Understanding stock market language can feel overwhelming when you first start trading or investing. New learners often watch videos, join groups, or read articles—only to get confused by unfamiliar terms and jargon.
This guide provides a simple, clear, and complete explanation of 40+ fundamental terms every stock market participant must know before learning advanced topics like fundamental analysis, technical analysis, or derivatives.
1. Stock Market
A marketplace where shares and other securities are bought and sold.
Example: “I trade in the stock market to earn an additional income.”
2. Market Segments
The stock market is divided into three major segments:
- Cash Market – trading in stocks/equity
- Derivative Market – trading in futures and options
- Debt Market – trading in bonds and debentures
3. Market Participants
Four key participants operate in the market:
- Promoters – owners/founders of the company
- Retail Investors – individuals like you and me
- FIIs (Foreign Institutional Investors) – overseas investment entities
- DIIs (Domestic Institutional Investors) – Indian corporate investors
4. Sector
Companies are grouped based on business categories such as:
- IT
- Banking
- Pharma
- FMCG
- Example: “The IT sector has grown rapidly in the past decade.”
5. Stock Symbol
A short code used to identify a company.
Example: INFY → Infosys, TCS → Tata Consultancy Services.
6. Outstanding Shares
Total number of shares a company has issued, including promoter holdings.
7. Public Float
Shares available for public trading.
Formula:
Public Float = Outstanding Shares – Locked-in Shares
8. Face Value
Original value of a share, assigned at the time of company formation.
Does NOT change daily.
9. Market Value (Share Price)
The current trading price of a stock shown on your broker platform.
10. Market Capitalization (Market Cap)
The total market value of a company.
Formula:
Market Cap = Current Share Price × Outstanding Shares
11. Large-Cap Stocks
Top 100 companies in India by market value.
12. Blue-Chip Stocks
Large, stable companies with a strong performance record (e.g., Reliance, TCS).
13. Mid-Cap Stocks
Companies ranked 101–250 by market cap.
14. Small-Cap Stocks
All listed companies ranked beyond 250.
15. Penny Stocks
Very low-priced small-cap stocks with weak financials.
High risk; often manipulated.
16. Annual Report
A detailed yearly document that includes business operations, financial statements, and future plans.
17. IPO (Initial Public Offering)
The first time a company offers its shares to the public.
18. Primary Market
Where companies issue shares directly to investors—mainly during IPOs.
19. Secondary Market
Where existing shareholders buy/sell shares among themselves (regular stock trading).
20. Dividend
A share of profits distributed by the company to its shareholders.
21. Portfolio
Your personal basket of stocks.
22. CAGR (Compound Annual Growth Rate)
The rate at which your portfolio grows yearly on average.
23. Position
A trade you take—buying or selling an asset.
24. Trading Capital
Total money you allocate for trading activities.
25. Deployed Capital
The portion of trading capital used in a specific trade.
26. Long Position
Buying first and selling later.
27. Short Position
Selling first and buying later (short selling).
28. Square Off
Closing or exiting a trade.
- Sell to square off a long position.
- Buy to square off a short position.
29. ROI (Return on Investment)
Percentage profit or loss from a trade.
Formula:
ROI = Profit ÷ Deployed Capital × 100
30. Contract Note
Daily document from your broker summarizing all trades and charges.
31. Trend
General direction of market movement:
- Uptrend
- Downtrend
- Sideways Trend
32. Bullish Market
Market/stock showing upward movement.
33. Bearish Market
Market/stock showing downward movement.
34. Volatility
The degree to which stock prices fluctuate.
35. Volume
Total number of shares traded during a specific timeframe.
36. Liquidity
How easily a stock can be bought or sold.
High liquidity = easy trading
Low liquidity = difficult to enter/exit
37. Charts
Graphical representation of stock price movements used for technical analysis.
38. 52-Week High/Low
Highest and lowest price of a stock in the past 52 weeks.
39. Upper Circuit
The maximum upward price limit for a stock on a single day.
Used to prevent manipulation.
40. Lower Circuit
The maximum downward price limit on a single day.
41. Gap Up
When a stock opens above the previous day's closing price.
42. Gap Down
When a stock opens below the previous day's closing price.
43. Closing Price
The weighted average price of the last 30 minutes of trading—not always the final LTP.
Final Thoughts
These 40+ terms act as the foundation for everything you will learn next—fundamental analysis, technical analysis, intraday strategies, options trading, and more. Understanding this vocabulary will give you confidence in conversations, help you analyze companies better, and prepare you for advanced stock market learning.
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