50 Stock Trading Terms You Need to Know
Trading can seem daunting to anyone just starting out, and all the terminology you have to learn makes it worse. Learning some key terms can help a beginner trader start to understand the basics of trading, and prepare them for more in-depth trading education. Below is a list of 50 terms that all traders should know. This is an amazing way to start your trading education journey. This guide to trading lingo is especially helpful for T3 Live subscribers — it will prepare you to better follow our instructors and to start profiting quickly. Arbitrage Arbitrage is the practice of buying and selling an asset in two different venues simultaneously to profit off a difference in the price. There is typically no holding period because both transactions happen at the same time. Ask The ask price is the price a seller is willing to accept for their stock. An ask quote will include the price and the number of share available to be sold at that price. Bear Market A bear market is a market that has declined 20% from the highs. The phrase “bear market” sometimes also refers to an individual security or commodity that has declined by at least 20%. More on Bear Markets Bid In comparison to the ask price, the bid price is the amount a buyer is willing to pay for a stock. Blue Chip Stocks “Blue chip stocks” are big name companies that are well-established and with a large market value. The name comes from blue poker chips, which are the most valuable chips. Blue chip companies are usually valued at $10 billion or more and can be found in a major market index, like the S&P 500 or Nasdaq 100. Bull Market A bull market is the opposite of a bear market. In a bull market, stocks are 20% off the lows. More on Bull Markets Candlesticks A candlestick looks like the wax part of a candle, and marks the opening or closing price of the stock and will be either black or red (if the stock closed lower) or white or green (if the stock closed higher). The thinner parts of a candlestick on the top and bottom, which look like the wicks on a candle, mark the highest and lowest prices of the day. T3 Live Director of Education Sami Abusaad explains the candlestick chart in the Strategic Day Trader Ultimate Guide Common Stock Common stock is the type of stock that most people invest in; it represents a share of ownership in a corporation and affords the investor the right to vote on the company’s board of directors and policies. Common stock owners also have a claim on profits, although they are at the bottom of the priority ladder if the company goes bankrupt (creditors and preferred shareholders receive their shares first). Cover Covering is the closing (or reducing of a short position). When a short position is initiated, the trader is selling shares they don’t actually own. Covering is when some or all of those shares are bought back. Day Trade A trade is one where thee position is bought and sold within the span of a single trading day. Day traders capitalize on short-term market moves in order to make a profit. T3 Live’s Strategic Day Trader subscription will help you understand day trading and guide you into making the best trades. Dividend When a company makes a profit, they can distribute portions of their earnings to stockholder through dividends. Dividends may come in the form of cash, additional shares of stock, or other property. Not all stocks pay dividends. Earnings Report Each quarter, public companies publish an earnings report detailing their most recent performance. The report includes an update of the company’s profit and loss statement, assets, liabilities, equity and cash flows. Shareholders can learn more about the company’s financial health and change their investment accordingly. The value of the company’s stock will fluctuate wildly on the day the report is released. Equity There are multiple financial definitions for “equity,” although the most common refers to the amount of assets that shareholders can claim if the company liquidated or paid off their debts. This is also called stockholders’ equity. In comparison, owner’s equity refers to the money that remains when the company has repaid its creditors after liquidating its assets. In some cases, equity is simply used to refer to stocks, particularly common stocks. ETFs ETF stands for exchange-traded fund, a grouping of multiple securities that can be traded on major exchanges like a stock. ETFs are divided into shares, which give the shareholders proportional shares of the total assets, although they do not own the underlying assets (which are owned by the fund provider). ETFs are designed to track the value of an asset, although they trade at prices determined by the market. ETFs that track a stock index will pay out lump dividend payments to investors for the stocks that make up the index. Fill When an order is placed to buy or sell a stock, the fulfillment of that order is called a fill. There are multiple ways of filling an order, depending on which type it is. If a market order is placed, the investor is telling the broker to either buy or sell that stock at the best available current price. If a limit order is placed, the order will be filled once the stock reaches a specific price; if that price is not met during the predetermined period of time, the order will not be filled. A stop order, or stop-loss order, is a limit order that becomes a market order once the set price is achieved. The order will be filled at the next available market price. Forex Forex is simply a nickname for the foreign exchange market. The market includes multiple countries and exchanges currencies rather than assets. Forex is the largest exchange market in the world, with trading occurring 24 hours a day, 5 days a week.
Continue Reading -->One of My Favorite Buy Setups
The Strategic Day Trader Lesson Series is designed to give you a comprehensive start-to-finish understanding of technical analysis. It is suitable for both short- and long-term traders, from traders who can follow the market for the entire day to traders who can only dedicate as little as 30 minutes per day. In this video, Sami explains: When you should wait to play a bleed breakout Why a gap fill is his favorite location What he’s learned about stocks that gap to resistance Why you shouldn’t play a stock that is downtrending long How a W pattern is actually a failure pattern What narrow range bars indicate
Continue Reading -->Options in Play – Crushed/Bounce Developing Pattern
A pattern has been playing out over and over again on stocks that have been crushed on news. It’s impacting my exits, entrances and how I approach new setups so it’s worth mentioning here.
Continue Reading -->Options in Play – Option Info I Use on a Daily Basis
There is a ton of information and statistics and indicators when it comes to options trading and it can be tough figuring out what is important and what isn’t. This video will show you what I use on a day to day basis for my trades.
Continue Reading -->Actionable Swing Trade Ideas for Nov 25-29 | Weekly Market Update
Recent headlines and earnings reports have had a major impact on the market as a whole. Find out what you can look forward to this week and how to take advantage of pre-holiday market moves. In this video, Sami explains: Why QQQ and SPY are so similar How political headlines affected QQQ How an hourly chart influences his swing decisions Why ENDP reminds him of TEVA What has happened after SDLB’s and DPLO’s big gap downs How to recognize a Transition A on a chart
Continue Reading -->Options in Play – Earnings on the Radar Week of 11/29
Gobble gobble… it’s Thanksgiving week and a ton of traders take vacation but the first few days actually feature a busy lineup of earnings. Big reports in Retail and Tech will be in focus.
Continue Reading -->Options in Play – Why I Don’t Like to Sell Worthless Options
When options get hammered and are trading at only 1-5% of the original net debit, it becomes a risk to reward game. Most of the time, I prefer to hold to see if the contract recovers value and view the strategy as a lotto.
Continue Reading -->Options in Play – Hedge Time
Eventually, volatility always returns – it’s just a matter of time. Whether or not today is the sign that we are entering a new period of higher volatility remains to be seen, but today’s action is a reminder of why hedges matter.
Continue Reading -->Strategic Day Trader Lesson 32: Variations on the T3 Buy Setup – Part 1
The Strategic Day Trader Lesson Series is designed to give you a comprehensive start-to-finish understanding of technical analysis. It is suitable for both short- and long-term traders, from traders who can follow the market for the entire day to traders who can only dedicate as little as 30 minutes per day. In this video, Sami explains: What he calls a Vanilla buy setup Why you need multiple time frames to find a buy setup When to enter before the end of a trend His favorite buy setup pattern Why you shouldn’t take the first entry on a stock with trapped traders How the Bleed Pattern applies to every time frame
Continue Reading -->Options in Play – Two Week Time Frame Bullish Swings
In a trending tape, 2 weeks will be a sweet spot for swing trades. A lot of what has been working recently is mid length expiration contracts on bullish breakouts, and if the market keeps grinding, that’s what we will keep screening for.
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