Trading Resources
Terminology to Get Started
Want to learn more? Search for terms in our blogs:
What is a stock?
A stock (also known as equity) is a security that represents the ownership of a fraction of a corporation. This entitles the owner of the stock to a proportion of the corporation's assets and profits equal to how much stock they own. Units of stock are called "shares."
What is Trading?
The act of actively buying and selling shares of companies in order to generate a short term profit.
What is a Broker?
A broker is an individual or firm that acts as an intermediary between an investor and a securities exchange.
Bearish
If you're bearish about a particular stock or asset, you expect the price to fall within a specified time period.
Bullish
If you're bullish about a particular stock or asset, you expect the price to rise within a specified time period.
Long
When a trader is in a long trade, they have purchased an asset and are waiting to sell when the price goes up. Day traders often use the terms "buy" and "long" interchangeably.
Short Selling
When a trader is in a short trade, they have borrowed and sold an asset and are waiting to buy it back when the price goes down.
Candlestick Chart
Candlesticks are created by up and down movements in the price of a stock. While these price movements sometimes appear random, at other times they form patterns that traders use for analysis or trading purposes.
PDT Rule
The Pattern Day Trader (PDT) Rule requires any margin account identified as a “Pattern Day Trader” to maintain a minimum of $25,000 in account equity, in order to day trade. The Financial Industry Regulatory Authority (FINRA) defines a “Pattern Day Trader” as a brokerage customer that executes more than three round trip trades during a rolling five-business day period. Different brokerages may also implement additional requirements for customers.
Float
A stock float is the total number of shares that are available for public investors to buy and sell.
Volume
Volume is the amount of an asset or security that changes hands over some period of time, often over the course of a day.
Secondary Offering
A dilutive secondary offering occurs when a company itself creates and places new shares onto the market, thus diluting existing shares. This offering happens when a company's board of directors agrees to increase the share float to sell more equity.
Scaling
The act of buying or selling partial positions, often referred to as "scaling in" to a trade. For example, instead of buying 100 shares of XYZ stock at $10 per share, you may choose to scale in by buying 50 shares at $10.20, and another 50 shares at $9.80, giving you an average buy price of $10. This is often used when you want to execute a trade, but want to limit your risk by not being "all in" at one price.
Borrow
The act of borrowing shares of a stock from your broker, in order to short it in the market, for a small fee.
Cover
A cover is an order placed to close a short position, by buying back the stock that you originally sold.
SSR
A short sale restriction is placed on stocks which have fallen 10% or more on any given trading day, and forces traders to wait for an uptick in the stock in order to take a short position.
Options
Options are financial derivatives that give buyers the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price and date.
Bid
The term "bid" refers to the highest price a buyer will pay to buy a specified number of shares of a stock at any given time.
Ask
The term "ask" refers to the lowest price at which a seller will sell the stock.
Market Maker
A market maker is an individual participant or member firm of an exchange that buys and sells securities for its own account. Market makers provide the market with liquidity and depth while profiting from the difference in the bid-ask spread.
Level 2
A level 2 quote is a set of real-time trading information, including the best bid/ask prices from market makers, for a security that trades on the Nasdaq or over the counter (OTC) markets.
Time and Sales
Time and sales, or T&S, show volume, price, direction, date, and time data for each trade that is executed on an exchange. Time and sales information is often provided as a real-time data feed of trade orders for a security.
Volatility Halt
Volatility halts are single stock circuit breaker halts that trigger 5-minute halts on fast price spikes or drops that exceed the acceptable trading price range.
Stop Loss
A stop-loss order is an order placed with a broker to buy or sell a specific stock once the stock reaches a certain price. A stop-loss is designed to limit an investor's loss on a security position. For example, setting a stop-loss order for 10% below the price at which you bought the stock will limit your loss to 10%.
Stuff Candle
A stuff candle is characterized by an attempt of a stock to break out of a certain price range to the upside, only to be met with high volume selling, and a failure to break out of a given range.
Soaking
The opposite of a stuff candle, soaking occurs when a stock attempts to break down out of a certain price range, only to be met with high volume buying, and a failure to break down out of a given range.
Fomo
Fear of Missing Out. This common emotion causes traders to make irrational decisions out of fear, leading to unnecessary losses and drawdowns.
Parabolic
Stocks rarely go straight up. When they do, the uncommon occurrence is called a "parabolic move." In stock terminology, such a move is defined by a sudden and dramatic increase in buying volume, thereby causing the company's share price to rapidly rise in a manner that resembles a parabola.
Scalping
Scalping is a type of trading in which traders try to open and close positions in very short time periods in order to profit from small movements in stocks.