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Basing

Definition of Basing

Basing happens when a security trades sideways after prolonged periods of falling prices.

As a result, the security forms a “base” or flat pattern which means there is little to no upward or downward movement and a decline in volatility.

This may go on for a relatively long time but is crucial as basing is an indicator of any meaningful reversal that may happen.

Related Terms

Cash Commodity

A cash commodity refers to physical goods like aluminium, cotton, gold, silver, zinc, and other tangible goods which are delivered to a trader or company most commonly after exercising derivatives like options and futures contracts.

Cash commodities are also known as actuals. A derivative contract for cash commodities will explicitly state the delivery date, price, and quantity. These details are necessary as some contracts may not involve the delivery of goods.

Abandoned Baby Pattern

An Abandoned Baby Pattern is a type of candlestick pattern that signals the reversal of a bullish or bearish trend. It is made up of three candles, each of which varies based on the trend.

Bullish Abandoned Baby Pattern


  • Candle #1: Red in color & forms during a downward trend
  • Candle #2: Forms a Doji Star below Candle #1’s closing price
  • Candle #3: Leads to a bullish trend & forms above the Doji Star (similar size to Candle #1)

Bearish Abandoned Baby Pattern


  • Candle #1: Green in color & forms during an upward trend
  • Candle #2: Forms a Doji Star above Candle #1’s closing price
  • Candle #3: Leads to a bearish trend & forms below the Doji Star (similar size to Candle #1)

Common Stocks

A common stock is a type of share that gives the holder the right to a part of a company’s profits, voting on key policies and decisions. Common stockholders have an advantage over preferred stockholders because they can:

  • Get higher returns
  • A part of the assets left after a company is liquidated (in case of default)

Debt To Equity Ratio

The debt to equity ratio is a measure of a company’s financial health that’s calculated by dividing liabilities from shareholder equity.

Debt to equity ratio: Total liabilities / Shareholder equity

A high debt to equity ratio means that a company is taking on more debt to run its business. A low debt to equity ratio means that a company is operating at low debt.

That’s why investors calculate the D/E ratio to understand a company’s ability to operate without debt. Generally, D/E is used for comparative analysis within sectors, not across industries because the ideal debt ratio may vary.

Equity Shares

Equity shares is a term used to describe stock of a company that’s issued via an Initial Public Offer (IPO), already issued and traded on the stock market, or freshly available through a Follow on Public Offer (FPO).

For a company, the goal of issuing equity shares is to raise money while investors who buy these equity shares get perks like voting rights, dividends, and even a share of the assets in case the company is liquidated.

Commodity Exchange

A commodity exchange is a marketplace where commodities and related derivative contracts are standardized and traded. The commodity exchange can be split into these sub-markets:

  • Derivatives market: this is where commodity exchanges allow futures, options, forwards, and other derivatives to be traded
  • Spot market: this is where commodity exchanges allow buying and selling of commodities in real-time (on the spot), including cash contracts

In India, there are 4 commodity exchanges that are popular and widely turned to:

  • Indian Commodity Exchange (ICEX)
  • Multi Commodity Exchange of India (MCX)
  • National Commodity & Derivatives Exchange Limited (NCDEX)
  • National Multi Commodity Exchange of India (NMCX)

Within these exchanges, the most commonly traded commodities include:

  • Crude oil
  • Coffee
  • Corn
  • Cotton
  • Gold
  • Natural gas
  • Silver
  • Sugar
  • Wheat



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