Essential Market Terminology
LTP, bid, ask, spread, GTT, MTM, free float, T+1, ex-date — the vocabulary printed on every broker screen and spoken in every business bulletin, grouped by theme and explained in plain English.
- Phase
- 3 of 5
- Speak the Market's Language
- Reading time
- 17 min
- 12 chapters
- Level
- Beginner
- No experience needed
Switch on a business channel and you will hear something like: 'Most stocks are falling, the index is holding its support, the mid-cap basket has slipped into a correction and three small-caps are locked at the lower circuit.' To a beginner that is noise. After this lesson it is an ordinary sentence.
The problem is almost never that markets are too complicated. The problem is that nobody stops to define the words. So the beginner nods along, guesses at the meaning, and quietly builds a wrong picture that costs money later.
We will fix that here. The terms are grouped into seven themes — quote, order, position, market-state, ownership, index and settlement — because vocabulary sticks far better in clusters than in an A-to-Z list. Each term gets a plain meaning and a reason you should care.
You cannot analyse what you cannot name. Vocabulary is the first tool anyone in this market picks up, and the last one they put down.— Rohit Singh
Why Vocabulary Is Your First Edge
Understanding has to come before analysis
Think of the first time you walked into a vegetable mandi as a child. The shouting made no sense. Then someone explained that the seller was calling out a rate per kilo, that the crowd was bidding, and that the fruit at the front was the best of the lot. Suddenly the noise turned into information.
The stock market works the same way. The screen is not hiding anything from you. It is labelling everything in shorthand, and nobody handed you the key.
Vocabulary also protects you. When a stranger on a messaging group sends a 'sure-shot call' wrapped in jargon, understanding the words lets you judge the claim instead of trusting the confidence behind it. Most bad tips survive only because the listener is too embarrassed to ask what a word means.
One more practical benefit: almost every rule in Indian markets is written in this vocabulary. Your contract note, your broker's risk policy, and SEBI circulars all assume you know what 'pay-in', 'square-off' and 'free float' mean. Learn them once and the paperwork stops being frightening.
Price and Quote Terms
Every number on the stock's main screen
This is the group you meet first, because it is the group your broker app opens with. A quote screen is a live snapshot of one stock's trading activity, and every field on it has a precise meaning.
The single most important idea here: the price you see is a record of the last trade that happened, not a price anyone is obliged to give you next. Two people have to agree for a trade to occur. The bid is what a buyer is offering, the ask is what a seller is demanding, and the gap between them is a real cost you pay to get in and out.
Work through a small example. Suppose a share shows a bid of ₹499.50 and an ask of ₹500.00. The spread is ₹0.50. If you buy 100 shares at the ask and sell them a second later at the bid, you lose 100 × ₹0.50 = ₹50 without the price ever moving. In a liquid large-cap that spread might be a few paise. In a thinly traded small-cap it can be several rupees.
LTP (Last Traded Price)
Plain-English meaning
The price at which the most recent trade actually took place
Why a beginner cares
It is the 'current price' your app shows — but it is history, not an offer to you
Open
Plain-English meaning
The first traded price of the session
Why a beginner cares
Tells you where the day started, so you can see whether the day has been up or down
High / Low
Plain-English meaning
The highest and lowest price touched today
Why a beginner cares
High minus Low is the day's range — a quick read of how wild the session was
Previous Close
Plain-English meaning
Yesterday's closing price
Why a beginner cares
Your app's red or green percentage is measured from this, not from your purchase price
Bid
Plain-English meaning
The best (highest) price a buyer is currently willing to pay
Why a beginner cares
If you sell at market right now, this is roughly what you receive
Ask / Offer
Plain-English meaning
The best (lowest) price a seller is currently willing to accept
Why a beginner cares
If you buy at market right now, this is roughly what you pay
Spread
Plain-English meaning
Ask minus Bid — the gap between the two
Why a beginner cares
A hidden entry cost. Wide spread means you start the trade already behind
Market depth
Plain-English meaning
The queue of pending buy and sell orders sitting at each price level
Why a beginner cares
Thin depth means your own order can push the price against you
VWAP
Plain-English meaning
Volume Weighted Average Price — the average price of the day so far, weighted by how many shares traded at each price
Why a beginner cares
A neutral benchmark large orders are measured against; it says where the bulk of today's business happened
Circuit limit
Plain-English meaning
The exchange's daily cap on how far a price may move up or down
Why a beginner cares
If a stock is locked at the lower circuit there may be no buyer at all — you cannot exit
Tick size
Plain-English meaning
The smallest price step an order may use
Why a beginner cares
Explains why your order at ₹499.983 gets rejected
Delivery percentage
Plain-English meaning
The share of the day's volume that was actually taken into demat rather than squared off same-day
Why a beginner cares
A rough read of how much of today's activity was ownership rather than churn
Quote and price vocabulary — what it means, and why it matters to you.
| Term | Plain-English meaning | Why a beginner cares |
|---|---|---|
| LTP (Last Traded Price) | The price at which the most recent trade actually took place | It is the 'current price' your app shows — but it is history, not an offer to you |
| Open | The first traded price of the session | Tells you where the day started, so you can see whether the day has been up or down |
| High / Low | The highest and lowest price touched today | High minus Low is the day's range — a quick read of how wild the session was |
| Previous Close | Yesterday's closing price | Your app's red or green percentage is measured from this, not from your purchase price |
| Bid | The best (highest) price a buyer is currently willing to pay | If you sell at market right now, this is roughly what you receive |
| Ask / Offer | The best (lowest) price a seller is currently willing to accept | If you buy at market right now, this is roughly what you pay |
| Spread | Ask minus Bid — the gap between the two | A hidden entry cost. Wide spread means you start the trade already behind |
| Market depth | The queue of pending buy and sell orders sitting at each price level | Thin depth means your own order can push the price against you |
| VWAP | Volume Weighted Average Price — the average price of the day so far, weighted by how many shares traded at each price | A neutral benchmark large orders are measured against; it says where the bulk of today's business happened |
| Circuit limit | The exchange's daily cap on how far a price may move up or down | If a stock is locked at the lower circuit there may be no buyer at all — you cannot exit |
| Tick size | The smallest price step an order may use | Explains why your order at ₹499.983 gets rejected |
| Delivery percentage | The share of the day's volume that was actually taken into demat rather than squared off same-day | A rough read of how much of today's activity was ownership rather than churn |
Order Terms
The instructions you can give the exchange
An order is an instruction, and the exchange follows it literally. Most beginner accidents happen because the instruction meant something slightly different from what the person intended.
