Day Trading is the equivalent to learning a new language, vocabulary is the first step to comprehension. Without learning the vocabulary, traders won't know what they are seeing. To place a name on an observation and being able to apply it to an action, will help you enhance understanding about what the market is attempting to tell you.
We present to you the beginner vocabulary for day trading:
Bull market: a market where prices are rising, and investors are optimistic.
Bear market: a market where prices are falling, and investors are pessimistic.
Volatility: the degree of fluctuation in the price of a security or market.
Trend: the direction in which a market or security is moving.
Resistance: a price level at which a security or market has difficulty breaking through.
Support: a price level at which a security or market is likely to find buyers.
Breakout: when a security or market breaks through a resistance or support level.
Consolidation: when a security or market is trading within a narrow range.
Pullback: when a security or market retraces part of its recent move.
Reversal: when a security or market changes direction.
Gap: a difference between the closing price of a security on one day and the opening price of the same security on the next day.
Bullish: an optimistic outlook on a security or market.
Bearish: a pessimistic outlook on a security or market.
Bull trap: a situation where investors are falsely led to believe that a security or market is rising, when in fact it is falling.
Bear trap: a situation where investors are falsely led to believe that a security or market is falling, when in fact it is rising.
Short selling: the practice of selling a security that the seller does not own, in the hope of buying it back at a lower price.
Leverage: The use of borrowed money to increase the potential return on an investment.
Margin: The amount of money required to be deposited as collateral in order to trade on margin.
Profit Taking: The act of selling a security to lock in profits.
Stop Loss: An order to sell a security when it reaches a certain price, in order to limit potential losses.
Limit Order: An order to buy or sell a security at a specific price.
Market Order: An order to buy or sell a security at the best available price.
Day Trading: The practice of buying and selling securities within the same trading day.
Scalping: The practice of making small, rapid trades in order to profit from small price movements.
Swing Trading: The practice of holding securities for a few days to a few weeks, in order to profit from medium-term price movements.
Position Trading: The practice of holding securities for a longer period of time, in order to profit from long-term price movements.
Technical Analysis: The study of past market data to identify patterns and trends in order to predict future price movements.
Fundamental Analysis: The study of a company's financial and economic data in order to predict its future performance.
Indicator: A mathematical calculation based on historical price and/or volume data, used to predict future price movements.
Moving Average: A technical indicator that calculates the average price of a security over a certain period of time.
Relative Strength Index (RSI): A technical indicator that measures the strength of a security's price movement.
Bollinger Bands: A technical indicator that plots two standard deviations away from a moving average, used to identify overbought and oversold conditions.
MACD: A technical indicator that calculates the difference between two moving averages, used to identify trends.
Divergence: When the direction of a technical indicator differs from the direction of the security's price movement.
Candlestick Chart: A type of chart that displays the opening, closing, high, and low prices of a security over a certain period of time.
Fibonacci Retracement: A technical tool that uses horizontal lines to indicate areas where a security's price may potentially retrace.
Pivot Point: A technical tool that uses the previous day's high, low, and closing prices to calculate potential support and resistance levels for the current day.
Volume: The number of shares or contracts traded during a certain period of time.
Open Interest: The number of outstanding contracts in a particular market.
Risk Management: The process of identifying, assessing, and prioritizing potential risks in order to minimize their impact on an investment.