In trading and investing, Alpha refers to the excess return a trader or portfolio earns above the market average or a benchmark index (like the S&P 500 or Nifty 50).
Positive Alpha = You're outperforming the market.
Negative Alpha = You're underperforming the market.
Example: If the market gives a 10% return and your portfolio gives 13%, your Alpha is +3%.
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⚖️ Alpha vs Beta (Common Confusion)
Term Meaning
Alpha Measures performance compared to the market
Beta Measures volatility or risk compared to the market
