Definitions

Question 1

Stock

Answer 1

Owning a percentage of the company based on the number of shares possessed by the holder relative to the outstanding shares of the company.

Question 2

Small Cap

Answer 2

A stock with a small market capitalization. It’s generally considered to include companies with a market capitalization between $300M and $2B.

Question 3

Micro Cap

Answer 3

Micro Cap regroups companies with a market capitalization between $50M and $300M.

Question 4

Quote

Answer 4

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.

Question 5

Bid

Answer 5

The highest value currently on record that a buyer is willing to pay for a single share of a stock.

Question 6

Ask

Answer 6

The lowest value currently on record that a seller is willing to accept for a single share of a stock.

Question 7

Spread

Answer 7

The difference in price that exists between the bid price and the ask price.

Question 8

Volume

Answer 8

The number of shares being traded for any given stock during the trading session.

Question 9

Liquidity

Answer 9

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.

Question 10

Day range or Price range

Answer 10

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.

Question 11

Volatility

Answer 11

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.

Question 12

Buy

Answer 12

The action of trading money for the ownership of a share.

Question 13

Sell

Answer 13

The action of trading the ownership of share for its monetary value.

Question 14

Short Sell

Answer 14

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.

Question 15

Buy to Cover

Answer 15

The action of buying back borrowed shares at the indicated price.

Question 16

Short Squeeze

Answer 16

An event that forces short sellers to cover for various reasons.

Question 17

Position

Answer 17

The ownership of shares in any given stock.

Question 18

Open position

Answer 18

A position is open when the shares are acquired through the process of buying, or owing shares in the case of a short sale.

Question 19

Close position

Answer 19

A position is closed when the shares are liquidated through the process of selling, or returning shares when buying to cover.

Question 20

Entry

Answer 20

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.

Question 21

Exit

Answer 21

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.

Question 22

Support

Answer 22

A type of trend line above which the price remains for a certain period of time without being crossed.

Question 23

Resistance

Answer 23

A type of trend line below which the price remains for a certain period of time without being crossed.

Question 24

Breakout

Answer 24

What occurs when a resistance line is crossed and the price of a stock increases in a very quick manner.

Question 25

Breakdown

Answer 25

What occurs when a support line is crossed and the price of a stock falls in a very quick manner.

Question 26

Pump and Dump

Answer 26

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.

Question 27

Promotor

Answer 27

An individual or corporation that actively promotes a security with the intent of pumping the stock price to a higher point.

Question 28

SEC Halt

Answer 28

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.

Question 29

Morning Panic

Answer 29

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.

Question 30

Morning Spike

Answer 30

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.

Question 31

Fade

Answer 31

When a stock price slowly decreases from its highs. Usually observed after a spike.

Question 32

Dip

Answer 32

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.

Question 33

Bounce

Answer 33

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.

Question 34

Chasing

Answer 34

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.