&P 500.
• Stock Futures: Reliance, TCS, Apple.
• Interest Rate Futures: Bonds, Treasury Bills.

The modern futures market began in 1848 with the establishment of the Chicago Board of Trade (CBOT), which introduced standardized contracts for agricultural commodities like corn and wheat. Over time, the market expanded beyond agriculture to include metals, oil, currencies, and stock indices, making futures a versatile financial instrument. Today, they are traded globally and widely used for both hedging risks and speculation.

Key features of futures:

• Leverage: You can buy large quantities by paying only a margin. It amplifies both profits and losses. 
• Standardization: Futures contracts are standardized in terms of quantity, quality, and expiry, making them exchange-traded and transparent.
• Hedging & Speculation: Futures contract protects against price risk also used for speculation.
• Expiry Date: Futures have a defined expiry such as current month ( expires in one month ), near month ( expires in two months ) and far month ( expires in three months) after which positions must be squared off or settled.

As the above image shows, 500 shares of reliance in current expiry futures need only 1.23 L, buying it for holding long term will need 6.93L. Due to this leverage, the number of retail traders in the F&O segment has nearly doubled in two years, indicating increased accessibility and interest.

66. Buyback

A buyback, also called a share repurchase, is a corporate action where a company purchases its own outstanding shares from the existing shareholders.

Why Do Companies Do Buybacks? There are four main reasons for buyback.

• Increase Share Value: Buying back shares increases the share price, which in turn increases the earnings per share (EPS) which attracts investors.
• Signal Confidence: Buying back shows that management is optimistic about the company’s growth. 
• Return of Cash to Shareholders: Instead of paying dividends, companies return money via buybacks.
• Tax Efficiency: In some cases, buybacks are more tax-efficient than dividends for shareholders.

Buying back shares is often a good signal for companies and investors.

Methods of Buyback. There are three main methods of buyback.

• Open Market: Company buys its own shares from the stock exchange.
• Tender Offer: Company offers to buy back shares directly from shareholders at a premium price.
• Book-building / Dutch Auction: Shareholders bid at which price they want to sell, and the company buys at a discovered price.

Infosys is the prime example, where he announces India’s largest buyback worth ₹18,000 crore, offering a 19% premium over the prevailing market price.

67. Options Greeks

Option Greeks are the key financial matrix which measures the sensitivity of an option price to various factors affecting the underlying and the option itself. The primary Greeks that traders use to assess and manage risk in options trading are Delta, Gamma, Theta, Vega, and Rho.

Delta (Δ):  This measures the sensitivity of option price. How much the option price changes if the underlying stock moves by  ₹1

For example, a call option with delta 0.6 will gain ₹0.60 if the stock rises by ₹1.

• Call options = Delta ranges from 0 to +1.
• Put options = Delta ranges from 0 to –1.

Gamma (Γ): This measures the rate of Change of Delta. It shows how much the delta itself changes when the stock moves ₹1. High gamma means delta will shift quickly, common in near-expiry ATM options which helps traders understand how fast risk is increasing.

Theta (Θ): It shows the time decay,  how much the option loses in value each day as expiry approaches.

If theta = –5 means the option will lose ₹5 in value daily if all else stays constant.

Time decay works against buyers and favours sellers.

Vega (ν): Measures volatility, how much the option price changes if implied volatility (IV) rises 1%. If Vega is 0.2 means the option gains ₹0.20 if IV rises 1%.

Buyers like increasing volatility to gain profit from increasing premiums. Whereas  sellers prefer stable or falling volatility.

Rho (ρ): Reflects interest rate sensitivity by showing how much the option price changes if interest rates move 1%. It usually has a small impact, except for long-dated options.

The concept of options greeks was introduced while developing options pricing models in the 20th century. Black-Scholes model, developed by Fischer Black and Myron Scholes in 1973 provided a mathematical formula to price options. Based on this, Robert Merton introduced the Greeks, Delta, Gamma, Theta, Vega and Rho were obtained to assess Sensitivity to price, time volatility, interest rates.

