Introduction
The stock market can feel like a foreign country where everyone speaks a language you don’t understand. “Buy the dip,” “support and resistance,” “call options,” “red day”—if these phrases make your head spin, you’re not alone. Every beginner investor faces this jargon barrier, and it’s one of the biggest reasons people delay starting their wealth-building journey. The good news? Stock market terminology isn’t actually complicated once you understand the logic behind the words. This comprehensive glossary breaks down 50+ essential stock market terms in plain English, with real examples from Indian markets. By the end, you’ll speak stock market fluently—and realize the complexity was mostly in the unfamiliar words, not the actual concepts.
What does intraday trading mean? Intraday trading (also called day trading) means buying and selling the same stock on the same trading day, squaring off your position before market close. Unlike delivery trading where you hold stocks for weeks or years, intraday traders profit from short-term price movements within a single day. For example, buying TCS at 9:15 AM and selling it at 3:00 PM the same day is intraday trading. This requires active monitoring and carries higher risk than long-term investing.
Fundamental Stock MarketTerms (Beginner Level)
Demat Account
A demat account (dematerialized account) is your digital locker that holds stocks, bonds, and other securities. Think of it like a bank account, but instead of holding cash, it holds electronic securities. You can’t buy stocks without a demat account. Parasram is a Depository Participant with both NSDL and CDSL, India’s two largest security depositories, ensuring your securities are held safely.
Example: When you buy 10 shares of Infosys, those shares are credited to your demat account within T+2 days (two business days after purchase).
Trading Account
Your trading account enables you to buy and sell securities on stock exchanges (NSE and BSE). While your demat account stores securities, your trading account is the marketplace where you execute buy and sell orders. Most brokers, including Parasram, open both accounts simultaneously in a single application.
Example: You use your trading account to place the order “buy 100 shares of Reliance,” and when the order executes, those shares go into your demat account.
Stock / Equity / Share
These three terms are often used interchangeably. A stock (or equity or share) represents fractional ownership in a company. When a company divides itself into 1 crore shares and issues them, each share represents 1/10,000,000th of the company.
Example: If you buy 1 share of Infosys (trading at ₹1,800), you own a tiny piece of the company. If Infosys has 100 crore shares outstanding, you own 1/10,000,000,000th of the company.
Market Cap (Market Capitalization)
Market cap = Current Stock Price × Total Shares Outstanding
This is the total market value of a company. It categorizes companies: - Large Cap: Market cap > ₹20,000 crore (established blue-chip companies like TCS, HDFC Bank) - Mid Cap: Market cap ₹5,000-₹20,000 crore (growing companies) - Small Cap: Market cap < ₹5,000 crore (emerging companies with higher risk/reward)
Example: If Reliance trades at ₹2,400 and has 30 crore shares, its market cap is ₹72,000 crore, making it the largest company on the stock exchange.
Dividend
A dividend is a cash payment that companies distribute to shareholders from their profits. Not all companies pay dividends—some reinvest profits into growth. When companies do pay dividends, they typically pay quarterly or annually.
Example: If HDFC Bank trades at ₹1,900 and pays ₹90 annual dividend, your dividend yield is 90/1900 = 4.74%. If you own 100 shares, you receive ₹9,000 as dividend annually.
P/E Ratio (Price-to-Earnings)
P/E Ratio = Stock Price ÷ Earnings Per Share
This shows how much investors are willing to pay for each rupee of company earnings. Higher P/E means investors expect faster growth; lower P/E means the stock might be cheap.
Example: If Infosys trades at ₹1,800 and earned ₹90 per share last year, its P/E is 1800/90 = 20. Compare this to the sector average P/E of 18—Infosys is trading at a premium, suggesting investors expect faster growth.
Bid-Ask Spread
At any moment, there are buyers and sellers in the market: - Bid price: The highest price buyers are willing to pay right now - Ask price: The lowest price sellers are willing to accept right now - Bid-ask spread: The difference between them (bid-ask gap)
Example: If Infosys shows Bid: ₹1,999 and Ask: ₹2,001, the spread is ₹2. This spread tightens for popular, liquid stocks and widens for thinly traded stocks.
Bull Market
A bull market is when stock prices are rising overall and investor sentiment is optimistic. Historically, bull markets last 1-5+ years.
Example: Indian markets from 2009-2021 was a prolonged bull market with occasional corrections, creating wealth for patient investors.
Bear Market
A bear market is when stock prices are falling and investor sentiment is pessimistic. Technically, a bear market is when indices fall 20%+ from recent highs.
Example: 2008 financial crisis was a severe bear market, with markets falling 50-60%. However, investors who continued buying during this period made exceptional returns in the subsequent bull market (2009-2021).
