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Trading > Bootcamp Glossary > Flashcards

Bootcamp Glossary Flashcards

1
Q

Algorithmic Trading

A

Also referred to as algo trading. This style of trading relies on artificial intelligence (AI) programs that identify trades for you based on algorithms. Some programs can even execute the trades for you.

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2
Q

Ask

A

The current lowest recorded price that a trader is willing to accept for a single share of a stock.

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3
Q

Bid

A

The current highest recorded price that a trader is willing to pay for a single share of a stock.

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4
Q

Bid/Ask Spread

A

The difference between the bid and ask price.

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5
Q

Breakdown

A

A stock price that moves below a key support level with increased volume.

See also: ​Support

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6
Q

Breakout

A

A stock price that moves above a key resistance level with increased volume.

See also: ​Resistance

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7
Q

Brokers

A

A broker facilitates the trading of stocks. For the purpose of the 30-Day Trading Boot Camp, we’re talking about online brokerages that allow you to trade penny stocks. It’s important to note that some online brokerages don’t allow you to trade penny stocks. Tim uses E-Trade and Interactive Brokers. He does not have any kind of affiliate relationship with these brokers. In his words: “They suck the least.”

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8
Q

Boxing

A

If you’re boxing a trading position, you’re holding both a long and short position in the same stock. To make it a pure box, you’d be long and short at the same price point. Most traders use different accounts for each position.

Two key reasons traders box are to avoid capital gains or to hedge on an early short.

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9
Q

Candlestick Chart

A

A type of stock chart. Its name comes from the fact that each unit on the chart resembles a candlestick, with a body and wicks. Within each candle, you can find a lot of information. The body represents the difference between the open and close prices. The wicks, or small lines above and below the body, represent the high and low prices. This is Tim’s favorite type of chart.

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10
Q

Catalysts

A

A stock catalyst is any information that can influence a stock’s price. It can pertain directly to a company, the industry, or the world at large.​ ​Examples include press releases, earnings reports, world events, new contracts, and management changes.​

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11
Q

Charts

A

At its most basic level, a stock chart is a visual representation of price and trading volume over time. Stock charts allow you to understand a stock’s price and volume history, key support and resistance levels, and patterns. In real time, the chart allows you to see the price action.

See also: ​Candlestick Charts​, ​Line Charts

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12
Q

Day Trading

A

Day trading refers to buying and selling shares of a stock within a single trading day. Between the time the market opens and closes, a day trader opens and closes trade positions.

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13
Q

Exchange

A

An exchange is a marketplace where stocks (or other financial instruments) are traded. Examples include the New York Stock Exchange (NYSE), Nasdaq, and OTCMarkets.

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14
Q

Fakeout Breakout

A

A stock that seems like it’s breaking out but then fails shortly after. For instance, it might break through a key support or resistance level, but then revert to a previous trading range.

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15
Q

Financing

A

A method of securing financing that companies use when they need cash. It reduces ownership of the company through the sale of stock shares for a specific amount of money. It could be to an active or passive investor. This can result in greater risk for shareholders.

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16
Q

Float

A

Float is the number of shares of a stock available to trade on the open market. The float is calculated by subtracting the number of closely held shares from the total number of shares. Closely held shares include those owned by insiders, employees, and long-term early investors.

See also: ​Float Rotation​, ​Low-Float Stocks

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17
Q

Float Rotation

A

Refers to the rate at which the freely available shares of a stock change hands. This can be determined by comparing float to trading volume.

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18
Q

Forex

A

Forex is short for foreign exchange and refers to trading currencies. The forex market is extremely liquid — trillions of dollars (and other currencies) change hands every day. Traders try to take advantage of currency fluctuations to profit.

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19
Q

Gap Down

A

When a stock’s price goes down preceded by little or no trading after market hours. For instance, if a stock’s price at the market open is lower than the previous day’s close, that’s a gap down.

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20
Q

Gap Up

A

When a stock’s price goes up preceded by little or no trading after market hours. For instance, if a stock’s price at the market open is higher than the previous day’s close, that’s a gap up.

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21
Q

Green

A

We say a stock is “green” on the day when it is up a positive percent compared to the previous close. For example, a stock up 10% on the day is considered green.

See also: ​Red

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22
Q

Hedge Funds

A

Hedge funds are investment funds allowed to make use of complex trading and portfolio management strategies. Hedge funds tend to use sophisticated (and high-risk) strategies like short selling and leveraged trading. Financial regulators don’t allow hedge funds to be marketed to low or average net worth individuals.

