Stock Trading.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A · · · · ·	Accumulation The first phase of a bull market. While most investors are discouraged with the market, and earnings are at their worst, some investors start buying shares. Or, an addition to a traders position. Adaptive Filter Continuously updating the weighting of past prices for smoothing or forecasting purposes. Advance/Decline Line Each days declining issues are subtracted from that days advancing issues. The difference is added to (subtracted from if negative) a running sum. Failure of this line to confirm a new high is a sign of weakness. Failure of this line to confirm a new low is a sign of strength. Alpha The premium an investment earns above a set standard. This is usually measured in terms of the Dow Industrials or the SP 500. How the stock performs independent of the market. American Option A put or call that can be exercised at any time prior to expiration. Most listed stock options, including those on European exchanges, are American-style options. Analysis  The examination and evaluation of the relevant information to select the best course of action from among various alternatives. Analyst  Generally an employee of a bank, brokerage, advisor, or mutual fund that studies companies and makes buy and sell recommendations, often specializing in a single sector or industry. An analyst may also be called a financial analyst or security analyst. Area Pattern When a stock or commodities upward or downward trend has stalled. The sideways movement in price which follows forms a pattern. Some of these patterns may have predictive value. Examples of these patterns are head & shoulders, triangles, pennants, flags, wedges, and broadening formations. Ascending Trend Channel The tops of an ascending price line develop along a line parallel to the trend line which slopes upward across the bottoms of the down waves. Ask (a.k.a. Offer) The lowest price that any investor or dealer has declared that he/she will sell a given security or commodity for.
B · · · · ·	Back Testing Optimizing a trading strategy on historical data and applying it to fresh data to see how well the strategy works. Bear Trap A false signal which indicates that the rising trend of a stock or index has reversed when in fact it has not. Bear Market A longer period of time when prices in the market are generally declining. Bear Spread An option strategy with maximum profit when the price of the underlying security declines. Maximum loss occurs if the underlying security rises in price. The strategy involves the purchase and simultaneous sale of options. Puts or calls can be used. A higher strike price is purchased and a lower strike price is sold. The options have the same expiration date. Bid  The highest price any buyer is willing to pay for a given security at a given time; also called bid price. Bounce A sudden rebound in the market (or an individual stock) typified by a strong upward move directly after a strong downward move. Bull   A person who believes that prices will rise Bull Market A market characterized by rising prices Buy To obtain ownership of a security or other asset in exchange for money or value.
C · · · · ·	Call  This is a contract that gives the holder the right to buy a certain quantity (usually 100 shares) of an underlying security from the writer of the option, at a specified price (the strike price) up to a specified date (the expiration date).  Close The price at which a security closed for trading on a given day or moment. Closeout To closeout a position is to buy or sell against it in order to end up with a neutral position. Convertible Security One security which is convertible into another. It is generally used with convertible preferred stock and convertible bonds. There is a specific rate at which the security can be converted. Cover To "cover" a position is to buy stock to closeout a short position.  Covered Writing an option when the writer also own the underlying security on a one to one ratio. A short call is covered if the underlying security is owned. A short put is covered if the underlying security is also short in the account. A short call is covered if a long call of the same underlying security is owned in the same account with the same or lower strike. A short put is covered if a long put of the same underlying security is owned in the same account with a strike price equal to or greater than the strike of the short put.
D · · · · ·	Day Order An order that remains live and executable until the end of the trading day, after which, it will be automatically canceled. Day Trading Buying or selling the same security within the same day. Day trading usually involves closing out all positions by the end of the day. Discount An option is trading at a discount if it is selling for less than its intrinsic value. If a future is trading for less than the price of the underlying security, it is considered to be trading at a discount. Something my wife is always looking for. Something that makes me very happy when she finds it. Diamonds Shares in a trust representing all 30 stocks in the Dow Jones Industrial Average. Traded on the American Stock Exchange. Symbol DIA. Dow Jones Industrial Average (DJIA) Measure of the performance of the collection of 30 "blue-chip", considered the leaders of the market. Double Bottom/ Double Top These are reversal patterns. It is a decline or advance twice to the same level (plus or minus 3%). It indicates support or resistance at that level. Drawdown Reduction in account equity from a trade or series of trade. It happens to all of us some of the time.