There are only two building blocks. A market order says 'fill me now at whatever the market offers' — speed guaranteed, price not. A limit order says 'fill me only at this price or better' — price guaranteed, fill not. Everything else is a variation built on those two.
The third essential is the stop-loss: an order that sits dormant until the price reaches a trigger you set, then wakes up and tries to exit you. It is the difference between having a plan and hoping. Set the trigger too close to the current price and ordinary noise takes you out; set it too far and the loss it allows is bigger than you can carry.
Market order
Plain-English meaning
Buy or sell immediately at whatever price is available
Why a beginner cares
Fast and certain to fill, but in an illiquid stock the fill price can shock you
Limit order
Plain-English meaning
Buy or sell only at your stated price or better
Why a beginner cares
You control the price; the trade-off is that it may never fill
Stop-loss order
Plain-English meaning
A resting exit order that activates only when price reaches your trigger
Why a beginner cares
This is how you cap a loss without staring at the screen all day
Trigger price
Plain-English meaning
The price at which a stop-loss wakes up and becomes a live order
Why a beginner cares
Too tight and normal wobble stops you out; too wide and the loss is unmanageable
SL-M
Plain-English meaning
At the trigger, the order becomes a market order
Why a beginner cares
Higher certainty of getting out, less certainty about the exit price
SL-L
Plain-English meaning
At the trigger, the order becomes a limit order at your limit price
Why a beginner cares
You control the exit price, but in a fast fall it may not fill at all
IOC (Immediate or Cancel)
Plain-English meaning
Fill whatever can fill this instant, cancel the remainder
Why a beginner cares
Stops a half-filled order from sitting in the book while the price runs
Day order
Plain-English meaning
Valid until today's close, then cancelled automatically
Why a beginner cares
Your unfilled order does not silently carry into tomorrow
GTT (Good Till Triggered)
Plain-English meaning
A standing instruction held by your broker for weeks or months, waiting for a price
Why a beginner cares
Lets you set a target and a stop once instead of re-entering them every morning
AMO (After Market Order)
Plain-English meaning
Placed outside market hours and queued for the next session's open
Why a beginner cares
Useful when you cannot be at a screen at 9:15 AM
Disclosed quantity
Plain-English meaning
Shows only part of a large order to the market at a time
Why a beginner cares
Matters only for large orders; it hides your full size from the book
Lot size
Plain-English meaning
The fixed quantity per contract in derivatives
Why a beginner cares
In F&O you cannot buy 'one share' — the minimum is one full lot
Order vocabulary as it appears in an Indian broker's order window.
| Term | Plain-English meaning | Why a beginner cares |
|---|---|---|
| Market order | Buy or sell immediately at whatever price is available | Fast and certain to fill, but in an illiquid stock the fill price can shock you |
| Limit order | Buy or sell only at your stated price or better | You control the price; the trade-off is that it may never fill |
| Stop-loss order | A resting exit order that activates only when price reaches your trigger | This is how you cap a loss without staring at the screen all day |
| Trigger price | The price at which a stop-loss wakes up and becomes a live order | Too tight and normal wobble stops you out; too wide and the loss is unmanageable |
| SL-M | At the trigger, the order becomes a market order | Higher certainty of getting out, less certainty about the exit price |
| SL-L | At the trigger, the order becomes a limit order at your limit price | You control the exit price, but in a fast fall it may not fill at all |
| IOC (Immediate or Cancel) | Fill whatever can fill this instant, cancel the remainder | Stops a half-filled order from sitting in the book while the price runs |
| Day order | Valid until today's close, then cancelled automatically | Your unfilled order does not silently carry into tomorrow |
| GTT (Good Till Triggered) | A standing instruction held by your broker for weeks or months, waiting for a price | Lets you set a target and a stop once instead of re-entering them every morning |
| AMO (After Market Order) | Placed outside market hours and queued for the next session's open | Useful when you cannot be at a screen at 9:15 AM |
| Disclosed quantity | Shows only part of a large order to the market at a time | Matters only for large orders; it hides your full size from the book |
| Lot size | The fixed quantity per contract in derivatives | In F&O you cannot buy 'one share' — the minimum is one full lot |
Position Terms
The words for what you are holding right now
Once an order fills, you have a position. Position vocabulary describes which way you are facing, how long you can stay, and how your profit or loss is being counted while you wait.
Long means you own it and gain if the price rises. Short means you sold something you do not own, planning to buy it back cheaper — you gain if the price falls. In the Indian cash segment, shorting is generally an intraday activity: if you have not bought back by the close, the position must be closed out, and failing to deliver shares leads to an auction penalty.
Average price is the single most misread number in a beginner's portfolio, so work it slowly. You buy 50 shares at ₹500 — that is ₹25,000. The price falls and you buy 50 more at ₹400 — that is ₹20,000. You now hold 100 shares that cost ₹45,000 in total, so your average price is ₹45,000 ÷ 100 = ₹450. Your app will now show a loss until the price crosses ₹450, not ₹500. Nothing was gained or lost by the maths; only your break-even moved.
MTM, short for mark to market, means your open position is being revalued at the current price continuously. It is a running score, not a settled outcome — until you square off, the number keeps changing.
