The following is by no means a complete list of all terminology used in the world of trading. However, it does contain the essential terms you need to know if you are just getting started at Trading.
Buy
To buy shares of an asset. As a trader, buying is generally the action taken when you believe that stocks’ prices will go up.
Sell
To sell the shares you currently own, Traders generally sell when they see an opportunity to take profits or believe that a stock’s rise is ending.
Ask
The price at which a trader is willing to sell his shares. In most cases, the ask price is lower than the bid price.
Bid
The price at which a trader is willing to buy shares of an asset. In most cases, the bid price is higher than the ask price.
Day Trading
Day trading is an active trading style that involves holding a position for a short period of time. Day traders typically hold positions for less than 12 hours, although they may occasionally keep their positions open overnight or even longer if they don’t have other things to do. Day trading can be very risky and it’s not for everyone, but if you’ve got the stomach for it and want to learn more about this style of investing, read on!
Swing Trading
Swing trading is a strategy that’s somewhere between day trading and long-term investing. Swing traders hold their positions anywhere from a few days to several months. They’re generally more interested in taking profits than they are in holding onto losing trades for an extended period of time, but they’re not as aggressive as day traders who tend to make many small trades throughout the day.
Margin Trading
Margin Trading is a form of leverage that allows traders to buy more than they could afford if they were using cash. The margin requirement for each trade is determined by the amount of money you have on deposit with your broker, as well as the value of the securities being bought or sold. Your broker will automatically calculate this amount and require that it be paid before you can place an order.
The amount of margin required is known as the maintenance requirement. Your broker may require that you deposit more money if your balance falls below this level, or they may attempt to liquidate some of your positions first.
Leveraged Trading
If you want to get in front of other traders, then using a leveraged trading platform is the way to go. Leveraged trading allows you to control more shares than you have in your account by using borrowed money from your broker. For example, if you were to trade on a 2x leveraged CFD market with $2,000 worth of margin, then the broker would lend you another $4,000 for a total investment of $6,000. If the price of the stock moved up by 10%, then you would make a profit of $600. If it moved down by 10%, then you would lose $600.
This is similar to margin trading, except in leveraged trading, the broker actually lends you money rather than just reducing the amount of money that you have to put up as collateral.
Scalping
Scalping is a form of trading that involves many small, quick trades with the intention of making small profits. It is one of the most common forms of day trading and can be done on any type of market. The idea behind scalping is to make money from the spread between bid prices and ask prices rather than from holding onto an asset for longer periods of time.
Long Trade
A long trade is a trade where you buy an asset. Long trades are profitable when the price of the asset increases.
For example: You buy a stock at $10, and it goes to $15 – You sell the stock at $15
– You make $5, or 50%
Short Trade
Short trades are when you sell a stock without owning it. You can buy the stock back at a lower price and make a profit, which is the opposite of long trades. For example: You sell a stock at $10, and it goes to $5 – You buy the stock back at $5 – You make $5, or 100%
Buy Stop Order
A buy stop order is placed above the current market price. A sell stop order is placed below the current market price. The difference between these two orders is that a buy stop order is triggered when a stock reaches its trigger price, while a sell stop order must be manually canceled or else it will expire at some point in time (usually after five days).
Stop loss orders are types of stop orders that trigger when a stock reaches a specified price. Stop loss orders are used to limit losses in trades by automatically selling shares once they reach their pre-defined level (or better). For example, if you bought 100 shares of Company X at $50 per share and wanted protection against further declines without having to monitor your position constantly, then one option would be placing an entry-level sell order with an SL at $48 per share which would execute if X drops below $48 during regular trading hours.*
Sell Stop Order
A sell stop order is an order to sell a security if it declines to a specified price. Sell stop orders are used to limit losses or protect profits, and they can be used as part of your trading strategy.
A buy limit order is the opposite of a sell stop order: it’s an instruction to buy only if the price reaches or exceeds your specified level (the “limit” part). A buy stop order is also called an entry point; it tells your broker not only when you want them to enter a trade for you but also at what price they should do so–in other words, what constitutes success for this particular trade?
Limit Order
A limit order is an order to buy or sell a stock at a specific price or better. Limit orders are used to control the price you pay or receive for a stock. If you place an order with a limit price, you are telling your broker that you want to buy (or sell) at no more than that given price. For example: if the current market price of XYZ Company shares is $20 per share, then placing an order with your broker to buy XYZ Company shares at $19 per share will give you control over whether or not your trade gets executed before other buyers/sellers on the exchange get their chance first.*
Limit orders can be used as both entry and exit points in your trading strategy by allowing investors flexibility around buying/selling decisions while still taking advantage of favorable movements within markets.* In fact, traders often use this type of strategy when entering into trades because there’s no guarantee they’ll get filled at exactly what they’ve specified–it just gives them better odds!
Stop Loss Order
A stop loss order, also known as “stop market order” or “stop entry order,” is an instruction to sell a security once its price falls to a predetermined level. A stop loss order can be set for either short positions (sells) or long positions (buys). Stop losses are one of the most common ways investors protect themselves against large losses on open positions in stocks and other securities.
If you have ever placed an order with your broker, then you’ve used a stop-loss order before!
Volume
A volume refers to the units of something that have been traded during a given time period.
