15 Basic Terms of the Stock Market (Part-2) 

1.Initial Public Offering (IPO) :

This is how companies go public and raise money from outside investors both retail and institutional. 

2. Primary Market

Refers to share transactions between the issuing company and a public investor. 

3. Secondary Market

Refers to share transactions between a public shareholder to another public shareholder. 

4. Dividend 

Company distributing a part of the profits it generated to it's shareholders. 

5. Portfolio 

• Useful for long term investment. 

• Baskets of stocks owned by the person. 

Ex: My portfolio has 10 stocks out of which 5 are mid - cap , 3 large-cap and 2 are small - cap stocks. 

6. CAGR

• Useful for long term investment. 

• Stands for : Compound Annual Growth Rate

• Use to measure the pace at which your portfolio is growing. 

Ex: NIFTY has given a CAGR of 14%  over the last many years. Our aim as an active investor should be to grow our portfolio at a CAGR greater than 15%.

7. Position

• Useful for trading purpose, a trade that we have taken. 

• Mostly used to refer to trading activity, both Intraday and Swing. 

Ex: I took a position in Reliance at 10am in the morning, which is in profits and now I am planning to hold on to the position for some more time. 

8. Trading Capital

• The entire money that you have added to trading account for trading activities. 

Ex: My trading capital is ₹1Lakh and my developed capital in the Tata Steel position is ₹25,000 , which is 25% of my trading capital. 

9. Long Position

A trade where you buy first and then sell later. 

10. Short Position

A trade where you sell first and then buy later. 

11. Square-Off

• Exiting a position. 

• You sell to square off a long position. 

• You buy to square off a short position. 

Ex:  I took a position in Tata Steel at 10am in the morning and I squared it off at 2pm.

12. Return on Investment (ROI) 

• Use to measure the returns in percentage that you could make from a trade.

ROI = Profit from a trade / Capital deployed in the trade

Ex: I took a position in Reliance at 10 am in the morning and I squared it off at 2pm. Trade gave me ROI of 2%.

13. Contract Note

Daily report of all traders placed and charges incurred in your DEMAT account. 

Ex: I checked my contract note and it showed a brokerage of ₹20 was charged for my trades. 

14. Trend

• General direction in which a stock is moving- 

1.Uptrend

2.Downtrend

3.Sideways trend

Ex: The stock is in a strong uptrend now despite of NIFTY being in downtrend. 

15. Volatility

If the market is not stable and market frequent big moves. 

Ex: The stock is bullish but also very volatile.