A few weeks into her new job, Ritika noticed many of her colleagues were into intraday trading. She found the idea interesting but was unsure if she was ready to start. She wanted to understand the basics first. After doing her research, she came across far too many confusing terms that she had never heard of before.

Sound familiar? Here’s a handy list of words and jargon you should know before you start your journey into intraday trading.

• Intraday trading involves buying and selling assets within the same day.
• Familiarise yourself with essential intraday trading jargon, as they are fundamental to trading strategies.
• Recognise the difference between the trends of the market.
• Utilise tools like stop loss to minimise losses and understand concepts.

To simplify the jargon of intraday trading, let us first understand it. Trading involves stocks, shares, derivatives, currencies, etc. In intraday trading, traders buy and sell shares on the same day. For example, Ritika buys 100 shares of LMD Company at 11 A.M. on 16th September. In intraday trading, she must sell all 100 shares before the market closes that same day, no matter the price.

Intraday trading is typically done to leverage the price instabilities and fluctuations that a particular asset may see in a day. Compared to regular trading, intraday traders try to make the most of the market volatility and book their profits.

Here are some terms you should be aware of:

1. Ask price and bid price

When investors check a stock’s price, they see the most recent trading price. However, when they go to buy or sell that same stock, the price may have changed by then as stock prices fluctuate.

• The ask price is the price at which the seller is ready to sell shares
• The bid price is the price at which the buyer is ready to buy shares

2. Bid-ask spread

The difference between the ask price and the bid price of a particular stock is called the bid-ask spread. It can help you see and understand how much the stock’s price has been fluctuating.

3. Bull and bear markets

Two of the most common terms in the intraday trading vocabulary are bull market and bear market.

• A bull attacks by thrusting its horns upward, representing upward movement. A bull market refers to a period when stock prices are rising or expected to rise, indicating positive investor sentiment. In a bull market, investor confidence is high as demand exceeds supply.
• A bear, on the other hand, swipes its paws downward, reflecting the downward movement. In a bear market, investor confidence is low, and fear or pessimism drives the market.

4. Candlestick charts

For a beginner investor, candlestick charts can be a helpful tool in understanding the otherwise complex pattern of price movements in the market. These charts display bars that look similar to candles of different lengths. The length of the candle, its wick, and its colour all represent the price movements.

5. Margin

Each time a stock is bought or sold, the stock exchange requires the broker to provide a small sum as security for the trade. This amount is called a margin. The broker collects this margin from the trader and deposits it with the exchange as a guarantee.

Buying on margin is another concept where the trader can borrow funds from the broker and make purchases.

6. Trading hours and after hours

Trading hours, as the name suggests, are the working hours, which are from 9:30 A.M. to 4:00 P.M., on weekdays, which are Monday through Friday. The after-hours or pre-market trades are from 4:00 P.M. to 9:30 A.M.

7. Position

In stock trading, position refers to the the commitment of the trader to buy or sell shares on the exchange. When traders buy shares through an intraday buy order, they hold an open buy position, also known as a long position. When traders sell shares through an intraday sell order, they hold an open sell position, also known as a short position.

8. Short selling

Short selling allows traders to sell shares even if they don’t own them in their demat account. Since it's an intraday trade, they must repurchase the shares before the market closes. Traders often short-sell when they expect the stock price to fall during the day, aiming to profit from the price drop.

9. Stop loss

For every intraday trader, be it beginner or seasoned, stop loss is an important tool, as it helps limit losses and manage risk. The idea is to reduce losses by automatically exiting the trade when the stock price hits a predetermined level. It’s an effective way to protect yourself from sudden and unfavourable market movements.

10. 52-week high or low

The 52-week high or low indicates the highest and lowest prices of a security over the past 52 weeks, that is 1 year. It serves as a technical indicator that shows resistance and support levels for traders in their decision-making.

These are some of the most common jargon of intraday trading.