For example, if there is $1 billion worth of trading activity on a stock today, then its volume would be 100 million shares. The greater the volume in a particular security or market, the more liquid it is considered to be.
Resistance
A resistance level is a price or range of prices in which a market has difficulty moving through. Resistance can be thought of as a ceiling for demand, which keeps prices from going up indefinitely. Once the resistance level is broken, it becomes support for future price increases and will often act as such until another resistance level is encountered.
Support
A support level is a price or range of prices in which a market has difficulty falling through. Support can be thought of as a floor for supply, which keeps prices from going down indefinitely. Once the support level is broken, it becomes resistance for future price decreases and will often act as such until another support level is encountered.
Liquidity
Liquidity refers to how easily an asset can be bought or sold without affecting the market price. The more liquid an asset, the easier it is to buy and sell. This can be important when you want to cash in on a profitable investment but don’t have time to wait for your order to execute at a fair price. The most liquid assets are cash and government bonds.
A less liquid asset might be a small company stock or an emerging market bond. Investors who want to quickly sell their investments may have to accept less than what they paid for them.
Technical Analysis
Technical Analysis is a way to make predictions about the future price of a security. Technical analysis involves studying charts that plot the price history of a security, as well as looking at other indicators such as volume and open interest.
Technical Analysis can be used to: -Identify support and resistance levels on charts -Predict trend changes by analyzing technical indicators -Determine when to enter and exit a position (e.g., when to buy or sell)
Different analysts have different ideas about how best to read the charts for any given asset or market.
Slippage
Slipage occurs when you place an order and the price moves in the direction of your trade before your order is filled.
Slippage occurs because market makers are constantly hedging their positions as they buy and sell, while at the same time providing liquidity to other traders. For example, if you place an order to buy 100 shares of a stock at $5.00 per share, the market maker may be able to sell you those shares at $4.99 or even $4.98 before your order is filled. This is known as slippage because it’s like paying for the privilege of getting in front of other traders and investors who were willing to pay more for their orders than you did.
Bull Market
A bull market is a period when the prices of stocks and other assets are rising. It is often referred to as an uptrend. A bull market can last for days, months or years.
Bear Market
A bear market is a period when the prices of stocks and other assets are falling. It is often referred to as a downtrend.
Volatility
Volatility refers to how much prices can change in a given time period. Volatility is measured by the standard deviation of returns for an asset. The higher the volatility, the more likely it is that prices will deviate from their average over time.
Moving Average
A moving average is a trend-following technical analysis tool that helps smooth out price action. It is calculated by adding the closing prices over a set period and then dividing that total by the number of periods used to calculate it. For example, if you wanted to calculate a 200-day moving average for Bitcoin, you would add its closing price on each trading day over the past 200 trading days and then divide that sum by 200.
Fibonacci
Retracement Fibonacci retracement is a technical analysis tool that is used to predict the future price action of an asset based on its past performance. It is calculated by taking two extreme points (usually a high and low), dividing each one into thirds, and then drawing vertical lines between those points. The resulting lines give traders an idea of what levels might serve as support or resistance during future price action.
Parabolic Chart
The parabolic chart is a technical analysis tool that is used to predict future price action based on past performance. It involves drawing an exponential curve through the high and low of each candlestick over a specified period of time. The starting point for the curve is usually set at the midpoint between the open and close of each candle on the chart; however, some traders prefer to use other points as well.
Parabolas
The parabola is a geometric shape that can be used to model many types of real-world phenomena. It’s most commonly used in physics and mathematics, but can also be applied to financial markets. In this context, a parabola is an exponential curve that shows how prices move over time. The curve is formed by plotting the price of an asset against time; it begins at zero on the y-axis and ends at its maximum value on the x-axis.
Relative Strength Index (RSI)
The relative strength index (RSI) is a technical indicator that measures the price of an asset against its own history. The RSI is based on the idea that stocks tend to move in cycles: they will usually have periods of growth and decline, as well as periods where they trend upwards or downwards.
The RSI attempts to determine whether an asset is overbought or oversold based on its price relative to its own history. It does this by comparing the current price of an asset with historically high and low prices. If the current price is higher than it has been in the past, then it may be considered overbought; if it’s lower than it has been in the past, then it may be considered oversold.
Moving average convergence/divergence (MACD)
The MACD is another popular momentum indicator that’s used by traders to help them identify changes in an asset’s direction. The MACD uses two moving averages (i.e., average price levels over a certain period of time) to plot the relationship between short-term and long-term trends. When these two lines cross, it means that the trend has shifted; this can provide traders with an early warning about potential changes in market direction.
Elliot Wave
A popular trading technique that’s based on the Elliott Wave Principle, which states that all market moves can be broken down into five waves (i.e., 3-2-5). The basic idea behind this approach is to identify the stages of a trend by analyzing its structure and then buy or sell accordingly. For example, if you believe that an asset has just completed a fifth wave move and is about to enter a correction phase, then selling now could allow you to lock in some profits before prices drop lower.
Trading is a complex game, but it can be learned.
Trading is a complex game, but it can be learned.
Trading is not for everyone. But if you think it is for you -educate yourself as much as you can on the terminology and various practices used by other traders. Try to keep away from anyone who tells you that you can make “100k in 30 days” on YouTube. It’s possbile, but highly unlikely.
