AGI (Adjusted Gross Income)
A key number used by many different section of the tax code to determine the eligibility of the taxpayer for deductions and credits. As a general rule, you want “above the line” expenses, such as business expenses, which are used to reduce your AGI.
AMEX (American Stock Exchange)
Located in downtown Manhattan, this stock exchange consists primarily of index options and shares of small and medium-sized companies.
Refers to a brokerage account in which many transactions occur. Brokerage firms may charge a fee for an account that does not generate an adequate level of activity.
Chairman of the Federal Reserve Bank. The market reacts very strongly to the occasional comments and remarks he makes about the economy and monetary policy.
American Stock Exchange (see AMEX)
An employee of a brokerage, fund management house, or other financial institution who studies companies and makes buy-and-sell recommendations on stocks of these companies. Most analysts specialize in a specific industry.
The date on which news concerning a given company is announced to the public. It is used in event studies to evaluate the economic impact of events of interest.
This is the lowest price a market maker will accept to sell a stock. The quoted offer at which an investor can buy shares of stock; also called the offer price.
Any possession that has value in an exchange.
Number of shares authorized for issuance by a firm’s corporate charter.
In simple terms, your cost of the asset. If you paid $10/share for stock and $1/share commission, your basis would be $11/share.
An investor who believes a stock or the overall market will decline.
Refers to the attitude of an investor as being pessimistic; a pessimistic outlook.
Any market in which prices exhibit a declining trend for a prolonged period, usually falling by 20% or more.
The most recent zone of resistance above the current price of the stock on an upward trend.
The most recent zone of support below the current price of the stock on a downward trend.
A measurement of the volatility associated with a stock relative to the S&P 500. A beta of 1.0 means the stock’s volatility is equal to that of the S&P 500.
The highest price a market maker is willing to pay to buy a security. The price an investor will pay to sell shares of stock.
The difference between the prices buyers are willing to pay and what sellers are asking for.
A term used to refer to institutional money as it flows in and out of the stock market.
Refers to October 19, 1987, when the Dow Jones Industrial Average fell 508 points after sharp drops the previous week.
A large and creditworthy company which is renowned for the quality and wide acceptance of its products and services, and for its ability to make money and pay dividends.
Debt issued for a period of more than one year. When investors buy bounds, they are lending money. The seller of the bond agrees to repay the principal amount of the loan at a specified time.
A rise in the price of a security above a resistance zone (commonly its previous high price) or a drop below a zone of support (commonly the former lowest price). It can be used as a buy or sell indicator.
An individual who is paid a commission for executing customer orders; an agent specializing in stocks, bonds, commodities, or options, and must be registered with the exchange where the securities are held.
An investor who thinks the market will rise.
Any market in which prices are in an upward trend.
Refers to the attitude of an investor as being optimistic; an optimistic outlook.
To purchase an asset, usually taking a long position.
A passive investment strategy with no active buying and selling of stocks.
Buy Limit Order
A conditional trading order that indicates a security may be purchased only at the designated price or lower.
Buy on Margin
Borrowing to buy additional shares of stock, and using those same shares as collateral.
An order to a broker to purchase a specific quantity of a security.
Buy Stop Order
An order to buy that is not to be executed until the market prices rises to the stop price. Once the security breaks through that price, the order is then treated as a market order.
A market in which the supply exceeds the demand, creating lower prices.
Money available to invest.
When a stock is sold for a profit, the difference between the net sales price of the securities and their net cost results in your total profit, which you then report to the IRS as a capital gain and pay capital gains taxes on.
Capital Gains Tax
The tax levied on profits from the sale of capital assets. A long-term capital gain, which is achieved once an asset is held for at least 12 months, is taxed at a maximum rate of 20% (for taxpayers in the 28% tax bracket) and 10% (for taxpayers in the 15% tax bracket). Assets held for less than 12 months are taxed at regular income tax levels, and, since January 1, 2000, assets held for at least 5 years are taxed at 18% and 8%.
When a stock is sold below cost (sold at a loss), the difference between the net cost of a security and the net sales price.
Represents earnings before depreciation, amortization, and non-cash charges; sometimes called cash earnings. This indicates the ability to pay dividends.
The highest price, interest rate, or other numerical factor allowable in a financial transaction.
The pattern made by a stock on its stock graph as it fluctuates over a given period of time. These patterns provide traders with information about support and resistance, breakouts, and so on.
The period at the end of the trading session; sometimes used to refer to the closing price of a stock.
