Day Trading Terminology: The Top Terms Every Trader Should Know!

Day Trading Terminology: The Top Terms Every Trader Should Know!

A stop with limit order to buy becomes a limit order at the stop price when the futures contract trades (or is bid) at or above the stop price. A stop order to sell becomes a limit order at the stop price when the futures contract trades (or is offered) at or below the stop price. A buyer of an initial futures contract is said to have a long position and, conversely, a seller of an initial futures contract is said to have a short position. An order to buy or sell at the end of the trading session at a price within the closing range of prices.

Sometimes a change in place can lead to a rapid increase in sales. In business, as in nature, whenever you experience resistance or frustration in any part of your sales or marketing plan, be open to revisiting that area.

A mutual fund an investment vehicle whereby funds are pooled together with the goal of investing into securities like stocks and bonds among others. Pump and dump is an investment scheme where untrue statements are made public about a stock with the purpose of artificially increasing the stock price. Stock is a type of asset that gives you ownership in a company, allowing you a claim on the company’s assets and earnings. Market trend represents the general direction in a market or a security over a given period time, which can last from a couple days to many months or years.

In addition to allow you to trade on borrowed money, they also extend a line of credit to your account for trading. Brokers in the US will always give you 4x Leverage which which means if you deposit $100k, you will have $400k in total buying power with $300k Margin being borrowed money from the broker. There are no fees for trading on Margin during the day, but holding with margin overnight is subject to interest rate fees. A Contract-For-Difference account is illegal in the United States.

Stock traders may advise shareholders and help manage portfolios. Traders engage in buying and selling bonds, stocks, futures and shares in hedge funds. A stock trader also conducts extensive research and observation of how financial markets perform. Other duties of a stock trader include comparison of financial analysis to current and future regulation of his or her occupation.

Short selling is the act of selling an asset that you do not currently own, in the hope that it will decrease in value and you can close the trade for a profit. A share price – or a stock price – is the amount it would cost to buy one share in a company.

The Bid Price is the price traders are currently bidding a stock at. Traders can put an order to buy at 10.00, and they will have to wait for a seller to come sell them shares. Alternatively, they can simply buy from a seller who is sitting on the ask at 10.02. This means they have a “long” position and expect the stock to go up. These traders will profit when the stock moves up, or will lose money when the stock moves down.

A crossed market refers to a temporary situation where bid prices associated with a particular asset or security is higher than the asking price. High Frequency Trading (HFT) is when a trader or institution utilizes powerful computers to automate trading and execute large orders an very high speeds. 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 to trade and everyone holding shares of the company will see their shares increase in value.

Usually the discounted price will stand for a specified time frame, after which it is returned to normal. Reserves are the liquid assets set aside for future use by an individual, central bank or business.

Although Level 2 is shown with Bids on the Left and Ask on the Right, some software choose to show it as a long line going left to right, with the current price being in the middle. The Ask price is the price traders are currently asking to sell the stock at. Traders can put an order to sell at 10.02, and they will have to wait for a buyer to come buy shares from them. Alternatively, they can simply sell to a buyer who is sitting on the bid at 10.00.

• With millions of transactions per day, this results in a large amount of profits.
• This brings integrity to the marketplace because participants are not allowed to trade unless funds are available to cover the positions.
• Currency appreciation is when one currency in a forex pair increases in value relative to the other currency in the pair.
• An example would be the technology sector, which includes companies like Apple and Microsoft.
• The locations and facilities designated by a futures exchange where stocks of a commodity may be delivered in fulfillment of a futures contract, under procedures established by the exchange.

Stock trading activity, as we know it today, was originally a 17th-century Dutch investing technique. Yield is the income earned from an investment, most often in the form of interest or dividend payments. Yield is one of the ways in which investments can earn a trader money, with the other being the eventual closing of a position for profit. VIX is short for the Chicago Board Options Exchange Volatility Index. It is a measure used to track volatility on the S&P 500 index, and is the most well-known volatility index on the markets.

Traders are developing algorithms that rely on deep learning to make themselves more profitable. Ultrafast trading is a lucrative and highly competitive method of stock trading that uses special software that makes trades in milliseconds. A high-speed data feed transmits data such as price quotes and yields in real time and without delays, and are used in high-frequency trading.

Long definition

An order given for an options or futures trade specifying a certain maximum (or minimum) price, beyond which the order (buy or sell) is not to be executed. According to the Chicago Board of Trade rules, the final day when trading may occur in a given futures or options contract month. Futures contracts outstanding at the end of the last trading day must be settled by delivery of the underlying commodity or securities or by agreement for monetary settlement (in some cases by EFPs). A central marketplace with established rules and regulations where buyers and sellers meet to trade futures and options on futures contracts.

Remember, as part of our Day Trading Courses I will explain each of these terms & how I use them in my day-to-day career as a trader. Day trading terminology is something every trader will need to understand. We’re going to start with basic terms that most day traders will already be familiar with. Then we’ll jump into the more advanced terms that you may still have questions about.

It is a government agency set up to regulate markets and protect investors in the United States, as well as overseeing any mergers and acquisitions. In trading, risks are the ways in which an investment can end up losing you money. A rights issue is when a company offers its existing shareholders the chance to buy additional shares for a reduced price.

This means 95% of all price action will take place in between the top and bottom bands. Some traders look for stocks trading outside their Bollinger Bands as that indicates an extreme situation (5% status). The idea here is that these stocks are very extended and are due to reverse.

If they are bearish, they may sell their bullish positions or even take short positions. Research has uncovered that algorithmic trading was a major factor in causing a loss of liquidity in currency markets after the Swiss franc discontinued its Euro peg in 2015. Algorithmic trading also allows for faster and easier execution of orders, making it attractive for exchanges. In turn, this means that traders and investors can quickly book profits off small changes in price.

When an order to buy or sell has been completed, the trader has executed the transaction. If you put in an order to sell 100 shares, this means that all 100 shares have been sold. Capital tablet exchange screen skyscraper – created by Jcomp – Freepik.comA place in which different investments are traded.

As an incentive to companies, the NYSE pays a fee or rebate for providing said liquidity. In July 2016, the average SLP rebate was $0.0019 for NYSE- and NYSE MKT-listed securities on NYSE. With millions of transactions per day, this results in a large amount of profits. The SLP was introduced following the collapse of Lehman Brothers in 2008, when liquidity was a major concern for investors. Both the Dow and the Nasdaq, then, refer to an index, or an average of a bunch of numbers derived from the price movements of certain stocks.