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Finance Glossary

Power-up your financial vocabulary with key finance terms and concepts.


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52 Week High

A 52-week high is the highest closing price of a stock or ETF in the last 365 days. Say for example you’re checking the history of a stock on 01-01-2022. Then its 52 week high will be the highest price it closed at between 01-01-2021 and 01-01-2022. 52 week highs are used as technical indicators by traders.

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52 Week Low

A 52 week low is the lowest closing price of a stock or ETF in the last 365 days. Let’s say you check a stock’s history on 01-01-2022. Then the 52 week low will be the stock’s lowest closing price between 01-01-2021 and 01-01-2022. 52 week lows are used as technical indicators by traders.

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Abandoned Baby Pattern

An Abandoned Baby Pattern is a type of candlestick pattern that signals the reversal of a bullish or bearish trend. It is made up of three candles, each of which varies based on the trend.

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Abc Wave Theory

Abc Wave Theory or Elliot Wave Theory is used to determine the direction of the stock market by identifying recurring waves or patterns over the long term. The theory is named after Ralph Nelson Elliott.

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Abridged Prospectus

An abridged prospectus is a short version of a company prospectus. As per SEBI norms, a company looking to offer equity or debt to investors must file a prospectus.

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Acceptance Credit

Acceptance Credit is a way for buyers to authorize fund transfers to sellers at a specific date when various terms & conditions are met.

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Accrued Expenses

An accrued expense is the cost that is incurred in the current accounting period but is due to be paid in the future.

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Accrued Interest

An accrued interest is the interest incurred in the current accounting period but the actual interest is due to be paid or received in the next accounting period.

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Accumulation/Distribution Indicator

An Accumulation/Distribution Indicator is used to figure out the trend of a stock based on the relationship between the price and volume.

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Acid Test Ratio

An Acid Test Ratio shows whether a company has enough liquid short-term assets to deal with current liabilities.

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Adjusted Closing Price

The adjusted closing price of stock accounts for any changes that happen due to corporate actions like dividends, stock splits, and others after trading hours.

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Adjusted Futures Price

An adjusted futures price shows the cost of purchasing, financing, and delivering the underlying assets of a futures contract.

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Advance/Decline Line

An Advance/Decline Line can help you plot the daily difference between the number of advancing and declining stocks.

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Advance Payment Guarantee/Bond

An Advance Payment Guarantee or Advance Payment Guarantee Bond is a contract issued by a third party willing to take responsibility for fulling the terms of an agreement or payments owed by one party to another.

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After Hours Trading

After hours trading means buying and selling securities after the end of regular market hours. In India, the stock market is open for regular trade from 9.15 AM to 3.30 PM.

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Algorithmic Trading

Algorithmic trading or algo trading means buying and selling securities using computer algorithms that follow a set of predefined rules to execute trades.

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All Or None Order

An all or none order is an instruction to execute the entire order or none of it. For example, you place an order for 1000 shares with a contingency that it should be an all or none order.

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Alpha

An Alpha indicates the measure by which a stock or portfolio has managed to outperform a benchmark like an index of shares.

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American Option

An American Option allows the contract holder to exercise the right any time before or on the expiry date. American style options contracts are not available in India.

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Anaume Pattern

An Anaume Pattern can be seen when a gap is filled after a change in the direction of a security or market’s price.

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Anchoring and Adjustment

Anchoring is a bias that drives people to make decisions that are based on (anchored to) pre-existing notions, ideas, and suggestions that may or may not be true.

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Annual Earnings Change

An Annual Earnings Change is the difference between a company's earnings from the present and previous fiscal year.

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Annual General Meeting

An Annual General Meeting is the difference between a company’s earnings from the present and previous fiscal year.

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Annual Net Profit Margin

A Net Profit Margin is the ratio of a company’s net profits to revenues.

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Annual Report

An annual report is an exhaustive written account of a company’s finances, activities, and other relevant information for the fiscal year.

