Definitions Flashcards
Stock
Owning a percentage of the company based on the number of shares possessed by the holder relative to the outstanding shares of the company.
Small Cap
A stock with a small market capitalization. It’s generally considered to include companies with a market capitalization between $300M and $2B.
Micro Cap
Micro Cap regroups companies with a market capitalization between $50M and $300M.
Quote
The last price at which a security traded. Simply put, it’s the most recent price at which a buyer and seller agreed to make a trade.
Bid
The highest value currently on record that a buyer is willing to pay for a single share of a stock.
Ask
The lowest value currently on record that a seller is willing to accept for a single share of a stock.
Spread
The difference in price that exists between the bid price and the ask price.
Volume
The number of shares being traded for any given stock during the trading session.
Liquidity
A liquid stock is considered to be a stock that has a high volume, or more specifically, a stock that trades a high number of shares during the session. The ideal range is roughly 200k to 2M shares traded per day.
Day range or Price range
The difference in price between the high of day value and the low of day value. This represents how much the stock price has moved during the current session.
Volatility
How often the price of a stock either rises or falls. Volatile stocks are typically considered to have a day range above 15-20% of the stock price.
Buy
The action of trading money for the ownership of a share.
Sell
The action of trading the ownership of share for its monetary value.
Short Sell
Borrowing shares to trade the ownership of those shares for a monetary value. The goal is to sell high (borrow) and buy low (cover) to make a profit.
Buy to Cover
The action of buying back borrowed shares at the indicated price.
Short Squeeze
An event that forces short sellers to cover for various reasons.
Position
The ownership of shares in any given stock.
Open position
A position is open when the shares are acquired through the process of buying, or owing shares in the case of a short sale.
Close position
A position is closed when the shares are liquidated through the process of selling, or returning shares when buying to cover.
Entry
The price at which a position was opened. More specifically, it represents the price paid per share for any given stock causing the position to be opened.
Exit
The price at which a position was closed. More specifically, it represents the price received per share for any given stock causing the position to be closed.
Support
A type of trend line above which the price remains for a certain period of time without being crossed.
Resistance
A type of trend line below which the price remains for a certain period of time without being crossed.
Breakout
What occurs when a resistance line is crossed and the price of a stock increases in a very quick manner.
Breakdown
What occurs when a support line is crossed and the price of a stock falls in a very quick manner.
Pump and Dump
Paid promotions for companies without a real product or any real value for investors. These promotions tend to hike the price before encountering a dramatic drop.
Promotor
An individual or corporation that actively promotes a security with the intent of pumping the stock price to a higher point.
SEC Halt
The temporary suspension of a stock on one or more exchanges. Usually imposed by the SEC when suspicious, unusual or irregular activity is found that needs further verification prior to allowing the stock to continue trading.
Morning Panic
When shareholders mass sell orders to cut their losses following an event that affects the price of the stock negatively and therefore reducing the underlying demand.
Morning Spike
An event market by mass buy orders from interested buyers in order to take profits following an event that affects the price of the stock positively and therefore increasing the underlying demand.
Fade
When a stock price slowly decreases from its highs. Usually observed after a spike.
Dip
A sudden decrease in price value for a given stock following a spike. Usually followed by a recovery increase of the price that may rise or surpass the previous high in some cases.
Bounce
A sudden increase in price value for a stock following a panic. Usually followed by a decrease of the price that may drop or go below the previous in some cases.
Chasing
Attempting to enter a position after the initial momentum has already spiked the stock price dramatically. It’s usually bad practice to chase without a supporting thesis that indicates that the momentum may continue. Chasing a stock frequently results in losses.
