GLOSSARY
Times
Premarket – Trading between 8:00 and 9:29 A.M.
The Open – Trading between 9:30 and 11:00 A.M.
Midday – Trading between 11:00 A.M. and 3:00 P.M.
The Close - Trading between 3:00 and 4:00 P.M.
After-hours – Trading between 4:01 and 8:00 P.M.
The Box
The Box – Where the action is. Your lifeline. Know everything going on in there.
The Bid – The price that people are willing to buy the stock at. On the left side of the box.
The Ask (or Offer) – The price that people are willing to sell the stock at. On the right side of the box.
Spread – The difference between the bid and the ask.
High bid – When a market maker, ECN, or NYSE go to the bid and indicates a higher price than the current bid. If
this is repeated, take serious note.
Low offer - When a market maker, ECN, or NYSE goes to the offer and indicates the lowest price. If this is repeated,
take serious note.
Inside market – Where the stock is trading. The highest bid and the lowest offer together make up the inside.
Hold the bid – When a market maker, ECN, or NYSE stays on the bid and continues to buy stock. Is a strong buy
signal.
Hold the offer – When a market maker, ECN, or NYSE stays on the offer and continues to sell stock. Is a strong sell
signal.
Market maker – The firms you’ve heard of. Have much more buying power than us. Examples are Goldman Sachs
(GSCO) and Morgan Stanley (MSCO).
ECN – Electronic Communications Network - What we use to trade. Examples are NSDQ, EDGX, BATS, and BTRD.
SDOT – Same as NYSE. Executes orders directly to the specialist.
Refreshing ECN– When an ECN continues to buy or sell stock even after the size that was initially indicated has
been exhausted.
The Man – The guy running a stock at that particular time. Can be an ECN or a market maker. IMPORTANT: Market
makers can also use ECN’s to trade.
Underlying – The bids and offers underneath the inside ones.
Volume – Total number of shares traded as of that point in the day.
Time and Sales (or Prints) – The list of trades that have been executed. Tells you the price the trade went off at and
the number of shares that were traded.
The Keys – Your keyboard.
Trading Terminology
Accumulation - The act of buying more shares of a security over a period of time to avoid forcing the market higher
with a single purchase.
Bidding- Placing a limit order to buy the stock on the bid
Block Trade - A large transaction that is negotiated off a trading floor or facility and then executed on an exchange’s
trading facility, as permitted under exchange rules. In general, 10,000 shares of stock (not including penny stocks) or
$200,000 worth of bonds would be considered a block trade. Block Trades are normally undertaken by institutional
investors.
Bounce – When a stock, or the market itself, starts to go up after a down move.
Breakout - A Breakout is a price movement that pierces the upper or lower boundaries of a trading range.
Chip Away – When down a good amount of money, this is what a trader needs to do to his/her negative balance.
Chirp – Something that was mentioned by CNBC, a website or the speaker guy.
Chop (or Chip) – A good trade. A profitable trade.
Choppy - A market or stock that moves violently back and forth in direction AND is difficult to determine in what
direction
Churning - Excessive trading of a discretionary account by a person with control over the account for the purpose of
generating commissions while disregarding the interests of the customer.
Confirmation - 1. Traders often look more than one signal to confirm their opinion on the price direction of a security.
Confirmation refers to a subsequent signal that validates or reinforces the traders opinion on where the issue is
heading
Correct price of a stock - The price we think a stock should trade at based upon previous trading experience.
Cover – To close out a short position.
Decrement —An order decreasing in size as people execute against the order
Double Down – When you are losing money in a position and decide to buy or sell twice as much as you had before.
Rarely works out well.
Drop—When the Best Bid disappears from the Box because its order to buy is complete
Explosion (Explosive Move) – When a stock or the futures, seemingly out of nowhere, go up a large amount
Fade—To take a position that is counter to the current trend of a stock. The position is established at the end of an
up or down leg.
Get Flat – To close out a long position.
“Go Time”—See Gman or Dr. B. Means a time to be aggressive.
High Bid – A high bid is a bid one penny above the best current market bid.
