ADR is short for American Depositary Receipt. These are certificates that represent shares of overseas stocks. ADRs allow you to buy and sell overseas stocks on U.S. stock exchanges in much the same way you can trade American stocks.
When a trader offers their shares for sale at a certain price. If a trader holds shares, and they want to sell them at a particular price, they’ll place an order asking buyers to purchase them.
when you buy a stock at 10, the price drops to 8.00, so you add the same amount of shares and bring your average cost down to 9.00 This is where an investor or trader buys more shares of a stock as the price drops, lowering the average price paid for the position. Averaging down can be an intelligent strategy for long-term investors, but we don’t recommend that active traders do it.
A bear market is the opposite of a bull market. It’s a market condition where prices are continually falling. Bear markets are times where the outlook appears bad for a company, an industry, or the overall economy. Traders and investors are less willing to buy stocks, and many are looking to sell their stocks. This causes prices to fall.
The statistical measure of the way a stock performs compared with the broader market. Investors use beta as a way of understanding how much risk there is in holding a stock. Bull Market A market condition where stock prices are continually rising. Bull markets are characterized by optimism and excitement from traders and investors.
When a trader in the market makes an offer to buy shares. Traders will bid for a stock at a certain price.
The difference between the highest price at which someone is willing to buy shares and the lowest price someone is willing to sell shares.
These are large, stable, well-known companies that are often profitable and pay consistent dividends.
When price moves past resistance level or below support level. For us here we’re looking for breaking resistance level. Example: Mini calls break at 1.00, you want to buy above that price around 1.01-1.03, not below it.
To take a position by buying shares of a company. As a trader, you generally buy shares when you think a stock’s price will rise.
Candlestick charts are what most active day traders will use to help them establish a basis for taking a trade. A candle stick includes 4 pieces of information. The open price, the close price, the high of the period price, and the low of the period price. When these 4 pieces of information come together, candle sticks can take shapes that communicate market sentiment.
A type of stock market order to buy or sell shares in which if the order isn’t filled during the day, it’s automatically canceled at the market close.
Day trading is buying shares of a stock with the intention of selling them on the same day. Usually no intention to hold overnight.
The practice of entering and exiting stock trades within a single day. For example, if you purchase a stock in the morning, then sell it for a profit in the afternoon, you’ve day traded.
This is when a company pays a portion of its earnings to its shareholders. Long-term investors and retirees generally focus on dividends.
This refers to the size of a company’s dividend compared with the price of its stock. For example, if a stock price is $20 and the company pays a dividend of $1 per share, the dividend yield would be 5%.
Exchange Traded Fund (ETFs)
ETFs are like mutual funds in that they’re pools of capital being used for investment purposes. But instead of wiring your money into the fund, you can simply purchase shares of the ETF on a stock exchange.
The act of fulfilling a stock trading order. For example, you place an order with your broker to buy 100 shares of XXX at $20. When that trade has been completed, you can refer to that order as having been executed.
Float refers to the number of outstanding shares available to trade. Lower float causes the stock to move up and down faster. Higher float causes slower movement.
Forex is short for foreign exchange. The term refers to the global trading of currencies in a way similar to the way stocks are traded.
Fundamental Analysis (FA)
Fundamental Analysis is when a trader looks at the fundamental metrics of a company. This includes their Annual and Quarterly Earnings per share, Their Book Value (total value of company assets), the strength of their sector, total cash per share, revenue, and the potential for growth.
Gaps on a daily chart occur when a stock opens higher or lower (by a big margin), than it had closed on the previous day. This happens when there is news or some type of catalyst overnight (Either good or bad), leaving a noticeable space between stock prices.
The particular space in between the “gap”.
By going long, you’re purchasing shares of a stock and you’re looking to profit if the stock price rises.
When a trader looks to profit from a stock’s price going down. A trader goes short by borrowing shares from a broker, selling them, and hoping to buy them back and return them to the broker after the price has dropped.
Price broke through the identified break/resistance and is moving up quick. Used in scalp trading & day trading.
Good Till Canceled Order (GTC)
A type of stock market order to buy or sell shares that remains open until the trade is made or you cancel the order. Also known as a GTC order.
Good faith violation
When you buy a security and sell it before paying for the initial purchase in full with settled funds. Only cash or the sales proceeds of fully paid for securities qualify as “settled funds.” Consequences: If you incur 3 good faith violations in a 12-month period in a cash account, your brokerage firm will restrict your account. This means you will only be able to buy securities if you have sufficient settled cash in the account prior to placing a trade. This restriction will be effective for 90 calendar days.
A trading halt is a temporary suspension of trading usually resulted in massive volatility in a very short period. (For either up or down movement)
A hedge fund is a type of investment fund that often uses non-standard investment and trading techniques. Hedge funds generally try to be profitable regardless of whether the market is up or down, and they’re generally reserved for high-net-worth investors.
Initial Public Offering (IPO)
IPO stands for initial public offering. It’s when a company goes through the process of selling shares on the stock market for the first time.
If a stock is $10, by using Level 2 data, we can see buyers at 9.99, 9.98, 9.97, and so on. We may see bids stacked tightly on the Level 2, or we may see them spaced apart such as 9.95, 9.89, 9.74, 9.64. When we see full market depth on both the Bid side and the Ask side, we are seeing complete level 2.
A type of stock market order that provides instruction to only execute at a certain price, or one that is more profitable. For example, a trader could place a limit buy order to purchase 100 shares of a stock at $10.20. The broker will attempt to buy 100 shares at a price of $10.20 or below.
The measure of a stock’s ability to be bought and sold quickly. More shares being bought and sold means more liquidity. If there are lots of buyers and sellers trading lots of shares of a stock, you’ll generally find it easier to enter and exit a position.