Why do Greeks Matter and where to track them? The greeks are available in the option chain of particular stocks or indexes. By tracking greeks, traders can manage risk, make informed strategies, and adjust positions more effectively. Most option sellers watch for Greeks for making trading strategies and risk management. 

68. Going Long

Going long is a trading or investment strategy where an investor buys an asset with the expectation that its value will rise over time, allowing them to sell it later at a higher price and make a profit. 

Suppose you buy 50 shares of ABC at ₹200 = Total investment ₹10,000

Price rises to ₹250 and you sold Sell 50 shares at 250 = ₹12,500

Profit = 12,500 – 10,000 = 2500.

When to Go Long? The best time to enter is when the price is moving up, technicals giving buy signals or companies have strong fundamentals.

• Price Trend:  Watch if the stock is in uptrend such as making higher high and higher low or trading above key moving average. 
• Technical Signals: When indicators like Moving Averages, RSI, MACD suggest bullish momentum.
• Fundamental Signals: If the company has strong earnings, growth potential, positive news.

Going long involves all kinds of trading such as intraday, swing and positional. This strategy offers the opportunity for capital gains and sometimes dividend income but carries the risk of loss if prices decline.

69. Arbitrage 

Arbitrage is the practice of simultaneously buying and selling the same asset in different market places to profit from price difference. It is considered a risk-free profit opportunity as traders use market inefficiency. 

Let’s understand it with an example, how it works. 

Suppose, stock XYZ is trading at ₹100 on the NSE and the same stock is trading at ₹102 on the BSE.

• A trader can buy 100 shares on NSE at ₹100 = Total cost ₹10,000.
• Sell 100 shares on BSE at ₹102 = Total revenue ₹10,200.

Profit is ₹200 without any directional risk, ignoring transaction costs.

The concept of arbitrage belongs to the 17th–18th Century with the rise of stock exchanges. Over time arbitrage continued evolving, and by the late 20th and early 21st century High-frequency trading (HFT) and computer algorithms allowed instantaneous arbitrage across global markets, making opportunities shorter-lived but more systematic.

There are five different types of arbitrage. 

• Spatial Arbitrage (Market Arbitrage): Taking advantage of price disparities in different exchanges/markets (as in NSE vs BSE).
• Triangular Arbitrage: Applied in forex markets through taking advantage of the exchange rate variations of three currencies.
• Statistical Arbitrage (Stat Arb): Ensures that quantitative models identify temporary mispricing of related assets, frequently done by HFTs.
• Merger Arbitrage (Risk Arbitrage): Appears when traders are speculating on the result of mergers or acquisitions (e.g. buying stock of the target company at a discount, bets are made as a result of the deal being completed).
• Convertible Arbitrage: Arbitraging convertible bonds and underlying stock to capitalize on a misprice.

In 2024, arbitrage mutual funds in India delivered on average 8% return, the best in about nine years. The Kotak Equity Arbitrage Fund, for example, gave  7.59%.

70. Going Short

Going short, also known as short selling, is the trading strategy where traders sell the stocks or other financial instruments they don’t currently own, expecting the price to fall, so that they can buy it back at a lower price.

Let’s understand it with an example.

• A trader shorts CDSL at ₹1,560, which means the trader borrowed stock from a broker and sold the shares for ₹1,560.
• Stock  falls to ₹1440. The trader buys back shares at ₹1440 and returns them to the broker.
• Profit: ₹1560 − ₹1440 = ₹120
• If Stock A rises to ₹1600 → Loss: ₹40.

Short selling started in 1609 where traders borrow shares of tulip to sell them, hoping to buy them back at lower price. Short selling became common in London and later in the United States as stock exchanges developed.

What is the common usage of short selling?

• Speculation: Profit from anticipated price declines.
• Hedging: Offset potential losses in long positions.
• Arbitrage & Advanced Strategies: Used in pairs trading, options strategies, and short-term market plays.

Most traders prefer short selling as down side moves are often fast. In June, 2024, short sellers profited nearly $5 billion from a sharp three-day decline in Nvidia’s stock price,

71. High Frequency Trading (HFT)

High Frequency Trading (HFT) is a specialized type of algorithmic trading which uses powerful computer programs, advanced algorithms, and high speed data infrastructure to make a large amount of trades in fractions of a second or sometimes in a few micro seconds. 

