Trading Glossary
Over 30 essential terms to help you navigate the Pakistan Stock Exchange and start investing with confidence.
Ask (Offer)
The lowest price a seller is willing to accept for a share.
Bear Market
A prolonged period of falling stock prices (usually 20% or more from recent highs). Pessimism dominates.
Bid
The highest price a buyer is willing to pay for a share.
Blue Chip Stocks
Shares of large, well-established, and financially sound companies (e.g., major banks, oil & gas).
Bull Market
A period of rising stock prices (often 20% or more). Optimism and confidence are high.
Broker / Brokerage Firm
Licensed intermediary that executes buy/sell orders on the exchange on behalf of investors.
Capital Gain
Profit earned when you sell a share at a price higher than what you paid.
CDC Account
Central Depository Company account that holds your shares electronically. Required to trade on PSX.
Dividend
A portion of a company’s profit distributed to shareholders. Can be cash or bonus shares.
Earnings Per Share (EPS)
Net profit divided by total shares – indicates profitability per share. Higher EPS is generally better.
Free Float
Shares available for trading by the public (excluding promoter holdings). Used to calculate indices like KSE‑100.
Fundamental Analysis
Evaluating a company’s financial health, management, and industry to determine its true value.
Index (e.g., KSE‑100)
A statistical measure of the performance of a group of stocks (top 100 PSX companies).
Initial Public Offering (IPO)
The first time a company sells its shares to the public on the stock exchange.
Limit Order
An order to buy or sell a share only at a specific price (or better).
Liquidity
How easily a share can be bought or sold without causing a big price change.
Market Lot
Minimum number of shares you can trade in one order on PSX. 500 shares for stocks below Rs. 50; 100 shares for stocks at or above Rs. 50.
Market Order
An order to buy or sell immediately at the best available price.
Market Capitalization
Total value of a company’s shares (share price × total shares).
Portfolio
A collection of investments owned by an individual or institution (stocks, bonds, etc.).
Price-to-Earnings (P/E) Ratio
Share price divided by earnings per share – indicates if a stock is overvalued or undervalued.
Return on Equity (ROE)
Net income divided by shareholders’ equity – measures how efficiently a company generates profit from equity.
Risk
The chance that an investment’s actual return will be different from expected – including losing some or all of the investment.
SECP
Securities and Exchange Commission of Pakistan – the regulator overseeing PSX and brokerages.
Settlement (T+2)
The process of transferring shares and funds – completed two business days after the trade date.
Spread
The difference between the bid (buy) price and ask (sell) price. Narrower spread = higher liquidity.
Stop Loss Order
An order to sell a share if the price drops below a certain level – used to limit losses.
Technical Analysis
Studying past price patterns and volume to forecast future price movements.
Volatility
The degree of price fluctuations – high volatility means large, rapid price changes.
Yield
Annual dividend income divided by the share price (expressed as a percentage).
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