The price of the last transaction of a particular stock completed during a day’s trading session on an exchange.
The last bid and offer prices of a particular stock at the close of a day’s trading session on an exchange.
An asset that can be repossessed if a borrower defaults.
The fee paid to a broker to execute a trade, based on number of shares, bonds, options, contracts, or their dollar value.
A fixed physical substance that investors buy or sell, usually through futures contracts. Commodities are basic goods and products, such as food, steel, metal, and so on.
Traditionally, units of ownership that do not give guaranteed payments or dividends to their owners, and are usually limited in their voting power. In return for accepting these restrictions, owners of common stock normally receive all growth over the amount paid to preferred shareholders.
The comparison of technical signals and indicators to ensure that the majority of them are pointing in the same direction; information that validates your opinion of a buying or selling opportunity.
Interest rate on a bond the issuer promises to pay to the holder until maturity, expressed as an annual percentage of face value. The term derives from the small detachable segment of a bond certificate which, when presented to the bond’s issuer, entitles the holder to the interest due on that date.
CPI (Consumer Price Index)
Measure of change in consumer prices, as determined by a monthly survey of the U.S. Bureau of Labor Statistics. Traders use this as a way to track inflation. Also known as the cost of living index.
CRB Index (Commodities Research Bureau)
An index of 21 of the most influential commodity categories, such as oil, gas, steel, etc.
Daily Price Limit
The level at which many commodity, futures, and options markets are allowed to rise or fall in a day. Exchanges usually impose a daily price limit on each contract.
A request to buy or sell stock that is good only for the day the order is placed. If the buy or sell request is not filled before the close of the market, the order is cancelled. Most stock buy and sell orders are day orders unless otherwise specified by the investor.
Establishing and liquidating the same position or positions within one day’s trading.
The market in which bonds are issued and bought and sold between investors.
Total liabilities divided by shareholder’s equity. This shows to what extent owner’s equity can cushion creditor’s claims in the event of liquidation.
A stock or bond quote that shows bid and ask prices 15 to 20 minutes after a trade takes place.
Market in which supply overwhelms demand, leading to weak and lower prices.
A brokerage house featuring relatively low commission rates in comparison to a full-service broker.
Dividing investment capital among a variety of securities with different risks, rewards, and correlations in order to minimize risk.
A portion of a company’s profit paid to common and preferred shareholders.
A nation’s internal market for issuing and trading securities or entities domiciled within that nation.
Dow Jones Industrial Average (Dow)
The best know U.S. stock index. A price-weighted average consisting of 30 actively trade blue-chip stocks, primarily industrial, including stocks traded on the New York Stock Exchange and NASDAQ. It is also a barometer of how shares of the largest U.S. companies are performing.
A move down in a particular stock.
The stage in which a stock begins making lower highs and lower lows.
The transition point between a rising, expanding economy to a falling, contracting one.
The total amount of money your trading system will lose during a losing trade or losing streak. Average drawdown can be calculated by adding all of your losing trades over a given period of time and dividing the total by the number of losing trades. This is a way to establish the amount of risk you have taken historically for the reward you have received.
Net income for a company during a specified period of time.
Positive or negative differences from the consensus forecast of earnings by institutions.
In an interest rate swap, the date the swap begins accruing interest.
An entry price to buy stock at a zone of support.
EPS (Earning Per Share)
Net income for a company during a specified period of time expressed as a per share value. Net income divided by shares outstanding.
The various exchanges that make up the stock market.
A location where buyers and sellers can exchange securities. This can be a trading floor, such as the New York Stock Exchange, or an electronic, computerized exchange, such as the NASDAQ.
An exit price to sell stock at a zone of resistance.
In a money management system, your reward multiplied by your chances of winning over time.
Goods and products produced in the U.S. and sold in foreign countries.
Exponential Moving Average
A moving average, calculated over any period of time, where the most recent price information is weighed more heavily than later information.
The event that occurs when a stock appears poised to break through a zone of support or resistance but fails to do so. A false trading signal that can be minimized through the use of filtering techniques.
Federal Reserve Bank
One of the 12 banks that, with their branches, make up the Federal Reserve System. These banks are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. The role of each Federal Reserve Bank is to monitor the commercial and savings banks in its region to ensure that they follow Federal Reserve Board regulations and to provide those banks access to emergency funds. The reserve banks act as depositories for member banks in their regions, providing money transfer and other services. Each of the banks is owned by the member banks in its district.
Fed Funds Rate
The rate banks charge to each other to cover Federal Reserve requirements. These are usually very short term loans, often overnight.