Circuit Breaker
A circuit breaker is an automatic trading halt triggered when markets move too far too fast. This prevents panic selling from spiraling into crashes. The market halts for 15 minutes to give everyone time to reconsider.
Example: If the Sensex falls 10% in a single day, trading halts for 15 minutes, then resumes. If it falls another 15%, trading halts again.
Volume
Volume is the number of shares traded in a stock during a specific period (day, week, month). High volume indicates strong investor interest; low volume suggests few traders are interested.
Example: If Reliance trades 5 crore shares daily on average, but today trades 15 crore shares, something significant happened (earnings, news) causing high volume.
Liquidity
Liquidity describes how easily you can buy or sell a stock at fair prices without moving the price significantly. Liquid stocks trade in high volumes; illiquid stocks trade rarely.
Example: TCS is highly liquid—you can buy or sell ₹1 lakh worth in seconds. A small-cap stock might take hours to sell the same amount, or you might have to accept a lower price to sell quickly.
Trading & Transaction Terms
Limit Order
A limit order sets a specific price you’re willing to pay (for buy orders) or willing to accept (for sell orders). Your order only executes if the market reaches that price.
Example: You place a limit order “Buy 100 shares of Infosys at ₹1,980.” If Infosys reaches ₹1,980, your order executes. If it never reaches ₹1,980, your order never executes.
Market Order
A market order buys or sells immediately at the current market price, whatever it is.
Example: You place a market order “Buy 100 shares of Infosys” at 10:00 AM. Your order executes immediately at the current market price (say ₹2,005), even if you wanted a lower price.
Stop Loss
A stop loss is a pre-determined price at which you’ll exit a position to limit losses. It prevents you from holding a falling stock in hopes it recovers.
Example: You buy Infosys at ₹1,800. You set a stop loss at ₹1,710 (5% below your buy price). If Infosys falls to ₹1,710, your position is automatically sold, limiting your loss to 5%.
Target / Profit Target
A target or profit target is the price at which you plan to exit a position and take profits.
Example: You buy Infosys at ₹1,800 with a target of ₹2,100 (16.7% upside). Once Infosys reaches ₹2,100, you sell and lock in profits.
Intraday Trading
Intraday trading (or day trading) means buying and selling the same stock within a single trading day, closing the position before 3:30 PM market close.
Example: Buy TCS at 10:00 AM at ₹3,500, sell at 2:00 PM at ₹3,550, profit ₹50 per share. This is very different from delivery trading where you hold for weeks or years.
Delivery Trading
Delivery trading means buying stocks intending to hold them for longer periods (weeks, months, years). The stock is delivered to your demat account and held for the long term.
Example: Buy HDFC Bank at ₹1,900 intending to hold for 5 years for capital appreciation and dividends. This is delivery trading, the foundation of wealth building.
Square Off
To square off means to exit a position, closing all holdings. In intraday trading, you must square off before market close.
Example: You bought 100 shares in the morning; squaring off means selling all 100 shares before 3:30 PM.
Support & Resistance: Understanding Parasram’s SR Levels Strategy
What is Support Level?
A support level is a price level where a stock finds buying interest, preventing further price decline. Think of it as the “floor” where demand is strong enough to stop the selling.
How support forms: - Multiple investors bought at a certain price in the past - When the price falls back to that level, those investors buy again, creating demand - This repeated buying at certain price levels creates a support zone
Example: Infosys fell from ₹2,100 to ₹1,900 during a market correction. Every time it approached ₹1,900 in the following weeks, buyers stepped in aggressively, preventing it from breaking below. ₹1,900 became a support level.
Trading with support: Smart investors buy near support levels because: 1. Demand is historically strong there 2. Risk is limited (stop loss just below support) 3. Reward is significant (stock usually bounces 5-10% from support)
What is Resistance Level?
A resistance level is the opposite of support—it’s a price level where selling pressure emerges, preventing further price increase. Think of it as the “ceiling” that stock can’t easily break above.
How resistance forms: - Multiple investors sold at a certain price in the past - When the price rises back to that level, those investors sell again to book profits - This repeated selling at certain price levels creates a resistance zone
Example: TCS rallied from ₹3,200 to ₹3,500. Every time it approached ₹3,500 in the following weeks, sellers emerged and pushed it down. ₹3,500 became a resistance level.
Trading with resistance: Smart investors sell or book profits near resistance levels because: 1. Selling pressure is historically strong there 2. Profit is visible (stock usually falls 5-10% from resistance) 3. Risk is limited (you’re exiting near the top)
How to Use SR Levels in Your Trading
For buyers: - Wait for price to approach support - When price touches support, it’s a good buying zone - Set stop loss slightly below support (risk is small) - Set target near the next resistance (reward is large)
Example: Infosys supports at ₹1,850, resists at ₹2,050. You buy at ₹1,860 (near support), set stop loss at ₹1,820, target at ₹2,000. Your risk-reward ratio is 40 points risk : 140 points reward = great risk-reward.
