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Market Basics & Instruments

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Market Basics & Instruments

Secondary Market

The market in which already-issued securities are traded between investors, with no money flowing to the issuer.

Test: both counterparties are investors and the issuer is not a party to the trade qualitative Market Basics & Instruments

Security

A tradable financial instrument representing ownership, a creditor relationship, or a right relating to either.

Test: the instrument is transferable, is issued in standardised units, and represents ownership, debt, or a right over one of these qualitative Market Basics & Instruments

Share

A single unit of ownership in a company, giving its holder a proportional claim on the company's profits and on whatever is left over if…

Ownership fraction = Shares Held / Total Shares Outstanding shares Market Basics & Instruments

Shareholder

A person or institution that owns shares in a company and therefore holds part of its ownership.

Test: the holder's name appears in the register of members, or in a depository account holding the shares, as of the relevant record date qualitative Market Basics & Instruments

Short Position

A position created by selling a security one does not own, which gains when the price falls and loses when it rises.

Profit or Loss = (Entry Price - Exit Price) x Quantity ₹ Market Basics & Instruments

Short Selling

Selling a security that is not owned, in the expectation of buying it back later at a lower price.

Test: the sale is executed without holding the security in the seller's demat account at the time of sale qualitative Market Basics & Instruments

Small-Cap Stock

A share of a company ranked 251st or lower by market capitalisation under India's classification.

Rank all listed companies by average market capitalisation; rank 251 onwards is small-cap qualitative Market Basics & Instruments

Stock Exchange

A regulated marketplace that matches buy and sell orders in listed securities and publishes the resulting prices.

Test: the venue is recognised by the regulator, operates an order-matching system and publishes executed prices qualitative Market Basics & Instruments

Swing Trading

Holding a position for several days to a few weeks in order to capture one directional move in the price.

Test: holding period spans multiple sessions but well under a year, with the exit defined by a price target or stop rather than by a valuation view qualitative Market Basics & Instruments

Ticker Symbol

The short alphabetic code used by an exchange to identify a listed security in quotes, orders and trade reports.

Test: the code is exchange-assigned, unique within that exchange, and resolves to exactly one security qualitative Market Basics & Instruments

Trader

A market participant who buys and sells to profit from price movement over short horizons rather than from the underlying business.

Test: the entry and exit decisions rest on price, volume and positioning, with a horizon measured in minutes to months qualitative Market Basics & Instruments

Trading Account

The account with a broker through which buy and sell orders are placed on an exchange.

Test: the account is opened with a trading member of an exchange and is used to route orders, not to hold securities qualitative Market Basics & Instruments

Turnover

The rupee value of trading in a security over a period, obtained by multiplying each trade's quantity by its price.

Turnover = Sum of (Trade Quantity x Trade Price) over the period ₹ crore Market Basics & Instruments

Unlisted Company

A company whose shares are not admitted to trading on any stock exchange, so they can only be transferred privately.

Test: no class of the company's shares is admitted to dealings on a recognised exchange qualitative Market Basics & Instruments

Unrealised Gain

The paper profit on a position that is still held, measured as the difference between the current price and the purchase price.

Unrealised Gain = (Current Market Price - Purchase Price) x Quantity Held ₹ Market Basics & Instruments

Value Stock

A share trading at a low price relative to accounting measures such as earnings, book value or cash flow.

Test: low P/E, low P/B or high earnings yield relative to the market and to the company's own history qualitative Market Basics & Instruments

Volume

The number of shares traded in a security over a stated period, counting each trade once.

Volume = total number of shares changing hands in the period shares