Common Stock Trading Terms Every Trader Should Know
Common Stock Trading Terms Every Trader Should Know:
Basic Terminology:* Bid: The highest price a buyer is willing to pay for a stock.* Ask: The lowest price a seller is willing to accept for a stock.* Market Maker: A company that actively buys and sells a stock to provide liquidity and stabilize prices.* Day Trader: A trader who buys and sells stocks within the same day, not holding them overnight.* Swing Trader: A trader who buys and sells stocks with the expectation of making profit over the short term, often holding positions for a few days to weeks.* Position Trader: A trader who holds stocks for a longer term, typically for months or even years.
Technical Analysis:* Support: A price level at which a stock is likely to bounce back after falling.* Resistance: A price level at which a stock is likely to stop rising after climbing.* Zigzag: A price pattern that consists of alternating waves of rising and falling prices.* Moving Average: A line that calculates the average price of a stock over a specific period of time.* Relative Strength Index (RSI): A measure of an asset’s strength compared to its historical price movements.* Moving Average Convergence Divergence: A technical indicator that signals potential trend reversals.
Trading Strategies:
- Buy-and-hold: Purchasing stocks and holding them for a long-term gain.
- Dollar-cost averaging: Investing a fixed amount of money at regular intervals into a stock.
- Fibonacci retracement: A technical analysis technique used to identify potential support and resistance levels based on past price movements.
- Scalping: Trading stocks with the intention of profiting from small price fluctuations within a short time frame.
- Swing trading: Holding trades for a few days to weeks, aiming for profit from short-term price fluctuations.
Other Important Terms:
- Volatility: The degree to which a stock’s price fluctuates.
- Liquidity: The ease with which a stock can be bought or sold.
- Earnings per Share (EPS): Company’s profitability.
- Dividend: Payment made to shareholders from company’s earnings.
- Beta: Measure of a stock’s volatility relative to the overall market.
- Volatility Index: A measure of a stock’s historical volatility.
