stock price is quoted, the ask price is the lowest price anyone is
willing to sell the stock. The ask price is usually used in conjunction
with bid, as in bid and ask.
used to describe negative sentiment, or the belief that the market or stocks
will decline. The term is in contrast to bull or bullish,
and it is believed to derive from the notion that a bear attacks by pulling
things down, while a bull lifts them up.
term used to describe a stock's volatility, or the average amount it swings
stock price is quoted, the bid price is the highest price anyone
is willing to buy the stock. The bid price is usually used in conjunction
with ask, as in bid and ask.
bonds are promissory notes issued by corporations or governments.
Although the term is often used along with stocks (as in stocks and bonds),
a bond is not the same thing as stock.
between you and the stock exchange. A broker is usually needed to
place buy and sell orders on the exchange. For this service, the broker
gets a fee for each transaction.
used to describe positive sentiment, or the belief that the market or stocks
will rise. The term is in contrast to bear or bearish, and
it is believed to derive from the notion that a bull attacks by lifting
things up, while a bear attacks by pulling things down.
that gives you the right, but not the obligation, to buy someone's stock
for a specific price before a specific expiration date. Options are viewed
by some as a way to trade huge amounts of "stock" for pennies
to the dollar, but such transactions are extremely volatile and prone to
is an abbreviation for capitalization. The term is used to describe the
"value" of a company based on the total number of outstanding
shares. For instance, if a company has issued 10,000,000 shares, if the
stock is currently trading at $5, then the company's capitalization is $50,000,000.
describe a relatively large company, usually in billions of dollars. See
describe a relatively medium size company. See cap.
describe a relatively small size company. See cap.
technical term used to describe a trading range for a stock or an index.
For instance, if a stock tends to trade between $20 and $30, you might say
it trades in this $10 channel. Various systems use channels to determine
the probable support and resistance levels of a stock.
system based on a stock's channel. Usually, channeling involves buying a
stock when it is at the bottom of its channel, and selling it when it reaches
the top. See channel.
that shows the recent price and volume performance of a stock. Charts can
show performance as long as many years or as short as a few minutes during
that a broker takes when you make a trade. Some brokers charge a flat rate
per trade, others charge a percentage of the trade amount or a price per
that describes a phenomenon where the market goes contrary to what the majority
think will happen. Usually, a Contrarian point of view is to be bullish
when everyone else is bearish, or visa versa.
of closing out a short position. When one goes short, shares were borrowed
and sold to someone else. The short seller has to eventually buy the shares
to cover the loan. See short selling.
for Dumb Money Gap Down, which is a trading strategy taught in this course
that exploits the weakness of inexperienced traders dumping a stock immediately
after the opening bell.
chart pattern that shows the approximate channel where a stock is trading.
Donchian was a technician who developed a formula, computing the channel
line for each horizontal point of a chart, going back a certain number of
days to obtain the highest high and lowest low. See channel, channeling.
the Dow Jones Industrial Average, a group of 30 stocks that trade in major
exchanges that are intended to represent various industry groups. The Dow
is reorganized every few years to reflect changes in these industries.
where public stock is traded. The two major exchanges in the United States
are the New York Stock Exchange and the NASDAQ.
a portfolio of stocks, bonds and/or commodities that is managed by a person
or a brokerage. See mutual fund, hedge fund.
and analysis of company fundamentals such as cash flow, earnings,
management, etc. Fundamental analysis differs from technical analysis (the
study of stock charts). See also technical analysis.
of a company that measure its value, such as its earnings, earnings growth
and cash flow. Many investors consider fundamentals to determine
what the value of a stock ought to be.
made between traders that involve the future delivery of a commodity. Originally,
a futures contract was an agreement between farmers and commodity
buyers for delivery of corn, soy beans, cattle, etc., in which the price
was agreed upon in advance. Today, futures contracts include such things
as gold, oil, and even stock (stock futures are useful for determining where
the market will probably open).
fund, similar to a mutual fund, but with less restrictions (hedge funds
can sell short, for instance). Originally, hedge funds were created to protect
large investors from market volatility; today, hedge funds are mostly offered
to large investors who want to take more risk for larger gains. See also
somewhat unconscious, but usually unrealistic idea that someone is using
to measure success. In trading, a hidden standard might be the idea
that only trades greater than a 100% gain are a failure, which is unrealistic.
A hidden standard is harmful because it causes bad decisions to be made
and creates a false sense of failure.
of stocks that are measured as a composite value, such as the Dow Jones
Industrial Index. While not actually a stock, some indexes trade like one
through certain funds provided by various exchanges and brokers.
to within-the-same day. For instance, an intra-day stock chart shows what
a stock did during the day, while a daily chart may show what the stock
did all week or many weeks.
purest form, an investor provides capital to a corporation in exchange for
a share of the profits. Today, and for publicly traded stock, an investor
is only a trader, with the difference in the intended time horizon to hold
shares of stock. Generally, traders hold stock for a very short period of
time, while an investor holds for longer periods of time. Both investors
and traders are looking for gains on the shares they purchased.
Public Offering. When a company decides to let its stock trade publicly,
it offers a certain number of its shares to the public. The purpose of an
IPO is for the company to raise capital.
that describes someone who assumes he or she already knows a subject, causing
them to block out new ideas. Certain trading failures can be traced to a
"knows best" situation where the trader cannot learn from his
or her mistakes.
||A buy or
sell order for stock where the person specifies the price to buy or sell.
See also market order.
of short. One is said to be long when stock is purchased with the
expectation that it will rise in price, as opposed to selling short, which
is the expectation that the stock will fall in price.
a loan from your broker to buy more stock than your available cash can cover,
where the purchased shares act as collateral. Brokers are allowed to lend
up to 50% of the stock value, which essentially doubles one's buying power.