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23
Q

High-Frequency Trading

A

Also called HFT trading. This is a type of algorithmic trading where computer programs execute a large quantity of orders based on the current market conditions — often within extremely short time periods.

See also: ​Algorithmic Trading

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24
Q

Hot Keys

A

A combination of keyboard shortcuts that can trigger specific trading actions and be used as a time-saving technique. Often, trading platforms have specific actions associated with specific hot keys. Some programs allow traders to customize the keys.

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25
Q

Investing (Long-Term Investing)

A

Investing involves giving another person or entity money in exchange for a share of profits. Common investments include stocks, bonds, commodities, and real estate. In the stock market, investing is associated with a longer-term approach, where investors hope to profit from the long-term growth of a company. Tim is not an investor. He attempts to profit from short-term price fluctuations by trading penny stocks.

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26
Q

Initial Public Offering (IPO)

A

When a previously private company first issues its stock to the public. To have an IPO on a major exchange, a company has to go through an arduous process with banks, SEC officials, and more to meet established requirements. The requirements are less stringent with penny stocks listed on OTC exchanges.

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27
Q

Large-Cap

A

A​ ​large-cap stock refers to a company with greater than $10 billion in market capitalization.

See also: ​Market Capitalization

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28
Q

Level 2 Data

A

​Level 2 is often called the order book and represents market depth. The left side of the level 2 table shows bid price (high to low), order size, and market maker. The right side shows the ask price (high to low), order size, and market maker.

See also: ​Time & Sales

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29
Q

Leverage

A

Leverage means to borrow capital — most often from your broker — for the purpose of trading shares. For example, a 4:1 leverage account allows you to trade four times the amount in your account. So if you open an account with $5,000 with 4:1 leverage, you can trade using $20,000. ​Tim highly recommends avoiding trading with leverage. ​While profits can be multiplied by using leverage, ​so can losses​.

30
Q

Limit Order

A

Limit orders get filled at your order price or better. For example, if you place a limit order to buy shares at $1, the market maker must fill the order at $1 or lower. If the stock is trading higher than $1, the order won’t be executed.

It works similarly for sell limit orders. If you place a sell limit order at 99 cents, the market maker must fill the order at 99 cents or higher. If the stock is trading below 99 cents, the order won’t get executed. Limit orders are like saying, ​“That’s my price, and I’m sticking to it.”

31
Q

Line Chart

A

A type of stock chart. This is perhaps the most simple and basic chart to view a stock price. The price is plotted along certain points and times on the chart — they connect to form a line.

When enough price points connect, you’ll see a line that zigzags based on the price action. Line charts are simple and easy to read, but advanced traders usually prefer more advanced charts like candlestick charts.

32
Q

Liquidity

A

A stock that is considered liquid has enough trading volume to ensure that you can easily enter or exit a position without too much difficulty.

Tim likes to trade like a ninja — quick and stealthy. There’s nothing worse than holding a position and watching the price either rise (if short selling) or fall (if going long) because you can’t buy or sell.

33
Q

Listed Market / Listed Stocks

A

Listed exchanges include the New York Stock Exchange (NYSE), Nasdaq, and the American Stock Exchange (AMEX). Listed stocks are stocks trading on these exchanges. Stocks on OTC and OTCBB exchanges are not considered listed stocks.

34
Q

Low Float Stocks

A

Stocks with a relatively low float. There isn’t a specific benchmark for what constitutes a low versus high float. Most traders have their own standards — for instance, many traders consider anything under 10 million to be low float.

See also: ​Float

35
Q

Market Capitalization or Company Value

A

This​ ​gives you an overview of how the market currently values a company. It’s the total value of all outstanding shares. To find the market cap, multiply the outstanding shares by the share price. If a company has 10 million shares trading at $1 per share, the market capitalization is $10 million.

36
Q

Market Makers

A

The puppet masters of the stock market. Market makers are the professionals who actually execute your trades. They can potentially have a massive influence over penny stocks.

37
Q

Market Order

A

A market order involves placing an order to buy or sell a stock at the current market price.

With a market order, the moment you put the order through, it’s transmitted and executed fairly instantly at the current price. Even though the time between clicking “buy” or “sell” and execution could be a matter of moments, the price could be different from the price that you saw when you executed. Because this leads to the potential for manipulation, Tim never uses market orders.

See also: ​Limit Order,​ S​top/Loss Order

38
Q

Mid-Cap

A

A​ ​mid-cap stock refers to a company with a market capitalization between $2 billion and $10 billion.

