Trading Glossary E–G

E

EMA (Exponential Moving Average) — A moving average that gives exponentially more weight to recent prices, making it more responsive to new information than the Simple Moving Average (SMA). The EMA formula applies a multiplier of 2÷(Period+1) to the latest close. Common periods: EMA 9 and 21 (swing trading), EMA 50 and 200 (trend identification). The EMA 200 on the daily NIFTY chart is one of the most watched institutional levels in Indian markets.

Engulfing Pattern — A two-candle reversal pattern where the second candle's body completely covers (engulfs) the first candle's body. Bullish Engulfing: large green candle engulfs previous red candle — appears after a downtrend, signals reversal up. Bearish Engulfing: large red candle engulfs previous green candle — appears after an uptrend, signals reversal down. Volume confirmation strengthens the pattern significantly.

Equity — Ownership interest in a company represented by shares. In NSE trading, equity refers to common shares traded in the cash segment. Equity holders have residual claim on company assets after all debts. Equity trading can be intraday (MIS) or delivery (CNC). Distinct from derivatives (F&O) which derive value from an underlying equity.

ETF (Exchange Traded Fund) — A fund that tracks an index and trades on the stock exchange like a regular share. NSE-listed ETFs include NIFTY BEES (tracks NIFTY 50), BANK BEES (tracks BANK NIFTY), GOLD BEES (tracks gold price), and many sectoral ETFs. ETFs provide instant diversification at very low cost — ideal for long-term investors.

Expectancy — The average amount a trader can expect to win (or lose) per trade, calculated as: (Win Rate × Average Win) − (Loss Rate × Average Loss). Positive expectancy is the only mathematical guarantee of long-term profitability. A strategy can have a 40% win rate and still have positive expectancy if average wins are significantly larger than average losses.

Expiry Date — The date on which a futures or options contract ceases to exist. On NSE: NIFTY and BANK NIFTY have weekly expiry every Thursday and monthly expiry on the last Thursday of the month. Stock options expire on the last Thursday of each month. All unexercised ITM options are automatically exercised at expiry; OTM options expire worthless. Time value of options approaches zero as expiry nears (theta decay).

F

F&O (Futures and Options) — The derivatives segment of NSE where contracts based on underlying assets (indices, stocks, commodities) are traded. F&O allows leverage — controlling large positions with a fraction of the notional value. SEBI data shows 88% of individual F&O traders lose money — emphasising the importance of education, backtesting, and strict risk management before trading derivatives.

Fair Value Gap (FVG) — A Smart Money Concepts term for a price inefficiency created when a large impulsive candle leaves a gap between the first and third candle in a three-candle sequence. The gap represents unfilled orders — price tends to return to fill (rebalance) the FVG before continuing. Bullish FVG: gap between Candle 1 high and Candle 3 low. Acts as support on retest. Used as entry zones for high-probability trades.

Fibonacci Retracement — A tool using the mathematical Fibonacci sequence to identify potential support and resistance levels during price pullbacks. Key levels: 23.6%, 38.2%, 50%, 61.8% (golden ratio), and 78.6%. The 61.8% level is considered the most significant — price frequently reverses from this zone during healthy trend pullbacks. Widely used on NIFTY 50 and large-cap NSE stocks for entry timing.

FII (Foreign Institutional Investors) — Foreign entities registered with SEBI to invest in Indian capital markets — including foreign mutual funds, hedge funds, and investment banks. FII flows have enormous impact on NSE — they account for approximately 20–25% of total market capitalisation. Net FII buying typically correlates with NIFTY 50 uptrends. NSE publishes daily FII activity data.

Flag Pattern — A continuation chart pattern forming after a sharp price move (flagpole). The flag itself is a small rectangular consolidation that drifts slightly counter to the flagpole direction. Low volume during the flag, then a surge on breakout confirms the pattern. Target = flagpole length projected from the breakout point. Bull flags on NSE after strong earnings results are highly reliable continuation setups.

Float — The number of shares of a company available for public trading, excluding locked-in promoter holdings and strategic investor stakes. Low-float stocks can move dramatically on relatively small volumes — popular with operators (market manipulators) on NSE. High-float blue-chip stocks are harder to manipulate and more suitable for technical analysis.

Futures Contract — A standardised agreement to buy or sell an asset at a predetermined price on a specific future date. NSE futures are cash-settled — no actual delivery of shares occurs. Futures allow leveraged trading (only margin required, not full notional value). NIFTY futures margin approximately ₹80,000 for ₹11,50,000 notional value at NIFTY 23,000 (roughly 7% margin).

G

Gap — A price discontinuity between the close of one session and the open of the next. On NSE, gaps occur when significant news arrives after market close — earnings results, RBI policy, global events. Gaps create imbalances (Fair Value Gaps in SMC terminology) that price often returns to fill. Gap analysis is an essential first step in NSE morning session analysis.

Gap Fill — When price returns to trade through the price range of a gap, essentially "filling" the empty space on the chart. Research on NSE shows that approximately 70–75% of gaps eventually fill, but timing varies from hours to months. Common gap (no news catalyst) fills quickly. Breakaway gap (on major news) may never fill.

Gap Up / Gap Down — Gap Up: price opens significantly above the previous close. Gap Down: price opens significantly below the previous close. On NSE, a gap of more than 0.5% is considered significant. Gap ups above resistance are bullish breakout signals. Gap downs below support are bearish breakdown signals. Both are frequently "tested" — often creating the best intraday entry opportunities.

Gamma — The options Greek measuring the rate of change of Delta for a ₹1 move in the underlying. Gamma is highest for ATM options near expiry — this is why ATM options on expiry day are extremely volatile and their premium can double or halve within minutes. Option sellers must monitor Gamma carefully as it increases their exposure rapidly as expiry approaches.

Going Long — Buying a security with the expectation that its price will rise. The most common trade direction for NSE equity traders. Long positions in equities have unlimited upside and limited downside (price cannot go below zero). Going long on NSE is straightforward — buy shares via delivery (CNC) or intraday (MIS).

Going Short — Selling a security you do not own, expecting to buy it back at a lower price. In NSE equity, short selling is only allowed intraday — positions must be squared off by end of session. Longer-duration short exposure requires selling futures or buying put options. Short selling allows traders to profit from falling prices.

Golden Cross — A bullish technical signal where a shorter-period moving average crosses above a longer-period moving average. Most common: 50-day SMA crossing above the 200-day SMA. Historically, Golden Cross on NIFTY 50 has preceded significant bull runs. The opposite (50-day crossing below 200-day) is the Death Cross — a bearish signal.

Greeks — A collective term for the sensitivity measures of options pricing: Delta (price sensitivity), Gamma (delta rate of change), Theta (time decay), Vega (volatility sensitivity), and Rho (interest rate sensitivity). Understanding Greeks is essential for options selling strategies on NSE — particularly Theta (time decay works for sellers) and Vega (IV crush after events benefits sellers).