E · · · · ·	European Option An option that can only be exercised at the end of its life. Equivolume Chart Richard Arms created this type of chart. It measures the relationship between price and volume. Price is measured on the vertical axis and volume is measured on the horizontal axis. Exponential Moving Average See section titled Tutorials on Technical Indicators in the Technical Analysis Section. There is a detailed discussion on them. Expiration Date  The date on which an option, futures contract, rights or warrant expires, and becomes worthless if not exercised. It is also, the date on which an agreement is no longer in effect.
F · · · · ·	Flat Being flat means that a trader has no open positions. Futures A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange. Fundamental Analysis A method of valuating a stock that takes into account the sales, earnings, assets and other fundamental measures of the company's performance. Future Contract A standardized, exchange-traded agreement to buy or sell a particular type and grade of commodity for delivery at an agreed-upon place and time in the future. Futures contracts are transferable between parties. Futures Market A continuous auction market in which participants buy and sell contracts for delivery of specific commodities on a specified future date. Trading is carried on through open outcry and hand signals in a trading pit or ring.
G · · · · ·	Gamma It measures the amount the delta changes for a 1 point move in the underlying security. GLOBEX A global after-hours electronic trading system.  Good Till Canceled An order placed with a broker meaning that it is good until either filled or canceled. In practice, this order has to be re-confirmed twice annually.
H · · · · ·	High The 'high' is the highest execution price of a trade that day. Historical Data Past information about a company, used to help forecast the future price of a stock or index futures contract; for example, historical price and historical volume. HOLDRs Investment platforms designed to provide investors with a flexible, cost-effective way to diversify their investment in a particular industry through a single, exchange-listed security. Like symbol HHH, traded on AMEX, for 20 largest Internet stocks.
I · · · · ·	Index A benchmark against which financial or economic performance is measured, such as the Dow Jones Industrial, SP 100, SP 500, Nasdaq 100, Nasdaq Composite or the Consumer Price Index. Index Shares Index-based investment products that let you buy or sells shares of entire portfolios of stock in a single security. Such as Diamonds, Spyders, QQQQ, HHH. Index Option An option whose underlying security is an index. An example is the SP 500 option, which is based on the SP 500 index. Indicator Data which provide information about or predict the overall health of the economy or the financial markets; examples are inflation, interest rates, employment, volume, and insider trading. Inside Bid The highest price at which someone is willing to buy a security. Inside Offer The lowest price at which someone is willing to sell a security. Invest  Use money to make more money, usually with the understanding that risk is something to be avoided unless adequately compensated for.
K · · · · ·	Keynesian Economics Named for economist John Maynard Keynes, Keynesian Economics is an economic theory that advocates government intervention, or demand-side management of the economy, to achieve full employment and stable prices. This is accomplished by controlling the money supply and interest rates.
L · · · · ·	Last Trade The price at which the last trade was executed; after the market close, this is the closing price for the day. Level The increment a stock moves in (this differs for each stock). Easily visible as the price difference between underlying bids or offers. Limit Order An order to buy or sell at a specific price or better. Limit buy orders are executed at or below the specified order price. Limit sell orders are executed at or above the specified order price. Liquidity The ability of an asset to be converted into cash quickly and without any price discount. Long To be 'long' is to actually own a security, contract, or commodity. This is sometimes also called a long position and is the opposite of a short position. Long Squeeze A situation in which investors who hold long positions feel the need to sell into a falling market to cut their losses. This pressure to sell usually leads to a further decline in market prices. This situation is less common than the opposite, a short squeeze. Low The 'low' is the lowest execution price of a trade that day.