The purpose of HFT is to profit from tiny price movements and market inefficiencies which is very difficult to do manually. 

HFT emerged in the late 1990s and early 2000s, enabled by electronic trading platforms and deregulation of financial markets. It has since grown to account for a substantial portion of trading volume in equities and derivatives globally.

But, how actually does HFT profit from the market? HFT trading involves a completely different strategy compared with manual trading.  Following are the common HFT strategies.  

• Market Making: It involves continually quoting buy and sell prices to gain profit due to a bid-ask spread.
• Statistical Arbitrage: The long and short positions are simultaneously used to exploit the statistical mispricing or cointegration of securities.
• Latency Arbitrage: The use of time differences between markets or exchanges in order to take advantage of price disparities.

The global HFT market is expected to reach USD 16.03 billion by 2030, growing at a CAGR of 7.7%. 

72. Algorithmic Trading

Algorithmic trading also known as algo trading is the use of computer programming and algorithms to execute trades automatically. It minimizes human intervention and executes trade faster than  humans. The main purpose of algo trading is to eliminate emotions, following trade plans and improving trade execution. 

Algorithmic trading started in 1970 with the growth of the electronic trading system. The real boom came in the 1990s with the development of HFTs and improvement in computing power, allowing trades to execute under milliseconds. 

What are the tools required for algo trading? 

• Programming Languages: Such as Python, R, C++, Java
• Trading Platforms: Any brokers with API support such as Zerodha Kite Connect, NinjaTrader and MetaTrader.
• Libraries & Frameworks: Pandas, NumPy, Backtrader, Zipline

How to do algo trading? There are 6 major steps of doing algo trading.

The global algo trading market is expected to grow to $65.2 billion by 2032, growing at a CAGR of 15.9%. Whereas, in India algo trading market is expected to grow $2.31 billion by 2030, growing at a CAGR of 14.3%.

73. AI Trading

AI Trading refers to the use of artificial intelligence systems, such as machine learning and complex algorithms, in order to automate, optimize and improve the trading decision-making in financial markets.

What is the difference between AI trading and Algo trading?

Feature	Algo Trading	AI Trading
Definition	Executes trades based on predefined rules or algorithms	Uses AI/ML to learn patterns, predict, and adapt trading decisions
Decision-Making	Rule-based; follows fixed instructions	Adaptive; learns from data and market behavior
Complexity	Relatively simple	More complex, involves predictive modeling and pattern recognition
Data Used	Structured data (prices, volume, indicators)	Structured + unstructured data (prices, volume, news, sentiment, reports)
Goal	Speed, efficiency, exploiting known patterns	Prediction, optimization, discovering new opportunities
Adaptability	Cannot adapt unless manually updated	Continuously adapts based on new data and trends
Example	Buy if 50 EMA crosses above 200 EMA	Predicts which stocks are likely to rise tomorrow based on multiple factors

AI concepts in trading started in the 1990s where hedge funds and banks began using expert systems and rule-based AI programs to assist in decision-making.These systems could process large amounts of market data faster than humans and provide trade suggestions. With the advancement in deep learning, reinforcement learning, and NLP, AI is able to predict trends, manage risk, and even execute trades autonomously.

Popular strategies involved in AI trading include the following.

• Mean Reversion: AI is used to forecast the occurrence of a stock returning to its average price.
• Sentiment Analysis Trading: Applies NLP to trade on sentiment of the news or social media.
• Statistical Arbitrage: AI seeks to identify pricing inefficiencies of similar properties.
• High-Frequency Trading (HFT): Trades in thousands of securities each second to make small gains.

Approximately 86% of hedge fund managers employ generative AI tools for data processing, predictive analytics, algorithmic trading, and fraud detection. The global AI trading market is expected to reach approximately $69.95 billion by 2034, expanding at a CAGR of 20.04%.

74. Real Estate Invested Fund (REIF)

A Real Estate Investment Fund (REIF) is an investment vehicle that pools money from investors to invest in income generating real estate such as residential, commercial or industrial properties. It is similar to mutual funds but invests in real estate rather than in stocks or bonds.

