Glossary

  • ABCD Breakout Pattern - When a stock reaches a high, then dips into a consolidation level for a retracement back to HOD, possibly making a new HOD.

  • ADX - The average directional index (ADX) is an indicator used in technical analysis as an objective value for the strength of a trend. ADX is non-directional, so it quantifies a trend's strength regardless of whether it is up or down. It is usually plotted in a chart window along with two lines known as the DMI (Directional Movement Indicators). Traders start by using the ADX to determine if there is a trend. A strong trend is occurring when the ADX is over 25; likewise, there is no trend when the ADX falls below 20. When the +DI line is greater than the -DI line, the bulls have the directional edge. However, when the -DI line is above the +DI line, the bears have the directional edge. As with all technical trends, traders use several indicators to confirm a movement. One option is to sell when -DI is up and the major trend is down. Another option is to buy when +DI is higher than -DI, but only when the larger trend is also moving up. In other words, it is possible to use the ADX as a way to time an entry on a market that is already confirmed to be trading in a particular direction.

  • BO - breakout or buyout depending on context. A breakout refers to a rapid and sustained upward movement in the price of a security. A buyout, on the other hand, is a corporate event in which part of the corporation or its assets are sold to another entity.

  • Channeling - A channeling stock is a stock in a trading range with prices bound by two parallel trend lines. The parallel trend lines connect the highs and lows, which form the area in which the stock is channeling. The upper trend line acts as resistance, and the lower trend line acts as support. Channeling stocks and trading ranges are the typical price action in stocks, as stocks tend to trend less than half of the time. A stock which breaks out of a channel or trading range is often affected by the duration of the channel, the width of the channel, and the strength of the breakout. Trading a channeling stock may mean buying support and selling resistance while waiting for a breakout to occur and a larger move to trade.

  • DCB - Dead Cat Bounce(DCB) is when a stock drops and bounces back up briefly without any fundamental reason.

  • DD - Due Diligence.

  • EOD - End of the day.

  • ER - Earnings Report.

  • EMA - The two most popular types of moving averages are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA). These moving averages can be used to identify the direction of the trend or define potential support and resistance level.

  • Float - All actively traded shares in the market right now. This does not include restricted stock or stock that is still in certificate/book form. For example, the shares outstanding is usually higher than the float because it include all issued shares that will include shares that have not yet been deposited at a brokerage and therefore are not freely available for trading or "floating" in the market.

  • FOMO - Fear of Missing Out (FOMO) is when a stock is increasing in price and investors jump in with the fear of missing out on gains to be had, without doing DD on the stock and possibly getting caught holding the bag at the end of the run.

  • HOD - High of the day.

  • IB - Interactive Brokers.

  • L2 - Level 2 is a subscription-based service that provides real-time access to the NASDAQ order book composed of price quotes from market makers registered in every NASDAQ-listed and OTC Bulletin Board securities. The Level 2 window shows the bid prices and sizes on the left side and ask prices and sizes on the right side.

  • LOD - Low of the day.

  • MACD - Moving average convergence divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals. Traders also watch for a move above or below the zero line because this signals the position of the short-term average relative to the long-term average. When the MACD is above zero, the short-term average is above the long-term average, which signals upward momentum.

  • MOMO/Momentum - 
    Momentum is the rate of acceleration of a security's price or volume. In technical analysis, momentum is considered an oscillator and is used to help identify trend lines. 

    In general, momentum refers to the force or speed of movement; it is usually defined as a rate. In the world of investments, momentum refers to the rate of change on price movements for a particular asset – that is, the speed at which the price is changing. 

    In trading once a momentum trader sees acceleration in a stock's price, earnings or revenues, the trader will often take a long or short position in the stock in the hope that its momentum will continue in either an upward or downward direction. This strategy relies on short-term movements in a stock's price rather than fundamental value.

  • NHOD - New high of the day.

  • OH - Optionshouse.

  • OTC/OTCBB/Pink Sheets - Over the counter(OTC) securities trade between individuals connected by telephone and computer networks with less oversight and regulations than ones listed on exchanges. In general, these securities are inherently riskier and subject to more manipulation than exchange-listed securities because of their smaller market capitalization.

  • Over Under - The price broke through resistance temporarily but then failed to find support and then falls back below resistance again.

  • PF - The Profit Factor(PF) of a given trade is the quotient of the entry value of the position divided by the market (or net if commission rates are included) gain realized on the trade: e.g. value of position on entry $4889.95 / realized profit $2688.10 = 1.819 (1.82) . Loosely interpreted it relates to the value of the dollars risked in relation to profit dollars, so if a trade has a PF of 2.0 then for every dollar risked in the trade then a 2.00 return is expected when the trade is closed.

