Trading Concepts and Terminology

This set of flashcards covers key trading concepts and terminology to aid in understanding financial markets.

Candlestick

A type of chart used to show price movement during a specific time period.

Open

The first price in the candlestick.

Close

The last price in the candlestick.

High

The highest price achieved during the candlestick period.

Low

The lowest price reached during the candlestick period.

Wick

The skinny line on a candlestick showing the high and low prices.

Body

The thick part of a candlestick showing the range between open and close.

Uptrend

A market condition where the price shows higher highs and higher lows.

Downtrend

A market condition where the price shows lower highs and lower lows.

Bullish

An expectation that the price will go up.

Bearish

An expectation that the price will go down.

Support

A price level where the market usually bounces higher.

Resistance

A price level where the market typically sees rejections down.

Breakout

When the price breaks above resistance and continues upwards.

Breakdown

When the price breaks below support and continues downward.

Fakeout

When the price breaks out or breaks down but then reverses quickly.

Bid

The highest price that buyers are willing to pay.

Ask

The lowest price that sellers are willing to accept.

Spread

The difference between the bid and ask price.

Volume

The total number of shares traded over a period.

Liquidity

The ease with which an asset can be bought or sold without affecting its price.

Float

The number of shares available for public trading.

Relative Volume (RVOL)

The current volume compared to average volume.

Entry

The point at which you buy into a position.

Exit

The point at which you sell out of a position.

Setup

A trading pattern or strategy you wait for before entering a trade.

Confirmation

Proof that the trading setup is valid.

Pullback

A brief decline in price before continuing in the direction of the trend.

Reversal

A change in the direction of the trend.

Momentum

The speed and strength of price movement.

Volatility

The degree of variation of trading prices.

Market Order

An order to buy or sell immediately at the current price.

Limit Order

An order to buy or sell only at a specified price.

Stop Loss (SL)

An automatic exit to limit larger losses.

Take Profit (TP)

An automatic exit designed to lock in a profit.

Trailing Stop

A stop loss that moves with the price as it rises.

Position Size

The number of shares you choose to trade.

Risk/Reward Ratio

The ratio of potential loss compared to potential gain.

Max Loss Per Day

The maximum amount you are willing to lose in a day before stopping.

Long

To buy first with the expectation of profiting from rising prices.

Short

To sell first with the expectation of profiting from falling prices.

Cover

Buying back shares to close a short position.