See also: ​Market Capitalization

39
Q

Morning Panic

A

A chart pattern featuring a penny stock that’s risen dramatically in the past couple of days or weeks, then experiences a price drop. Often, it’s not because of bad news, but due to overextension and/or run-of-the-mill price pullbacks that trigger stop-loss orders.

When this occurs, Tim’s goal is to dip buy the stock, hoping to gain profits before the stock bounces back. The morning panic dip buy is one of Tim’s favorite patterns.

40
Q

Mutual Fund

A

An investment made up of funds that have been collected from a variety of different investors. Yep, it’s all in the name!

This money is managed by a professional manager who invests the money in a variety of different assets. It might include stocks, bonds, commodities, and real estate. Mutual funds can’t be traded on exchanges, but rather you buy into a fund through a broker.

41
Q

Offshore Brokers

A

Brokers with offices located outside the U.S. These brokers do not fall under U.S. regulations and, therefore, are able to engage in sketchy practices. Tim recommends avoiding using offshore brokers. FINRA and SEC rules are put in place to protect you.

42
Q

Options

A

Options are a specific type of security called a derivative. When you buy options, you have the right, but not the obligation, to buy or sell securities at a pre-arranged price on a specific date. Options are contracts to buy or sell without obligation.

Options writers, on the other hand, ​are obliged to purchase or sell if the options get exercised. Option writers earn a premium by giving the buyer the right to buy or sell. ​

43
Q

OTC

A

OTC stands for over the counter. OTCMarkets provides a platform for trading nano- and micro-cap companies. OTC companies are generally too small to trade as ‘listed’ stocks. They’re not held to the same financial disclosure regulations as companies listed on the NYSE or Nasdaq.

44
Q

Overtrading

A

Trading too often and without discipline. This is a common problem with newbie traders. Remember, sometimes the best trade is no trade at all.

45
Q

Pattern Day Trader Rule (PDT)

A

Under FINRA rules, a trader must maintain a minimum equity of $25,000 on any day the customer day trades. The required minimum equity must be in the account prior to any trading activities. Under the PDT rule, accounts below the $25,000 threshold can only make three day trades per rolling five-day period.

The PDT does not apply to cash accounts. However, SEC rules call for a three-day settlement period. So if you make a trade, it will take three days from the time you sell (long) or cover (short) for the funds to be available. ​

46
Q

Patterns

A

A pattern is a regularity in the world around you. In penny stock trading, patterns refer to common and observable price action depicted on a stock chart. Common stock chart patterns include cup and handle, breakout, and breakdown. Common penny stock patterns include the supernova, the morning panic, and the crow.

47
Q

Penny Stocks

A

Penny stocks are low-priced stocks trading for under $5 per share. Some penny stocks go through price fluctuations which, technically speaking, make them non-penny stocks. (i.e., they trade for over $5 per share for a period of time.) ​

48
Q

Penny Stock Framework

A

A seven step framework that accurately predicts the direction of ALL penny stocks. ​

49
Q

Pre-market/Afterhours Trading

A

Premarket and after-hours trading occurs during hours directly before and after the market’s regular hours of 9:30 a.m. to 4 p.m. Eastern, Monday through Friday, except for holidays.

The times may vary depending on your broker. Premarket trading often runs from as early as 4 a.m. until the market open, and after-hours trading usually runs until 8 p.m. (all times Eastern).

50
Q

Prop Firms

A

Proprietary trading firms. Traders trade using the firm’s money. Some prop firms — especially sketchy offshore firms — require the trader to put up a certain amount of their own capital. The profits (or losses) are then split based on percentages.

51
Q

Red

A

We say a stock is “red” on the day when it is down or negative compared to the previous close price. For example, a stock down 10% from the previous close is considered red.

See also: ​Green

52
Q

Resistance

A

When a stock’s price settles into an area where sellers emerge, preventing additional price increases.

For example, say a stock is trading at $4 a share. Resistance might be $5. At that point, a lot of people might want to sell. If a stock breaks through that resistance barrier, it’s called a breakout.

See also: ​Support

53
Q

Scanner

A

A stock scanner is a tool to filter or screen potential stocks to trade. It searches the markets based on criteria you set to find trades that fit your desired setups. ​StocksToTrade​ is Tim’s favorite scanner. This revolutionary tool has hundreds of scanners, social media filters, real-time charts, news feeds, and Tim’s secret weapon to finding the hottest penny stocks before anyone else: ​The Breaking News Room.