Long
Plain-English meaning
You bought first; you profit if the price rises
Why a beginner cares
The default position for almost every beginner
Short
Plain-English meaning
You sold first, intending to buy back lower; you profit if the price falls
Why a beginner cares
In the cash segment this is an intraday-only activity with delivery consequences
Square-off
Plain-English meaning
Closing an open position by doing the opposite trade
Why a beginner cares
Nothing is realised until you square off — paper gains are not money
Intraday (MIS)
Plain-English meaning
A position that must be closed the same session
Why a beginner cares
Your broker will auto square-off near the cutoff whether you are watching or not
Delivery / carry-forward (CNC)
Plain-English meaning
A position held past the close, settling into your demat
Why a beginner cares
This is how you actually become an owner rather than a day-trader
Auto square-off
Plain-English meaning
The broker forcibly closes your intraday position near the day's cutoff
Why a beginner cares
It happens at whatever price exists then, and usually carries an extra charge
Average price
Plain-English meaning
Your blended cost per share across every purchase of that stock
Why a beginner cares
It is your real break-even; your app's profit and loss is measured from it
MTM (mark to market)
Plain-English meaning
Your open position revalued at the current price
Why a beginner cares
A running score that changes every tick — not a settled result
Unrealised P&L
Plain-English meaning
Profit or loss on a position you still hold
Why a beginner cares
It can vanish overnight; treat it as a number, not as money in hand
Realised P&L
Plain-English meaning
Profit or loss after you have squared off
Why a beginner cares
This is the only figure that reaches your bank account and your tax return
Position size
Plain-English meaning
How many shares or lots you are holding in one idea
Why a beginner cares
The single biggest determinant of how badly one wrong idea can hurt you
Position vocabulary and the product codes your broker uses.
| Term | Plain-English meaning | Why a beginner cares |
|---|---|---|
| Long | You bought first; you profit if the price rises | The default position for almost every beginner |
| Short | You sold first, intending to buy back lower; you profit if the price falls | In the cash segment this is an intraday-only activity with delivery consequences |
| Square-off | Closing an open position by doing the opposite trade | Nothing is realised until you square off — paper gains are not money |
| Intraday (MIS) | A position that must be closed the same session | Your broker will auto square-off near the cutoff whether you are watching or not |
| Delivery / carry-forward (CNC) | A position held past the close, settling into your demat | This is how you actually become an owner rather than a day-trader |
| Auto square-off | The broker forcibly closes your intraday position near the day's cutoff | It happens at whatever price exists then, and usually carries an extra charge |
| Average price | Your blended cost per share across every purchase of that stock | It is your real break-even; your app's profit and loss is measured from it |
| MTM (mark to market) | Your open position revalued at the current price | A running score that changes every tick — not a settled result |
| Unrealised P&L | Profit or loss on a position you still hold | It can vanish overnight; treat it as a number, not as money in hand |
| Realised P&L | Profit or loss after you have squared off | This is the only figure that reaches your bank account and your tax return |
| Position size | How many shares or lots you are holding in one idea | The single biggest determinant of how badly one wrong idea can hurt you |
Unrealised profit is a number on a screen. Realised profit is money in a bank account. Never confuse the two.
Market-State Terms
Words for what the whole market is doing
This group describes mood and shape — whether prices are broadly rising or falling, and what the movement looks like along the way.
The two headline words are bull and bear. A bull charges by thrusting upward with its horns, so a bull market is an extended rising phase and 'bullish' means expecting a rise. A bear swipes downward with its paw, so a bear market is an extended falling phase and 'bearish' means expecting a fall.
Between those extremes sit the words for texture. A rally is a sustained rise. A correction is a moderate fall — commonly described as a fall of roughly a tenth from a recent high — that happens inside a larger uptrend. Consolidation is a sideways phase where price moves within a range and neither side wins. These are descriptions of what has happened, not forecasts of what comes next.
The price-action words matter most for the rest of this course. A breakout is price moving above a level that had been capping it; a breakdown is price slipping below a level that had been supporting it; a retest is price coming back to touch that level from the other side afterwards. Notice that all three are described only with price and volume — no indicator is required to see them.
Bullish / bull market
Plain-English meaning
Expecting a rise / an extended rising phase
Why a beginner cares
Describes the mood behind a headline, not a promise about tomorrow
Bearish / bear market
Plain-English meaning
Expecting a fall / an extended falling phase
Why a beginner cares
Bear phases are when most beginners meet real risk for the first time
Rally
Plain-English meaning
A sustained rise over a run of candles
Why a beginner cares
A rally inside a downtrend is common and often mistaken for a reversal
Correction
Plain-English meaning
A moderate fall inside a larger uptrend
Why a beginner cares
Corrections are normal. Treating every correction as a crash is expensive
Consolidation / range
Plain-English meaning
A sideways phase with a fairly stable high and low
Why a beginner cares
Most of market time is spent here, not trending
Trend
Plain-English meaning
A sequence of higher highs and higher lows (up), or lower highs and lower lows (down)
Why a beginner cares
Defined by structure you can point at, not by an opinion
Breakout
Plain-English meaning
Price pushing above a level that had been capping it
Why a beginner cares
Volume behaviour around a breakout is what separates a real move from a fake one
Breakdown
Plain-English meaning
Price slipping below a level that had been supporting it
Why a beginner cares
The mirror image of a breakout, and the more dangerous one if you are long
Retest
Plain-English meaning
Price returning to touch a broken level from the other side
Why a beginner cares
A second, calmer chance to judge whether the break was genuine
Gap up / gap down
Plain-English meaning
Today's opening price is meaningfully above or below yesterday's close
Why a beginner cares
Often caused by overnight news — or by a corporate action, which is not news at all
Volatility
Plain-English meaning
How sharply and quickly prices swing
Why a beginner cares
High volatility means the same position size hurts more
52-week high / low
Plain-English meaning
The highest and lowest price of the past year
Why a beginner cares
A quick reference for where the current price sits in its own recent history
All-time high (ATH)
Plain-English meaning
The highest price the stock has ever traded at
Why a beginner cares
There is no overhead supply of trapped sellers above an all-time high
Market-state vocabulary you will hear in every market bulletin.
