This is the Momentum IQ Trading Glossary — plain-language definitions of every term you will encounter on NSE charts, in backtesting, and in market analysis. No jargon left unexplained.
Accumulation · ADX · Alpha · Arbitrage · Ask Price · ATH (All-Time High) · ATM (At the Money) · ATR (Average True Range) · Averaging Down · Backtest · BANKNIFTY · Base Formation · Bear Market · Beta · Bid Price · Bid-Ask Spread · Blue Chip · Bollinger Bands · Breakout · BSE · Bull Market · Bullish · Buy-Side Liquidity
A
Accumulation — The phase in which institutional investors (smart money) quietly buy large quantities of a stock or index over an extended period without causing significant price increases. Accumulation zones are identified by sideways price action on declining or low volume, followed by a sharp upward move when the buying is complete.
ADX (Average Directional Index) — A technical indicator that measures trend strength on a scale of 0 to 100, without indicating direction. ADX above 25 confirms a trending market suitable for trend-following strategies. ADX below 20 indicates a ranging/sideways market where mean reversion strategies work better. Developed by J. Welles Wilder.
Alpha — The excess return of a trading strategy or investment compared to a benchmark (typically NIFTY 50). Positive alpha means the strategy outperforms the market. Negative alpha means underperformance. Example: A strategy returning 22% when NIFTY returned 15% has an alpha of +7%.
Arbitrage — Simultaneously buying and selling the same or equivalent security in different markets to profit from price differences. On NSE, cash-futures arbitrage involves buying shares in the cash market and simultaneously selling equivalent futures when futures trade at a premium.
Ask Price — The lowest price at which a seller is willing to sell a security. Also called the offer price. When you buy a stock, you pay the Ask price. The difference between Ask and Bid is the spread.
ATH (All-Time High) — The highest price a stock or index has ever traded. NIFTY 50 ATH is a closely watched level — institutional resistance often appears near previous ATHs. New ATH breakouts on high volume are considered bullish signals.
ATM (At the Money) — An options term describing a strike price equal to or very close to the current market price of the underlying. ATM options have the most time value and are the most sensitive to price changes. Example: NIFTY at 23,500 — the 23,500 CE and 23,500 PE are ATM options.
ATR (Average True Range) — A volatility indicator measuring the average range of price movement over a given period (typically 14 sessions). ATR is used to set stop losses, calculate position sizes, and identify volatility regimes. High ATR = high volatility; Low ATR = low volatility. Not a directional indicator.
Averaging Down — Buying more of a stock as its price falls, reducing the average purchase price. Considered appropriate for long-term fundamental investors but extremely dangerous for short-term traders — especially in F&O where losses are amplified by leverage and time decay erodes options value.
B
Backtest — The process of testing a trading strategy against historical market data to evaluate how it would have performed. A valid backtest includes realistic brokerage charges, STT, slippage, and is tested across multiple market conditions (bull, bear, and sideways). Momentum IQ provides NSE backtesting on up to 5 years of historical data.
BANK NIFTY — The NSE index comprising the 12 most liquid and large Indian banking stocks. Bank NIFTY is the most actively traded derivatives index in India by value. It is 3–4× more volatile than NIFTY 50 and has weekly options expiry every Thursday. A favourite instrument for intraday and options traders.
Base Formation — A prolonged period of sideways price consolidation near a support level, during which institutional accumulation typically occurs. A valid base is at least 5–6 weeks long. Breakouts from well-formed bases on high volume are among the highest-probability setups in NSE trading.
Bear Market — A sustained decline of 20% or more from recent highs in a stock, index, or market. Bear markets are associated with negative economic sentiment, falling earnings expectations, and institutional selling. The NSE experienced notable bear markets in 2008, 2020 (COVID), and 2022.
Beta — A measure of a stock's volatility relative to the market (NIFTY 50). Beta of 1.0 = moves in line with NIFTY. Beta above 1.0 = more volatile than NIFTY (e.g., small-caps often have Beta 1.3–2.0). Beta below 1.0 = less volatile (e.g., FMCG, pharma stocks). Useful for portfolio risk management.
Bid Price — The highest price a buyer is willing to pay for a security at a given moment. When you sell a stock, you receive the Bid price. The gap between Bid and Ask determines the trading cost beyond brokerage.
Bid-Ask Spread — The difference between the Ask (seller's price) and Bid (buyer's price). A narrow spread (₹0.05) indicates high liquidity — NIFTY 50 stocks. A wide spread (₹2–₹5) indicates low liquidity — small-cap stocks. Wide spreads significantly increase effective trading costs and should be factored into all strategy calculations.
Blue Chip — Stocks of large, well-established, financially stable companies with a long record of consistent performance. On NSE, blue chips include Reliance, HDFC Bank, Infosys, TCS, ITC, and NIFTY 50 constituents generally. Characterised by high liquidity, lower volatility, and predictable business models.
Bollinger Bands — A technical indicator consisting of three lines: a 20-period Simple Moving Average (middle band) and two bands set 2 standard deviations above and below it. The bands expand during high volatility and contract during low volatility (the "squeeze"). Price touching the upper band is overbought; lower band is oversold — in a range-bound market. In a trend, price can "walk the band" for extended periods.
Breakout — When price moves decisively through a key support or resistance level, often accompanied by a surge in volume. A valid breakout on NSE requires a daily candle closing beyond the level (not just touching it intraday) and volume at least 1.5× the 20-day average. Low-volume breakouts frequently fail and reverse.
BSE (Bombay Stock Exchange) — India's oldest stock exchange, established in 1875 and headquartered in Mumbai. BSE operates alongside NSE and uses the SENSEX (30 stocks) as its primary index. Most serious technical traders use NSE data due to higher liquidity and more active derivatives market.
Bull Market — A sustained rise of 20% or more from recent lows, characterised by positive economic sentiment, rising earnings, and institutional buying. NSE has experienced major bull markets from 2003–2008, 2014–2018, and 2020–2024.
Bullish — Describing a positive or optimistic market outlook. A trader is bullish when they expect prices to rise. A bullish candle closes higher than it opened (green). Bullish patterns include Double Bottom, Morning Star, Bullish Engulfing, and Cup and Handle.
Buy-Side Liquidity (BSL) — In Smart Money Concepts, the pool of stop-loss orders and pending buy orders sitting above recent swing highs. Institutions target BSL by pushing price above swing highs to trigger stops — generating the selling volume institutions need to distribute their long positions. A BSL sweep is often followed by a sharp price reversal downward.