10 Terms used in Stock Market

1️⃣ What is BETA in Stock Market Terms?

Beta = Sensitivity of a stock to market movement

Simple Definition
If the market moves 10% and the stock moves 15% → Beta > 1
If the stock moves only 5% → Beta < 1

Formula (Simple)
Beta = Stock Volatility ÷ Market Volatility

Important Truth
High beta gives faster gains — and faster losses.

2️⃣ What is MARKET CAPITALIZATION?

Market Cap = Company’s market value

Simple Definition
Market Cap = Share Price × Total Shares

Example
₹100 share × 10 crore shares = ₹1,000 crore market cap

Important Truth
Big companies move slower, small companies move faster.

3️⃣ What is P/E RATIO?

P/E = Price paid for ₹1 of earnings

Simple Definition
If P/E = 20 → You pay ₹20 for ₹1 profit

Formula
P/E = Share Price ÷ EPS

Important Truth
High P/E means growth expectations, not guaranteed returns.

4️⃣ What is EPS (Earnings Per Share)?

EPS = Profit per share

Simple Definition
Company earns ₹100 crore
Shares = 10 crore
EPS = ₹10

Important Truth
Rising EPS matters more than rising stock price.

5️⃣ What is DIVIDEND?

Dividend = Profit shared with shareholders

Simple Definition
If dividend = ₹5
You get ₹5 per share you own

Important Truth
Good dividends signal stable businesses, not fast growth.

6️⃣ What is COMPOUNDING?

Compounding = Earnings on earnings

Simple Definition
₹1,00,000 at 12% for 20 years ≈ ₹9,64,000

Important Truth
Time matters more than timing.

7️⃣ What is STOP LOSS?

Stop Loss = Pre-decided exit to limit loss

Simple Definition
Buy at ₹100
Stop loss at ₹90
Max loss = 10%

Important Truth
Capital protection comes before profit.

8️⃣ What is VOLUME?

Volume = Number of shares traded

Simple Definition
High price move + high volume = strong move

Important Truth
Price without volume is unreliable.

9️⃣ What is RISK–REWARD RATIO?

Risk–Reward = Loss vs Gain potential

Simple Definition
Risk ₹10 to earn ₹30 → Ratio = 1:3

Important Truth
Even 40% accuracy works with good risk–reward.

🔟 What is MARKET CYCLE?

Market moves in cycles, not straight lines

Simple Definition
Fear → Recovery → Greed → Crash → Repeat

Important Truth
Money is transferred from impatient to patient investors.