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MACD
Definition of MACD
MACD (Moving Average Convergence Divergence) is a technical indicator used to identify entry or exit signals when trading stocks, futures, options, and others. MACD consists of two lines as follows: MACD line Signal line The MACD line represents the difference between two exponential moving averages, while the signal line is a moving average of the MACD line.
Related Terms
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.
Lump Sum
Lump sum refers to a one-time, single payment made in a single installment, as opposed to a series of smaller periodic payments. It commonly refers to a large sum of money paid at once, like a mutual fund investment or a share market investment, rather than spread out over multiple payments like SIPs.
Multi-Bagger
A multi-bagger refers to a stock that delivers returns multiple times higher than its original investment value. For example, a stock that grows five times from its purchase price is called a five-bagger. Investors often associate multi-baggers with strong business growth, long-term holding, and effective capital allocation.
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.
The difference between the spot and futures prices forms the “basis” for the trading strategy. Hence the name basis trading. These are the two ways in which a trader may use the basis:
The difference between the spot and futures prices forms the “basis” for the trading strategy. Hence the name basis trading. These are the two ways in which a trader may use the basis:
- Short the basis : Done if the price difference or basis is expected to reduce
- Long the basis :Done if the price difference or basis is expected to increase
Tick Size
Tick size is the minimum price movement allowed for a security in a given market. It determines how prices can change and at what increments orders can be placed. Tick size influences liquidity, bid-ask spreads, and execution precision, particularly in high-volume trading environments.
Value Trap
A value trap occurs when a stock appears cheap based on valuation metrics but continues to underperform due to underlying business problems. For example, a company with declining revenues and poor management may trade at low price-to-earnings ratios, misleading investors into thinking it offers value when its fundamentals are deteriorating.
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