Trading Terminology
To begin your day trading career, there are a few words that you should be familiar with. These terms are used throughout the day trading world, and a firm understanding of them will help you read fundamental analysis reports and technical charts, as well as study the financial markets, economics, and day trading. Although this will serve as the extreme basics of a vocabulary list, your knowledge of the terms associated with the markets and day trading will grow naturally as you gain experience in day trading.
ECONOMIC AND BANKING TERMS
Advancing Market |
An average upswing in market prices across an entire sector |
Analyst |
An investment professional who makes comments and predictions about a company, industry sector, or the entire economy |
Appreciation |
The growth of the value of a security over time |
Auction Market |
Trading securities through brokers and dealers to get the best prices for buyers and sellers |
Balance Sheet |
The financial accounting of a company's assets, debts, and equity. Is frequently used as one of the tools to assess a company's financial health |
Bear Market |
A steady, long-term downward trend in a market or sector |
Beta |
A mathematical measurement of risk in relation to the entire overall market with a beta of one being equal to the market's risk. For example, a stock might have a beta of 1.5 would have 150% the risk of the overall market, and a stock with 0.25 beta would have 25% the risk of the overall market |
Bull Market |
A long-term upward trend in a market or sector |
Central Bank |
A government established bank that issues currency, holds reserves of other banks, and administers policy |
Economic Report |
Statements issued through government entities and research departments to make comments on the economic health of a business sector, geographic region, or entire country |
Fundamental Analysis |
The use of a company's financial statements to predict future cash flows and stock price |
Technical Analysis |
The study of charts to predict the future price of a security or overall market |
Market Indicator |
Factors that are used to accurately predict the direction of markets |
After you learn the economic and banking terms, the next terms to learn are the ones directly related to day trading:
DAY TRADING TERMS
Going Long |
A term used to state you have a trade that is set up to make money when the security or sector is moving upward |
Margin |
A form of credit in a brokerage account used to purchase securities |
Net Profit on a Trade |
The amount realized from a transaction, minus the transaction fees, minus the price of entry, leaving the overall profit on the trade |
Order Entry |
The method that an online trading terminal uses to actually purchase or sell a security |
Shorting |
A term used to state you have a trade that is set up to make money when the security or sector is moving downward |
Unrealized Profit or Loss |
The profit or loss that you would make on a trade if you closed the trade at that exact moment |
Additional economic, banking, and day trading terminology knowledge can be developed through the study of your brokerage firm's research reports and by reading the daily news wire services.
Most brokerage firms offer an “education” section that includes complete lists of the thousands of words used in the investment, banking, and day trading world. Other sources of complete terminology lists include investment and banking dictionaries as well as investment dictionaries that are electronically embedded directly into some trading software.