Hit (Hit the Bids) – To sell out of your position.
Hidden Order—An order placed through NSDQ that doesn’t appear on the Box.
Hunt Order—An order to buy or sell that automatically executes against a particular price.
Indicator – Futures are an example of an indicator. Is more probable a stock will move in the direction of its
respective indicator.
Intraday High & Low – The high and low for that day for a stock or for the futures
Intraday Support & Resistance – The support and resistance levels for that day for a stock or for the futures.
Lift/Get Up—When the Low Offer disappears from the Box because its order to sell is complete
Lighten Up – To close out part of your position. If you had two lots, after lightening up, you only have one lot left.
Liquidity - Describes the level to which a security can be traded without significantly affecting price. A liquid security
can undergo a high volume of trading without a significant change in price.
Lot – A batch of stock. For those just starting, a lot is usually 100 shares.
Low Offer – A low offer is an offer one penny bellow the best current market offer.
Market Order - An order to buy or sell a security at whatever price is obtainable at the time it is entered in the ring,
pit, or other trading platform.
Market Maker - A professional securities dealer or person with trading privileges on an exchange who has an
obligation to buy when there is an excess of sell orders and to sell when there is an excess of buy orders. By
maintaining an offering price sufficiently higher than their buying price, these firms are compensated for the risk
involved in allowing their inventory of securities to act as a buffer against temporary order imbalances.
Momentum stock – Stock that moves a lot; has a lot of activity.
Multiple lots – When you like what you see and increase the size of your position. You usually initiate a position with
one lot and increase it one lot at a time.
Offering - Placing and order to sell or get short on the offer
Opening Price - The price (or price range) recorded during the period designated by the exchange as the official
opening.
Opening - The period at the beginning of the trading session officially designated by the exchange during which all
transactions are considered made "at the opening."
Pairs trading - a strategy that consists of buying one stock in a given industry, and selling short another stock,
usually in the same industry. The strategy seeks to identify two companies with common characteristics (eg Coke and
Pepsi) whose prices are trading out of line with eachother - trading outside of their historical trading range. The
undervalued stock is bought while the over valued stock is sold short.
Pay the offer- to buy a stock by taking the offer as opposed to buying the stock on the bid
P&L – Profit & Loss. What a trader has made or lost in a given day.
“Piker”—generally used to refer to Specialists or other Market Makers who have no idea how to trade
Position – The side that you are in a stock. What you are holding; either short or long.
Price Improvement—An execution at a better price than the limit order that is placed
Printing below the Bid or above the Offer – Usually a panic sign! Things may get a lot worse.
Printing on the Bid or on the Offer – When a stock trades at the inside bid or inside offer.
Program – When a stock is being dictated by computer-run trade programs. Makes it very difficult to trade. However,
they are a fact of life.
Pullback – When a stock is strong (going up) and comes off (goes down) a little bit. The thought is that it will
probably go back up again at some point.
Range - The difference between the high and low price of a commodity, futures, or option contract during a given
period
Reading the Tape – Watching and interpreting the Time and Sales as it comes across. Some traders make good
money doing this.
Rip – A trade that turned out badly. An unprofitable trade.
Scalper - A speculator on or off the trading floor of an exchange who buys and sells rapidly, with small profits or
losses, holding his positions for only a short time during a trading session. Typically, a scalper will stand ready to buy
at a fraction below the last transaction price and to sell at a fraction above, e.g., to buy at the bid and sell at the offer
or ask price, with the intent of capturing the spread between the two, thus creating market liquidity.
Scalping – When a trader takes small profits and trades quickly in and out of a stock.
Selling off – When a stock or the futures are going down and the thought is that it will continue to do so.
Slippage - a failure to meet expectation with regard to the execution of an order. Slippage also describes the
difference between estimated transaction costs for a trade and the amount paid due to market conditions, poor
execution etc.
Short interest – The percentage of a stock’s float that is presently short.
Short Squeeze - When those that are short have to cover to avoid excessive losses. Leads to a seemingly
unexplainable up move.
Shot – Having a position for no rational reason. Have hurt many a trader on many different occasions.
