Quick references for common trading terminologies
Long / Short
Is defined by the trade direction
> Long = when price goes up and you profit from it
> Short = when price goes down and you profit from it.
Bid and Ask
> BID = the price you can sell it at
> ASK = the price you can buy it at
> The difference between the BID price and the ASK (asking) price
> Enter the market now
Pros: You know you will be in the trade
Cons: You might pay a premium as the price goes up or down.
> Enter only if the market comes to your desired price (pullback)
Pros: Enter at cheaper price
Cons: You might miss the move or trade as your trading against current momentum
You only enter if the market moves in your favour (breakout), you get into the trade
Pros: Enter the trade with momentum
Cons: You might enter a false breakout
> It helps you get out of a trade. Risk management. Its your insurance policy if the market drops, you cut you loses.
Pros: Stops further losses
Cons: The market might reverse back and you will lose that position or direction of the market
Elements with the exchange panel (1)
What is a spread – refer the chart below
> The spread term is the difference between the BID price and the ASK price
> Stocks that have large capital, have more liquidity (tighter bidask spread)
> Small cap stocks have less liquidity (larger bidask spread)
> Basically the volume of transactions for that particular stock can be scares or heavy.
Where is the BID and ASK price?
We have the red and green section. The red is the “ASK”ing price (0.86530 cents)The green is the “BID”ing price (0.86185 cents)
The difference in their prices is the spread.
> This is when you borrow from the exchange (stock) and then sell it at a price with the intension of buy the stock back at a lower price.
> Therefore you make money by keeping the difference. Note the stock has to be payed back along with being charged with a fee + interest.>In such cases, you need equity to be able to borrow and sell on the exchange.
> This is when you sell the stock that makes a quick move towards a known resistance where you will sell the stock.
Pump and dump
> This is a common phrase by investors and traders after an asset has inclined strongly with big gains to a point that profit taking is inevitable. Usually such price actions are unexpected by recent trends. Its usually looks like manipulation
Sell the pumb
> This is when you sell the stock that makes a quick upward trend towards a likely resistance level where will sell the stock
Buy the dips
> “Buy the dips ” is a common phrase investors and traders hear after an asset has declined in price in the short-term. Therefore, they are buying when the price drops in order to profit from some potential future price rise. Usually a short-term decline, in repeated fashion.
> This is usually a measured or planed price level which is likely to be in the support range or just below it.
Elements with the exchange panel (2)
When trading, the exchange provides you with the tools to buy and sell the stock. The tool suite general provides you with the options as to how you want to buy and how you want to sell or manage risk. It is probably better to watch the video if you need a demonstration as to what these are:
A market order is an trade order to buy or sell immediately, meaning what ever the price offer is at the time.
In some cases going long or short with this type of order can be bad as you will buy or sell much more than your expectations, especially selling when there is a dump, the order book could be very low prices.
Limit orders set the maximum or minimum price at the time which you are willing to complete the trasanction. Its a fixed price and it could mean you have to wait until the orders (order book) reach your price. In many cases, they might
not hit your price and you miss out.
This is another strategy to stop your losses on a trade.A market stop is basically a stop loss tool where you provide a trigger price (when price hits this level, it triggers the rest of the order) and hence will either buy or sell
what ever the market price is at the time. For low liquidity stock or crypto, this can be dangerous as the next price could be very high or very low.
A stop limit order or stop loss is also another strategy to stopping your losses in a trade, meaning you place an order to limit your losses.
By placing a stop limit, you basically place an order with a trigger price and then a price to either buy at or sell at price (if your are shorting, you buy and if you are longing, you sell). This is usually done so when your not watching your trade, the order is like an insurance policy that you limit your losses. In many cases, you can also use it to get into a trade when not watching.
Its a stop limit that trails price with specific (buffer) settings. It follows price in the trend and updates its stop loss level.
Take profit is an order that you place to (partially) close your position once it reaches a certain level of profit. One can have multiple TP points.
TAKE PROFIT LIMIT
to be provided
Order book or order block is a different way to look at supply and demand. It is the initial opposite move before the trend resumes making new highs or lows.
to be provided
to be provided