  • PDT - Pattern day trader(PDT) is a term defined by FINRA to describe a stock market trader who executes 4 (or more) day trades in 5 business days in a margin account, provided the number of day trades are more than six percent of the customer's total trading activity for that same five-day period. Maintaining an account balance over $25,000 or opting for a cash account removes those restrictions.

  • PH - Power-hour. The final hour of the trading day is often referred to as "Power hour". This occurs because of the day-traders who like to settle their accounts before the days end.

  • PT - Price Target, The target in which we aim to take profits, or surpass in price. Usually a minimum win number.

  • RH - Robinhood.

  • RR - Risk /Reward.

  • RSI - The relative strength index (RSI) is a momentum indicator developed by noted technical analyst Welles Wilder, that compares the magnitude of recent gains and losses over a specified time period to measure speed and change of price movements of a security. It is primarily used to attempt to identify overbought or oversold conditions in the trading of an asset. Traditional interpretation and usage of the RSI is that RSI values of 70 or above indicate that a security is becoming overbought or overvalued, and therefore may be primed for a trend reversal or corrective pullback in price. On the other side of RSI values, an RSI reading of 30 or below is commonly interpreted as indicating an oversold or undervalued condition that may signal a trend change or corrective price reversal to the upside.

  • Shares Outstanding - Shares outstanding is a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company's officers and insiders.

  • Shorting/Short Selling/SS - The shares are sold and the proceeds are credited to your account. Sooner or later, you must "close" the short by buying back the same number of shares (called covering) and returning them to your broker. If the price drops, you can buy back the stock at the lower price and make a profit on the difference.

  • Short-Sale Restriction/Short-Sale Rule - A Securities and Exchange Commission (SEC) trading regulation that restricted short sales of stock from being placed on a downtick in the market price of the shares. Short sales could only be permitted on upticks (last trade higher than the one before) or zero-plus ticks (last trade is the same as previous, which was an uptick). The regulation was passed in 1938 to prevent selling shares short into a declining market; at the time market mechanisms and liquidity couldn't be guaranteed to prevent panic share declines or outright manipulation.

  • SL - Stop Loss, the number in which we are willing to risk to. If our price is hit, we will be stopped out and have taken a small loss. Always plan on risking small, it helps with positioning.

  • SMA - The simple moving average (SMA) is the most basic of the moving averages used for trading. The simple moving average formula is calculated by taking the average closing price of a stock over the last "x" periods.

  • Spread - The spread is the difference between the bid and the ask.

  • ST - Suretrader or Stocktwits depending on context.

  • TD - TDAmeritrade.

  • ToS - ThinkorSwim.

  • Trading Halt - A trading halt is a temporary suspension in the trading of a particular security on one or more exchanges, usually in anticipation of a news announcement or to correct an order imbalance. A trading halt may also be imposed for purely regulatory reasons. During a trading halt, open orders may be canceled and options may be exercised. A trading halt gives all investors equal opportunity to evaluate news and make buy, sell or hold decisions on that basis. The stock exchange can also halt a stock at any time if it suspects unusual activity related to a stock's price. The stock will typically resume trading after 30 minutes, once news from the issuing company has been disseminated.

  • Tutes - Institutions, hedge funds, or other money managers.

  • Volatility -

    1. Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security.

    2. A variable in option pricing formulas showing the extent to which the return of the underlying asset will fluctuate between now and the option's expiration. Volatility, as expressed as a percentage coefficient within option-pricing formulas, arises from daily trading activities. How volatility is measured will affect the value of the coefficient used.

    In other words, volatility refers to the amount of uncertainty or risk about the size of changes in a security's value. A higher volatility means that a security's value can potentially be spread out over a larger range of values. This means that the price of the security can change dramatically over a short time period in either direction. A lower volatility means that a security's value does not fluctuate dramatically, but changes in value at a steady pace over a period of time. One measure of the relative volatility of a particular stock to the market is its beta. A beta approximates the overall volatility of a security's returns against the returns of a relevant benchmark (usually the S&P 500 is used). For example, a stock with a beta value of 1.1 has historically moved 110% for every 100% move in the benchmark, based on price level. Conversely, a stock with a beta of .9 has historically moved 90% for every 100% move in the underlying index.

  • VWAP - The volume weighted average price (VWAP) is a trading benchmark used especially in pension plans. VWAP is calculated by adding up the dollars traded for every transaction (price multiplied by number of shares traded) and then dividing by the total shares traded for the day.

  • W%R - Williams %R, sometimes referred to as the Williams Percent Range, is a momentum indicator that measures overbought and oversold levels, comparable to a stochastic oscillator. The Williams %R is used to establish entry and exit points in the market. It compares the close of a stock to the high-low range over a period of time, typically 14 days. The Williams %R is a popular indicator because of its remarkable ability to signal a market reversal at least one to two periods in the future. Traders, specifically, depend upon the Williams %R to not only anticipate market reversals, but also to determine overbought and oversold market conditions.