M · · · · ·	Margin Cash or guarantee deposited by a client wishing to trade Maturity Date for settlement Market Capitalization The market capitalization of a company is the total dollar value of all outstanding shares of that company at any given time. Computed as the number of outstanding shares times the current market price. This is a measure of the value that the stock market places on a company at any moment and is a measure of corporate size. Market Indicators Market indicators are various indices that give a value and usually a net daily change for a specific market. Market Maker A stock exchange member who is responsible for insuring a liquid market for a particular security by buying and selling for his own account when the public is not buying and selling. In exchange for this responsibility, the market maker has the benefit of knowing the bid and asks positions of all the traders lined up to buy or sell that security. Market Order An order that is executed as quickly as possible at the best price available. Momentum The strength behind an upward or downward movement in price. It is often heavily affected by trading volume. Moving Average (MA) Used in charts and technical analysis, the average of security, index or commodity prices constructed in a period as short as a few minutes or as long as several years and showing trends for the latest interval. As each new variable is included in calculating the average, the last variable of the series is deleted.
N · · · · ·	Nasdaq Nasdaq stands for the National Association of Securities Dealer Automated Quotations system for over-the-counter stock trading. Founded in 1971, the Nasdaq exchange is the world's first electronic stock market. There are over 5000 companies listed on the Nasdaq exchange. NASDAQ Composite Index A market-value weighted index of all common stocks listed on NASDAQ. Nasdaq-100 Index Tracking Stock The Nasdaq-100 Index Share of largest 100 Nasdaq stocks. This index share can be traded on the American Stock Exchange. The symbol is QQQQ. Net Change The amount and direction of a security's price change since its previous day's closing price.
O · · · · ·	Odd Lot A block of stock consisting of less than 100 shares. When odd lots trade, a premium is usually tacked on by the specialist or market maker. These receive the least favorable price and trade last. Or, my next door neighbors. Offer (a.k.a. Ask) This is the price at which someone is willing to sell a security. Open This is the price at which a security opened for trading on a given day (or some other interval). Option A contract bearing the right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified period of time. For stock options, the amount is usually 100 shares.  Out-of-the-Money A call option whose strike price is higher than the market price of the underlying security, or a put option whose strike price is lower than the market price of the underlying security.
P · · · · ·	Panic A sudden, widespread fear of economic or market collapse, leading to massive bank deposit withdrawals and/or falling stock prices Portfolio Insurance In order to protect a portfolio of stocks an investor may sell index futures or buy index put options for downside protection. Position A position refers to security holdings in an account or an obligation to repay or return a security holding to a lender (as in a short position). Price Earnings Ratio The ratio of the price of a stock to the earnings per share. Or total annual profit divided by the number of shares outstanding. Put An option contract that gives the holder the right to sell a certain quantity of an underlying security to the writer of the option, at a specified price (strike price) up to a specified date (expiration date). This is also called a put option. Put also refers to the act of exercising a put option. A put is the opposite of a call.
Q · · · · ·	Quantitative Analysis The process of determining the value of a security by examining its numerical, measurable characteristics.
R · · · · ·	Ratio Write Buying stock and selling calls against the stock. It can also be constructed by shorting stock and then selling puts against the short stock. Relative Strength A comparison of an individual stock's performance to that of a market index. Most times the SP 500 or the Dow Jones Industrial Index are used for comparison purposes. It is calculated by dividing the stock price by the index price. A rising line indicates that the stock is doing better than the market. A declining line indicates that the stock is not doing as well as the market. Resistance A price level at which you would expect selling to take place due to technical analysis. The resistance level of one currency is the support level for the other Resistance Level A price at which a particular stock or index may tend to stop its momentum when moving upward.
