Glossary of Terms

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Glossary of Terms

ATR

Average True Range - A measurement of how much a stock moves on a daily basis based on the average movement of the last 14 trading days.

Accumulation

A period in which market makers are purchasing shares of stock with an intent to sell them at a higher price.

Asset

A fundamental metric of a company that includes physical and intellectual property that a company owns.

Brokerage account (cash)

A type of brokerage account that allows an individual to purchase financial instruments. The amount an individual can use to purchase financial instruments is limited to the amount of money the individual has currently in the account.

Brokerage account (margin)

A type of brokerage account that allows an individual to purchase financial instruments. The amount an individual can use to purchase financial instruments may include money leant by a brokerage firm. The amount that can be borrowed is dependent on both the financial instrument being traded and the amount of cash available in the account.

Buy

The act of purchasing a financial instrument.

Buy Stop

A buy order that won't execute until a user defined price is reached.

Buy to Cover

The act of closing a position in which you are currently short.

Call

An option contract giving the purchaser the right to buy a specified amount of an underlying security at a predefined price and time.

Candle body

The area of a candle representing the open and close prices for a defined trading period.

Candle wick

The area of a candle representing where the price of a stock has fluctuated relative to the opening and closing prices.

Channel

An ascending or descending area in which a stock is generally trading.

Chart

A visual representation of a stock's price action over a given period of time.

Chasing

When a stock has already made a significant move, "chasing" involves entering the position during the extension, which is inherently very risky as the move may be over.

Close price

The price at which a stock ended trading during a specified period of time.

Complex Trendline

An ascending or descending line that connects pivot levels and is well respected despite crossing through price action at various points.

Consolidation

A period in which a stock trades in a general range without trending above or below that range.

Convergence

When multiple price levels come together in a single area. For example: A moving average line is coming close to or meeting up with another moving average or support/resistance level on the same timeframe.

Distribution

A period in which market makers are selling shares of stock that they have purchased for a lower price.

Divergence

When the price of a stock is moving in the opposite direction of a technical indicator.

Dividends

An amount of money issued to shareholders on a quarterly basis that is issued by a company based on profits and performance.

EMA

Exponential Moving Average - A measurement that tracks the price of a stock over a period of time. The EMA is weighted to give more importance to recent price data.

EPS

Earnings Per Share - A calculation of a company's profit divided by their outstanding shares of common stock.

ETF

Exchange Traded Fund - A type of tradeable security that involves a collection of securities that often track an underlying index, industry or sector.

Ex-dividend Date

The date at which a company is not required to pay a dividend to any shareholders that are not already owners of shares on or after this date.

Exchange

Where shares are offered for sale or purchase to the general public.

FOMO

Fear of Missing Out - A psychological feeling associated with an individual wanting to enter a trade out of fear they will miss a good profit opportunity.

Float

The number of oustanding shares available to purchase with respect to a given company.

Future

Derivatives of financial contracts that allow individuals to buy or sell assets at a predetermined future date and price.

Gapper

A stock that has moved significantly up or down in price in relation to the previous day's closing price and the premarket or opening price.

High (price)

The highest price at which a stock traded during a specified period of time.

IPO

Initial Public Offering - The act of a company that is currently private, deciding to go public by offerring partial ownership of the company in the form of shares of stock.

IRA

Individual Retirement Account - A tax advantaged account that allows individuals to save money for retirement.

Liability

A fundamental metric of a company in which a financial debt is owed to another entity.

Limit Order

A buy or sell order that won't execute until a user defined price is reached.

Long

Purchasing shares of a stock that you think will go up in price where you get to keep the difference in the purchase and sales prices as profit if the stock moves higher after your entry.

Low (price)

The lowest price at which a stock traded during a specified period of time.

MOMO

Momentum - Slang used to describe something that has momentum.

Macro

An overall look at how something functions on a larger scale.

Margin

An amount of money that can be used for trading that is leant to a borrower from a brokerage firm. The amount that can be borrowed is dependent on both the financial instrument being traded and the amount of cash available in the account.

Market Makers

A group of professional investors that facilitate the buying and selling of stock shares with the general public.

Market Order

A buy or sell order that will execute as quickly as possible at the best possible price, regardless of what the price is.

Micro

A detailed look at how something functions on a smaller scale.

Mutual Fund

A collection of (typically) diverse investment vehicles that are managed by a fund manager and can be purchased by the general public.

OHLC

An acronym for the open, high, low and close prices of a stock during a specific period of time.

Offering

The act of a company selling ownership in the form of shares of stock.

