Active Investing - The act of investing or trading your own portfolio - making your own trade decisions and taking personal responsibility for the results. The opposite is passive investing, where you leave the trading and investing decisions to another party, such as a mutual fund, investment counselor, etc.

Advance/Decline Index - A calculation that represents the total difference between the number of advancing and declining security prices. This index is used to measure the "health" of the market as a whole. For example, you want to see more advancing issues than declining issues in a healthy market.  The trendline of the index helps to identify possible reversals in the market.

Alpha - A calculation representing the "excess" rate of return of a security or a portfolio vs. another model, such as the S & P 500. For example, a positive alpha of 1.0 means that the security or portfolio outperformed the comparison index or model by 1%.

Ask - Also known as the "offer price", the Ask is the price a market-maker or other seller is willing to accept for a security. It's often tied to the number of shares available at that price (see Ask Size). The opposite of the "Ask" is the "Bid" (see below).

Ask Size - The number of shares a market maker or other seller has agreed to sell at a quoted ask price.

At-The-Close Order - An order specifying that a trade is to be executed at (or as near as possible) to the close of the market.

At-The-Opening Order - An order specifying that a trade is to be executed at the opening of the market. If not executed, the trade is to be canceled.

Average Daily Trading Volume - ADTV - The average amount of individual securities traded in a day or over a specified amount of time. Trading activity relates to the liquidity of a security. Therefore, when average daily trading volume is high, the stock can be easily traded and has high liquidity.
Bid - An offer made by an investor, a trader or a dealer to buy a security. The bid is usually made up of both the price at which the buyer is willing to purchase the security and the quantity of shares desired to be purchased.

Bearish - The general feeling that a market or a specific security is about to go down in value. The opposite is "Bullish" (see below).

Beta - The measure correlation of a return to a specific security or a portfolio in comparison to the market (or a particular index) as a whole. For example, a beta of 2.0 on a security means that security is twice as volatile as the general market, and will move twice as much (and as fast) as the general market.

Breakout - A price movement through an identified level of support or resistance, usually on heavier volume than normal. Traders looking for breakouts will buy the underlying asset when the price breaks above a level of resistance (upside breakout) and sell (or short) when it breaks below support (downside breakout).

Bullish - The general feeling that a market or a specific security is about to go up in value. The opposite is "Bearish" (see above).

Cover - The act of completing a transaction in order to remove any obligations. For example, an investor short a stock may want to cover his position (by buying the stock) if the stock starts going back up.

Day Order - Any order to buy or sell a security that automatically expires if not executed on the same day the order is placed.

Day Trader - A trader who buys and sells the same security in the same day. The SEC has recently imposed strict guidelines on this style of trading. Too many day trades made consistently will label you a "pattern day trader", subject to those restrictions - such as minimum account size, etc.

Fundamental Analysis - A method of evaluating a security by attempting to measure its intrinsic value by examining the "fundamentals" of the company, such as sales, earnings, price to earnings ratio, price to sales ratio, etc. That "value" is then determined to be "undervalued" or "overvalued", based on other criteria, and a buy or sell decision is then made.

This method of security analysis is considered to be the opposite of Technical Analysis (see below).
Gap - A break between prices on a chart that occurs when the price of a stock makes a sharp move up or down with no trading occurring in between. Gaps can be created by many factors, such as unexpected news announcements on the company (usually overnight, causing a gap on the open), surprise earnings reports, a respected analyst's opinion change, etc.

Limit-On-Close Order - A type of limit order to buy or sell shares near the market close only if the price of the stock near the close is trading better than the limit price.

Limit-On-Open Order - A type of limit order to buy or sell shares at the market open if the stock's opening price meets the limit condition. This type of order is good only for the market open, and is immediately canceled if the limit condition fails.

Long/Short Equity - A hedging strategy that involves buying certain stocks long and selling others short.

Margin - Borrowed money that is used to purchase securities. This practice is referred to as "buying on margin."

Margin Call - Margin accounts have restrictions as to the minimum maintenance margin they must have. You may get a "margin call" from your broker to deposit additional money or securities when one or more of the securities you had bought (with borrowed money - on margin) decreased in value past a certain point. At that time, you would be forced either to deposit more money in the account or to sell off some of your account assets to bring your account back in compliance with the minimum margin requirements.

Market Order - In general, an order to buy or sell a security "at the market", i.e., at whatever price the security is currently being bid or asked for. As opposed to a "limit order", or any other order with additional restrictions attached.

Money Flow - A calculation of the average of the high, low, and closing prices, and multiplying by the daily volume. Money flow is positive or negative for the current day based on the comparison with the number for the previous day

Moving Average - MA - An indicator showing the average value of a security's price over a set time period. The main use of moving averages is to "smooth out" the overall direction of a trend by removing the day-to-day "noise." They are also used to measure momentum, define areas of possible support and resistance, and to identify possible trend reversals.

The two most commonly used moving averages are the "simple" and the "exponential." The simple moving average weights each day's price action of the measured time period equally, while the exponential moving average weights recent price action more heavily.

Opening Price - The price at which a security first trades upon the opening of an exchange on a given trading day.

Option - A financial instrument that represents a contract sold by one party (option writer) to another party (option holder). The contract gives the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date).

