Beginner's Trading Glossary
Every term used on Pedigree Analyst, in plain English. Read these once and the blogs get twice as easy. Start with Treat Trading Like a Business when you're ready.
- Stop-loss order
- An instruction to your broker to sell automatically if the price falls to a level you set in advance (or buy, for a short sale). It caps your loss and takes emotion out of the exit. Read more ↗
- Trailing stop-loss
- A stop-loss that moves up as the price rises, often following a moving average, so you lock in gains while staying in a trend. Read more ↗
- Take-profit target
- The pre-planned price at which you book profit, usually set near a resistance level or at a multiple of your risk.
- Risk-to-reward ratio
- How much you stand to gain for each rupee you risk. At 1:2 you risk ₹1 to make ₹2. Break-even win rate = 1 ÷ (1 + reward-to-risk). Read more ↗
- Position sizing
- Choosing how many shares or lots to trade so that hitting your stop-loss costs only a fixed share of capital, typically 1–2%. Quantity = (capital × risk %) ÷ (entry − stop). Read more ↗
- Moving average (DMA)
- The average closing price over a set number of days, such as 50 or 200. Price above both the 50-DMA and 200-DMA suggests a bullish zone; below both, a bearish zone. Read more ↗
- Exponential moving average (EMA)
- A moving average that gives more weight to recent prices, so it reacts faster. The 20-day and 50-day EMA are common pullback levels for swing traders. Read more ↗
- Support and resistance
- Price zones where buying (support) or selling (resistance) has repeatedly stopped a move. Used to place stops and targets.
- Trend (higher highs and higher lows)
- A sustained move in one direction, shown by price structure: an uptrend makes higher highs and higher lows; a downtrend makes lower highs and lower lows.
- VWAP (volume-weighted average price)
- The average price of the day's trades weighted by volume. It resets every session and is a benchmark institutions use to judge their executions, so intraday traders watch whether price holds above or below it. Read more ↗
- Linear regression
- The best-fitting straight line through prices over a chosen period. Its slope shows the direction and speed of the move and its R² (0 to 1) shows how consistently price followed it. It describes the past; it does not predict the future. Read more ↗
- Bollinger Bands
- Bands drawn two standard deviations above and below a 20-period moving average. They narrow (a squeeze) when volatility contracts and widen when it expands. Read more ↗
- Retracement
- A temporary move against the trend that leaves its structure intact, such as a pullback in an uptrend that holds above the previous higher low. Read more ↗
- Reversal
- A change in the direction of a trend. In an uptrend, the first sign is a pullback that breaks the previous higher low, followed by a lower high. Read more ↗
- Opening range
- The high and low a stock makes in the first 15–30 minutes of the session. A decisive break of this range on high volume is a common intraday entry.
- Swing trading
- Holding positions for a few days to a few weeks to capture a single price swing, using daily and hourly charts. Read more ↗
- Volatility
- How much and how quickly a price moves. Higher volatility means wider swings, and needs smaller position sizes for the same rupee risk.
- Exchange-traded fund (ETF)
- A fund that trades like a share and tracks an index or sector, giving instant diversification. A beginner-friendly instrument. Read more ↗
- Derivatives (futures and options)
- Contracts whose value comes from an underlying asset. They carry high leverage and complexity; SEBI found 93% of individual equity F&O traders lost money in FY22–FY24.
- Leverage
- Controlling a large position with a small amount of money. It magnifies gains and losses equally, the fastest way for a beginner to lose capital.
- Hedging
- Taking an offsetting position to reduce the risk of an existing one, insurance for your portfolio.
- Trading journal
- A written record of every trade: entry, exit, reason, and emotional state. Reviewed weekly, it exposes your behavioural blind spots.
- Punter
- Someone who trades on tips, hunches or excitement without a plan, risk limit or stop-loss, the "perfect lunch" for the market's carnivores.