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Arbitrage

Arbitrage is a strategy where a security is bought in one market and sold in another market to generate profits due to the difference in price. This difference is known to be minor.

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Ask Or Offer Price

The ask or offer price is the price at which an investor is willing to sell a security like stocks, bonds, currencies, ETFs, and others.

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Ask Size

The ask size is the number of units of a security that an investor is willing to sell at the ask or offer price.

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Asset Allocation

Asset allocation is a strategy or method in which an investor decides how much money they should allocate to an investment based on their risk profile, financial goals, and other factors to maximize returns and minimize risk.

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Assets

An asset is anything that has economic value and is owned by an individual, company, or group. Assets are bought to generate returns in the future.

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Assets And Liabilities

An asset is something that has monetary value and can generate profits in the future while a liability is a debt that’s repayable immediately or in the future. Assets are owned whereas liabilities as owed.

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At The Close Or Closing Price

At the close or closing price is the last traded price of securities like stocks, ETFs, and others at the end of regular market hours.

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At The Money

At The Money is a scenario in which the strike price of an options contract is the same as the market price of its underlying security.

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At The Opening

At the opening is an instruction to execute an order at the open price, which is the price of a security at the start of regular stock market hours.

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Authorized Capital

Authorized capital or authorized share capital is the maximum amount of capital for which shares can be issued by a company to its shareholders.

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Autoregressive Model

An autoregressive model uses one or more past values to forecast the current value of an asset.

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Average Daily Trading Volume

The Average Daily Trading Volume (ADTV) is a technical indicator that indicates the number of shares that were bought and sold on average across one or more trading days.

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Average True Range Atr

The Average True Range (ATR) is a technical indicator used to measure market volatility, typically using the average of true ranges from 14 periods that can be daily, weekly, monthly, or even intraday values.

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Averaging Down

Averaging down means buying more shares when the price drops, thereby bringing down your overall average cost of investing.

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Back Months

“Back months” is used to refer to futures contracts that have a delivery date that’s due far into the future. Back months is generally known to be a popular term in commodity trading.

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Backtesting

Backtesting means simulating trading strategies and models using historical data to understand whether they are effective.

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Balance Sheet

A balance sheet is a financial statement that reveals a company’s assets, liabilities, and shareholders’ equity. It can help current and potential investors understand the financial health of a company.

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Basing

Basing happens when a security trades sideways after prolonged periods of falling prices.

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Basis Trading

Basis trading means futures trading strategies that use the difference between the spot price and the futures contract price of a stock or commodity.

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Basis Of Allotment

The basis of allotment is the criteria to allocate shares to investors, most commonly during IPOs.

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Bear Market

A bear market is a period of continuous decline in the stock or commodity market.

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Benchmark

A benchmark is a standard used by investors to compare the performance of a stock, commodity

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Best Efforts Underwriting/Offering

A best efforts underwriting or offering means the underwriter will do their best to market the securities for the issuer (company, supplier, etc) to investors. The underwriter will not buy all the securities from the issuer, only those the underwriter’s clients want to purchase.

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Beta Coefficient

Beta coefficient is used to measure the volatility of stocks in relation to changes in the market. Basically, Beta helps investors understand the risks associated with a stock compared to the market.

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Beta Stocks

Beta of stocks measures the risk that the shares carry compared to the broader market. Theoretically, the market is said to have a default Beta of 1. As a result, Beta stocks can be of four types.

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Block Trade

A block trade is a substantially large buy or sell order for a stock, commodity, or other security. Block trades are typically done by institutional investors like hedge funds, mutual funds, and others to mask the true size of the transaction.

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Blue Chip Stocks

Blue chip stocks are shares of iconic companies in India that have been leaders of their respective industries for years, if not decades, and have a stellar yet consistent business track record.

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Bombay Stock Exchange

Established in 1875, Bombay Stock Exchange or simply BSE is a place where stockbrokers and traders can buy and sell securities like stocks, bonds, ETFs, and more. 5000+ securities are listed on BSE, which is the oldest stock exchange in India and Asia.