REIFs have been around since the late 20th century as a way for investors to gain exposure to real estate without directly owning properties. Globally, they evolved alongside REITs (Real Estate Investment Trusts), but with a focus on private or less liquid real estate investments.

There are five main key features of the Real Estate Invested Fund (REIF) such as diversification, professional management, income generation,liquidity and minimum investment. 

• Diversification: Investors are exposed to a variety of real estate, reducing the risk of investing in one property.
• Professional Management: Professional fund managers deal with property purchase, lease and repairs.
• Income Generation: REIFs are usually generating income via rental income, capital growth, or both.
• Liquidity: Publicly traded REIF/REIT can be bought and sold just like stocks in exchanges, ensuring liquidity.

REIF is suitable for investors seeking long-term income, retirement planning and inflation protection. 

A REIF in India is regulated by SEBI and invests in a portfolio of commercial office spaces in Mumbai and Bengaluru. Investors receive quarterly rental income distributions and benefit from property value appreciation when the fund sells assets.

75. Robo Advisors

Robo-advisors refer to online services offering automated and algorithm-based financial planning and investing with minimally or no human involvement. They use technology to study the financial goal, objectives and risk tolerance of a client and create a diversified investment portfolio automatically, which is typically less expensive than a traditional advisor.

The first Robo adviser emerged around 2008, during the global financial crisis, with platforms such as Betterment and Wealthfront launching in the U.S making automated investing accessible to retail investors. Since then many of the traditional financial institutions have introduced their own versions.

Key features of Robo advisory

• Rebalancing and automated portfolio creation.
• It is goal-based investment (retirement, education, wealth building).
• Low charges in comparison to conventional advisors.
• Availability with minimal minimum investments.
• Diversification of ETFs and index funds.
  

Globally, robo-advisors manage over $1 trillion AUM (Assets Under Management) and are expected to keep growing as investors seek low-cost, tech-driven solutions. Some popular examples include Betterment, Wealthfront (U.S.), Nutmeg (UK), Zerodha’s NPS. 

76. SPAC

A SPAC (special purpose acquisition company), is a publicly traded shell created by a corporation to raise funds through an IPO with the purpose of acquiring or merging with a private company, hence taking that company public without going through the traditional IPO process.

SPACs first appeared in the U.S. during the 1980s as blank-check companies, but due to fraud concerns they were heavily regulated in the 1990s. It slowly started getting credibility when institutions and private funds started to get involved. Their peak came in 2020–21, when over 600 SPAC IPOs raised more than $160 billion, making them a popular alternative to traditional IPOs.

Here is how the SPAC works.

• Create SPAC: A sponsor forms a SPAC with no business, just a plan to find a company.
• Raise Money: SPAC goes public through an IPO and collects funds from investors.
• Find Target: Within 18–24 months, the SPAC searches for a private company to merge with.
• Merger (De-SPAC): If approved by shareholders, the private company merges with the SPAC.
• Goes Public: The private company becomes a publicly traded company through this merger.

What if a suitable merger is not completed? In this case the SPAC is liquidated and funds are returned to investors.

In 2020–2021, SPACs surged in popularity. Companies like DraftKings and Virgin Galactic went public via SPAC mergers.

77. Social Trading

Social trading is a modern investment practice where traders and investors connect on online platforms to exchange ideas, strategies, and real-time trade. Instead of making all decisions independently, beginning traders and even experienced traders can follow or copy the trade of successful investors and traders. imitate the trades of profitable investors.

Social trading started gaining traction in the mid 2000s, when online trading platforms started adding community features. and social trading began to gain momentum. The actual breakthrough came around 2007-2010, with products such as eToro and ZuluTrade, which introduced the concept of copy trading the trades of successful traders.

According to MarketGrowthReports, over 64 million users are engaging in replicated strategies on social-trading platforms. Leading platforms like eToro have 38 million users globally.

78. Economic Bubble

An economic bubble is the situation where the price of an asset such as stocks, real estate and commodities rises far above its true value or intrinsic value mainly due to  speculation and market hype. 