54
Q

SEC Filing

A

An SEC filing refers to formal documents submitted by companies to the U.S. Securities and Exchange Commission. Public companies are obligated to file regularly.

55
Q

Sector

A

Stocks are placed in sectors representative of the overall economic sectors, for example, the industrial sector or the consumer discretionary spending sector. There are 11 sectors and numerous sub-sectors.

56
Q

Short Selling

A

Short selling is when a trader borrows shares of a security from their broker, sells the shares, and then buys back shares to ‘cover’ the short. Short sellers bet against the stock.

Here’s a short-selling example: Let’s say you short sell 1,000 shares at $1 per share. The $1,000 goes into your trading account. Then the price drops to 50 cents per share. You cover at 50 cents per share, buying to cover, at a cost of $500. You keep the difference, less borrow fees, as profit. If you cover a short at a higher price than when you sold, you lose money.

Short selling can be a viable strategy, but it’s ​very risky.

57
Q

Short Squeeze

A

A phenomenon where too many short sellers trigger a price increase on a stock. In order to close out short positions, sellers are forced to cover. This creates a ton of demand, which actually increases the price. The more sellers who try to cut their losses, the bigger the squeeze. ​

58
Q

Slippage

A

The difference between the anticipated price of a trade and the price at which it’s actually executed. It can happen at any time, but it’s even more pronounced in a volatile market, especially when many market orders are being used. ​

59
Q

Small-Cap

A

A​ ​small-cap stock refers to a company with less than $2 billion in market capitalization.

See also: ​Market Capitalization

60
Q

Stock Shares

A

Shares in a company. When you buy shares, whether as a trader or a long-term investor, you’re buying a piece of the company.

61
Q

Stop/Stop Loss

A

A stop order is an order type that’s only executed once the stock price exceeds a certain level that you set. This can help you maximize profits or cut losses.

A stop-loss order is triggered if the stock fails to rise and goes below the level you set. This helps you avoid having to be glued to your computer watching every tick of the stock. Tim doesn’t use stop or stop-loss orders. Instead, he uses “mental” stops and executes via limit order.

See also: ​Limit Order,​ Market Order

62
Q

Supernova

A

A chart pattern featuring a stock that gradually increases over weeks, then suddenly experiences a price explosion, then fizzles out and fades away. Its name is inspired by supernovas in outer space.

This pattern creates opportunities to buy on the way up and to short sell on the way down. This is Tim’s all-time favorite pattern. He even has an ​alert program​ specifically dedicated to this pattern.

63
Q

Supply vs. Demand

A

The stock market is governed by supply and demand. Typically, the greater the demand and the lower the supply, the higher a stock price will go. The inverse is also true: the higher the supply and the lower the demand, the lower the stock price will go.

64
Q

Support

A

This is​ ​when a stock’s price settles into an area where buyers emerge, preventing additional price drops. For example, say the support is $5. The price won’t go below support — otherwise, it’s bearish.

See also: ​Resistance

65
Q

Sympathy Play

A

A sympathy play is when an indirect catalyst affects stock prices. One company’s news or earnings can pump up the prices of other stocks within the sector … even if the event doesn’t affect them directly. Sympathy plays create opportunities for traders within a sector or around a theme.

66
Q

Time & Sales

A

Commonly referred to as the tape. It is a real-time display of the share volume, price, direction, date and time for each trade. Think of it as a real-time transaction history.

See also: ​Level 2 Data

67
Q

Volatile Stocks/Volatility

A

Volatility is a measure of variation in trading price over time. The bigger the price swing, the higher the volatility. As Tim says, ​“I prefer to trade highly volatile stocks. As long as you manage your risk and focus on clear patterns, there’s better potential for profits.”

68
Q

Volume

A

This is the number of shares traded for the day. The higher the volume, the more shares being traded.

69
Q

Warrants

A

A stock warrant gives you the right to purchase a stock at a specified price within a specified period of time. A key difference between warrants and stock options is that warrants are issued directly by the company.

70
Q

Watchlist

A

A watchlist is a short list of stocks you’re keeping tabs on to see if they fit a particular strategy or setup. You can’t effectively watch all of the thousands of stocks out there at once — a watchlist is where you narrow it down to the most promising potential trades.

71
Q

Wick

A

On a candlestick chart, wicks are the high and low, with the ends of the bar forming the open and the close.

See also: ​Candlestick Chart

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