Common Trading Terms

To trade or invest efficiently, having a grip on the market’s terminology is essential. In this chapter, we highlight some commonly used expressions and phrases that traders and investors on platforms like m.Stock encounter regularly. These terms may describe stock price influencers, trade execution processes, or significant corporate actions you need to be aware of. 

Shares & Stocks: A share represents a single unit of ownership in a company. When you hold shares across one or more companies, collectively, they’re referred to as stocks. 

CMP (Current Market Price): This is the live trading price of a stock at any given moment during market hours. 

Bid Price: This is the price a buyer is willing to pay for a share. It reflects the highest offer made by any buyer currently in the market. 

Ask Price: Also known as the offer price, this is the minimum price a seller agrees to accept for a share. 

Bid-Ask Spread: The difference between the bid and ask price, this spread reflects liquidity and can change frequently in real time. 

Volume: Volume indicates how many shares have been bought or sold during a trading session. A higher volume signals greater liquidity. 

Liquidity: This refers to how quickly and efficiently a stock can be bought or sold without causing a significant change in its price. 

Free Float: Represents the number of shares available for public trading—excluding locked-in shares. It’s an important measure to assess stock liquidity. 

Shares Outstanding: This includes all shares issued by the company—both those held by the public and those retained by promoters. 

Market Capitalisation: A company’s market value is calculated by multiplying its current market price with the total number of shares outstanding. 

Stock Split: A move by companies to increase the number of shares by reducing their face value, thereby improving liquidity. 

Ex-Dividend Date: The first date when a stock trades without the dividend value. Investors who purchase the stock on or after this date aren’t eligible for dividends. 

Record Date: This is the cutoff date set by the company to determine which shareholders qualify for dividend payments. 

Day Trading: A trading approach where a trader enters and exits positions within the same day, without taking delivery of shares. 

Swing Trading: A strategy where traders hold onto stocks overnight or for a few days to capitalize on short-term price movements. 

Short Squeeze: Occurs when traders holding short positions rush to cover their trades due to unexpected price increases, further driving the prices up. 

Short Covering: The act of closing out a short position to lock in gains or limit losses, typically when prices begin to move against the short trade. 

Upper Circuit: The maximum price limit a stock can rise in a session. Once triggered, trading is frozen at that level until buying pressure reduces. 

Lower Circuit: The maximum price decline allowed for a stock in a session. It halts further downward movement until selling pressure eases. 

Market Order: An order type where a trade is executed at the best available price instantly in the market. 

Limit Order: Here, the trade is executed only if a specified price is met or better. If not, the order remains pending. 

GTC (Good Till Cancelled): A limit order that stays active until it’s either executed or manually cancelled—valid for up to 365 days on m.Stock. 

Bracket Order: Used mostly for intraday trades, it bundles three orders—a main order, a target (profit booking) order, and a stop-loss order. 

Cover Order: This combines a basic buy/sell order with a stop-loss. It is simpler than a bracket order and used to control risk during intraday trades. 

Basket Order: A convenient way to execute trades in multiple stocks through a single order by grouping different scrips into one basket. 

Stop Loss Order: This order limits losses by automatically triggering a sell (or buy) if the price hits a certain predefined level. 

Day Order and IOC (Immediate or Cancel): A day order remains active until market close if not filled. An IOC order is executed immediately—either in full or partially—with the unfilled part getting cancelled instantly. 

Fills and Partial Fills: A fill is an executed order. When only a portion of the total order is executed, it’s referred to as a partial fill. 

Premium: If the futures contract is trading higher than its underlying asset or index, it is said to be at a premium—also known as contango. 

Discount: If the futures contract trades below the value of the underlying, it is considered at a discount—also called backwardation.