What causes an economic bubble? Bubbles are often fueled by investor psychology such as  fear of missing out (FOMO), easy access to credit, or overconfidence in continued growth.

The term bubble first came into picture in the 18th century, during the South Sea Bubble of 1720 in England. The South Sea company promised investors to give massive returns from trade in South America. When the company failed to deliver profit, stock crashed, wiping the fortunes. The term bubble was used because prices expanded like a soap bubble until it burst.

This bubble generally goes through five stages.

• Displacement: A new opportunity, technology or economic state spark interest.
• Boom: This is when prices begin to increase with more investors flooding in.
• Euphoria: Price jumps so high irrationally, because of a large amount of speculation.
• Profit-taking: There are investors who begin selling because they feel that the bubble will burst.
• Panic: The stock market starts to fall at a rapid rate as the investors start selling, and the market corrects itself.

Since the South Sea Bubble of 1720, bubbles have appeared rapidly in history, such as the 1929 bubble in the U.S. stock market, the Dot-com bubble of 2000 and the U.S. housing bubble 2008, all of them encountering the same decline and agonizing burst.

79. Hedge fund

A hedge fund is a privately managed investment fund that collects money from wealthy individuals and institutional investors to earn high returns using complex strategies. Hedge funds invest in a wide range of assets such as equities, bonds, derivatives, currencies, commodities and sometimes private assets. Hedge funds are less regulated compared to mutual funds and they tend to provide high returns but with risk. 

The different strategies hedge funds use based on risk appetites and asset focuses includes the following. 

• Equity Long/Short: Buying undervalued stocks, short selling overvalued ones.
• Global Macro: Bet on economic trends such as currencies, commodities, and bonds
• Event-driven: Trade around mergers, bankruptcies, or restructuring.
• Quantitative: Use algorithms and data-driven models such as MFT and HFT.

The first hedge fund was introduced in 1949, by Alfred Winslow Jones, who pioneered the idea of balancing long positions with short selling and leveraging to increase returns, and coined the term hedged fund. Hedge funds were later popularized in the 1980s-1990s with legendary hedge fund managers such as George Soros and Julian Robertson.

Jones also pioneered the “performance fee” model (20% of profits), which became the industry standard known as “2 and 20.”

As of 2024, hedge funds control more than 4 trillion in investments worldwide, compared to 18 million when Alfred Winslow Jones began the first one in 1949. A few famous hedge funds include Bridgewater Associates, Renaissance Technologies and Pershing Square.

80. Averaging Down

Averaging down is the investment strategy where an investor buys additional shares of the stocks they already own after its price has fallen, thereby reducing the average cost per share of their total holding. The goal is to reduce the breakeven point and gain high return if the price stock rebounds. 

Let’s understand it using an example. Assume that you purchased a stock at 4000 each.

Now, the stock falls to ₹3780. You do not sell but purchase another more shares at ₹3780.

Now, the stock fell again to ₹3500, you bought it again.

Total Shares = 3.

Average Cost = (₹4000 + ₹3780 + ₹3500) ÷ 3 = ₹3760 per share.

By doing so, though the stock fell, your breakeven price reduces to 3760.

The concept of averaging down is as old as the market, but it got more attention during the Great Depression (1929-1939) when many blue-chip companies had lost over 80-90% of their value. Long term investors who averaged down in the companies such as Coca-Cola, General Electric and IBM ended up seeing enormous returns decades later.

Many successful value investors including Warren Buffett used averaging down as a long-term strategy. In the years 2011- 2012, Buffett increased his stake in Bank of America to average down the price and positioned himself to make billions of profits as the shares regained their worth.

81. Stock split

Stock split is the corporate action where a company increases its number of outstanding shares by splitting each existing share into a defined ratio, such as 2-for-1, 3-for-1, or 3-for-2. This increases the number of shares but reduces the price of shares proportionally, so the total investment value of shareholders remains the same and the company’s market capitalization does not change.

Lets understand it with an example, where the stock split is 2-for-1.

• You have 100 shares worth ₹500 each = total ₹50,000.
• The company does a 2-for-1 split, which means 1 share split into 2.
• Now you have 200 shares, but each share is worth ₹250.
• Total investment is still ₹50,000.

