Must Know Terminology

Ticker

A stock symbol is a unique series of letters assigned to a security for trading purposes.

Calls

Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a stock, bond, commodity or other asset or instrument at a specified price within a specific time period.

Puts

A put option is a contract giving the owner the right, but not the obligation, to sell–or sell short–a specified amount of an underlying security at a pre-determined price within a specified time frame.

Strike Price

A strike price is the set price at which a contract can be bought or sold when it is exercised. For call options, the strike price is where the security can be bought by the option holder; for put options, the strike price is the price at which the security can be sold.

Option Premium

An option premium is the current market price of an option contract.

Expiration Date

An expiration date in derivatives is the last day that derivative contracts, such as options or futures, are valid. On or before this day, investors will have already decided what to do with their expiring position.

Bull or Bullish

This term refers to a strong market of stocks moving up. This can even be used to reference a specific position the trader is taking. If they are bullish, they expect the stock to go up.

Bear or Bearish

This term refers to a weak market. This means traders think the price of stocks or a specific stock will be going down. If they are bearish, they may sell their bullish positions or even take short positions.

Breakout

A breakout is a stock price moving outside a defined support or resistance level with increased volume.

Breakdown

Breakdowns are quick pullbacks that occur when a stock breaks through a support area.

Support Level

A support level is the price level whereby demand of a security is strong enough that it prevents the decline in price past it.

Resistance Level

A resistance level is the price level at which selling of a security is deemed strong enough to eliminate the increase in price.

Confirmation

Confirmation on a chart describes a chart pattern that shows a sustainable stock trading opportunity, which by virtue of its persistence is confirmed (given credibility).

Rejection

When a potential confirmation is denied from breaking above the needed levels.

Consolidation

Consolidation is the term for a stock or security that is neither continuing nor reversing a larger price trend. Consolidated stocks typically trade within limited price ranges and offer relatively few trading opportunities until another pattern emerges.

Sell Off

A sell-off occurs when a large volume of securities are sold in a short period of time, causing the price of a security to fall in rapid succession.

Rally

This is the inverse of a sell off, or a period of continuous increase in the prices of stocks causing the price of a security to rise in rapid succession.

Candlestick/s

Candlestick charts are what most active day traders will use to help them establish a basis for taking a trade. A candle stick includes 4 pieces of information. The open price, the close price, the high of the period price, an the low of the period price.

Price Action

Price action is the movement of a security's price plotted over time. Price action forms the basis for all technical analysis of a stock, commodity or other asset chart.

Momentum

Momentum shows the rate of change in price movement over a period of time to help investors determine the strength of a trend.

Volume

Volume is a measure for the number of shares traded. A stock that trades 1 million shares in a day has a volume of 1 million.

Gaps (Up/Down)

Gaps on a daily chart occur when a stock opens higher or lower, than it closed the previous day. This happens when there is news or some type of catalyst overnight.

Sentiment

Market sentiment refers to the overall consensus about a stock or the stock market as a whole.

Catalyst

A catalyst in equity markets is an event or other news that propels the price of a security dramatically up or down.

Due Diligence

Due diligence is defined as an investigation of a potential investment (such as a stock) or product to confirm all facts. These facts can include such items as reviewing all financial records, past company performance, plus anything else deemed material.