| Term | Plain-English meaning | Why a beginner cares |
|---|---|---|
| Bullish / bull market | Expecting a rise / an extended rising phase | Describes the mood behind a headline, not a promise about tomorrow |
| Bearish / bear market | Expecting a fall / an extended falling phase | Bear phases are when most beginners meet real risk for the first time |
| Rally | A sustained rise over a run of candles | A rally inside a downtrend is common and often mistaken for a reversal |
| Correction | A moderate fall inside a larger uptrend | Corrections are normal. Treating every correction as a crash is expensive |
| Consolidation / range | A sideways phase with a fairly stable high and low | Most of market time is spent here, not trending |
| Trend | A sequence of higher highs and higher lows (up), or lower highs and lower lows (down) | Defined by structure you can point at, not by an opinion |
| Breakout | Price pushing above a level that had been capping it | Volume behaviour around a breakout is what separates a real move from a fake one |
| Breakdown | Price slipping below a level that had been supporting it | The mirror image of a breakout, and the more dangerous one if you are long |
| Retest | Price returning to touch a broken level from the other side | A second, calmer chance to judge whether the break was genuine |
| Gap up / gap down | Today's opening price is meaningfully above or below yesterday's close | Often caused by overnight news — or by a corporate action, which is not news at all |
| Volatility | How sharply and quickly prices swing | High volatility means the same position size hurts more |
| 52-week high / low | The highest and lowest price of the past year | A quick reference for where the current price sits in its own recent history |
| All-time high (ATH) | The highest price the stock has ever traded at | There is no overhead supply of trapped sellers above an all-time high |
Ownership and Corporate Terms
Who actually owns the company
A share is a unit of ownership in a company. This group of words describes how that ownership is divided, and how much of it is actually available for you to buy.
Start with a distinction that trips up nearly everyone. Face value is the nominal value printed on a share — commonly ₹1, ₹2, ₹5 or ₹10 — and it is mostly an accounting figure used for dividends and splits. Book value is the company's net assets divided by the number of shares. Market price is what people are actually paying today. All three can be wildly different numbers for the same share, and only the third one is what you pay.
Free float is the portion of shares genuinely available for public trading, after removing promoter and other locked-in holdings. It matters for two reasons: it decides how easily you can enter and exit, and Indian indices weight their members by free-float market cap rather than full market cap.
Pledging deserves a sentence of its own. When promoters borrow money and offer their own shares as security, those shares are pledged. If the share price falls far enough, the lender can sell them, which pushes the price down further. A rising pledge percentage is a fact worth checking in a company's shareholding disclosure — it is publicly filed every quarter.
Equity share
Plain-English meaning
A unit of ownership carrying a claim on profits and, usually, a vote
Why a beginner cares
This is what you actually buy — not a 'ticket' on a price
Face value
Plain-English meaning
The nominal value assigned to a share, often ₹1, ₹2, ₹5 or ₹10
Why a beginner cares
Dividends are sometimes declared as a percentage of face value, not of market price
Book value
Plain-English meaning
Net assets of the company divided by the number of shares
Why a beginner cares
A balance-sheet view of worth, entirely separate from the market price
Authorised capital
Plain-English meaning
The maximum share capital the company is permitted to issue
Why a beginner cares
A ceiling set in the company's own documents, not a market number
Issued / outstanding shares
Plain-English meaning
The shares actually issued and currently held by everyone
Why a beginner cares
The multiplier in the market cap calculation
Free float
Plain-English meaning
Shares genuinely available for public trading, excluding locked-in holdings
Why a beginner cares
Decides liquidity, and it is what Indian indices weight by
Promoter holding
Plain-English meaning
The stake held by the founding or controlling group
Why a beginner cares
Large changes in it are disclosed and are worth reading about
Pledging
Plain-English meaning
Promoters borrowing against their own shares as collateral
Why a beginner cares
A forced sale by the lender can add selling pressure exactly when the price is already weak
Public shareholding
Plain-English meaning
Everything not held by promoters — retail, institutions, others
Why a beginner cares
Listed companies must keep a minimum level of it (25% under Rule 19A of the Securities Contracts (Regulation) Rules; public sector companies are treated separately)
FII / DII holding
Plain-English meaning
Stake held by foreign and domestic institutions
Why a beginner cares
Disclosed quarterly; useful as context, never as a signal on its own
Dividend
Plain-English meaning
Cash paid out of profits to shareholders
Why a beginner cares
Declared as a rupee amount per share (often quoted against face value), and taxable in your hands
Corporate action
Plain-English meaning
A company event that changes the shares themselves — split, bonus, dividend, buyback
Why a beginner cares
It can change your share count and your chart overnight without anything going wrong
Ownership and corporate vocabulary, all of it publicly disclosed.
| Term | Plain-English meaning | Why a beginner cares |
|---|---|---|
| Equity share | A unit of ownership carrying a claim on profits and, usually, a vote | This is what you actually buy — not a 'ticket' on a price |
| Face value | The nominal value assigned to a share, often ₹1, ₹2, ₹5 or ₹10 | Dividends are sometimes declared as a percentage of face value, not of market price |
| Book value | Net assets of the company divided by the number of shares | A balance-sheet view of worth, entirely separate from the market price |
| Authorised capital | The maximum share capital the company is permitted to issue | A ceiling set in the company's own documents, not a market number |
| Issued / outstanding shares | The shares actually issued and currently held by everyone | The multiplier in the market cap calculation |
| Free float | Shares genuinely available for public trading, excluding locked-in holdings | Decides liquidity, and it is what Indian indices weight by |
| Promoter holding | The stake held by the founding or controlling group | Large changes in it are disclosed and are worth reading about |
| Pledging | Promoters borrowing against their own shares as collateral | A forced sale by the lender can add selling pressure exactly when the price is already weak |
| Public shareholding | Everything not held by promoters — retail, institutions, others | Listed companies must keep a minimum level of it (25% under Rule 19A of the Securities Contracts (Regulation) Rules; public sector companies are treated separately) |
| FII / DII holding | Stake held by foreign and domestic institutions | Disclosed quarterly; useful as context, never as a signal on its own |
| Dividend | Cash paid out of profits to shareholders | Declared as a rupee amount per share (often quoted against face value), and taxable in your hands |
| Corporate action | A company event that changes the shares themselves — split, bonus, dividend, buyback | It can change your share count and your chart overnight without anything going wrong |
Valuation Terms
Cheap, expensive, and why the words are slippery
Valuation vocabulary tries to answer one question: is the price reasonable compared with the business behind it? You will study these properly in the analysis phase. Here you need the working meaning of each.
Market capitalisation is share price multiplied by the number of outstanding shares. It is the price tag on the whole company, and it is the only honest measure of size. A ₹40 share and a ₹4,000 share tell you nothing until you know how many shares exist.
