Trading glossary

New trading terms come thick and fast. This glossary defines the words you'll meet most often in the stock, futures and options markets — each in one or two plain sentences. Bookmark it and refer back as you work through our guides and practise in the simulator.

A–C

Ask (offer): The lowest price a seller is currently willing to accept for a security. You buy at the ask.

Averaging down: Buying more of a falling position to lower your average entry price. It can reduce your break-even — or deepen a loss if the price keeps falling.

Bid: The highest price a buyer is currently willing to pay. You sell at the bid.

Bid–ask spread: The gap between the bid and the ask. A narrow spread means a liquid, easy-to-trade market; a wide spread costs you more to enter and exit.

Blue chip: A large, well-established, financially sound company whose shares are considered relatively stable.

Bull / bear market: A bull market is a sustained rise in prices; a bear market is a sustained fall (commonly 20%+ from the peak).

Call option: A contract giving the buyer the right (not the obligation) to buy an asset at a set strike price before expiry. See calls and puts explained.

Candlestick: A chart symbol showing the open, high, low and close for a period. Learn to read candlesticks.

Circuit breaker: An exchange rule that halts trading when a stock or index moves beyond a set percentage in a day, to curb panic.

D–G

Day trading: Opening and closing positions within the same session, holding nothing overnight. See intraday basics.

Delta: An option Greek measuring how much the option's price moves for a ₹1 move in the underlying. See the Greeks guide.

Derivative: A contract whose value is derived from an underlying asset — futures and options are the most common.

Diversification: Spreading capital across different assets so that no single loss can sink the whole portfolio.

Dividend: A share of a company's profit paid out to shareholders, usually in cash.

Expiry: The date on which a futures or options contract settles and ceases to exist.

Futures: A standardised contract to buy or sell an asset at a set price on a future date. Both sides are obligated to settle.

Gamma: An option Greek measuring how fast delta itself changes as the underlying moves.

H–M

Hedge: A position taken to offset the risk of another position — like buying a put to protect a stock holding.

Index: A basket of stocks tracked as a single number, such as the Nifty 50 or Bank Nifty.

In the money (ITM): An option that has intrinsic value — a call whose strike is below the current price, or a put whose strike is above it.

Intraday: Within a single trading day. Intraday positions are squared off before the market closes.

Leverage: Using borrowed money or margin to control a larger position than your cash alone allows — magnifying both gains and losses. See leverage and margin.

Limit order: An order to buy or sell only at a specified price or better. See market vs limit orders.

Liquidity: How easily an asset can be bought or sold without moving its price. High volume = high liquidity.

Long: Owning an asset (or a call) in the expectation that its price will rise.

Lot size: The fixed number of units in one futures or options contract.

Margin: The deposit a broker requires to open a leveraged position, acting as collateral against losses.

Margin call: A demand from your broker to add funds (or close positions) when losses erode your margin below the required level.

Market order: An order to buy or sell immediately at the best available price.

N–R

Net worth (equity): Your cash plus the current market value of your open positions — what your account is worth right now.

Open interest: The total number of derivative contracts (futures or options) currently outstanding in the market.

Out of the money (OTM): An option with no intrinsic value — only time value remains.

Paper trading: Practising trades with virtual money against real prices. The whole point of DummyTrader.

Portfolio: The complete collection of assets and positions you hold.

Premium: The price paid by an option buyer to the seller for the contract.

Put option: A contract giving the buyer the right to sell an asset at a set strike price before expiry.

Resistance: A price level where selling has historically been strong enough to stop a rise.

Risk–reward ratio: The potential loss of a trade compared with its potential gain, used to judge whether a setup is worth taking.

S–Z

Short selling: Selling an asset you don't own (borrowing it) to profit from a falling price, buying it back later to close.

Slippage: The difference between the price you expected and the price you actually got — common in fast or illiquid markets.

Spot price: The current market price of an asset for immediate delivery.

Spread: Either the bid–ask gap, or an options strategy combining multiple contracts.

Stop-loss: An order that automatically closes a position once it reaches a set loss, capping the damage. A core risk-management tool.

Strike price: The fixed price at which an option can be exercised.

Support: A price level where buying has historically been strong enough to halt a decline.

Theta: An option Greek measuring time decay — how much value an option loses each day as expiry approaches.

Underlying: The asset a derivative is based on — the stock or index behind an option or future.

Vega: An option Greek measuring sensitivity to changes in implied volatility.

Volatility: How much and how quickly a price moves. Higher volatility means bigger swings — and pricier options.

Volume: The number of shares or contracts traded in a period; a gauge of activity and conviction.