Fed Funds Discount Rate
The rate at which banks can borrow money from the Federal Reserve Bank. Usually a relatively slow-changing rate, it is adjusted up or down in increments as the Fed deems necessary to boost the economy or guard against inflation. The stock market reacts dramatically to changes in this rate.
Filtering (see Price Filter, Time Filter, Volume Filter)
A method used to determine whether a market is breaking or holding support or resistance zones.
An analysis of a company’s financial statement, usually done by financial analysts.
Professionals who analyze financial statements, interview corporate executives, and attend trade shows of companies in order to write reports recommending either purchasing, selling, or holding various stocks. Also called securities analysts and investment analysts.
The three-month period of time the company uses to track their quarterly performance. All quarterly statements and financial reports are tied to this time period. Although this quarter often follows standard calendar quarters, it just as often does not. The quarter period a company follows is dictated by its fiscal year.
The twelve-month period of time the company uses to track their yearly performance. All year-end statements and financial reports are tied to this time period. Although many company’s fiscal years follow the standard calendar year (January – December) it is just as common that they do not. A fiscal year can begin and end in any twelve-month period on the calendar.
A money management technique to dictate how much of the investment capital an investor has will be used in a single trade. Encourages more conservative position sizing which helps to minimize risk.
Flight to Quality
Moving capital to the safest possible investment to protect oneself from loss during an unsettling period in the market. This movement can manifest itself in any of the various financial markets; for example, unexpected volatility and risk in the stock market often results in investors selling stocks and buying more government bonds.
Shares outstanding minus insider holdings. The float consists of all shares that are available for trade in the stock market at any given time. This number can help identify how liquid a stock is as well as how much control of the stock insiders maintain.
A price or interest rate change.
Making projections about future performance on the basis of historical and current conditions data.
A broker who provides clients an all-inclusive selection of services such as advice on security selection and financial planning.
Used to describe an investor whose assets are totally committed to investments, typically stock.
Security analysis that seeks to detect mis-valued securities through an analysis of a firm’s business prospects and historical performance, focusing on earnings, dividend prospects, expectations for future interest rates, and risk evaluation of the firm.
A term used to designate all contracts covering the sale of financial instruments or physical commodities for future delivery on a commodity exchange.
An agreement to buy or sell a set number of shares of a specific stock in a designated future month at a price agreed upon today by the buyer and seller. The contract is often traded on the futures market. A futures contract differs from option as an option is the right to buy or sell, while a futures contract is the promise to actually make the transaction.
A profit on a securities transaction recognized by selling a security for more than security originally cost. The gain is the difference between the cost and the sale.
Sales minus the cost of goods sold.
Gross Profit Margin
The gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold.
Opportunity to invest in profitable projects.
A transaction that reduces the risk of an investment.
A strategy designed to reduce investment risk using call options, put options, short-selling, or futures contracts. Its purpose is to reduce the volatility of a portfolio by reducing the risk of loss; it help lock in profits.
An order that must be executed without hesitation or if the stock can be bought or sold at that price in sufficient quantity.
Stocks of companies operating in high-technology fields. Intel, Microsoft, IBM, Yahoo! and Amazon.com are example of high-tech stocks.
To maintain ownership of a stock over a long period of time; also a recommendation of an analyst who is not positive enough on a stock to recommend a buy, but not negative enough on the stock to recommend a sell.
IRA (Individual Retirement Account)
Tax deferred accounts one can contribute to as long there is earned income; the individual maximum annual contribution is $2,000, although spouses can also make contributions even if they do receive earned income. Contributions are deductible so as the taxpayer does not earn more than $51,000 and is not covered by a pension plan.
Independent Financial Market
A financial market that trades a specific type of financial instrument. The stock market, bond market, currency market, and commodity market are all examples of independent financial markets, because although each can impact the other, they don’t necessarily depend on each other to operate on their own.
Statistical composite that measures changes in the economy or in financial markets, often expressed in percentage changes from a base year or from the previous month. Indices measure the ups and downs of stocks, bonds, and some commodities markets, in terms of market prices and weighting of companies in the index.
A technical or fundamental measurement securities analysts use to forecast the market’s direction, such as investment advisory sentiment, stock trading volume, interest rates direction, and corporate insiders’ buying or selling.
Average, typical investors who trade their own money, rather than doing it for institutions. Even wealthy, very successful investors who trade their own accounts are considered individual investors.
A subcategory of market organization below the sector level.
A subcategory of market organization below the Industry level.