Earnings per share, or EPS, is net profit divided by the number of shares — the profit attributable to each share. The P/E ratio is price divided by EPS. Work it through: a share trades at ₹600 and earned ₹30 per share last year, so the P/E is 600 ÷ 30 = 20. You are paying ₹20 for every ₹1 of last year's annual profit.
Dividend yield is the annual dividend divided by the price. If a share pays ₹12 a year and trades at ₹400, the yield is 12 ÷ 400 = 3%. Enterprise value goes one step further than market cap by adding the company's debt and subtracting its cash — the price of buying the whole business including what it owes.
Market cap
How it is calculated
Share price × outstanding shares
Why a beginner cares
The real size of a company; per-share price says nothing about size
EPS
How it is calculated
Net profit ÷ number of shares
Why a beginner cares
The per-share profit that the P/E ratio is built on
P/E ratio
How it is calculated
Price ÷ EPS
Why a beginner cares
How many rupees you pay for ₹1 of annual profit
P/B ratio
How it is calculated
Price ÷ book value per share
Why a beginner cares
Price compared with balance-sheet net assets
Dividend yield
How it is calculated
Annual dividend per share ÷ price × 100
Why a beginner cares
The cash return you get while you hold, separate from price movement
Enterprise value (EV)
How it is calculated
Market cap + debt − cash
Why a beginner cares
The cost of the whole business including its borrowings
Face value vs market price
How it is calculated
Nominal accounting value vs what it trades at
Why a beginner cares
A ₹10 face value share can trade at ₹4 or ₹4,000 — the two are unrelated
Valuation vocabulary with the arithmetic spelled out.
| Term | How it is calculated | Why a beginner cares |
|---|---|---|
| Market cap | Share price × outstanding shares | The real size of a company; per-share price says nothing about size |
| EPS | Net profit ÷ number of shares | The per-share profit that the P/E ratio is built on |
| P/E ratio | Price ÷ EPS | How many rupees you pay for ₹1 of annual profit |
| P/B ratio | Price ÷ book value per share | Price compared with balance-sheet net assets |
| Dividend yield | Annual dividend per share ÷ price × 100 | The cash return you get while you hold, separate from price movement |
| Enterprise value (EV) | Market cap + debt − cash | The cost of the whole business including its borrowings |
| Face value vs market price | Nominal accounting value vs what it trades at | A ₹10 face value share can trade at ₹4 or ₹4,000 — the two are unrelated |
Index and Segment Terms
Baskets, benchmarks and the series letter beside a symbol
An index is a basket of shares tracked as a single number. A benchmark is an index used as the yardstick for comparison — NIFTY 50 is both an index and, for most Indian equity, the benchmark.
Size categories come from a ranking, not a rupee cut-off. Companies are ranked by market cap, and the top 100 are large caps, ranks 101 to 250 are mid caps, and rank 251 onwards are small caps. Because it is a ranking, a company can move between buckets even if its own price has not changed.
Now the letters you may have noticed next to a symbol on the NSE. Most shares trade in the EQ series, the normal rolling-settlement segment where intraday trading is allowed. Some are in the BE series, also called trade-to-trade, where every trade must be taken to delivery and intraday squaring off is not permitted. Exchanges move stocks into restricted segments for surveillance reasons, and the exchange publishes the list.
Finally, index funds and exchange traded funds. You cannot buy an index directly — it is a calculation, not a security. What you can buy is a fund that holds the index's constituents, or a derivative contract written on the index. That distinction is covered fully in the indices lesson.
Index
Plain-English meaning
A basket of shares tracked as one number
Why a beginner cares
Lets you read broad direction without watching thousands of stocks
Benchmark
Plain-English meaning
The index used as the comparison yardstick
Why a beginner cares
Every fund's performance is reported against one
Free-float weighting
Plain-English meaning
Members weighted by their publicly tradable market cap
Why a beginner cares
Explains why a handful of heavyweights can move the whole index
Sector / sectoral index
Plain-English meaning
An industry grouping and the index that tracks it
Why a beginner cares
Shows where strength and weakness are concentrated
Large / mid / small cap
Plain-English meaning
Rank 1–100, 101–250, and 251 onwards by market cap
Why a beginner cares
A ranking, not a rupee threshold — so the bucket can change on its own
EQ series
Plain-English meaning
The normal rolling-settlement equity segment
Why a beginner cares
Where intraday trading is permitted
BE / trade-to-trade series
Plain-English meaning
Compulsory delivery segment — no intraday squaring off
Why a beginner cares
A stock you thought you could day-trade may not allow it at all
Index fund / ETF
Plain-English meaning
A fund that holds the index's constituents in the same proportions
Why a beginner cares
The practical way to 'buy the index', since the index itself is not a security
Lot size (index derivatives)
Plain-English meaning
Fixed contract quantity for a futures or options contract
Why a beginner cares
The reason derivatives require far more capital than one share
Index and segment vocabulary.
| Term | Plain-English meaning | Why a beginner cares |
|---|---|---|
| Index | A basket of shares tracked as one number | Lets you read broad direction without watching thousands of stocks |
| Benchmark | The index used as the comparison yardstick | Every fund's performance is reported against one |
| Free-float weighting | Members weighted by their publicly tradable market cap | Explains why a handful of heavyweights can move the whole index |
| Sector / sectoral index | An industry grouping and the index that tracks it | Shows where strength and weakness are concentrated |
| Large / mid / small cap | Rank 1–100, 101–250, and 251 onwards by market cap | A ranking, not a rupee threshold — so the bucket can change on its own |
| EQ series | The normal rolling-settlement equity segment | Where intraday trading is permitted |
| BE / trade-to-trade series | Compulsory delivery segment — no intraday squaring off | A stock you thought you could day-trade may not allow it at all |
| Index fund / ETF | A fund that holds the index's constituents in the same proportions | The practical way to 'buy the index', since the index itself is not a security |
| Lot size (index derivatives) | Fixed contract quantity for a futures or options contract | The reason derivatives require far more capital than one share |
Settlement and Plumbing Terms
How shares and money actually change hands
A trade is an agreement. Settlement is the delivery. In Indian equities, settlement runs on a T+1 cycle: the trade happens on day T, and the shares and money are exchanged on the next trading day.