Oversold - In the stock market, a condition in which the price of a stock has fallen to a level below which its true value resides. This condition is usually a result of market overreaction or panic selling.

It also can be a situation where the stock has sold down to a lower bound of some sort of technical analysis measurement tool - like stochastics. This is generally interpreted as a sign that the price of the stock is becoming undervalued and may represent a buying opportunity for investors or traders.

The opposite of "Oversold" is "Overbought."

Penny Stock - A stock that trades at a relatively low price and market capitalization, usually outside of the major market exchanges. These types of stocks are generally considered to be highly speculative and extremely risky because of their lack of liquidity, large bid-ask spreads, small capitalization and limited following and disclosure. They will often trade over the counter through the OTCBB (Over The Counter Bulletin Board) and the Pink Sheets (see below), since they don't meet the standards and requirements for trading on one of the major exchanges.

The term "Penny Stock" may be misleading, since in some circles any stock trading less than $5 could be considered a "penny stock."

Pink Sheets - A daily publication compiled by the National Quotation Bureau with bid and ask prices of over-the-counter (OTC) stocks, including the market makers who trade them. Unlike companies on a major stock exchange, companies quoted on the pink sheets system do not need to meet minimum requirements or file with the SEC.

The pink sheets got their name because they were actually printed on pink paper. You can tell whether a company trades on the pink sheets because the stock symbol will end in ".PK".

Pre-Market - Before the market opens. Some investors and traders analyze pre-market conditions to try to forecast and prepare themselves for the potential market action that day.

Profit Taking - The action of selling stock, usually to cash in on a sudden, sharp rise or when the market or individual securities are considered to be overbought short term. This action usually pushes prices down temporarily. So when no other causes are immediately evident on a stock's sudden pullback, market pundits sometimes attribute the price reduction to simple "profit taking."

Program Trading - The act of buying and selling stock using computer-based rules and algorithms. It's estimated that as much as 30% of the daily trading volume on the New York Stock Exchange results from program trading.

Runner - A broker employee who delivers a customer market order to the broker's floor trader.
Most of the major exchanges are shifting from floor-based trading environments to electronic platforms. So the need for runners may soon become non-existent.

Scalping - A trading strategy that attempts to make many profits on small price changes. "Scalpers" will place anywhere from 10 to a couple hundred trades in a single day in the belief that small moves in stock price are easier to catch than large ones.

Short Interest - The total number of shares of a security that have been sold short by customers and securities firms.

Short interest is usually expressed as a percentage of the shares available for trading. For example, 3% short interest means that 3% of the outstanding shares are held short.

Short Selling - "Selling short" is the opposite of "going long." The short seller feels the current price of a stock is too high, and wants to profit from any price drop. While the seller does not own the stock, he/she can "borrow shares" from their broker and sell them, with the idea of buying back at a lower price, pocketing the difference.

While it's almost always possible to go long a stock, sometimes it's not possible to short it. The broker may not have any shares on hand, for example, or not be able (or willing) to find any on the open market at that price.

Short Squeeze - A situation in which a heavily-shorted stock suddenly finds lots of buyers. As the buyers start to outnumber the shorts, the short sellers are forced to cover and buy the stock back, further forcing the stock's price up in value. Thus the shorts are "squeezed" into continuous buying back of the stock.

Stop - A price at which a trader or investor wants an automatic order to take place. In a "buy stop" trade, the buyer's intent is to buy the stock when it reaches at least the specified buy stop price. For a "sell stop" or "stop loss" trade, the seller wants to sell a stock if it falls to the specified sell stop price or below.

Stop-Loss - An order placed with a broker to sell a security when it reaches a certain price. The intent is to limit an investor's loss on a security position. For example, setting a stop-loss order at 10% below the price you paid for the stock would limit your loss to 10%.

Swing Trading - Mostly used by individuals, a style of trading that attempts to capture gains in a stock within a short time frame, usually within one to four days (although some swing traders hold their stocks two to three weeks and more). In other words, swing trading occurs somewhere in between day trading and long term investing.

Technical Analysis - A method of evaluating securities and forecasting future price and volume action by analyzing what the stock is actually "doing" (and what it's done in the past) instead of trying to arrive at some "intrinsic value." Technical analysts use charts and other tools to identify patterns that can suggest future activity.

The opposite of Technical Analysis is considered to be Fundamental Analysis (see above).

Trend - The general direction of a market or of the price of an asset. Trends can be of various lengths, based on the type of trader or investor analyzing the trend - from short, to intermediate, to long term. If you can identify a trend, it can be highly profitable, because you will be able to trade with the trend. An old market saying is "The trend is your friend."

Once a trend is identified, a trendline can be drawn on the chart. That can then be used to immediately identify trend changes by noticing the price action breaking the trendline, either up or down.

VIX-CBOE Volatility Index - A measure of the market's expectation of 30-day volatility. VIX is the ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index. Often referred to as the "investor fear gauge", the VIX is a widely used measure of market risk.

VIX values greater than 30 are generally associated with a large amount of volatility, usually as a result of investor fear or uncertainty, while values below 20 generally correspond to less stressful (perhaps even complacent) times in the markets.


More information here. >>