Rise in the prices of good and services, as happens when spending increases relative o the supply of goods on the market – too much money chasing too few goods. Moderate inflation is a common result of economic growth, while prices rising at more than 100% per year are considered hyperinflation and reflective of a lack of confidence in the dollar.
Cost of borrowing money, expressed as a rate per period of time, usually one year, in which case it is called an annual rate of interest.
The process of analyzing each of the independent financial markets to determine their impact on the stock market.
A trend period of six to nine months. Changes in the Intermediate Trend are generally taken as market corrections.
Material information about a company that has not yet been made public.
Directors and senior officers of a corporation; those who have access to inside information about a company; someone who owns more than 10% of the voting shares of a company.
Money invested in the market by mutual funds, investment banks, insurance companies, brokerage houses, and major corporation. Large dollar volume transactions that can dramatically impact the price of a stock in a short period of time.
The revenue from a portfolio of invested assets.
The individual who manages a portfolio of investments; also called a portfolio manager or money manager.
The study of financial securities, such as stocks and bonds, from the investor’s viewpoint.
A strategy an investor uses when deciding how to allocate capital among several options, including stocks, bonds, cash equivalents, commodities, and real estate.
The owner of a financial asset; one who is looking to earn money in the stock market through a “buy and hold” strategy. Most earnings are either long-term capital gains, dividends, or interest.
Goods and services brought into a country from sources outside its borders.
A type of pension plan in which taxes are deferred. Available to those who are self-employed.
A stock with a high level of market capitalization, usually at least $5 billion in market value.
A stock or group of stocks first to move in a market upsurge or downturn.
This rising or falling at a proportionally greater amount than comparable investments; a given stock price change that may result in a great increase or decrease in the value of the investment.
Claims on the assets of a company or individual – excluding ownership equity. Characteristics: 1) It represents a transfer or assets or service at a specified or determinable date. 2) The firm or individual has little or no discretion to avoid the transfer. 3) The event causing the obligation has already occurred.
An order to buy stock at or below a specified price, or to sell stock at or above a specified price. A conditional trading order designed to avoid the danger of adverse unexpected price changes.
Stocks traded on an exchange.
In accounting terms, one year or longer.
Long Term Capital Gains
Gains from the purchase or sale of capital assets that are held for longer than 12 months.
A person who makes investments for a period of at least five years in order to finance his or her long-term goals.
The bottom range of a technical oscillator such as MACD or Stochastics.
A hybrid technical analysis tool which combines the characteristics of an oscillator with trend tracking to identify buying and selling signals.
A shareholder who is part of a group that controls more than half of the outstanding shares of a corporation.
Allows investors to buy securities by borrowing money from a broker; the difference between the market value a stock and the loan a broker makes.
An account that can be leveraged, in which stocks can be purchased for a combination of cash and a loan. The load is collateralized by the stock; if the value of the stock drops sufficiently, the owner must either put in more cash, or sell a portion of the stock.
An analysis of technical, corporate, and market data used to predict movements in the market.
A demand for additional funds because of adverse price movement in a stock bought on margin; maintenance margin requirements; security deposit maintenance.
The total dollar value of a company’s equity. Calculated by multiplying the current price of the stock by the shares outstanding.
The most immediate zone of resistance in a stock.
The most immediate zone of support in a stock.
A report produced by Multex.com to compile recent and current financial statement data such as earnings, revenues, etc. for the entire stock market.
A measure of the market consisting of weighted values of the components that make up a certain list of companies. A tracking of the performance of certain stocks by weighting them according to their prices and the number outstanding shares using a particular formula.
The start of a formal trading day on an exchange.
An order to buy or sell a stated amount of a security at the most advantageous price obtainable after the order is presented in the trading crowd. Special restrictions cannot be specified (all or none or good till cancelled orders) on market orders.
The amount of money a willing buyer pays to acquire stock from a willing seller.
A technical analysis of factors such as volume, price trends, and market breadth that are used to predict price movement.
The return on the market portfolio.
Risk that cannot be diversified away.
The percentage of total industry sales that a particular company controls.
The price at which a security is trading and could presumably be purchased or sold; what investors believe a stock is worth, calculated by multiplying the number of shares outstanding by the current market price of the stock.
To cease to exist; to expire.
An acquisition in which all assets and liabilities are absorbed by the buyer; any combination of two companies.
A stock with a capitalization of usually between $1 billion and $5 billion.
The amount of acceleration of an economic, price, or volume movement.