The words for the two halves are pay-in and pay-out. On the settlement day, sellers deliver shares and buyers deliver funds — that is pay-in. The clearing corporation then hands shares to buyers and money to sellers — that is pay-out. Your broker sits in the middle and your ledger reflects the result.
If a seller fails to deliver the shares they sold, the exchange runs an auction to source those shares from the market, and the defaulting seller bears the cost difference plus a penalty. Under T+1, the auction is held on T+1 and settled on T+2; the penalty rules are set in the exchange's circulars, so check the current NSE/BSE circular for the exact figure (Needs verification). That is why short selling in the cash segment without squaring off the same day is a genuinely expensive mistake, not a technicality.
The rest of this group is record-keeping. Your demat account holds the shares in electronic form with a depository — CDSL or NSDL — through a depository participant, usually your broker. Your contract note is the legal record of every trade you did that day, with every charge itemised. Your ledger is the running record of money in your trading account.
T day
Plain-English meaning
The day the trade is executed
Why a beginner cares
The clock for everything downstream starts here
T+1 settlement
Plain-English meaning
Shares and funds change hands on the next trading day
Why a beginner cares
It also fixes the last day you can buy to be eligible for a corporate action
Pay-in
Plain-English meaning
Sellers deliver shares and buyers deliver funds to the clearing corporation
Why a beginner cares
The obligation half of settlement
Pay-out
Plain-English meaning
The clearing corporation delivers shares to buyers and funds to sellers
Why a beginner cares
The moment shares appear in your demat
Auction
Plain-English meaning
The exchange buys shares in the market when a seller fails to deliver
Why a beginner cares
The defaulting seller pays the difference plus a penalty
Short delivery
Plain-English meaning
A seller could not deliver the shares they sold
Why a beginner cares
The reason casual cash-segment shorting is genuinely dangerous
Depository (CDSL / NSDL)
Plain-English meaning
The institution that holds shares electronically
Why a beginner cares
Your shares are held here, not by your broker
Depository participant (DP)
Plain-English meaning
The agent through whom you access the depository — usually your broker
Why a beginner cares
DP charges appear on every delivery sale
Demat account
Plain-English meaning
The electronic account where your shares sit
Why a beginner cares
Ownership lives here; the trading account is only the doorway
Contract note
Plain-English meaning
The daily legal record of your trades with all charges itemised
Why a beginner cares
The document to reconcile against, and the one to keep for tax time
Ledger
Plain-English meaning
The running record of funds in your trading account
Why a beginner cares
Where charges, payouts and obligations actually show up
Margin
Plain-English meaning
Money or approved collateral you must keep with the broker to hold certain positions
Why a beginner cares
A shortfall triggers penalties or forced closure of your position
Settlement vocabulary — the plumbing behind every trade.
| Term | Plain-English meaning | Why a beginner cares |
|---|---|---|
| T day | The day the trade is executed | The clock for everything downstream starts here |
| T+1 settlement | Shares and funds change hands on the next trading day | It also fixes the last day you can buy to be eligible for a corporate action |
| Pay-in | Sellers deliver shares and buyers deliver funds to the clearing corporation | The obligation half of settlement |
| Pay-out | The clearing corporation delivers shares to buyers and funds to sellers | The moment shares appear in your demat |
| Auction | The exchange buys shares in the market when a seller fails to deliver | The defaulting seller pays the difference plus a penalty |
| Short delivery | A seller could not deliver the shares they sold | The reason casual cash-segment shorting is genuinely dangerous |
| Depository (CDSL / NSDL) | The institution that holds shares electronically | Your shares are held here, not by your broker |
| Depository participant (DP) | The agent through whom you access the depository — usually your broker | DP charges appear on every delivery sale |
| Demat account | The electronic account where your shares sit | Ownership lives here; the trading account is only the doorway |
| Contract note | The daily legal record of your trades with all charges itemised | The document to reconcile against, and the one to keep for tax time |
| Ledger | The running record of funds in your trading account | Where charges, payouts and obligations actually show up |
| Margin | Money or approved collateral you must keep with the broker to hold certain positions | A shortfall triggers penalties or forced closure of your position |
Cost and Tax Terms
The vocabulary on the bill
Every trade carries costs beyond the price. They are small individually and enormous cumulatively, which is exactly why the vocabulary is worth learning — you cannot control a cost you cannot name.
The charges fall into three families. Your broker's own fee is brokerage. Statutory levies are collected on behalf of the government and the regulator — securities transaction tax, stamp duty, the exchange transaction charge, the regulator's turnover fee, and GST on the service components. Depository charges apply when shares actually leave your demat on a delivery sale.
Rates and slabs are set by the exchanges, the depositories and the government, and they change from time to time. This lesson deliberately gives no numbers. Take the current figures from your own contract note and from the official exchange and depository schedules, and treat any number you saw in a forum post as out of date until proven otherwise.
On the tax side, the words you need are short-term and long-term capital gains, which depend on how long you held before selling, and the annual information statement, which is the government's own record of your reported financial transactions. Tax treatment is personal and rules change — a qualified tax professional is the right place for your specific situation.
Brokerage
Plain-English meaning
Your broker's own fee for executing the trade
Why a beginner cares
The only line item that varies materially between brokers
STT (Securities Transaction Tax)
Plain-English meaning
A statutory tax on securities transactions
Why a beginner cares
Charged automatically; it differs by segment and by side of the trade
Exchange transaction charge
Plain-English meaning
The exchange's fee on turnover
Why a beginner cares
Small per trade, meaningful across many trades
SEBI turnover fee
Plain-English meaning
The regulator's levy on turnover
Why a beginner cares
Tiny, but present on every contract note
Stamp duty
Plain-English meaning
A state levy on the transaction
Why a beginner cares
Charged on the buy side
GST
Plain-English meaning
Goods and Services Tax on the service components of the bill
Why a beginner cares
Applies on brokerage and certain charges, not on the share price
DP charges
Plain-English meaning
The depository participant's fee when shares leave your demat
Why a beginner cares
A flat per-scrip charge on delivery sales, so tiny sales are proportionally expensive
Turnover
Plain-English meaning
The total value of your trades over a period
Why a beginner cares
Several charges are calculated on turnover, not on your profit
STCG / LTCG
Plain-English meaning
Short-term and long-term capital gains, decided by holding period
Why a beginner cares
Holding period changes the tax treatment of the same profit
AIS
Plain-English meaning
Annual Information Statement — the government's record of your reported transactions
Why a beginner cares
Reconcile it with your contract notes before filing
Cost and tax vocabulary. Rates change — always read the current schedule.
