Day Trading Lingo

security futures product

A short squeeze is when the underlying asset traded (for example, a stock’s share price) unexpectedly appreciates in price drastically over a short period of time. It’s so named because it ‘squeezes’ any short sellers of that market, who often exit their trades in a short squeeze to limit their losses as the market’s price rises. A successful day trader understands the discipline of technical analysis. This is identifying trading opportunities by observing and plotting the patterns of price and volume movement in a stock . The long-term trend shows how the stock has behaved in the past and suggests how it should behave in the immediate future. A futures or option contract are based on underlying cash indexes, commodity markets or futures contracts in the case of options.

buying or selling

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A shorthand method of referring to the payment of a loss and receipt of a gain by a clearing member to or from a clearing organization that occurs after a futures position has been marked-to-market. A technical opinion that the market price has declined too steeply and too fast in relation to underlying fundamental factors; rank and file traders who were bearish and short have turned bullish. The trading of commodities, contracts, or other instruments not listed on any exchange.

Bearish Engulfing Pattern

After a round of bidding has closed, submitted bids are compared and the person with the highest bid wins the award and pays the amount of his bid to the seller. To purchase or sell a scale down means to buy or sell at regular price intervals in a declining market. To buy or sell on scale up means to buy or sell at regular price intervals as the market advances.

The Commissions in 2012 adopted rules and interpretations to clarify that a few types of transactions in particular are swaps. A temporary restriction in the trading of certain stock index futures contracts that becomes effective following a significant intraday decrease in stock index futures prices. Designed to provide an adjustment period to digest new market information, the restriction bars trading below a specified price level. Shock absorbers are generally market specific and at tighter levels than circuit breakers.

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Market risk, liquidity risk, systematic risk are some of the types of risk present in trading. A rally is a period within which asset prices experience a strong upward move or momentum. A pullback is a quick move of prices against the main trend, indicating that the overall market trend has paused temporarily. A long position refers to buying an asset because you expect its price to rise.

This ultimately results in the value of shares that are being held by someone to increase in value since now the number of shares available to trade has been reduced. The advantage of paper trading is that it does not require any money and yet gives you access to the market to trade. So it is an important tool in every beginner’s arsenal to practice before investing actual money.

Momentum day trading may suit you if you want to make money in the stock market. The asset or currency on which the covered warrant, futures contract or option is based and derives its value. The act of buying or selling forex based on current prices, with settlement taking place two days later. Simultaneously buying and selling calls and puts of the identical expiration month but having different strike prices. This refers to any day on which notices of “intent to deliver” on futures contracts may/shall be issued. This occurs when a request/demand is made from a futures brokerage firm, such as Cannon Trading Co, to one of its clients to bring margin deposits up to initial levels for a particular futures contract/position.

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Indicators, for the most part will be what you use, and they usually come for free with good chart/trading platforms. Move onto making actual trades once you feel you have a good grip on day trading concepts. Basically, by placing a stop-loss, the investor is instructing their broker to sell their asset once it reaches a pre-set price limit. ROI or Return on Investment is the metric that measures profit or loss that has been generated by an investment, in relation to the invested funds.

  • The intrinsic value of an option is what its premium would be if the price of the underlying would remain at its current level until expiration.
  • When a Broker operates under the A-Book model, it passes the orders directly to the Liquidity Provider.
  • The Financial Industry Regulatory Authority has written rules to regulate this fast-moving practice and to educate investors about the potential for significant losses.
  • It can also refer to the difference between a stock’s value and the amount a bank will recognize as collateral for a loan.
  • The terms support and resistance levels are by far the two most commonly used terms in technical ana…

But, most importantly, there are some other terms that are used by intraday traders that need to be understood before venturing into such trades. This is the asset specified in an option contract, which, except in the case of cash-settled options, is transferred upon exercise of the option contract. With cash settled options, only cash changes hands, based on the current price of the underlying. In futures markets, the open is a representative price of the first minute of trading.

No Load Funds

On one hand, traders who do NOT wish to queue their order, instead paying the market price, pay the spreads . On the other hand, traders who wish to queue and wait for execution receive the spreads . Some day trading strategies attempt to capture the spread as additional, or even the only, profits for successful trades. The following are several basic trading strategies by which day traders attempt to make profits.

day trading

The commodity pool operator either itself makes trading decisions on behalf of the pool or engages a commodity trading advisor to do so. Managers at hedge funds or their advisors are often registered with the CFTC as CPOs or CTAs. An investment trust, syndicate, or similar form of enterprise operated for the purpose of trading commodity futures or option contracts. Usually, individuals who invest in the stock market, either on their own or through a broker, have full-time employment or another source of income to fund their investments. For most day traders, trading is their job; it is their main source of income. Trend following, or momentum trading, is a strategy used in all trading time-frames, assumes that financial instruments which have been rising steadily will continue to rise, and vice versa with falling.

In analysis, this refers to the opinion that the futures market price has risen too steeply and too quickly in relation to analyzed underlying economic fundamental factors. Many traders who had been bullish and had long positions have turned bearish and may enter short positions. On the topic of brokerage accounts, you will also want to make sure you have a suitable one before you begin day trading. High transaction costs can significantly erode the gains from successful trades, and the research resources some brokers offer can be invaluable to day traders.

Down Trend

Central Bank intervention refers to the selling or buying of a currency in the forex market by its central bank. The central bank is looking to increase or decrease the value of its currency against another currency. A buy order, also known as purchase order, is an instruction to a broker to buy a certain number of assets at a specified limit price.

The theory implies that the best predictor of prices is the current price, and that past prices are not a reliable indicator of future prices. If the random walk theory is correct, technical analysis cannot work. The total number of futures contracts long or short in a delivery month or market that has been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery. A private investment fund or pool that trades and invests in various assets such as securities, commodities, currency, and derivatives on behalf of its clients, typically wealthy individuals. Electronic Communications Network, refers to a electronic system for trading in stocks or futures. The critical distinction between an exchange and an ECN is that while both can match and execute trades, only an exchange can list a new security or futures contract.

You can hold on to them as long as you like or sell them when you feel the time is right. These stocks represent shares of ownership in a company. Companies are willing to sell shares of their company in order to raise capital to fund their own operating expenses or grow the business. Let’s start with a basic question, what is the stock market? The key thing to understand is that “the market” is not one single entity. It’s a marketplace of all the individuals and institutions that buy and sell stocks.


Negative theta signifies long positions or debit spreads; positive theta signifies short options or credit spreads. Settlement prices are used to determine open trade equity, margin calls and invoice prices for deliveries. A price level that acts as an overhead barrier to further price gains. Prices will frequently rally to these levels and then retreat. Resistance is rarely a specific price; it is more often a relatively contained price range, frequently in the vicinity of past technical patterns.

A collection of assets that makes up a trader or investor’s portfolio. You can have as few as one stock in a portfolio or an infinite amount of stocks or other securities. A high refers to a stock or index reaching a greater price point. Stocks near 52-week highs or all-time highs can be a bullish signal for traders. Let’s look at some of the most important stock market terms you must know to trade stocks.

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