Trading Glossary S–T

S (continued)

Stop Hunt — A deliberate price move engineered by institutional traders to trigger the stop-loss orders of retail traders — generating the liquidity institutions need to fill their own large orders. Stop hunts are characterised by a quick spike beyond a key level, a volume spike, and immediate reversal. Recognising stop hunts and trading the reversal is a core Smart Money Concepts technique for NSE intraday traders.

Stop Loss — A pre-set order that automatically exits a position when price reaches a specified level — limiting maximum loss on the trade. The most important single risk management tool. A stop loss converts uncertain risk into defined, manageable risk. NSE traders use Stop Loss Market (SL-M) orders that trigger a market sell when the trigger price is hit. Never trade without a stop loss — it is not optional.

Stop Market Order (SL-M) — An NSE order type that converts to a market order when a trigger price is reached. Used to implement stop losses. If the stop is triggered, execution is guaranteed (unlike a stop-limit order which may not fill if the market gaps through the limit price). Preferred for liquid instruments where slippage at stop is minimal. For highly illiquid stocks, gap risk means SL-M can execute significantly below the trigger.

Stochastic Oscillator — A momentum indicator comparing closing price to its price range over a lookback period (default 14). Ranges from 0 to 100. Above 80 = overbought. Below 20 = oversold. The Stochastic generates signals via the %K and %D line crossovers — most reliable when crossovers occur within overbought/oversold zones. Faster and more sensitive than RSI — often used in combination with RSI for confirmation.

Straddle — An options strategy buying (or selling) both a Call and Put at the same strike price and expiry. Long Straddle: buy ATM Call + ATM Put — profits if the underlying makes a large move in either direction (useful before high-uncertainty events like budget, elections, results). Short Straddle: sell ATM Call + ATM Put — profits if the underlying stays near the strike at expiry. Short Straddle on NIFTY is the most popular premium-collection strategy.

Strangle — Similar to Straddle but uses OTM Call and OTM Put at different strikes. Long Strangle: cheaper than Straddle, needs larger price move to profit. Short Strangle: collects less premium than Straddle but has a wider profit zone (price can move more before losses begin). Both strangles and straddles are significantly impacted by IV — IV Crush after events destroys long strangles bought before results.

STCG (Short-Term Capital Gains) — Tax on profits from selling listed equity shares or equity mutual fund units held for 12 months or less. STCG is taxed at a flat 15% regardless of income tax slab. All intraday (MIS) equity gains are business income, not STCG — taxed at normal income tax rates. F&O profits are always taxed as business income. Consult a tax professional for individual circumstances.

Strike Price — The predetermined price at which an options contract can be exercised. A NIFTY 23,500 CE has a strike price of 23,500 — the buyer has the right to buy NIFTY at 23,500. NSE lists multiple strike prices for each expiry in increments of 50 points for NIFTY. The selection of strike price is critical — it determines Delta, premium cost, and probability of the option becoming profitable.

Supertrend — A trend-following indicator plotted directly on the price chart, using ATR to calculate dynamic support and resistance. A green line below price indicates uptrend — hold longs. A red line above price indicates downtrend — stay out or short. When the line flips, it signals a trend reversal. The most popular indicator among NSE retail traders for its simplicity and clarity. Default settings: Period 10, Multiplier 3.

T

Technical Analysis — The study of historical price and volume data to forecast future price movements. Technical analysts use charts, patterns, indicators, and volume to identify trading opportunities — without relying on company financials or economic data. Based on three assumptions: markets discount everything, prices move in trends, and history repeats. Technical analysis is the foundation of active trading on NSE.

T+1 Settlement — NSE's trade settlement cycle. Trades executed today are settled (shares transferred to buyer, money to seller) by the next working day. India moved to T+1 settlement from T+2 in 2023 — one of the fastest settlement cycles globally. T+1 means shares bought Monday are available in your Demat by Tuesday evening. Shorter settlement reduces counterparty risk in the system.

Theta — The options Greek measuring daily time decay — how much an option's value decreases with each passing day, all else being equal. Theta is negative for option buyers (time decay is their enemy) and positive for sellers (time decay works in their favour). Theta accelerates dramatically in the final week before expiry — options lose the most time value in their last 7 days. This is why selling options near expiry is a popular strategy.

Tick — The minimum price movement of a traded instrument. For NIFTY 50 futures and most NSE stocks, the tick size is ₹0.05. For some instruments it is ₹0.01. Understanding tick size matters for limit order placement — orders must be placed at valid tick increments. Tick data (every single transaction) is used for advanced backtesting and high-frequency analysis.

Trailing Stop — A dynamic stop loss that moves in the direction of a profitable trade, locking in gains while allowing the position to continue running. Methods: fixed percentage trail (stop moves up by X% as price rises), ATR-based trail (stop = highest price − 2×ATR), or structure-based trail (stop below each new Higher Low). Trailing stops allow unlimited upside while defining the maximum acceptable loss at any point in the trade.

Trend — The general direction of price movement over a period. Uptrend: series of Higher Highs and Higher Lows. Downtrend: series of Lower Highs and Lower Lows. Sideways: no clear directional bias. Trading with the trend significantly increases probability of success. The primary trend (weekly chart), secondary trend (daily), and minor trend (hourly) often conflict — always prioritise the higher timeframe trend.

Trendline — A straight line connecting two or more swing highs (downtrend) or swing lows (uptrend). A valid trendline requires at least two touches — a third touch significantly increases reliability. The more times price touches a trendline without breaking it, the more significant the eventual break. Trendlines are the most basic form of technical analysis and the foundation of most chart patterns.

Triangle Pattern — A consolidation chart pattern where price makes progressively smaller swings as it converges toward a point. Three types: Ascending Triangle (flat top + rising lows = bullish), Descending Triangle (flat bottom + falling highs = bearish), Symmetrical Triangle (converging both sides = neutral, trade the breakout direction). Common on NSE during sector consolidation phases.

Triple Bottom — A bullish reversal pattern forming three roughly equal lows at the same support level — showing strong buying interest at that price. More reliable than a Double Bottom because the level has been tested and defended three times. Confirmed when price closes above the highest peak between the three lows. Pattern completion often leads to significant rallies on NSE.

Triple Top — A bearish reversal pattern forming three roughly equal highs at the same resistance level — showing strong selling interest at that price. More reliable than a Double Top. The third failed attempt at resistance confirms overwhelming supply. Confirmed when price closes below the lowest trough between the three tops. Often appears at NIFTY 50 psychological round number resistance levels.

Turtle Soup — A reversal pattern in SMC/ICT trading that fades a recent 20-day high or low breakout. When price barely exceeds a 20-day extreme and immediately reverses back within the range, it signals institutional stop hunting. Trade the reversal: enter when price closes back inside the 20-day range after the false breakout. Stop just beyond the swept extreme. Named from the original Turtle Trader methodology it fades.