| Term | Plain-English meaning | Why a beginner cares |
|---|---|---|
| Brokerage | Your broker's own fee for executing the trade | The only line item that varies materially between brokers |
| STT (Securities Transaction Tax) | A statutory tax on securities transactions | Charged automatically; it differs by segment and by side of the trade |
| Exchange transaction charge | The exchange's fee on turnover | Small per trade, meaningful across many trades |
| SEBI turnover fee | The regulator's levy on turnover | Tiny, but present on every contract note |
| Stamp duty | A state levy on the transaction | Charged on the buy side |
| GST | Goods and Services Tax on the service components of the bill | Applies on brokerage and certain charges, not on the share price |
| DP charges | The depository participant's fee when shares leave your demat | A flat per-scrip charge on delivery sales, so tiny sales are proportionally expensive |
| Turnover | The total value of your trades over a period | Several charges are calculated on turnover, not on your profit |
| STCG / LTCG | Short-term and long-term capital gains, decided by holding period | Holding period changes the tax treatment of the same profit |
| AIS | Annual Information Statement — the government's record of your reported transactions | Reconcile it with your contract notes before filing |
Words That Trap Beginners
Vocabulary used to sell you something
Some market words are not descriptions at all. They are persuasion devices, and they show up most often in unsolicited messages and paid groups. Recognising them is part of speaking the language.
'Multibagger' simply means an investment that multiplied several times over. It is a description applied afterwards. Used in advance — 'this is the next multibagger' — it is a forecast dressed up as a fact.
'Sure shot', 'jackpot', 'guaranteed returns' and 'operator-backed' have no technical meaning whatsoever. No one can guarantee a market outcome, and any offer of assured returns on securities should immediately make you check the sender's registration on the SEBI website.
Then there are honest words used dishonestly. 'Long-term view' is a real idea, but it is often deployed after a trade goes wrong to avoid taking a loss. 'Averaging down' is a real mechanic, but it is frequently a way to keep adding money to a mistake. 'Book partial profit' is a real technique, but it means nothing without a rule for when.
'Next multibagger'
What it actually means
A prediction with no accountability attached
The honest question to ask
What has to be true for this, and what if it is not?
'Sure shot' / 'jackpot call'
What it actually means
Nothing — it is not a market term
The honest question to ask
Is the sender registered with SEBI, and where can I verify it?
'Guaranteed returns'
What it actually means
A claim no one is permitted to make about market-linked products
The honest question to ask
Who is guaranteeing it, with what money, under what regulation?
'Operator is active'
What it actually means
An unverifiable rumour about manipulation
The honest question to ask
Would I still want this if that sentence were removed?
'I have a long-term view now'
What it actually means
Often a loss being renamed rather than accepted
The honest question to ask
Would I buy this today at this price if I owned nothing?
'Averaging down'
What it actually means
Adding money to a position that is currently wrong
The honest question to ask
Is my total risk in this idea still within my own limit?
'Insider information'
What it actually means
Trading on unpublished price-sensitive information is prohibited
The honest question to ask
Do I understand that acting on this can be an offence?
How to hear these words correctly.
| What you hear | What it actually means | The honest question to ask |
|---|---|---|
| 'Next multibagger' | A prediction with no accountability attached | What has to be true for this, and what if it is not? |
| 'Sure shot' / 'jackpot call' | Nothing — it is not a market term | Is the sender registered with SEBI, and where can I verify it? |
| 'Guaranteed returns' | A claim no one is permitted to make about market-linked products | Who is guaranteeing it, with what money, under what regulation? |
| 'Operator is active' | An unverifiable rumour about manipulation | Would I still want this if that sentence were removed? |
| 'I have a long-term view now' | Often a loss being renamed rather than accepted | Would I buy this today at this price if I owned nothing? |
| 'Averaging down' | Adding money to a position that is currently wrong | Is my total risk in this idea still within my own limit? |
| 'Insider information' | Trading on unpublished price-sensitive information is prohibited | Do I understand that acting on this can be an offence? |
Quick-Reference Glossary
The whole vocabulary on one screen
Keep this section bookmarked. It compresses the seven themes into a single scan, so you can check a word in ten seconds and get back to what you were reading.
The most effective way to use it is not to reread it. It is to open your broker app beside it and find each term on your own screen. Vocabulary attaches to things you can see far better than to lists you scroll past.
When a term here belongs to a bigger idea, the linked lessons at the end of this page go deeper: the quote screen, the indices, market cap and categories, and corporate actions each get a full treatment of their own.
A closing note that applies to every lesson in this module. Markets carry risk, including the risk of losing money. Everything here is education, not investment advice, and no part of it is a recommendation to buy or sell any security. Decisions about your own money should account for your circumstances, and a SEBI-registered investment adviser is the right place for personalised guidance.