A complete, holistic set of trading rules and specifications that defines how you should make your stock trades. Establishes the balance you need to maintain between reward and risk to be successful in your trading over time.
The mean price of a stock calculated at any time over a past period of fixed length to help define trend direction and support and resistance zones.
Moving Average Crossover
The point when moving averages reflecting different time periods (such as a 20-day MA and a 50-day MA) intersect and cross. Depending on the direction of the trend, these crossovers can be seen as critical breakthrough points to the upside as well the downside. Many oscillators use these crossover points to identify specific buying or selling signals.
The National Association of Securities Dealers Automatic Quotation System. A nationwide computer network for buying and selling NASDAQ-listed stocks.
An inactive market, which displays large fluctuations in prices due to a low volume of trading.
Narrowing the Spread
Reducing the difference between the bid and ask prices of a security.
The gain or loss on a security sale as measured by the selling price of a security less the adjusted cost of acquisition.
New York Stock Exchange
The most well-known stock exchange in the world. Also called the Big Board or the Exchange.
Daily events reported on news programs and the Internet which can often have a sudden and dramatic effect on the price of a stock.
NYSE Composite Index
Composite index covering price movements of all common stocks listed on the New York Stock Exchange. It is based on the close of the market on December 31, 1965, at a level of 50.00 and is weighted according to the number of shares listed for each issue. The composite index is supplemented by separate indexes for four industry groups; industrial, transportation, utility and finance.
Indicates a willingness to sell at a given price.
Having either buy or sell interest at the indicated price level and side.
A long or short position whose value will change with a change in prices.
The beginning of the trading session officially designated by an exchange during which all transactions are considered made “at the opening”.
The range of prices at which first bids and offers are made on an exchange.
Instruction to a broker/dealer to buy, sell, deliver, or receive securities or commodities that commits the issuer to the terms specified.
A tool used to confirm trend direction and short-term buying and selling signals. Oscillators are generally designed to measure momentum and overbought/oversold conditions.
Over the Counter (OTC)
A market in which securities transactions are conducted through a telephone and computer network connecting dealers in stocks and bonds, rather than on the floor of an exchange. The NASDAQ is an OTC market. Also, a stock that is not listed and traded on an organized exchange (bulletin board stocks, for example) are traded over the counter.
A condition in which a stock is considered to have risen as much as it is likely to in the short term, forecasting a short-term pullback.
A condition in which a stock is considered to have dropped as low as it is likely to in the short term, forecasting a short-term increase in price.
The face value of a bond. A bond selling at par is worth the same dollar amount it was issued for or at which it will be redeemed at maturity.
Unrealized capital gain/loss on securities held in a portfolio based on a comparison of the current market price to the original cost.
Placing stock trades in paper format rather than with actual dollars to gain experience in using research and timing techniques without putting investment at risk.
The price to earnings ratio, which is calculated by dividing the current stock price by trailing annual earnings per share or expected annual earnings per share.
The high point at the end of an economic expansion until the start of a contraction.
A derivation of the P/E ratio and expected growth rates. It is calculated by dividing the current P/E ratio by the expected EPS.
A professional who assumes responsibility for the securities portfolio of an individual or institutional investor. In return for a fee, the manager manages the portfolio and chooses which types are most appropriate over time.
A market commitment. The number of shares bought or sold for which no offsetting transaction has been entered into. The buyer of a security is said to have a long position, and the seller of a security is said to have a short position.
The process of determining what portion of an investor’s capital should be placed in a single position. This is an important component of risk management in an effective trading system.
Shares that give investors a fixed dividend from the company’s earnings and entitle them to be paid before common shareholders.
A condition in which technical indicators such as Stochastics and MACD begin to move in the opposite direction of the price of the stock. Rather than confirming a buying signal, this is a warning sign in an up trending stock.
A method for identifying breakthroughs of support and resistance zones. Price filtering refers to waiting for a stock to break through a specific price that has been identified as support or resistance before initiating a buy order on the stock.
Where a newly issued security is first offered. All subsequent trading of this security occurs in the secondary market.
The longest term trend, lasting nine months to two years. This trend is most directly impacted by the fundamental strength of the broad economy.
The interest rate banks charge to their most creditworthy customers, and which acts as a baseline for loans to less creditworthy customers.
Revenue earned minus the cost and the commission. Total amount made on the transaction.
A prediction of future profits of a company that could affect investment decisions.
An indicator of profitability. The ratio of earnings available to stockholders to net sales. Determined by dividing net income by revenue for the same 12-month period. Also known as net profit margin.