One of the earliest stock splits happened in the U.S in the 20th century, when fast growing companies such as General Electric and Standard Oil split their shares to allow more investors to participate. Over time stock split became a common practice for rapidly growing companies. 

There are two types of stock split, forward stock split and reverse stock split. 

• Forward Stock spit: Most common type, where number of stock increases but price of stock decreases. 
• Reverse stock split: The number of shares decreases and the price of shares increases. 

But what is the purpose of stock split? The purpose of the stock split is to make shares affordable for retail investors, improve liquidity and maintain a stock price in a desirable range. Recently ADANI Power had a split of 5 for 1 changing its CMP from 700 to 140.

82. Stock Symbol

A stock symbol, also known as ticker symbols, is a unique series of letters or numbers given to a stock to identify them on a stock exchange. These stock symbols are usually derived from the company’s name and assigned by exchange based on availability, company name, and marketing considerations. The purpose of a stock symbol is to make it easy to buy, sell and keep track of shares of a company.

Characteristics of Stock Symbol

• Length: Typically 1-5 letters in the U.S. such as AAPL, an abbreviation of Apple. 
• Exchange-specific: Same company can have different symbols on different exchanges.
• Extensions: Sometimes symbols have suffixes to denote the kind of security.

.NS for NSE (India), e.g., TCS.NS

.BO at BSE (India), e.g. RELIANCE.BO.

The concept of stock symbol originated in the 19th century, as stock markets were growing, there was a need for a simple and efficient way to identify companies. This practice became more formalized with the rise of the New York Stock Exchange (NYSE). 

Are stock symbols only in the form of letters? No, stock symbols include numbers too. There are two types of symbols globally.

• Alphabetical code: Such as AAPL for Apple in the U.S.
• Numerical code: Such as 0700.HK for Tencent in Hong Kong

NSE and BSE have more than 2000 and 5000 listed companies, all with unique alphabetical code. 

83. Stock portfolio

A stock portfolio is the collection of stocks owned by an individual investor or institutions in order to generate return while managing risk through diversification. Stock portfolios can be built according to different investment strategies and risk appetite.  

The different types of portfolio includes the following

• Growth Portfolio: Focuses on capital appreciation by adding growth stocks such as IT, EV, pharma stocks.
• Income Portfolio: Focuses on dividend-paying companies for regular income such as PSU banks and FMCG.
• Balanced Portfolio: Mix of growth and income for stability.
• Speculative Portfolio: High-risk bets on penny stocks or turnaround stocks.

The concept of investing comes from the early days of investing, where wealthy merchants, bankers, and traders started keeping collections of assets to spread risk. Harry Markowitz in 1952, formalized the Modern Portfolio Theory (MPT) and mathematically proved that combining different assets could reduce overall risk without necessarily reducing returns which became the backbone of professional investing and is still used by fund managers, mutual funds, and individual investors.

Why is stock portfolio important? 

• Helps investors in achieving their financial objectives such as retirement, wealth creation, passive income.
• Managing risk and returns through diversification.
• Allows tracking performance in relation to benchmarks such as Nifty 50 or Sensex.

A study by RBC shows that a portfolio with 50/50 mix of equities and bonds only dropped 19% in 2008, while the equity index fell 33%. This shows how a stock portfolio reduces risk through diversification. 

84. Dow Jones Industrial Average (DJIA)

Dow Jones Industrial Average (DJIA) is one of the largest and most followed indexes which represent the top 30 publicly traded companies in the U.S. It consists of stocks from different sectors like technology, finance, healthcare, and consumer goods, making it a benchmark of overall market performance.

Dow Jones Industrial Average (DJIA) was created in 1896 by Charles Dow using only 12 industrial stocks which represent American industrial growth. In 1928, it grew to 30 companies, which is still standard today.

Unlike the majority of market-cap weighted indices such as S&P 500, the DJIA is a price-weighted index, i.e. the more expensive a company is, the more impact it has over the index movement, irrespective of the size of the company.

85. Market volatility

Market volatility refers to a period where a market or security experiences unpredictable and sharp price movement due to factors like political events, economic changes, or market sentiment. 