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Bond Market

A bond market is a place where bonds are issued, bought, and sold. Bonds are issued in exchange for a loan generally by governments and corporations.

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Bonds

Bonds are fixed income securities issued in exchange for a loan, generally by governments and corporations. A bond will generate a fixed interest rate on top of the principal across a fixed time period. A bond market is a place where bonds are issued, bought, and sold. Bonds are issued in exchange for a loan generally by governments and corporations.

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Book Building

Book building is the process of determining the potential issue price of a financial instrument based on investor demand, generally during an IPO.

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Book Entry Securities

Book entry securities are financial instruments like stocks, bonds, ETFs, and others whose ownership is recorded and tracked electronically. Book building is the process of determining the potential issue price of a financial instrument based on investor demand, generally during an IPO.

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Book Running Lead Manager

A book running lead manager is the head or lead of the underwriting process when new shares or securities are issued for their client, most commonly during an IPO.

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Book To Bill Ratio

Book to Bill ratio is the value you get by dividing the total worth of new orders received by the total worth of orders sold. The formula to calculate Book to Bill ratio is:

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Book Value

Book value of an asset is what you get by subtracting its accumulated depreciation from the original cost of the asset.

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Bottom Line in Finance

Bottom line in finance is used to refer to a company’s crucial metrics like earnings, profits, net profits, earnings per share (EPS), and others.

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Bottom Up Investing

Bottom-up investing is a stock picking strategy that uses analysis of individual companies and shares for decision-making instead of focusing on the broader economy, market, or industry.

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Bought Out Deal

A bought-out deal is a stock offering where an investment bank buys the entire issue of shares from a company. In turn, the investment bank will attempt to sell the shares to other investors. A deal of this kind has two benefits:

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Bounce Trading

Bounce trading refers to buying a position in security when its price falls to a particular support level with the anticipation that it will “bounce” back to a certain price level. Technical analysis is the bedrock of bounce trading but various patterns and strategies can be used to achieve the desired goal.

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Box Spread

A box spread is a trading strategy that involves buying a bull call spread and a matching bear put spread.The goal of a box spread is to create an arbitrage strategy that can generate profits due to the price differential between the two spreads.

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Bracket Order

A bracket order is used in intraday trading to limit downside and lock upside by placing three types of orders together.

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Broker

A broker is an intermediary between a securities exchange and investors. Only registered entities can place trades on a securities exchange. These members can be individuals or firms known as stockbrokers.

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Brokerage

Brokerage is the fee that an investor or trader must pay to a brokerage in exchange for its services. Brokerage varies from platform to platform. But, broadly speaking, brokerage on intraday, futures, and options trading is known to be higher than equity delivery (investing).

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BSE

Bombay Stock Exchange or BSE is a stock exchange that allows companies to issue new securities through IPOs or FPOs and enables traders & investors to buy and sell securities like shares and ETFs. Established in 1875 under a banyan tree in Mumbai, BSE is the oldest stock exchange in India and Asia.

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Bull Market

Bull market is a positive trend in the stock market where price of shares increase by 20% or more after falling by 20%. Investors may say they're bullish or expect a bull market to arrive when they believe that there will be prolonged periods of increase in the stock market.

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Bullion

Bullion is used to refer to gold, silver, and other non-ferrous metals that have been designed to have high purity. These metals are generally molded into bars, coins, and other valuable items.

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Bureau Of Indian Standards

Bureau Of Indian Standards (BIS) is responsible for standardizing and certifying goods and services from third parties so that the end consumer knows that the products are safe and reliable.

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Butterfly Spread

A butterfly spread is an options strategy that combines bull and bear spreads to generate a small chunk of profit. To achieve this, a butterfly strategy consists of four positions in four options contracts that have the same expiration but different strike prices.

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Buy and Hold

Buy and hold is a long term investment strategy that is designed to help investors ride out market volatility by buying and holding fundamentally solid businesses that have the potential to grow over decades.

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