For sellers: - Wait for price to approach resistance - When price touches resistance, it’s a good selling zone - Set target slightly below support (profit is visible)
Why Parasram’s SR Analysis? Parasram provides daily support and resistance levels for 50+ major stocks, helping you identify these optimal entry and exit points. Our research team analyzes: - Historical price levels where support/resistance has held - Volume traded at each level (strong volume = strong support/resistance) - Upcoming technical levels to watch
This advantage helps Parasram clients time their entries and exits better than random buying/selling.
Trend
A trend is the general direction of price movement over time: - Uptrend: Higher highs and higher lows (price generally rising) - Downtrend: Lower highs and lower lows (price generally falling) - Sideways trend: Price moving horizontally without clear direction
Example: Reliance from Jan-Dec 2024 showed an uptrend, making higher highs and higher lows. This confirmed the overall bullish direction.
Risk Management Terminology
Leverage
Leverage means borrowing money from your broker to increase your buying power. With leverage, you can control more shares than your capital allows.
Example: You have ₹1 lakh. Without leverage, you can buy ₹1 lakh worth of stock. With 2:1 leverage, your broker lends you ₹1 lakh more, so you control ₹2 lakhs worth of stock. If stock rises 10%, your profit is ₹20,000 (20% of ₹1 lakh). If stock falls 10%, your loss is ₹20,000 (also 20% of ₹1 lakh).
Warning: Leverage is a double-edged sword. It magnifies both gains AND losses. Most beginner stock investors should avoid leverage until they’ve built experience.
Margin
Margin is the amount of your own money required to open a leveraged position. Higher margin requirement = less leverage available.
Example: If a broker requires 50% margin for intraday trading, you need ₹50,000 of your own money to control ₹1 lakh worth of stock. If you only have ₹40,000, you can’t open this position.
Portfolio
Your portfolio is your entire collection of investments—all your stocks, mutual funds, bonds, etc. Portfolio management means ensuring good diversification across sectors and stocks.
Example: Your portfolio might consist of: 50% HDFC Bank, 20% TCS, 15% Reliance, 15% Infosys. This is a concentrated portfolio. A better portfolio might have 5-10 different stocks with more balanced weightings.
Diversification
Diversification means spreading your money across many different stocks, sectors, and asset classes to reduce risk. The logic: if one stock crashes, it doesn’t crash your entire portfolio.
Example: A diversified portfolio across sectors: - Banking: HDFC Bank, ICICI Bank - IT: TCS, Infosys - Energy: Reliance, NTPC - Pharma: Cipla, Sun Pharma - FMCG: HUL, ITC
If Banking sector falls 20%, your portfolio only falls 4% (because banking is only 20% of your portfolio).
Hedging
Hedging means taking offsetting positions to protect against losses. It’s like insurance for your portfolio.
Example: You own 100 shares of TCS at ₹3,500. You’re worried about market crashes. You buy a put option (which profits if TCS falls) as insurance. If TCS crashes, your put option gains offset your stock losses.
Parasram’s derivatives team can help you design hedging strategies protecting your portfolio during uncertainty.
Derivatives Terms (Futures & Options)
Call Option
A call option gives you the RIGHT (not obligation) to buy 100 shares of a stock at a predetermined price (strike price) on or before expiry.
Example: You buy a TCS call option with strike ₹3,500 expiring in 30 days. This gives you the right to buy 100 TCS shares at ₹3,500 anytime in the next 30 days. If TCS rises to ₹3,700, you exercise your right, buy at ₹3,500, and immediately sell at ₹3,700, making ₹200 × 100 = ₹20,000 profit (minus the option premium you paid).
Put Option
A put option gives you the RIGHT (not obligation) to SELL 100 shares of a stock at a predetermined price on or before expiry.
Example: You buy a TCS put option with strike ₹3,300 expiring in 30 days. This gives you the right to sell TCS at ₹3,300 anytime in the next 30 days. If TCS falls to ₹3,100, you exercise your right, buy TCS at ₹3,100 in the market, and sell at ₹3,300, making ₹200 × 100 = ₹20,000 profit (minus option premium paid).
Strike Price
The strike price is the predetermined price at which you have the right to buy (call) or sell (put) the stock.
Example: A TCS call with strike ₹3,500 means the right to buy TCS at ₹3,500, regardless of what the current market price is.
Expiry
Expiry is the date when the option contract ends. After expiry, the option becomes worthless if not exercised.
