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Day Trading Terms -Learning to Trade

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Algorithmic Trading

The use of computer programs for entering trading orders with the computer algorithm initiating orders or placing bids and offers.

Arbitrage or Arb

Arbitrage is a trading strategy that looks to make profits from small discrepancies in prices. An example would be if there is a futures contract that has a pit traded and electronic market. When prices separate enough arbitrage can occur where you sell the higher priced market and buy the lower priced market until the disparity ceases to exist.

 

Bear, Bearish

A trader who expects a decline in prices. A news item is considered bearish if it is expected to result in lower prices.

 

Breakout Trade

A breakout trade is a trade in which the market is expected to "Break out" of the current trading range or support/resistance levels. Generally there is need of sufficient market momentum and participation for this to work as a trade.

Bull, Bullish

A trader who expects a rise in prices. A news item is considered bullish if it is expected to result in higher prices.

Chart

A Chart is a price chart where the market action is plotted usually on a time basis like 5 minute, daily, weekly.
Here is an example of a chart

 

Contrarian Investing

Contrarian Investing is a trading strategy in which a speculator is anticipating that the market will change course or reverse. As an example if the market is going up a contrarian investor might sell the market at a resistance level expecting the market to turn lower.

Day Trader

A person who buys and sell futures, forex or securities and closes those positions out during the same day.

Day Trading

When a trader buys and sells a futures contract, option or stock within the same day.

 

Elliot Wave

(1) A theory named after Ralph Elliot, who contended that the stock market tends to move in discernible and predictable patterns reflecting the basic harmony of nature and extended by other technical analysts to futures markets; (2) in technical analysis, a charting method based on the belief that all prices act as waves, rising and falling rhythmically..

Fading the market

A counter trend strategy where the trader "fades" or takes the opposite side of current market action. If the Gold Futures are moving higher a trader may "Fade" or sell Gold futures based on any assumption, but more often the belief that the current move is about to end.

High Frequency Trading -HFT Trading

HFT is the use of computer programs called trading algorithms carried out by computer to trade in seconds or fractions of a second. HFT trading relies on super fast computers generally co-located at the trading exchange for low latency.

 

Momentum

Momentum is a strategy that involves trading on news releases or strong movement supported by high volume

News trading

News trading is the type of trading in which a trader reacts or aniticipates information that will drive prices. This information may come in the form of economic reports like the monthly unemploymet report or interest rate decisions from the FOMC to stock earnings

Opening Range 30min, 60 min

These basic concept is that the market will establish significant trading levels within the first 30 and 60 minutes
of a day trading session. These levels will act like a support or resistance level. Traders will generally either trade within the range or look for breakout trades.

Pivot Points

Pivot Points are also know as floor pivots. These are the places where traders expect support and resistance to occur in the market and as such are used as entry and exit points for trades. 

Resistance Level

Resistance Level usually referred to as a Support/Resistance line is an area where the market typically trades to and does not penetrade or it requires sufficient market action to break out of.

 

Scalping

Scalping is a trading strategy which involves selling or buying over a short period of time trying to capture small profits many times

Specualation

Speculation is trading in risky financial transactions attempting to profit from short or medium term fluctuations in the market.

Stop Loss Order

An order placed after entering a trade that defines the trader's risk they are wanting to take on a trade.

Trend Following

Trend following is a trading strategy used to partake in the current momentum of the market in anticipation that this momentum or trend will continue

 

 

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