Action taken by short-term securities traders to cash in on gains created by a sharp market rise, which pushes prices down temporarily but implies an upward market trend.
A stock offering to the investment public, after compliance with registration requirements of the SEC, usually by an investment banker or a syndicate made up of several investment bankers, at a price agreed upon between the issuer and the investment bankers.
The portion of a company’s stock that is held by the public.
Describes a company whose stock is held by the public.
Publicly Traded Assets
Assets that can be traded in a public market such as the stock market.
A written order to buy specified goods at a stipulated price.
Occurring every three months.
The price at which the last trade of a particular security or commodity took place.
An upward movement in the price of a stock or the broad market.
The high and low prices recorded during a given period of time.
A stock or bond quote that is current with the current buy or sell price of the stock or bond.
The return that is actually earned over a given time period.
A temporary downturn in economic activity, usually indicated by two consecutive quarters of a falling gross domestic product.
The rate at which a stock falls relative to other stocks groups in a falling market or rises relative to other stocks in a risking market. Analysts reason that a stock that holds value on the downside will be strong performer on the upside and vice versa. This logic can also be applied to industry group and sector comparisons.
A price level above which it is supposedly difficult for a security or market to rise. A price ceiling at which technical analysts and traders note persistent selling of the security or market.
The change in the value of a portfolio over a period of time, including any distributions made from the portfolio during that period.
Return on Equity (ROE)
An indicator of profitability determined by dividing net income for the past 12 months by stockholder equity and shown as a percentage. ROE is used to measure how a company is using its money.
Return on Investment (ROI)
Book income as a proportion of net book value.
Total dollars brought into a company through sales, stated on a quarterly and annual basis.
A change in the direction or trend of a stock.
Reward: Risk Ratio
The potential reward in a given trade or set of trades over time divided by the amount of risk taken. If a trade appears to have $2 of upside potential against $1 of downside potential, then the reward: risk ratio is 2:1. A critical component of risk and money management.
The risk that the issuer cash flow will not be adequate to meet its financial obligations. Additional risk a company’s shareholder bears when the firm uses debt and equity.
A set of common factors that impact returns (e.g., market return, interest rates, inflaction, etc.).
Risk Management (see also Money Management)
The process of identifying and evaluating risks and selecting and managing techniques to minimize risk.
A type of IRA account that allows contributors to invest up to $2,000 per year, and for assets to grow completely tax-free, and to withdraw the principal and earnings tax-free under certain conditions. This differs from a traditional IRA, however, in that yearly contributions are not tax deductible.
A conservative approach to position sizing an money management that places smaller amounts of money in a position at the beginning of the trade, then increases the size of the position as the stock extends into an upward trend.
Trade Seeker search features that allow users to scan the stock market for potential stock plays based on a variety of bullish or bearish scenarios.
Securities and Exchange Commission. A federal agency that regulates the U.S. financial markets, as well as overseeing the securities industry and promoting full disclosure in order to protect the investing public against malpractice in the securities market.
A key input to a firm’s financial planning process based on historical experience, statistical analysis, and consideration of various macroeconomic factors.
S&P 500 Composite Index
An index of 500 widely held common stocks that measures the general day-to-day performance of the market.
Used to characterize a group of securities that are similar with respect to maturity, type, rating, industry, and coupon.
The flow of institutional money into various sectors of the stock market.
Stocks and their derivatives, bonds, and commodities. Any financial instrument that can be publicly traded.
Sell Limit Order
Conditional trading order that indicates a security may be sold at the designated price or higher.
The sale of securities under pressure.
An order that may take many different forms by an investor to a broker to sell stock, bond, option, future, mutual fund, or other holding.
A market in which demand exceeds supply. As a result, the seller can often the dictate the price and terms of the sale.
Selling a stock not actually owned. If an investor thinks the price of a stock is going down, the investor could borrow the stock from a broker and sell it. Eventually, the investor must buy the stock back on the open market to close the position and repay the obligation to the broker.
The general attitude or feeling about a stock or market. Most accurately reflected by tracking buying and selling volume.
A person or entity that owns shares or equity in a corporation.
Total assets minus total liabilities of a corporation.
Certificates or book entries representing ownership in a corporation or similar entity.
Shares of a corporation, authorized in the corporate charter, which have been issues and are outstanding.
One who has sold a contract to establish a market position and has not yet close out the position through an offsetting purchase.
Occurs when a person sells stocks he or she does not yet own. Shares must be borrowed from the broker before the sale to make “good delivery” to the buyer. Eventually, the shares must be bought back to close out the transaction. This is done when an investor believes the stock price will drop.
