11. Glossary

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  1. Physical delivery: In case of physical delivery of the underlying security under a particular contract, the seller of the contract delivers the quantity to the buyer, who pays the full price for it.
  2. Cash settlement: It means settlement of the difference between the spot price and the derivative price through the exchange of money and not the underlying security itself. Currently, equity derivatives are settled by cash in India.
  3. Normal Session: This is the primary Indian share market timing lasting from 9.15 a.m. to 3.30 p.m. Any transactions made during this time follows a bilateral order matching system, wherein price determination is done through demand and supply forces.
  4. Muhurat Trading: It is the auspicious stock market trading for an hour on Diwali (Deepawali). It is a symbolic and old ritual that has been retained and observed for ages, by the trading community.
  5. Lesser Risk Reward Ratio: When the margins are higher, traders can expect more risk and fewer rewards.
  6. Earnings season: It is the period of time during which a large number of publicly traded companies release their quarterly earning reports. In general, each earnings season begins one or two weeks after the last month of each quarter 
  7. Seasonal stock investing: It is about understanding recurring patterns in stock prices to assess when to buy / sell a particular stock.
  8. Line charts: These are simple financial charts that are drawn between closing prices to show general price movement.
  9. Bar charts: Bar trading chart patterns are also called OCHL charts, meaning opening, closing, high and low. Unlike, line charts these are more detailed, giving more insight to traders and investors about asset price movement.
  10. Candlestick charts: Candlestick charts are popular trading charts that look like bar charts but also clearly show day’s high and low. Each cylindrical body captures day’s opening and closing price, while upper and lower shadows respectively represent day’s high and low for the asset.
  11. Head and shoulder formation: It is a typical formation that combines one large peak in the middle and two smaller peaks on either side of it. Traders look at the pattern to guess bullish-to-bearish trend reversal.
  12. Double top and bottom patterns: These shapes appear before a trend reversal. During these phases, asset price rises or falls twice before crossing over to the other side of the trend line.
  13. Wedges: They are a chart pattern where two sloping trend lines converge at the end. It can be either rising or falling.
  14. Symmetrical triangle: It is a continuation of a trend pattern. It appears when the market goes through frequent fluctuations, creating a series of peaks and troughs to converge to a point.

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