TRADER'S GLOSSARY
When traders place an opening and closing trade on the same stock on the same day, they are making a day trade and are subject to special rules.
A professional day trader can informally be considered somebody who day trades for a living.
Swing traders will hold stocks for at least one night. These are very short-term investments.
This term refers to a strong market of stocks moving up.
This term refers to a weak market; this means traders think the price of stocks or a specific stock will be going down.
When a company floats an IPO, they sell a fixed number of shares of a particular company in the open market to raise money.
Float refers to the number of outstanding shares available for trade.
A Share Buy Back program is when a company buys back shares that were sold during the IPO. By doing this, they are reducing the number of shares available for trading purposes in the market.
A secondary offering is an offering that is given after the Initial Public Offering. A secondary offering will raise money for the company by selling more shares.
Beta is a measure of the volatility—or systematic risk—a security or portfolio compared to the market as a whole.
A crossed market refers to a temporary situation where the bid price associated with a particular asset or security is higher than the ask price.
Dividends are the money paid out to shareholders who hold shares of the company for a certain period of time as a way of sharing the company's success.
In day trading, divergence is trading concept that forms on your trading bar chart and results from the price action of security moving in opposite directions.
Earnings Per Share (EPS) is a portion of a company's profit allocated to a person's stock share and is an essential metric for analysts.
Market Capitalization is a measurement used to classify a company's size and is based on the market value of the total shares outstanding.
Mergers are deals that unite two separate companies into a single new business entity.
A penny stock typically refers to the stock of a small companies.
Return on investment (ROI) is a metric that measures profit or loss generated by an investment about the invested funds.
Shares outstanding refers to the stock of a company currently held by all shareholders, including restricted and institutional shares.
Market trend represents the general direction in a market or security over a given period of time and can last from a couple of days to many months or years.
This refers to the level of uncertainty surrounding price fluctuations of financial instruments. Volatility is usually characterized by rapid, random price movements.
A professional day trader can informally be considered somebody who day trades for a living.
A resistance level is the price level at which the selling of a security is deemed healthy enough to eliminate the price increase.
Stock is a type of asset that gives you ownership in a company, allowing you to claim the company's assets and earnings.
A price target is the projected price of a financial instrument provided by an analyst and used to determine under and overvalued stocks.
Recession refers to when a country's economy experiences a decline due to different factors over a specific period.
The OTC or over-the-counter market allows for the trading of assets without the formal structure of official exchange and is considered risky.
The Hard to borrow list refers to an inventory of securities the brokerage firm cannot provide for short selling and is only available for buying.
Derivatives are securities with prices dependent on, or derived from, one or more separate underlying assets such as options or futures contracts.
Equity refers to the ownership of assets after liabilities and debts have been settled, or it can refer to stock or ownership of shares in a public company.
Blue-chip stocks are companies that are often worth billions of dollars, pay dividends, and have a long history of reliable operations.
A bond is a debt investment where investors loan funds to a corporate or government for a particular period of time at a variable or fixed interest rate.
When traders are "long" a stock, they are buying shares and expect the stock price to go up.
Price average is the average price of the stock that you have paid.
glossTraders who are "short" on a stock are short-selling shares. As soon as they sell the shares, they profit from the sale; however, they must buy back the shares.ary5
You must borrow shares from your broker to short. If your broker doesn't have shares available for you to borrow, you can't short the stock.
To close a short position, a trader must "cover" their position, this is, buying stocks to cover the shares they borrowed from their broker.
Short interest refers to the number of shares all traders worldwide are currently holding as a short position against the stock.
This is when a stock suddenly starts moving up, and traders holding short positions start buying to cover their positions.
When a trader opens a broker account, they are given Margin. In addition to allowing you to trade on borrowed money, they also extend a line of credit to your account for trading.
The rate that your cash deposit will be multiplied to give you total buying power.
The money an investor has for purchasing securities, the cash balance plus the margin.
The percentage a trader has to pay their broker in exchange for borrowing money.
Traders who are issued a margin call are in debt to their broker. The broker will require you to repay the debt and force you to sell other assets to return the money.
Bid Price is the price at which traders are currently bidding on stock.
Ask price is the price at which traders are currently asking to sell the stock.
Spread is the difference between the Bid price and Ask price.
Market Makers create the spread. They are large institutional players that are both buyers and sellers of a stock.
Volume is a measure of the number of shares traded.
Relative volume shows how much volume a stock has compared to its average volume for the same period.
Thin market means a low number of traders actively trade a particular stock. In a thin market, prices tend to be volatile.
Thickly-traded markets and stocks will be crowded with traders.
Stocks can be halted and paused from trading for several reasons. During circuit-breaker halts, traders cannot trade the stock in any way.
Slippage is the difference between the price you thought you would trade at and the price at which the trade went through.
A limit order is when you ask your broker to buy you shares and state the most you are willing to pay.
Stop orders are a versatile order used for getting in and out of trades. When you place a stop order, you are saying that you want to get in or out of a trade when prices hit your stop price.
This is Fill or Kill, which means either you get your entire order filled or the order won't fill at all; this prevents partial orders.
This is a Good Till Cancelled order. That means the order will stay on the broker's servers until you cancel it.
Trailing stop order is a stop order that allows setting of the value as a percentage usually below the current market price and will move as prices move.
A Good Till Cancelled (GTC) order refers to a buy or sell request designed to last until the request is executed or canceled by the trader or broker.
Fundamental Analysis is when a trader (or more often, an investor) looks at a company's fundamental metrics. This includes their annual and quarterly earnings per share, their book value (total value of company assets), their sector's strength, and the growth potential.
Technical Analysis, in contrast to fundamental analysis, focuses solely on the stock price.
Line charts simply plot a line. This can give a good understanding of price action over long periods of time, but it doesn't provide the necessary insight that traders require for shorter time periods.
Bar charts show the open price and the close price for any given period.
Candlestick charts include four pieces of information. The open price, the close price, the high of the period price, and the low of the period price.
Technical indicators, or studies, help us interpret current price action.
Moving averages are a technical indicator that tells us the average price of a stock over time.
Simple Moving Average (SMA) is an average price calculation on the closing price of a security over a period of time divided by the number of periods.
The volume profile refers to an advanced charting study used to show trading activity where volume is displayed at prices instead of over a specific time.
Standard deviation is a statistical measure representing the rate of divergence from the mean in a data set and is used a lot in trading.
On Balance Volume, a momentum indicator helps measure the buying and selling pressure in a stock or any other financial security with volume.
An opening range breakout is a relatively simple strategy that involves taking a position when price breaks above or below the previous candle, high or low.
The Keltner Channel is a technical indicator that shows a central line for a moving average and channel lines below and above.
Average Directional Index is a technical indicator used to signify the strength of a trend and works best when a stock is trending.
