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Algorithmic Trading

Trading using certain logic is considered to be algorithmic trading. It is however usually referred closely to automated trading.

Technical Analysis

Study of price-volume movement to make decisions on time of buying and selling of a stock. Its one of the two most widely used methodologies used for trading. Within technical analysis, a number of technical indicators , which are mainly certain formulas derived from price and volume parameters. Its usually for short term trading.

Fundamental Analysis

Study of company reports, balance sheets and corporate actions to make trading decisions with a long term holding period, i.e. buying a stock and selling it only after a few months and years.

Profit and loss

A widely used term that tells how much money one earned( profit) or lost( loss) while trading in the stock markets. It's good to be in profits.

Intraday trading

Its simply buying and selling of stocks on the same day, during the trading hours

CNC

It's an order type in which you can hold a position for more than one day.

MIS

Market Intraday Squareoff: An order type in which at the end of the day, all the orders are closed by the broker. It's the order type for intraday trades.

Bullish

A jargon used widely by traders, used as bullish on stock of Company , meaning the price of Company A are expected to increase with time

Bearish

Another jargon widely used by traders, used as bearish on stock of Company A meaning the price of Company A are expected to decrease with time.

Buy order

A buy order signifies that the person feels the prices of a particular stock will move up, i.e. the person is bullish on the stock and he will make a profit by selling at a higher price.

Sell order

Just the opposite of a buy order, i.e. it signifies that the person feels the prices will fall, i.e. the person is bearish on the stock and he will make a profit by short selling the stock.

Stock

A stock is a representative term used to indicate a company listed on the stock markets. Example: the stock of SBI, or the stock of Reliance.

Share

A share is the smallest entity, indicating an amount of volume. Example: You buy 100 shares of stock A

Trading

Trading is the buying and selling of stocks listed in the stock markets, through a DEMAT account.

Trend

A trend in the market is a unidirectional movement of stock prices, either upwards or downwards for a particular time period.

Reversion

Reversion is the end of a trend, i.e. if the trend was upwards, the prices start falling at the point of reversion and vice-versa.

Simple Moving Average

A technical indicator, that is used to identify trend. A simple moving average (SMA) of prices for a period of x time, is the average price of the stock in that time and it is calculated at every minute, for the same x time frame.

Volatility

Volatility is the movement of stock prices from the mean price. It is calculated by the standard deviation of the price. Used to indicate the disturbance in the market.

Sharpe Ratio

It's a parameter that gives out an idea about the quality and stability of the trading strategy. Higher the Sharpe, better is the strategy. Its a ratio of annualized returns to standard deviation of day level returns.

Max Drawdown

It's the maximum loss a strategy has faced. Lesser the drawdown, the better is the strategy.

Balance sheet

It's a document released by all the companies listed on the exchange. It contains information about the assets and liabilities.

Net Income

It is the profit of the company after taxes.

EBIDTA

Earnings before interest, depreciation and tax.

EBID

Earnings before interest and depreciation.

Corporate Announcement

These are public notices given by listed companies usually for annual and quarterly report announcements, and sometimes in cases wherein there's change in corporate structure of the company.

Revenue

It's the total amount made by the company in a given fiscal year. It is not the profit of the company.

Net profit

Revenue minus costs minus taxes is the simplest definition.

Investing

Investing refers to the ideology of buying a stock and selling it only after a few months or years, i.e. long holding periods.

Normal distribution

A normal distribution curve is a bell shaped curved centered about the (0,0) point in the coordinate system. It's considered to be the most natural curve.

Mean

Average of data points in a series.

Median

The middle point of a data series when arranged in ascending or descending order.

Mode

Its the data point that occurs with highest frequency in a data series.

Trading strategy

A trading strategy is any idea derived from logical interpretations which is used to to trading in the markets.

Quantitative Trading

Refers to the field of using mathematics and numbers and making buy and sell decisions based on equations and expressions derived from a trading logic.

Portfolio

A set or a bucket of stocks which are usually traded together. A trading strategy is mapped to a particular portfolio when trading.

Stock Selection

Its the procedure of selecting stocks based on their sector, price-volume movement or any other logic which a person can develop.

Backtesting/Simulation

Its a process of testing a given trading strategy over historical data to check the quality of the strategy. It lets the user know how his strategy would have performed if he would have had traded live using it.

Portfolio Optimization

It's a technique to distribute investment amounts to different stocks in a portfolio on the basis of the returns and standard deviations of the returns.

Stress Test

A stress test is a technique used to check the robustness of a trading strategy over artificially created market scenarios. Better the results during a stress test, a there's higher probability of the strategy working as desired.

Efficient Market Hypothesis

Its a theoretical concept which states that the stock prices absorb and adjust to any news instantaneously. According to EMH, three types of markets exists, weak form of market efficiency, semi strong and strong forms of market efficiency.

EPS

Earnings per share. It's a parameter that portrays the health and quality of management of a company.

Skewness

Its a parameter that gives an idea about the distribution of the data points. Skews means few in short.A positively skewed data series implies that there are few(less) points are on the right side of the mean.

Linear Regression

Its a predictive model that generates a linear equation out of the training datasets and then predicts the future points using the same <equation class=""></equation>

K-Means Clustering

Its a classification model that classifies data points into different categories based on their distance from the mean.

Autocorrelation

Its a correlation of 2 sets of data points within a single series at different time intervals.

Market Capital

Its the product of the price of a given stock and its total outstanding shares.

Outstanding shares

Total number of shares issued by a company to be traded in the markets.