Stop Loss Order – This is an order that becomes a market order when a particular price level is reached. A sell stop
is placed below the market, a buy stop is placed above the market.
Sweep - Sweep means to hit the bids or pay the offers. Sweep keys are used in replacement of market orders to limit
the price at which a trader’s order can be filled. A sweep key sends out an order to be filled immediately in the
market, but only at a designated amount away from the current bid or offer; for example, pushing the buy sweep key
will buy stock up to 3 cents away from the current bid until your entire order is filled. If your entire order is not filled,
the remaining amount will sit on the bid 3 cents away where you started buying (the 3 cent sweep amount can be
adjusted). There will be no pop up box after pushing the key to warn you before the execution of the order; similar to
a market order.
Swing Trading - Trading in a time frame of one to four days. Swing Traders attempt to exploit short-term price
momentum.
Take the Offer – To buy a stock.
Tank – When a stock or the futures are collapsing (going down with speed).
Tick - The minimum fluctuation/movement (up or down) in the price of a security.
Ticket – A lot of 1000 shares. 50,000 shares traded = 50 tickets.
Ticket Average – Your P&L divided by your number of tickets.
Tier size – Same as a lot. The amount of shares that each order is for.
Trend – The pattern a stock is following. It is best NOT to fight the trend.
Unusual Hold—Either a bid or offer that buys/sells an unusually large amount of shares at the same price
Volatility—The amount of price movement in a given stock
Chart Terms / Technical Analysis
Bear Trap - A Bear Trap is a major downside breakout rapidly followed by an upside price reversal.
Channel - The parallel trend lines surrounding a price trend on a chart.
Double Top - A technical analysis term for a chart pattern displaying two prominent peaks, where price has risen to
the same price level twice. This price level is considered to constitute resistance.
Engulfing Pattern - A reversal pattern on a Japanese Candlestick chart that can be bearish or bullish depending
upon whether it is in an uptrend or downtrend. An Engulfing Pattern is a two candlestick pattern, where the first day is
characterized by a small body, followed by a day whose body completely engulfs the previous day's real body (it
need
not engulf the shadows/wick). The second day's real body (candle) should be the opposite color of the first real body.
The bearish engulfing pattern signals the end of an uptrend and the bullish engulfing pattern suggests a downtrend
reversal.
Flag - A popular and reliable continuation chart pattern. The flag resembles a parallelogram, or rectangle that slopes
against the prevailing trend. The flag represents a minor consolidation or pause in a price trend that takes place
before the prior trend resumes.
Fibonacci Numbers - A number sequence discovered by a thirteenth century Italian mathematician Leonardo
Fibonacci (ca 1170-1250), who introduced Arabic numbers to Europe, in which the sum of any two consecutive
numbers equals the next highest number – i.e., following this sequence: 1, 1, 2, 3, 5, 8, 13, 21, 34, 55 and so on. The
ratio of any number to its next highest number approaches 0.618 after the first four numbers.
Gap - When the high of the day is below the low of the previous day or when the low of the day is above the high of
the previous day, leaving a break between prices.
Hammer - On a Japanese Candlestick chart, the hammer is known as a reversal candlestick. Hammer candlesticks
occur when a security moves significantly lower after the open, but rebounds to close well above the intraday low. In
a perfect hammer, this tail is twice the length of the body and the candlestick will have no upper shadow or wick. The
smaller the body and the longer the tail, the more significant the hammer is as a bullish indicator.
Head and Shoulders - a chart formation that resembles a human head and shoulders and is generally considered to
be predictive of a price reversal. A head and shoulders top (which is considered predictive of a price decline) consists
of a high price, a decline to a support level, a rally to a higher price than the previous high price, a second decline to
the support level, and a weaker rally to about the level of the first high price.
Indicator - A value that is based on a securities price and/or volume and used to forecast future price movements.
Indicators are divided into two groups: trend following/lagging and momentum/leading. Lagging indicators reflect what
prices are doing now, or in the recent past, and are useful in a trending market.
Momentum - In technical analysis, the relative change in price over a specific time interval.