For instance, if a margin account had $5,000 cash, the account owner could
buy up to $10,000 worth of stock.
situation in which stock was purchased on margin (borrowed money from the
broker), but the stock value has fallen below an allowable minimum, in which
case the borrower now now has to come up with more money, or sell the stock.
||A buy or
sell order that executes at the current price a stock is trading. A market
buy order executes at the ask price, while a market sell order executes
at the bid price, whatever the prices may be. This differs from a limit
order where the price is specified. See also bid, ask, limit order.
fund is a portfolio of stocks, bonds and/or cash accounts managed by a brokerage
firm for which the public can invest. It is called a mutual fund since it
has many "shareholders" that mutually benefit (or lose). Mutual
funds have certain restrictions to ensure less risk, as opposed to hedge
funds that are inherently aggressive and high-risk.
for National Association of Securities Dealers Automated Quotations, the
NASDAQ was created in the 1970's as an alternate exchange to the NYSE (New
York Stock Exchange). Unlike the NYSE, the NASDAQ is purely electronic,
i.e., there is no physical trading floor that traders go to for transactions.
All trades are performed through a computerized system.
for New York Stock Exchange, which is the largest public exchange in the
issued by shareholders that grant the right to buy stock at an agreed upon
price, with an expiration date. A call option grants the buyer of the contract
the right, but not the obligation, to buy shares at a specific price for
a specific period of time. A put option grants the contract buyers to sell
the shares at a specific price for a specific period of time. Option contracts
can be traded, just like stocks, but usually for a small fraction of the
underlying stock value.
of stocks, bonds, or other commodities one currently owns. Usually, a portfolio
is simply stocks that one currently owns, although it can be a collection
of just about any commodity one has bought with expectation of appreciation.
has taken a long position, stock has been purchased with the expectation
that it will rise in value. When one takes a short position, borrowed stock
has been sold with the expectation that it will fall in value. In each case,
a position means that the trader is now set up to win, lose or draw when
the position is finally closed.
that gives you the right, but not the obligation, to sell a stock to someone
else at a specific price before a specific expiration date. A put option
is profitable when the underlying stock declines, hence, put options are
a method to profit on falling prices. Options are viewed by some as a way
to trade huge amounts of "stock" for pennies to the dollar, but
such transactions are extremely volatile and can result in quick losses.
on the last known price that a stock traded for. A full quote contains three
prices: the bid price, ask price, and the last traded price.
Quotes will sometimes include the size of the trade and the total volume
traded since the market opened.
for which there is no delay. For instance, real-time quotes are reports
on stock prices instantaneously conveyed the moment they occur.
for Standard and Poors-500, a composite of 500 stocks, from various exchanges,
that are chosen across different sectors that represent the broader market.
Like the Dow, the S&P-500 is intended to gauge the state of the market,
and many big investors and fund managers use it as such an indicator, or
as a basis to measure their own performance.
session is the time between the opening bell, or 9:30AM-EST, to the closing
bell, or 4:00PM-EST. It does not necessarily include pre-market or after-hours
the "mood" of the market. If the sentiment is negative, stocks
tend to sell off, and the sentiment is said to be bearish. If stocks are
rising, or there is buying in earnest, the sentiment is positive, or bullish.
of elimination for trading or investing. Since there are thousands of stocks
that trade on the major exchanges, one screens them to reduce the
list to a more manageable size.
in which a trader can profit on a stock's decline. Essentially, a trader
can borrow shares of a stock and sell them to someone else. Eventually,
the shares have to be paid back, and if the stock price falls, the trader
can by the shares for less than he sold them for, and pocket the difference.
One way to understand this is to imagine if you had a friend who let you
borrow his car for a year, and you could do whatever you wanted to with
the car as long as you gave it back in tact. You sell the car for $5,000
to someone else, and after a year, the car has depreciated by $1,000. Hence,
you buy the car back for $4,000, return the vehicle, and you have made $1,000
on the sale. Short selling is essentially a (bearish) bet that a stock price
will fall, and it is one way that traders make profits in a declining market.
who engages in a transaction in hopes that it will return a profit in the
(usually a software program) that delivers continues stock quotes. Hence,
the data streams in.
to sell when a stock falls to a certain price that the shareholder specifies
(or an order to buy that a short seller specifies). A stop order is sometimes
referred to as a stop loss order, because it is used to protect against
this referred to the ticker tape that printed stock trades on the floor
of the exchange. Today, when one refers to the "tape", that usually
means the trend of the market. "Don't fight the tape" means that
one should not try to buck the market's trend.
of stock charts and their pattern(s). Technical analysis is used to help
predict what might happen in the future. This differs from fundamental analysis
which is the study of company fundamentals.
or "name" of a stock. The term comes from the old days, when stock trades
were reported on ticker tape (a paper tape that punched wholes, showing
stock symbols and trading prices). Today, it means the stock's "ID" that
you use to make a trade. Ticker symbols of 3 or less characters belong to
the New York Stock Exchange or American Exchange, while tickers of 4 or
5 characters belong to the NASDAQ.
occurs when one person sells shares to another person, hence, it trades
hands. A trader is anyone who participates in this activity.
direction of a stock or the market. An uptrend is when a stock makes progressively
higher highs and higher lows; a downtrend is when a stock makes progressively
lower highs and lower lows.
a stock moves in price, from high to low, in either direction. Volatility
often refers to a single day, although it can refer to the distance of price
swings from day to day as well.
of shares a stock has traded. Some stocks trade millions, or tens of millions
or shares or more a day, while others might trade only a few thousand.
Wall Street was an area which people traded commodities. While there is
literally a Wall Street (road), today, it refers to the stock market in