Trading terminology

Sometimes we hate it. Often it confuses people. Always, we know we should avoid it.

But it comes out anyway.

Jargon. Lingo. Acronyms.

I'm certainly guilty of typing it here. So how about some definitions. This is not an exhaustive list but will cover most of the commonly used terms.

Bullish                       an opinion that the price of a stock or security will rise

Bearish                      an opinion that the price of a stock or security will fall

Long                           you own the stock - a bullish opinion

Short                          you've sold stock that you don't own - a bearish opinion

SMA                          Simple Moving Average

EMA                          Exponential Moving Average

ATH                          All-time high

HOD                          High of the day

LOD                           Low of the day

MACD                       Moving Average Converging Differences

RSI                             Relative Strength Index

Bid                             The price at which a buyer is willing to pay

Ask                             The price at which a seller is willing to sell

Spread                        The difference between the bid and the offer

Scalp                           a very quick trade, usually lasting only minutes

Day Trade                  a trade that is opened and closed in the same trading day

Swing Trades            a trade that is planned to last a few days to a few weeks’ time

Position Trade          a trade that is held as a position in a larger portfolio, generally for a longer period of time

Investment                a position based on the fundamentals of a company and intended to be held for the long term

Fundamental analysis             Study of the business data of a company including earnings per share, book value, debt ratios, and the management team

Technical analysis                  Study of the price action and supply and demand relationship of a security

Float                            the total number of shares available for trading on the open market

Short Interest              the number of shares or percentage of the float that is sold short. An indication of bearish sentiment

Stock split                   Shares are divided, and the price is adjusted proportionately. 1 share priced $100 -> 2/1 split -> 2 shares priced $50

Market order               an order to buy at the market offer or sell at the market bid

Limit order                  an order to buy or sell only at a specified bid or offer price

Stop order                   an order that triggers at a set price. often used as a protective stop loss to sell a position that moves against the trade

Trim and Trail             Trim - Selling part of a position as it moves into profitable territory

Trail - moving the protective stop loss up with the stock to reduce risk and/or secure more profit