Moving Average - one of the most useful and objective tools available to the technical analyst. Moving averages
show the average value of a security's price over a certain number of time periods. The most commonly used moving
averages are the 20, 30, 50, 100, and 200 day averages. Moving averages smooth a data series and make it easier
to spot trends and smooth out price and volume fluctuations or noise that can confuse interpretation. An exponentially
smoothed moving average (EMA) gives greater weight to the more recent data, in an attempt to reduce the lag. The
shorter the time span, the more sensitive the moving average will be to price changes.
Overbought - A technical opinion that the market price has risen too steeply and too fast in relation to underlying
fundamental factors.
Oversold - A technical opinion that the market price has declined too steeply and too fast in relation to underlying
fundamental factors.
Pennant - A continuation chart pattern formed when there is a large movement in a security, followed by a
consolidation period with converging trendlines, which forms the pennant. The pennant is typically followed by a
resumption of the initial trend movement
Resistance - a price area where new selling will emerge to dampen a continued rise.
Retracement – A reversal with a major price trend
Reversal - A change of direction in prices.
Support - a price area where new buying is likely to come in and stem any decline.
Technical Analysis - An approach to forecasting prices that examines patterns of price change, rates of change, and
changes in volume of trading and open interest, without regard to underlying fundamental market factors. Technical
analysis can work consistently only if the theory that price movements are a Random Walk is incorrect.
Trend - The general direction, either upward or downward, in which prices has been moving.
Trendline - In charting, a line drawn across the bottom or top of a price chart indicating the direction or trend of price
movement. If up, the trendline is called bullish; if down, it is called bearish.
Triple Top - a reversal pattern of an uptrend. Similar to the head and shoulders top, the pattern features three
prominent peaks, however in the case of the Triple Top all three peaks are at roughly the same price level.
Financial Terms
Arbitrage - the simultaneous purchase of a security in one market and the sale of it or a derivative product in another
market to profit from price differentials between the two markets.
Analyst - A financial professional employed by a bank, brokerage, advisor, or mutual fund with expertise in
evaluating financial instruments, who performs investment research and makes buy and sell recommendations to
institutional and retail investors.
AMEX - The American Stock Exchange (AMEX) is the third largest stock exchange in the United States and handles
approximately 10% of all domestic securities trading. Located in New York, the exchange traces its origins to when
brokers began meeting on the curb outside the NYSE in order to trade stocks that failed to meet the Big Board’s
stringent listing requirements. Though AMEX now has its own trading floor it is sometimes referred to as the Curb
Exchange. Most trading on AMEX is in small-cap stocks and derivatives.
Basis point - The measurement of a change in the yield of a debt security. One basis point equals 1/100 of one
percent.
Bear - One who expects a decline in prices. The opposite of a bull.
Bear market rally - A temporary rise in prices during a bear market.
Bear Market - A market in which prices generally are declining over a period of months or years
Blue Chip Stock - Refers to the stock of a large, public company that is considered to be financially sound and
having stable fundamentals, including profitability and earnings
Bonds - A bond is a debt security, similar to an IOU. When you purchase a bond, you are lending money to a
government, municipality, corporation, federal agency, or other entity known as the issuer. In return for the loan, the
issuer promises to pay you a specified rate of interest during the life of the bond and to repay the face value of the
bond (the principal) when it "matures," or comes due.
Bond Yield - The return received when bond is purchased and held to maturity. The yield is calculated by dividing
the interest rate by the purchase price of the bond.
Bull Bear Ratio - The Investors Intelligence Sentiment Survey (IIS) was launched in January 1963 by A.W. Cohen.
The Bull/Bear Ratio summarizes the content of the IIS survey each week. The Bull/Bear Ratio is based on a weekly
poll of investment advisors as to whether they are bullish, bearish, or neutral on the stock market. The Ratio shows
the relationship between the bullish and bearish advisors. It is interpreted as a contrary indicator, meaning that if it
reflects extreme bullishness, the market is probably at a top and vice versa. High readings of the Bull/Bear Ratio are
bearish and low readings are bullish.
Bull Market - A market in which prices generally are rising faster than their historical average over a period of months
or years.