LTP
One-line meaning
Price of the most recent trade
Bid / Ask
One-line meaning
Best available buy price / best available sell price
Spread
One-line meaning
The gap between bid and ask — a hidden entry cost
VWAP
One-line meaning
Volume-weighted average price of the session so far
Circuit limit
One-line meaning
Daily cap on how far a price may move
Market order
One-line meaning
Fill now at any price
Limit order
One-line meaning
Fill only at my price or better
Stop-loss / trigger
One-line meaning
A dormant exit that activates at a price you choose
GTT
One-line meaning
A standing instruction that waits weeks or months for a price
Long / short
One-line meaning
Bought first / sold first
Square-off
One-line meaning
Closing a position with the opposite trade
Average price
One-line meaning
Blended cost per share — your true break-even
MTM
One-line meaning
Open position revalued at the current price
Bull / bear
One-line meaning
Extended rising phase / extended falling phase
Correction
One-line meaning
A moderate fall inside a larger uptrend
Consolidation
One-line meaning
A sideways, range-bound phase
Breakout / breakdown
One-line meaning
Price clearing a capping level / losing a supporting level
Gap up / gap down
One-line meaning
Opening meaningfully above or below the previous close
Face value
One-line meaning
Nominal accounting value of a share
Book value
One-line meaning
Net assets per share
Free float
One-line meaning
Shares actually available for public trading
Promoter holding
One-line meaning
Stake held by the founding or controlling group
Pledging
One-line meaning
Promoters borrowing against their own shares
Market cap
One-line meaning
Share price × outstanding shares
EPS / P/E
One-line meaning
Profit per share / price paid per ₹1 of annual profit
Dividend yield
One-line meaning
Annual dividend as a percentage of price
Enterprise value
One-line meaning
Market cap + debt − cash
Index / benchmark
One-line meaning
A basket tracked as one number / the yardstick
EQ / BE series
One-line meaning
Normal segment / compulsory-delivery segment
T+1
One-line meaning
Settlement on the trading day after the trade
Pay-in / pay-out
One-line meaning
Delivery of obligations / delivery of entitlements
Auction
One-line meaning
Exchange sourcing shares a seller failed to deliver
Contract note
One-line meaning
The daily legal record of your trades and charges
STCG / LTCG
One-line meaning
Short-term / long-term capital gains by holding period
One-line reference for the terms in this lesson.
| Term | One-line meaning |
|---|---|
| LTP | Price of the most recent trade |
| Bid / Ask | Best available buy price / best available sell price |
| Spread | The gap between bid and ask — a hidden entry cost |
| VWAP | Volume-weighted average price of the session so far |
| Circuit limit | Daily cap on how far a price may move |
| Market order | Fill now at any price |
| Limit order | Fill only at my price or better |
| Stop-loss / trigger | A dormant exit that activates at a price you choose |
| GTT | A standing instruction that waits weeks or months for a price |
| Long / short | Bought first / sold first |
| Square-off | Closing a position with the opposite trade |
| Average price | Blended cost per share — your true break-even |
| MTM | Open position revalued at the current price |
| Bull / bear | Extended rising phase / extended falling phase |
| Correction | A moderate fall inside a larger uptrend |
| Consolidation | A sideways, range-bound phase |
| Breakout / breakdown | Price clearing a capping level / losing a supporting level |
| Gap up / gap down | Opening meaningfully above or below the previous close |
| Face value | Nominal accounting value of a share |
| Book value | Net assets per share |
| Free float | Shares actually available for public trading |
| Promoter holding | Stake held by the founding or controlling group |
| Pledging | Promoters borrowing against their own shares |
| Market cap | Share price × outstanding shares |
| EPS / P/E | Profit per share / price paid per ₹1 of annual profit |
| Dividend yield | Annual dividend as a percentage of price |
| Enterprise value | Market cap + debt − cash |
| Index / benchmark | A basket tracked as one number / the yardstick |
| EQ / BE series | Normal segment / compulsory-delivery segment |
| T+1 | Settlement on the trading day after the trade |
| Pay-in / pay-out | Delivery of obligations / delivery of entitlements |
| Auction | Exchange sourcing shares a seller failed to deliver |
| Contract note | The daily legal record of your trades and charges |
| STCG / LTCG | Short-term / long-term capital gains by holding period |
Nobody is born fluent in this language. Every experienced participant learned these words the same way you are learning them now — one confusing term at a time.
Common questions
What is the difference between LTP and the price I will actually get?
LTP is the price of the last completed trade — it is history. What you will actually get depends on the bid and the ask. If you sell at market you receive roughly the bid; if you buy at market you pay roughly the ask. In a liquid large-cap the difference is a few paise. In a thinly traded stock it can be several rupees per share, which is a real cost paid the moment you enter.
What is the bid-ask spread and why does it cost me money?
The spread is the gap between the best buy price (bid) and the best sell price (ask). Suppose the bid is ₹499.50 and the ask is ₹500.00 — the spread is ₹0.50. If you buy 100 shares at the ask and sell instantly at the bid, you lose ₹50 without the price moving at all. That is why liquidity matters: wider spreads mean you start every trade further behind.
What does MTM mean in my broker app?
MTM stands for mark to market. It means your open position is being revalued continuously at the current market price, so the profit or loss shown keeps changing every tick. It is a running score, not a settled result. Nothing is realised — and nothing reaches your bank account or your tax return — until you square off the position.
How is my average price calculated when I buy the same stock twice?
It is the total money spent divided by the total shares held. Buy 50 shares at ₹500 (₹25,000) and later 50 more at ₹400 (₹20,000), and you hold 100 shares that cost ₹45,000, so the average is ₹450. Your app now shows a loss until the price crosses ₹450 rather than ₹500. The maths did not create or destroy anything — it only moved your break-even.
What does T+1 settlement actually mean for me?
The trade is executed on day T and the shares and funds change hands on the next trading day. If you buy on a Monday, the shares are credited to your demat on Tuesday and you are the registered owner from then. T+1 also decides eligibility for corporate actions, because you must be a registered holder by the record date to receive a dividend, split or bonus.
What is the difference between EQ series and BE series on the NSE?
EQ is the normal rolling-settlement segment where intraday trading is permitted. BE, also called trade-to-trade, is a compulsory-delivery segment where every purchase must be taken into demat and cannot be squared off the same day. Exchanges move stocks into restricted segments for surveillance reasons and publish the list, so check the series before assuming you can day-trade a stock.
Why did my stock gap down when there was no bad news?
Check for a corporate action first. When a stock goes ex-dividend, ex-split or ex-bonus, the exchange adjusts the reference price, so the chart shows a gap that is pure arithmetic rather than selling pressure. A ₹1,000 share that splits into ten ₹100 shares looks like a 90% crash on an unadjusted chart while your total value has not changed by a rupee.
Written By
Rohit Singh
Mr. Chartist
With 14+ years of experience in Indian financial markets, Rohit Singh (Mr. Chartist) is a SEBI Registered Research Analyst, Amazon #1 bestselling author, and the founder of Investology — a premium trading ecosystem trusted by a 1.5 Lakh+ strong community across India.