S · · · · ·	Secondary Market A market available to trade securities after their initial public offering. The New York Stock Exchange is an example of a secondary market. Sell Sell refers to the selling of a security. Sell Short The act of selling stock that you don't own in the hope that the price will go down and you can replace it with stock purchased at a lower price. In essence, the stock is borrowed from a brokerage firm for delivery to the buyer and must be bought back at a future date. If it is purchased at a lower price, the short-seller will make money. Short Position When a trader has "sold short" a stock and still holds the position. A short position reflects an obligation to return the stock to the lender by buying it sometime in the future. Short Squeeze A situation in which the price of the stock rises and investors who sold short rush to buy it to cover their short position and cut their losses. As the price of the stock increases, more short sellers feel compelled to cover their positions. More common than the opposite, long squeeze. Spider (SPDR)  These are shares of a security designed to track the value of the SP 500. Spiders trade on the American Stock Exchange under the symbol SPY. One SPDR unit is valued at approximately one-tenth of the value of the SP 500. Dividends are distributed quarterly, and are based on the accumulated stock dividends held in trust, less any expenses of the trust. These are also called SPDRs. Symbol SPY. Spike A large, quick, temporary rise or fall in price.  Speculation  The act of taking risks, especially with respect to trying to predict the future. Speculation can also refer to gambling, in the hopes of making quick profit.   Speculator  One who engages in speculation.  Spread The incremental difference (in price) between the bid and the offer for a particular stock. Each stock has its own spread which may fluctuate during the course of the trading day. Standard & Poor's 500 (SP 500) The SP500 is a market value weighted index of 500 blue-chip stocks, considered to be a benchmark of the overall stock market.   Standard & Poor's Depositary Receipt (SPDR) Securities representing ownership in a long-term unit investment trust designed to mirror the SP 500's performance. Traded on the AMEX. also called Spider.  Stock Index An Index of market prices of a particular group of stocks, such as the SP 500 and the NASDAQ Composite Index.  Support Level A price at which a particular stock may tend to stop its momentum when moving downward. This type of technical indicator exists for varying reasons and is specific to each individual stock or index. Swing A dramatic reversal in either the market or a trader's profit/loss. Swing also refers to mid-term trading as in swing trading. Symbol A code (usually 1 to 5 letters), used to designate a security for trading on an exchange. Synthetic Stock Using options, it is equivalent to the stock. A long call and a short put is a synthetic long stock. A long put and a short call is a synthetic short stock.
T · · · · ·	Technical Analysis A method of evaluating securities by relying on the assumption that market data, such as charts of price, volume, and open interest, can help predict market trends.  Technical Analyst Someone who invests based on technical analysis. also called technician.  The Market Term used to identify the current inside (best/highest) bid and (best/lowest) offer. Example: 127 3/8 x 127 7/16. Tick The minimum price fluctuation available in a marketplace, expressed in terms of points or fractions of a point of the price or rate. Also called Minimum Price Fluctuation. A movement by a market maker is called also called a "tick." Ticks Down The market maker moves away from current best market bid, thus lowering their desired buying price. Ticks Up The market maker has moved its bid closer the market bid, thus raising their desired buying price.
U · · · · ·	Uncovered Option This is sometimes referred to as a naked option. It is when a trader writes an option without owning the underlying security. It is a position with large risk. Underlying Bid The bid or bids that are listed in the Level II Nasdaq market but are not the best (highest) bid price.
V · · · · ·	Volume The number of shares, bonds or contracts traded during a given period, for a security or an entire exchange. This is also called trading volume. Volume Moving Average (Volume MA) This is an indicator used in charts and technical analysis. It refers to the average volume of a security, commodity or index constructed in a period as short as a few minutes or as long as several years and showing trends for the latest interval. As each new variable is included in calculating the average, the last variable of the series is deleted. Volatility A measurement of how much an underlying stock or index fluctuates over a period of time.
W · · · · ·	Warrant A long term security which is similar to an option. A stock warrant usually allows a trader to purchase one share of stock at a fixed price for a certain period of time. Writer The seller of an option who collects the premium payment from the buyer.
X · · · · ·	X or XD This is a symbol used by newspapers to signify that a stock is trading ex-dividend, or that a bond is trading without interest, or that a mutual fund recently paid a capital gain or dividend.
Y · · · · ·	Yield The annual rate of return on an investment, expressed as a percentage. Yield Curve Shows the relationship between yields at different maturity dates for a set of similar bonds, usually Treasuries, at a given point in time.
Z  · · · · ·	Zero-Sum Game A situation or interaction in which one participant's gains result only from another's equivalent losses.