Call - (1) An option contract giving the buyer the right but not the obligation to purchase a commodity or other asset
or to enter into a long futures position; (2) a period at the opening and the close of some futures markets in which the
price for each futures contract is established by auction; or (3) the requirement that a financial instrument be returned
to the issuer prior to maturity, with principal and accrued interest paid off upon return.
Diamonds (DIA) - A security that approximates the performance of the DJIA's 30 stocks. Diamonds trade like stocks
on the Amex.
Dollar Cost Averaging - Dollar cost averaging refers to the practice of purchasing securities at predetermined
intervals and at set amounts, protecting the investor against dramatic movements in price.
Euro - The official currency of most members of the European Union.
Exercise - To elect to buy or sell, taking advantage of the right (but not the obligation) conferred to the owner of an
option contract.
Fed Funds Rate - The Fed Funds Rate is the primary tool that the Federal Open Market Committee uses to influence
interest rates and the economy. Changes in the Fed Funds rate have far-reaching effects by influencing the
borrowing cost of banks in the overnight lending market, and subsequently the returns offered on bank deposit
products such as certificates of deposit, savings accounts, and money market accounts. Changes in the Fed Funds
rate and the Discount Rate also dictate changes in the Wall Street Journal Prime Rate, which is of interest to
borrowers. The interest rate at which banks and other depository institutions lend money to each other, usually on an
overnight basis. The law requires banks to keep a certain percentage of their customer's money on reserve, where
the banks earn no interest on it. Consequently, banks try to stay as close to the reserve limit as possible without
going under it, lending money back and forth to maintain the proper level. Like the federal discount rate, the federal
funds rate is used to control the supply of available funds and hence, inflation and other interest rates. Raising the
rate makes it more expensive to borrow.
Federal Reserve Board - The governing body of the Federal Reserve System. The seven members of the Board of
Governors are appointed by the president, subject to Senate confirmation, and serve 14-year terms. The board sets
Fed policy regarding the discount rate and reserve requirements. The 7-member Board of Governors that oversees
Federal Reserve Banks, establishes monetary policy (interest rates, credit, etc.), and monitors the economic health of
the country.
Federal Reserve Policy - The Federal Reserve is the U.S. central bank, and it regulates the nation's financial
institutions and implements economic and monetary policies that aim to keep the economy operating at it's best. The
Fed controls the US economy through it's regulation of interest rates. It's policies influence commodity prices, the
value of the US dollar in foreign exchange markets, government and corporate bond yields, mortgage rates, real
estate prices and stock market valuations.
Forex - Refers to the OTC market for foreign exchange transactions.
Front Running - taking a position in a security based on non-public information such as an impending transaction by
another person in the same or related security.
Fundamental Analysis - Study of basic, underlying factors that will affect the supply and demand of the security
being traded.
Hedging - Taking a position in a futures market opposite to a position held in the cash market to minimize the risk of
financial loss from an adverse price change; or a purchase or sale of futures as a temporary substitute for a cash
transaction that will occur later. One can hedge either a long cash market position (e.g., one owns the cash
commodity) or a short cash market position (e.g., one plans on buying the cash commodity in the future)
Inflation - the rate at which the general level of prices for goods and services in an economy is rising.
In-The-Money- A term used to describe an option contract that has a positive value if exercised.
Inverted Yield Curve - The yield curve is a graph showing the range of interest rates available to investors. An
inverted yield curve shows long-term rates falling below short term rates.
IPO – Initial Public Offering – the first sale of common stock by a private company to the public. IPOs are a means for
a company to raise capital.
LBO—When a publicly traded company is taken private
Manipulation- Any planned operation, transaction, or practice that causes or maintains an artificial price.
Margin Call - (1) A request from a brokerage firm to a customer to bring margin deposits up to initial levels; (2) a
request by the clearing organization to a clearing member to make a deposit of original margin, or a daily or intra-day
variation margin payment because of adverse price movement, based on positions carried by the clearing member.