Market Capitalization (MC or Market Cap)
Market Capitalization is a measurement used to classify a company’s size, which can be categorized between small, medium, or large cap, and is based on the market value of the total shares outstanding. Basically, the company’s worth.
Market Makers (MM)
Market Makers create the spread. They are large institutional banks that are both buyers and sellers of a stock. They create the spread, and they profit by selling shares between the spread. The larger the spreads, the more the market makers can profit.
A type of stock market order that provides instruction to buy or sell as quickly as possible, at whatever price is currently available. Market orders can be expensive if there’s not enough volume being traded. If you’re going to trade penny stocks, you should almost never use a market order.
The use of borrowed money to trade shares. Some brokers allow margin trading, but we don’t recommend it, especially if you’re new to the markets. For example, you might have $10,000 in your trading account, but use a margin account to purchase $20,000 of stock. With margin, you can make money and lose money faster. Be careful!
A commonly used technical indicator found on stock charts. The moving average is an average of the stock price over a certain time period. For example, the 20-day moving average is calculated by taking the price of the stock on each of the prior 20 days, then finding the average of those 20 prices. It’s a quick and simple way for traders to see the trend direction of a stock.
Mutual funds are pools of investor money put together to invest in stocks, bonds, and other financial assets.
An offering will raise money for the company by selling more shares. This increases the supply of shares on the market and decreases the value of current shares. This is generally something traders do NOT like to see.
This is the total number of a company’s shares. It includes both the public float and restricted shares held by management or key investors.
Pattern Day Trader (PDT) Rule
If a trader takes 3 or more day trades in a 5 day period, they are a day trader and they must maintain a minimum account balance of $25,000. If under (for most brokerages), you must not daytrade more than 3 times a week.
A price quote is a stock’s price at a certain point in time. Traders will often want up-to-date price quotes to better analyze stocks and find decent trading set-ups.
A price rally is when a stock price rises at a quicker pace. Public Float This is the term for a company’s freely traded shares. Many companies will have large chunks of shares that aren’t tradeable because they’re held by company management or key investors. As active traders, we generally look for companies with a small public float, as their prices tend to be more volatile.
A resistance level is the price level at which selling of a security is deemed strong enough to eliminate the increase in price. Basically where a lot of sellers show up.
Reverse Split (RS)
A reduction in the number of a company’s traded shares. This causes a lower “float”. A 10:1 reverse stock split, for example, will take a stock trading at $1.00 and turn it into $10.00. If you were previously holding 1,000 shares at $1.00, you would only be holding 100 shares at $10 after the split.
Scaling in or out
To enter or to exit a position a trader may “scale.” This technique, when used to scale in, means buying a partial small position at 5.50, and adding (or scaling) with a 2nd position at 6.00. Due to scaling in with equal sizes, the trader has a cost average of 5.75.
Scalping targets minor changes in intra-day stock price movement, frequently entering and exiting throughout the trading session, to build profits. These are quick trades and should be only done by advance traders.
A company may raise money from investors by offering shares, even after the company’s shares are traded on a stock exchange. This is called a secondary offering.
The stock market is made up of shares of companies in different industries and niches. We refer to them as sectors.
To sell the shares you currently own. Traders generally sell shares when they see an opportunity to take profits or they think the stock’s rise is ending.
In the stock market, spread refers to the difference between the lowest ask price and the highest bid price. If the lowest ask price for a share of XXX stock is $10, and the highest bid price is $25, then the spread is $15
A person or company that acts as an agent, allowing traders and investors to buy and sell stocks. Need help picking a broker? Find out more here.
The visual graph of the price of a stock over time. Traders use stock charts as a way to help them interpret what the stock price is doing and what’s likely to happen next.
A stock exchange is an entity where stocks are bought and sold. The most well-known stock exchanges are the New York Stock Exchange (NYSE) and the Nasdaq.
A stock portfolio is an investor’s collection of stocks. Stock Symbol A unique collection of letters and/or numbers that represent a stock. Penn National Gaming, for example, trades on the Nasdaq under the symbol PENN.
A support level is the price level whereby demand of a security is strong enough that it prevents the decline in price past it. Basically where a lot of buyers show up.
Swing Trading, in contrast to day trading, is the act of holding shares overnight. Swing traders will hold stocks for at least 1 night, but perhaps many nights or even weeks. These are short-term investments.
An experienced trader who can shorten your learning curve by teaching you how they trade and what they’ve found to work in the markets.
The number of shares being traded at a point in time. More trading volume means a stock is more active, and it’s easier to enter and exit positions.
Technical Analysis (TA)
Technical Analysis, in contrast to fundamental analysis, does not focus on the fundamental metrics of a company, but instead, focuses solely on the price of the stock, volume, charts, and patterns. Technical analysis requires a complex understanding of chart patterns and technical indicators. This is the type of trading most day traders will practice.
The statistical measure of how much a stock moves up or down. Stocks that move up and down wildly are known as volatile stocks. They can provide great profit opportunities, but also come with greater risk.
The wash-sale rule is an IRS regulation that prevents a taxpayer from taking a tax deduction for a security sold in a wash sale. The rule defines a wash sale as one that occurs when an individual sells or trades a security at a loss and, within 30 days before or after this sale, buys a “substantially identical” stock or security, or acquires a contract or option to do so.
AH = Afterhours
ATH = All Time High
BTD = Buy the Dip
EOD = End of Day
FOMO = Fear Of Missing Out (buying into a ticker while running. Don’t do this)
FD = Slang for out of the money options expiring within a week.
NHOD = New High of Day
HOD = High of Day
PH = Power Hour (3:00pm-4:00pm Eastern)
PM = Premarket PT = Price Target
VC = Voice Chat
WW = Worth Watching When we identify a stock that might jump based on technicals, news, or volume.