Open price

The price at which a stock began trading during a specified period of time.

Option

Derivatives of stocks that are based on the value of the underlying security that they represent.

P/E Ratio

Price/Earnings Ratio - A measurement used to value a company based on its current share price relative to its per-share earnings (EPS).

Paper trading

Trading real financial instruments with real financial data using money that is not real.

Pattern Day Trader (PDT)

A regulation imposed by the SEC that prohibits an individual from making 4 or more roundtrip trades in a marigneable brokerage account within a 5 business day period unless the individual has at least $25,000 in the account.

Priceline

A manually drawn horizontal line on a chart often used to connect key areas of support or resistance.

Primary Market

Where shares are sold by the originating company to institutional investors.

Profit/Loss Ratio

A ratio used for risk management purposes that references the potential profit associated with a trade divided by the potential loss of the same trade.

Put

An option contract giving the purchaser the right to sell a specified amount of an underlying security at a predefined price and time.

ROA

Return on Assets - A calculation used to assess a company's efficiency at generating profits based on their current assets.

ROIC

Return on Invested Capital - A calculation used to assess a company's efficiency at turning existing capital into profitable investments.

RSI

Relative Strength Index - A measurement of the magnitude associated with a stock's current trading price.

Range

A horizontal area in which a stock is generally trading.

Relative Volume

A ratio comparing the current trading volume of a stock compared to its prior trading volume (usually the last 14 days).

Resistance

An invisible price area that a stock has historically struggled to get above.

Round trip

The act of opening and closing a position on a financial instrument in the same trading day.

SMA

Single Moving Average - A measurement that tracks the price of a stock over a period of time.

Scalping

The act of buying or selling shares that you do not intend to hold for a very long time. Usually seconds or minutes.

Scanner

A tool or resource that allows an individual to locate stocks in real-time based on predefined criteria. The criterai is typically based on a combination of technical and fundamental data.

Screener

A tool or resource that allows an individual to locate stocks based on predefined criteria that is typically based on fundamental data. Screeners do not push data to a user real-time and require that a user refreshses the screener's results each time they want to get an updated list.

Secondary Market

Often referred to as an "exchange", the secondary market is where shares are offered for sale or purchase to the general public.

Secondary Offering

The act of an already-public company offering additional ownership of the company through the process of selling shares of stock.

Sell

The act of selling a financial instrument.

Sell Short

The act of borrowing shares from a willing individual with the intentions of earning a profit if the stock price goes down in value.

Short

Borrowing shares of a stock that you think will go down in price where you get to keep the difference in the purchase and the sale prices as profit if the stock moves lower after your entry.

Split

A company's decision to make the price of a share of stock cheaper or more expensive by dividing or multiplying the number of outstanding shares so that the value of each share changes but the overall amount of all shares does not.

Spread (candle)

The difference between the open and the close prices of a given stock in a given period of time.

Spread (price)

The difference between the ask price and the bid price of a given stock.

Squeeze (short squeeze)

When a large number of short sellers are forced to cover because the stock is moving upwards. The buying to cover in tandem with other traders buying creates a significant momentum move to the upside.

Stop Limit

A sell order that won't execute until a user defined price is reached. Once triggered, shares will only be sold at the desired price.

Stop Loss

A sell order that won't execute until a user defined price is reached. Once triggered, all shares will be sold at the best price available, even it is different than the originally defined price.

Support

An invisible price area that a stock has historically struggled to get below.

Swing

The act of holding onto a financial instrument past the close of the trading session in which it was obtained.

Sympathy momentum

The act of a stock price moving up or down as the result of another event that is not directly tied to the specific stock in question.

Ticker

A unique symbol assigned to a company's stock for trading purposes.

Trailing 12-months

A data element typically used in the calculation of a company's fundamentals in which the previous 12-months are used.

Trailing Stop

An order that is placed to close all or part of a position. The stop is placed as a percentage or fixed amount of the current share price and will fluctuate as the price of the underlying asset goes up, but does not move lower than the price at which the stop was initially placed.

Trend

A period in which a stock is moving up or down in a general direction.

Trendline

A manually drawn ascending or descending line on a chart often used to connect key areas of support or resistance.

Upgrade/Downgrade

An opinion given by an individual analyst or group of analysts indicating their overall sentiment associated with the future price of a given company's stock.

VWAP

Volume Weighted Price Average - An indicator that measures the average price for a security based on both volume and price.

Volume

The number of shares being traded on a given stock in a given period of time.

Volume Price Analysis

A trading strategy and methodology involving the proportions of a candle's price movement and the volume of shares traded during the same period of time.