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Risk & Portfolio Management

Position Sizing

Deciding how much capital to commit to a single position, based on the loss that would be acceptable if it went wrong.

Position Size = (Account Value x Risk per Trade %) / Risk per Share shares Market Basics & Instruments

Positional Trading

Holding a position for weeks to months, aiming to capture a sustained trend rather than a single swing.

Test: holding period measured in weeks or months, with the exit governed by trend condition rather than by an intraday level qualitative Orders, Execution & Market Structure

Post-Closing Session

A short window after the main session in which orders execute at the day's official closing price rather than at a negotiated one.

Test: all trades in the window execute at the previously determined closing price, with no price discovery qualitative Orders, Execution & Market Structure

Pre-Open Session

The window before continuous trading begins in which orders are collected and matched in a call auction to set the opening price.

Test: orders may be entered and modified during the collection window but execute only at the single auction price qualitative Market Basics & Instruments

Preference Share

A share that receives a fixed dividend ahead of equity shares and ranks ahead of them in a winding-up, usually in exchange for giving up…

Annual preference dividend = Face Value x Coupon Rate x Number of Preference Shares ₹ Corporate Actions, Dividends & Governance

Preferential Allotment

An issue of shares to a selected group of investors rather than to all shareholders or the public.

Test: shares are issued to identified persons under a special resolution, at a price not below the floor set by SEBI's pricing formula qualitative Market Psychology & Behavioural Finance

Present Bias

The tendency to overvalue immediate rewards relative to larger rewards available later.

Test: a smaller immediate reward is preferred to a larger delayed one, at a discount rate far above the market rate qualitative Market Basics & Instruments

Previous Close

The official closing price of the prior trading session, used as the reference point for the current day's change and circuit limits.

Day's Change % = (Current Price - Previous Close) / Previous Close x 100 ₹ Technical Analysis & Chart Patterns

Price Action

The analysis of raw price movement itself, without indicators derived from it.

Test: the reading uses only the sequence of highs, lows, opens and closes, with no calculated overlay qualitative Orders, Execution & Market Structure

Price Band

The maximum percentage a security may move from its previous close in a session before orders outside the range are rejected.

Upper Band = Previous Close x (1 + Band %); Lower Band = Previous Close x (1 - Band %) % Orders, Execution & Market Structure

Price Discovery

The process by which the interaction of buy and sell orders produces a price that reflects the market's aggregate view.

Test: price emerges from competing orders rather than being set administratively or by a single participant qualitative Indicators & Oscillators

Price Oscillator

The difference between two moving averages of price, expressed either in absolute terms or as a percentage.

Percentage Price Oscillator = (Short-Period MA - Long-Period MA) / Long-Period MA x 100 % Corporate Actions, Dividends & Governance

Price-Sensitive Information

Information about a company that, if published, would be likely to materially affect its share price.

Test: a reasonable investor would consider the information relevant to a decision to buy, hold or sell the security qualitative Orders, Execution & Market Structure

Price-Time Priority

The rule by which an exchange ranks orders for matching: better prices first, and among equal prices, whichever arrived earlier.

Rank = better price first; among equal prices, earlier timestamp first qualitative Fundamental Analysis & Valuation

Price-to-Book Ratio

The market price of a share divided by its book value per share.

P/B = Market Price per Share / Book Value per Share ratio (x, times) Fundamental Analysis & Valuation

Price-to-Cash-Flow Ratio

Market capitalisation divided by operating cash flow, valuing the company against cash generated rather than accounting profit.

P/CF = Market Capitalisation / Operating Cash Flow ratio (x, times) Fundamental Analysis & Valuation

Price-to-Earnings Ratio

The price of one share divided by the earnings attributable to it, showing how many rupees are paid per rupee of annual profit.

P/E = Market Price per Share / Earnings per Share ratio (x, times) Fundamental Analysis & Valuation

Price-to-Sales Ratio

Market capitalisation divided by annual revenue, showing how much is paid per rupee of sales.

P/S = Market Capitalisation / Annual Revenue ratio (x, times) Fundamental Analysis & Valuation

Pricing Power

The ability to raise prices without losing enough volume to reduce profit.

Test: gross margin is stable or rising through a period of input-cost inflation, with volumes broadly maintained qualitative Bonds & Fixed Income

Primary Dealer

An institution authorised by the Reserve Bank to underwrite and make markets in government securities.

Test: the entity holds a Reserve Bank authorisation, bids in primary auctions and quotes two-way prices in the secondary market qualitative Market Basics & Instruments

Primary Market

The market in which securities are created and sold by the issuer for the first time, with the proceeds going to the issuer.

Test: does the money paid by the buyer reach the issuing company or government? If yes, the transaction is primary qualitative Bonds & Fixed Income

Principal

The face amount a bond issuer borrows and must repay at maturity, on which interest is calculated.

Coupon Payment = Principal x Coupon Rate / Number of Payments per Year ₹ Market Psychology & Behavioural Finance

Probability Neglect

Focusing on the magnitude of a possible outcome while disregarding how likely it is.

Test: the decision responds to the size of a payoff or loss but is insensitive to changes in its probability qualitative Financial Statements & Accounting

Profit and Loss Statement

A statement of revenue earned and costs incurred over a period, ending in the profit or loss for that period.

Net Profit = Revenue + Other Income - Operating Expenses - Depreciation - Interest - Tax ₹ crore