High volatility = Sharp up and down movement.

Low volatility = Stable and gradual price movement. 

Market volatility is typically measured by standard deviation or beta. The indices ssuch as India VIX (Volatility Index) also used to track volatility in the coming months.

The word “Volatility” is derived from a Latin word “volatilis” meaning quickly changeable or unstable. Economists adapted it to describe unpredictable price swings in markets. 

During global financial crises, the market volatility hit record high with VIX spiking up to 89.5. The S & P 500 dropped about 57% and India’s Nifty 50 fell nearly 52%. This data shows how extreme fear and uncertainty wiped out more than half of market value within a year.

Why should a Beginner know Stock Market Jargons? 

Beginners should know stock market jargon because of 5 main reasons. The reasons are Better Understanding, 

• Better Understanding: It simplifies to interpret the news, reports and charts.
• Informed Decisions: Helps making better decisions such as when to enter, when to exit and when to hold .
• Avoid Confusion & Mistakes: The errors that occur through misunderstanding are reduced.
• Accelerated Learning Process: Accelerates the learning of advanced concepts and strategies.

Learning stock market jargon early empowers beginners to trade wisely, reduces costly mistakes, and lays the groundwork for becoming an informed and confident investor.

What are the Most Used Stock Market Terms?

Since we have covered 85 common terms in the stock market, some of the most common terms that beginner hear on a daily basis includes: Stock, Index, P/E Ratio, Dividend, Bull Market, Bear Market, Portfolio, Liquidity, Volatility, EPS, Stop Loss, Market Capitalization, IPO, Broker, and Volume. These words are the basis of the daily market discourse as well as the key to the interpretation of trading and investing.

How to Learn Stock Market Terminologies? 

There are four major steps to learn stock market terminologies. The steps are to start with basics, read financial websites, follow market news, practice while learning, and join communities.

• Start with basics: Start with understanding the meaning of the concepts such as shares, dividends, P/E ratio, bull/bear market, bid/ask price, and market indices. Use beginner-friendly resources such as books, online courses, blogs, and YouTube channels tailored for beginners.

• Read financial websites: Financial websites such as Moneycontrol, Strike Money, investopedia, and etc. Reading articles, glossaries, and tutorials will help you understand common words like index, P/E ratio, and dividend in context.

• Follow market news: Keep watch of daily news by trusted sources such as CNBC, ET, Moneycontrol, and etc. As you read headlines such as “Markets volatile ahead of Fed decision”, you’ll naturally understand how terms like volatility, liquidity, or bear market are used in real scenarios.

• Practice while learning: Follow live markets, read news, and try virtual trading apps to see terms in action.
• Join communities: Participate in groups, forums, social media, or discussion boards in order to learn by talking.

Following these steps systematically equips learners with both the language and context needed to navigate the stock market confidently and make informed investment decisions

Is Stock Market Terminology Required for a Beginner to Trade Stocks? 

Yes, understanding stock market terminology is essential for beginners to trade stocks. There are five main reasons which help traders make informed decisions during trading. 

• Clarity in Communication: Stock markets have their own language. Terms like bullish, bearish, volume, bid, ask, market order, limit order are commonly used. Without knowing these, it’s easy to misinterpret advice, news, or charts.

• Understanding Market Movements: Terms like support, resistance, trend, breakout, gap-up, gap-down help you read charts and price action. This knowledge assists in determining possible buying or selling trends.

• Risk Management: Understanding such concepts as stop-loss, margin, leverage, derivative, options Greeks enables safer trading. Without them, amateurs will make risky decisions.

• Making Informed Decisions: Financial ratios like EPS, P/E ratio, dividend yield, market cap are useful in the analysis of stocks. Being aware ensures you invest in companies wisely rather than guessing.

• Avoiding Common Mistakes: Misunderstanding simple terms like intraday, delivery, short selling can lead to costly errors. A solid grasp of terminology reduces confusion and impulsive trades.

A beginner doesn’t need to memorize every term at once, but learning the basic stock market terminology is crucial. It builds confidence, improves decision-making, and reduces mistakes while trading.