Any investments with a maturity of one year or less.
A profit or loss realized from the sale of securities held for less than a year. This is taxed at normal income tax rates if the net total is positive.
A trend that lasts two to four weeks. Changes in the short-term trend generally come about from random news events such analyst ratings and downgrades and profit forecasts.
Sideways Trend (see Trendless)
A horizontal price movement within a narrow price range over an extended period of time, creating the appearance of a relatively straight line on a stock’s price graph.
Simple Moving Average
A moving average that is calculated by adding the closing prices over a given period of time, then dividing the sum by the number of days in the period. Each day in the calculation is given the same weight. This contrasts with an exponential moving average which places a heavier weighting on the most recent days.
A temporary fall in performance, often describing consistently falling security prices for several weeks or months.
A stock with a small capitalization, meaning a total equity value of less than $500 million.
Experienced, sophisticated investors who use advanced techniques to track sector rotation and institutional money flow as a guide for stock trades.
Purchasing risky investments that present the possibility of large profits, but also pose a high-than-average possibility of loss.
When a company splits its outstanding shares into more shares. The investor’s equity in the company remains the same, and the share price of the owned is one-half the price of the stock on the day prior to the split.
Stage I Trend
The highly speculative early period of an upward trend. The immediate trend at this time is flat or sideways.
Stage II Trend
The period of an upward trend immediately after a breakout from support or resistance zones. The period of time where investors buy into a stock hoping the early price surge will continue.
Stage III Trend
The final upward thrust of an upward trend when everybody that wants to be in the stock now is. This is usually the beginning of the end of the upward trend.
Stage IV Trend
The final period of the upward trend where the stock begins to test support zones and fails to break resistance zones, resulting in a sideways movement of the stock.
An oscillator that measures overbought and oversold conditions in a stock over time.
Ownership of a corporation indicated by shares, which represent a piece of the corporation’s assets and earnings.
A person registered with the CFTC who is employed by and solicits business for a commission house or futures commission merchant.
A corporation’s purchase of its own outstanding stock, usually in order to raise the company’s earnings per share.
A document representing the number of shares of a corporation owned by a shareholder.
The payment of a corporate divided in the form of stock rather than case; often used to conserve cash needed to operate the business. Stock dividends are not taxed until sold.
Formal organizations approved and regulated by the SEC that are made up of members who use the facilities exchange certain common stocks.
An index such as the Dow Jones Industrial Average that tracks the performance of a basket of stocks.
Also called the equities market.
Occurs when a firm issues new shares of stock and in turn lowers the current market price of the stock to a level that is proportionate to pre-split prices.
A letter designation assigned to securities and mutual funds traded on U.S. financial exchanges.
A stop order designating a price limit. Unlike the stop order, which becomes a market order once the stop is reached, the stop-limit order becomes a limit order.
Stop Loss Order
An order to sell a stock when the price falls to a specified level.
An order to buy or sell at the market when a definite price is reached, either above (on a buy) or below (on a sell) the price that prevailed when the order was given.
A purchase or sale executed under a stop order at the stop price specified by the customer.
An upward or downward trend that becomes steeper as buying or selling activity increases in the stock. This usually serves to extend the current trend even higher in the short term.
The rate at which winning trades make money. This is correlated with drawdown rates to identify reward: risk profiles and appropriate position sizes in specific trades.
Support (see Price Floor)
Price zone at which a security tends to stop falling because demand begins to outweigh supply.
Letters used to identify companies on the exchanges.
The price an investor hopes a stock will reach in a certain time period.
Security analysis that seeks to detect and interpret patterns in past security prices.
Analysts who use mechanical rules to detect changes in the supply of and demand for a stock in order to capitalize on the expected change.
Information that confirms or supports trading signals. Oscillators such as MACD and Stochastics are examples of effective technical indicators.
Threshold Trading Method
A systematic approach to identifying entry and exit points in stock trades.
Refers to the minimum change in price a security can have either up or down.
A method for identifying breakthroughs of support and resistance zones. Once a stock has broken a support or resistance zone, waiting 1-3 days to see if the stock holds the new higher price can provide confirmation of the move.
An order that becomes a market or limited price order, or is cancelled at a specific time.
The price paid for a security, plus the commission and any accrued interest owed to the seller (as with a bond).
Total Dollar Return
The dollar return on a nondollar investment, including the sum of any dividend/interest income, capital gains or losses, and currency gains or losses on the investment.
