GLOSSARY New
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Here are some terms every trader should be familiar with
| Day Trade | 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. |
| Professional Day Trader |
A professional day trader can informally be considered somebody who day trades for a living. |
| Swing Trading |
Swing traders will hold stocks for at least one night. These are very short-term investments. |
| Bull or Bullish |
This term refers to a strong market of stocks moving up. |
| Bear or Bearish |
This term refers to a weak market; this means traders think the price of stocks or a specific stock will be going down. |
| Initial Public Offering (IPO) |
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 |
Float refers to the number of outstanding shares available for trade. |
| Share Buy Back | 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. |
| Secondary Offering | 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 | Beta is a measure of the volatility—or systematic risk—a security or portfolio compared to the market as a whole. |
| Crossed Market | 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. |
| Dividend |
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. |
| Divergence | 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 | 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 Cap | Market Capitalization is a measurement used to classify a company’s size and is based on the market value of the total shares outstanding. |
| Merger | Mergers are deals that unite two separate companies into a single new business entity. |
| Penny Stocks | A penny stock typically refers to the stock of a small companies. |
| Return on Investment (ROI) | Return on investment (ROI) is a metric that measures profit or loss generated by an investment about the invested funds. |
| Shares Outstanding | Shares outstanding refers to the stock of a company currently held by all shareholders, including restricted and institutional shares. |
| Market Trend | 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. |
| Volatility | This refers to the level of uncertainty surrounding price fluctuations of financial instruments. Volatility is usually characterized by rapid, random price movements. |
| Support Level | A professional day trader can informally be considered somebody who day trades for a living. |
| Resistance Level | A resistance level is the price level at which the selling of a security is deemed healthy enough to eliminate the price increase. |
| Stock | Stock is a type of asset that gives you ownership in a company, allowing you to claim the company’s assets and earnings. |
| Price Target | A price target is the projected price of a financial instrument provided by an analyst and used to determine under and overvalued stocks. |
| Recession | Recession refers to when a country’s economy experiences a decline due to different factors over a specific period. |
| OTC Market | The OTC or over-the-counter market allows for the trading of assets without the formal structure of official exchange and is considered risky. |
| Hard To Borrow |
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. |
| Derivative |
Derivatives are securities with prices dependent on, or derived from, one or more separate underlying assets such as options or futures contracts. |
| Equity |
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 |
Blue-chip stocks are companies that are often worth billions of dollars, pay dividends, and have a long history of reliable operations. |
| Bond |
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. |
| Long Side Trading |
When traders are “long” a stock, they are buying shares and expect the stock price to go up. |
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Price Average
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Price average is the average price of the stock that you have paid. |
| Short Side Trading | 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 |
| Borrowing | 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. |
| Covering | 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 | Short interest refers to the number of shares all traders worldwide are currently holding as a short position against the stock. |
| Short Squeeze | This is when a stock suddenly starts moving up, and traders holding short positions start buying to cover their positions. |
| Margin | 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. |
| Leverage Rate | The rate that your cash deposit will be multiplied to give you total buying power. |
| Buying Power | The money an investor has for purchasing securities, the cash balance plus the margin. |
| Margin Rate | The percentage a trader has to pay their broker in exchange for borrowing money |
| Margin Call | 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 | Bid Price is the price at which traders are currently bidding on stock. |
| Ask Price | Ask price is the price at which traders are currently asking to sell the stock. |
| Spread | Spread is the difference between the Bid price and Ask price. |
| Market makers | Market Makers create the spread. They are large institutional players that are both buyers and sellers of a stock. |
| Volume | Volume is a measure of the number of shares traded. |
| Relative volume | Relative volume shows how much volume a stock has compared to its average volume for the same period. |
| A Thin Market | Thin market means a low number of traders actively trade a particular stock. In a thin market, prices tend to be volatile. |
| A Thick Market | Thickly-traded markets and stocks will be crowded with traders. |
| Circuit Breaker | Stocks can be halted and paused from trading for several reasons. During circuit-breaker halts, traders cannot trade the stock in any way. |
| Slippage | Slippage is the difference between the price you thought you would trade at and the price at which the trade went through. |
| Limit Orders | A limit order is when you ask your broker to buy you shares and state the most you are willing to pay. |
| Stop Orders | 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. |
| FOK Order | 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. |
| GTC Order | This is a Good Till Cancelled order. That means the order will stay on the broker’s servers until you cancel it. |
| Trailing Stop | 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 |
| Good Till Cancelled | 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 | 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 | Technical Analysis, in contrast to fundamental analysis, focuses solely on the stock price. |
| Line Charts | 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 | Bar charts show the open price and the close price for any given period. |
| Candlestick Charts | 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 | Technical indicators, or studies, help us interpret current price action. |
| Moving Averages | Moving averages are a technical indicator that tells us the average price of a stock over time. |
| Simple Moving Average | 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. |
| Volume Profile | 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 |
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. Ads:
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| On Balance Volume | On Balance Volume, a momentum indicator helps measure the buying and selling pressure in a stock or any other financial security with volume |
| Opening Range Breakout | 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. |
| Keltner Channel | 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 (ADX) | Average Directional Index is a technical indicator used to signify the strength of a trend and works best when a stock is trending. |
TRADER’S GLOSSARY
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