Example: A TCS option expiring on 25th Jan 2025 can be exercised anytime up to market close on 25th Jan 2025. On 26th Jan, the option is worthless.
Open Interest
Open Interest (OI) is the total number of outstanding option contracts for a specific strike and expiry. Higher OI indicates more active trading and better liquidity.
Example: If “TCS 3,500 CE 25-Jan-2025” has OI of 50 lakh contracts, it means 50 lakh call options (with strike 3,500, expiring 25-Jan) are currently open. High OI makes it easy to buy and sell these options without moving the price significantly.
Market Analysis Terminology
Technical Analysis
Technical analysis involves studying price and volume charts to predict future price movements. It’s based on the belief that historical price patterns repeat.
Example: When price breaks above resistance level with high volume, it usually continues higher (called a “breakout”). Technicians use this pattern repeatedly to identify trading opportunities.
Parasram’s daily SR (support-resistance) analysis is a form of technical analysis helping you identify key price levels.
Fundamental Analysis
Fundamental analysis involves studying a company’s financial statements, business model, and industry to determine if a stock is expensive or cheap.
Example: You analyze Infosys’ quarterly results and find earnings grew 15% while stock P/E ratio is only 20 (vs sector average of 22). Conclusion: Infosys is undervalued based on fundamentals. Good buying opportunity.
Volatility
Volatility measures how wildly a stock price swings. High volatility means large daily/weekly price swings; low volatility means steady, stable prices.
Example: Small-cap stocks typically have 3-5% daily swings (high volatility), while blue-chip stocks might swing only 0.5-1% daily (low volatility).
For beginners, lower volatility stocks are less stressful to hold through market downturns.
Corporate Action Terms
Stock Split
A stock split happens when a company divides each share into multiple shares. The total market cap doesn’t change—you just get more shares at lower prices.
Example: TCS 1:2 stock split means each share becomes 2 shares, and price is halved. If you owned 100 shares at ₹3,500, after split you own 200 shares at ₹1,750. Total value unchanged: ₹3.5 lakh.
Bonus
A bonus is when a company issues free shares to existing shareholders from its reserves.
Example: HDFC Bank 1:5 bonus means every shareholder gets 1 free share for every 5 shares held. If you owned 100 shares at ₹1,900, after bonus you have 120 shares worth approximately ₹1,583 each (total value still ₹1.9 lakh). The company is rewarding long-term shareholders.
Rights Issue
A rights issue is when a company offers new shares to existing shareholders at a discounted price before offering to the public.
Example: TCS announces 1:10 rights issue at ₹3,000 per share. If you own 100 shares, you get the right to buy 10 new shares at ₹3,000 (discounted from market price). This gives existing shareholders a chance to increase holding at bargain prices.
FAQ Section
Q: What’s the difference between bid and ask?
A: Bid is the price buyers are willing to pay right now; ask is the price sellers are willing to accept. Bid is always lower than ask. When you buy, you pay the ask price; when you sell, you receive the bid price. The difference (bid-ask spread) is the cost of trading.
Q: What does “red day” and “green day” mean?
A: A “green day” is when a stock closes higher than opening (prices rose during the day). A “red day” is when a stock closes lower than opening (prices fell). These terms come from color coding in stock charts—green for up, red for down.
Q: Why is support and resistance important for beginners?
A: Support and resistance help beginners time their entries and exits better. Buying near support (when price is about to bounce) gives you better prices and smaller losses. Selling near resistance (when price is about to fall) locks in profits. It’s like having a map of where prices typically go.
Q: What should I focus on: technical analysis or fundamental analysis?
A: For long-term investing (which we recommend for beginners), focus 80% on fundamentals and 20% on technical analysis. Buy fundamentally strong companies using technical analysis to time entries at support levels. For short-term trading, technical analysis becomes more important, but this isn’t recommended for beginners.
Q: Do I need to understand derivatives as a beginner?
A: No, you can build wealth without ever using options or futures. However, understanding these terms helps you understand market news. Learn the basics, but focus on stocks initially. Derivatives are advanced tools for experienced traders.
Q: What’s the most important terminology for beginners?
A: Master these first: Demat Account, Trading Account, Support/Resistance, P/E Ratio, Dividend, Bull/Bear Market, Diversification, Stop Loss. Once you understand these, the rest becomes easier.
Key Takeaway
Stock market jargon exists because financial professionals need precise terminology. But underlying each term is simple logic you already understand. Bid-ask is just “seller’s asking price” vs “buyer’s offering price.” Support is just “price level where people buy.” Leverage is just “borrowing to invest more.”
Start with the fundamental terms (demat account, dividend, P/E ratio), practice identifying support and resistance in charts, and gradually expand your vocabulary. Within a few weeks of active investing, stock market terminology becomes second nature.