In performance measurement, the actual rate of return realized over an evaluation period.
Total sales and other revenue for the period shown.
The total number of shares or contracts traded on national and regional exchanges in a stock, bond, commodity, future, or option on a certain day.
An oral (or electronic) transaction involving one party buying a security from another party. Once a trade is consummated, it is considered final. Settlement occurs 1-5 business days later.
Individuals who take positions in stock investments with the objective of making profits. Traders take proprietary positions in which they seek to profit from the directional movement of prices or spread positions that can be held for either the long term or short term.
The buying and selling of securities.
Teach Me to Trade’s proprietary software for watchlist management and stock research and analysis.
Costs of buying and selling securities, including commissions, slippage and the bid/ask spread.
The long-range direction of a security’s price, charter by drawing a line connecting the highest prices the security has reached and another line connecting the lowest prices at which the security has traded over the same period.
The difference between the high and low prices traded during a period of time.
A set of predetermined, customized rules that must be followed on each and every trade you place.
Teach Me to Trade’s proprietary software which can be used to find stocks throughout the market that meet the requirements of a variety of technical trading scenarios.
An indication of a buying or selling opportunity. The Threshold Trading Method uses breakouts through support and resistance zones as primary trading signals.
A holistic view of the trading process that encapsulates trading rules, fundamental, technical and intermarket analysis, and money management techniques to increase the odds of success over time.
The number of shares transacted every day. Because there is a seller for every buyer, trading volume is half of the number of shares traded.
A stop loss order that trails the progress of an upward trending stock. It helps to preserve profit while also providing downside protection.
The delivery of a security by a seller, and its acceptance by the buyer.
Short and long-term bonds issued by the Treasury Department and backed by the full faith of the U.S. government. Treasury yields are commonly used to track fluctuations in interest rates.
The general direction of the market
Trendless (see Sideways Trend)
A horizontal price movement within a narrow price range over an extended period of time, creating the appearance of a relatively straight line on a stock’s price graph.
A technical chart line that depicts the past movement of a security, and that is used to help predict future price movements.
When a security appreciates at a slower pace than the overall performance of the market.
A stock price perceived to be too low, as indicated by a particular valuation model. For instance, a company’s stock price may be considered cheap if the company price-earnings ratio is much lower than the industry average.
Shares authorized in a corporation’s charter, but not issued.
A cash account held at a brokerage firm.
Market indication that securities, or the market in general, is doing well in volume trading.
A plus tick; a price movement in the upward direction. A trade occurring at a price higher than the previous trade.
Raising the quality rating of a security because of new optimism about the prospects due to tangible/intangible factors. This can increase investor confidence and push the price of the security up.
The amount by which analysts or investors expect the price of a security may increase.
An upward turn in a security’s price after a period of falling prices.
Upward direction in the price of a stock, bond, or commodity future contract or overall market.
The top range of a technical oscillator such as MACD or Stochastics.
The comparison of technical signals and indicators to ensure that the majority of them are pointing in the same direction; information that confirms your opinion of a buying or selling opportunity.
The low point at the end of an economic contraction until the start of an expansion.
A determination of the value of a company’s stock based on earning and the market value of assets.
An element in a model; variables change through time and are not constant.
A measure of risk based on the standard deviation of the asset return. A variable that appears in option pricing formulas where it denotes the volatility of the underlying asset return from now to the expiration of the option.
The daily number of shares of a security that change hands between a buyer and a seller.
A method for identifying breakouts through support and resistance zones. Volume Filtering refers to waiting for an increase in buying or selling volume to support the breakout you are observing.
Generic term for the security industry firms that buy, sell, and underwrite securities.
A list of securities selected for special attention as potential investments.
A market with few buyers and many sellers, and a declining trend in prices.
A portfolio that includes a variety of securities in order to approximate the overall market risk. The unsystematic risk of each security is diversified throughout the portfolio.
A highly volatile environment in which a stock experiences severe fluctuations on both the upside and downside. Traders will sometimes get stopped out of these trades only to see the stock continue to rally higher after they have exited the trade.
A special dividend declared at the end of a fiscal year that usually represents higher-than-expected company profits.
The period beginning at the start of the calendar year up to the current date.
The percentage rate of return paid on a stock in the form of dividends.
A stock research and analysis firm that publishes reports on a variety of financial data for the entire range of the stock market.
A price level of support or resistance for a stock. Looking for breakouts through support and resistance zones provides opportunities to buy stocks at the early stage of new rallies.