Margin - The amount of money or collateral deposited by a customer with his broker, by a broker with a clearing
member, or by a clearing member with a clearing organization. The margin is not partial payment on a purchase. (1)
Initial margin is the amount of margin required by the broker when a futures position is opened; (2) Maintenance
margin is an amount that must be maintained on deposit at all times. If the equity in a customer's account drops to or
below the level of maintenance margin because of adverse price movement, the broker must issue a margin call to
restore the customer's equity to the initial level.
Market Cap—The value of a company as defined by number of shares outstanding times the price per share
NASDAQ - National Association of Securities Dealers Automated Quotation System. Unlike the New York Stock
Exchange where trades take place on an exchange, Nasdaq is an electronic stock market that uses a computerized
system to provide brokers and dealers with price quotes. The Nasdaq Stock Market comprises two separate markets:
(1) the Nasdaq National Market that trades the largest and most active securities, and (2) The Nasdaq SmallCap
Market that lists a smaller number of emerging growth companies.
NASDAQ – 100 index - "modified capitalization-weighted" index designed to track the performance of a market
consisting of the 100 largest and most actively traded nonfinancial domestic and international securities listed on The
Nasdaq Stock Market, based on market capitalization. To be included in the Index, a stock must have a minimum
average daily trading volume of 100,000 shares.
OPEC - The Organization of Petroleum Exporting Countries.
Option - A contract that gives the buyer the right, but not the obligation, to buy or sell a specified quantity of a
commodity or other instrument at a specific price within a specified period of time, regardless of the market price of
that instrument.
Out-Of-The-Money - A term used to describe an option that has no intrinsic value
Overnight Trade - A trade which is not liquidated during the same trading session during which it was established
Position Trader - A securities trader who either buys or sells securities and holds them for an extended period of
time, as distinguished from a day trader, who will normally open and close a position within a single trading session.
Premium – The amount in excess of a stock’s price. A firm usually gets taken over at a premium to its traded price.
Qualified Investor - Qualified Investors are individuals, trust accounts or institutional funds with at least $5 million in
assets to invest with.
REIT - Real Estate Investment Trusts, or REITs are companies that hold portfolios of properties, or real estate related
assets. There are about 200 publicly traded REITs.
SEC - The Federal regulatory agency established in 1934 to administer Federal securities laws. Banks and investors
had lost great sums of money in the crash of 1929, and the depression that followed caused people to loose
confidence in the markets. To restore investor confidence, Congress passed the Securities Act of 1933 and the
Securities Exchange Act of 1934.
Sector—An aspect of the economy that has companies in related businesses
Secondary – When a company that is already trading issues another batch of stock. Find out who underwrote it and
at what price.
Security - Generally, a transferable instrument representing an ownership interest in a corporation (equity security or
stock) or the debt of a corporation, government or organization. Other forms of debt such as mortgages can be
converted into securities. Certain derivatives on securities (e.g., options on equity securities) are also considered
securities for the purposes of the securities laws.
Stagflation - the combination of slow economic growth and high unemployment (stagnation) along with rising prices
(inflation).
Stock - An instrument that signifies ownership (called equity) in a corporation and represents a claim on part of the
corporation's assets and earnings.
Stock Splits - When a company declares a stock split, the price of the stock will decrease, but the number of shares
will increase proportionately. For example, if you own 100 shares of a company that trades at $100 a share and it
declares a two for one stock split, you will own a total of 200 shares at $50 a share after the split. A stock split has no
effect on the value of what shareholders own. If the company pays a dividend, your dividends paid per share will also
fall proportionately.
Trade Deficit- Refers to a country's excess of imports over exports.
Takeover—When a publicly traded company is purchased via a LBO or by another public company
Underwriter—A financial firm that brings private companies public by assisting in the initial offering of shares to the
public
Weak Hands – Short term speculators
Yield Curve - The yield curve is a graph showing the range of interest rates available to investors. It is a graphic
representation of market yield for a fixed income security plotted against the maturity of the security. The yield curve
is positive when long-term rates are higher than short-term rates. Under normal circumstances, the longer the
maturity, the higher the yield. This is because an investor expects a premium for taking on more risk by holding the
bond for longer.
