Lesson 1: Laying the Foundation

Question 1

anything traded in the market (shares, options, futures, etc.)

Answer 1

security

Question 2

buying/selling a security within the same day

Answer 2

day trade

Question 2

the act of buying or selling a security

Answer 2

trade

Question 3

buying a security and holding the position overnight or longer (up to 2 months)

Answer 3

swing trade

Question 4

bias on the stock price rising

Answer 4

long (aka “bullish”)

Question 5

bias on the stock price falling

Answer 5

short (aka “bearish”)

Question 6

an option contract that bets on the stock to rise in price

Answer 6

call

Question 7

an option contract that bets on the stock to fall in price

Answer 7

put

Question 8

when the stock market as a whole is in a trend of increasing prices

Answer 8

bull market

Question 9

when the stock market as a whole is in a trend of decreasing prices

Answer 9

bear market

Question 10

portion of a company you own

Answer 10

shares

Question 11

a portion of a company’s earnings that are paid to shareholders (people that own the company’s stock)

Answer 11

dividends

Note: may be paid annually or quarterly

Note: not all companies pay dividends

Question 12

the number of shares of a security traded during a particular time period

Answer 12

volume

Question 13

analysis that includes a business’ finances, structure, health, and overall well-being on the market

Answer 13

fundamental analysis

Question 14

analysis that uses patterns, volume, and other non-fundamental indicators to identify trends and make predictions on future price action

Answer 14

technical analysis

Question 15

selling shares of a company you don’t own

Answer 15

short selling

Question 16

when a security drops/raises and bounces back in the original direction, similar to a ball being bounced off the floor

Answer 16

bounce

Question 17

when a security rejects off a particular price when going up (think of someone going up for a layup and being rejected)

Answer 17

reject

Question 18

when you buy more of a losing position to make your average price lower

Answer 18

averaging down

Question 19

when a security reverses its trend and direction

Answer 19

reversal

Question 20

when a trade works in our favour

Answer 20

print

Question 21

your demand (think of this as your floor)

Answer 21

support

Question 22

your supply (think of this as your ceiling)

Answer 22

resistance

Question 23

__________ (margin/cash) accounts under $25,000 are restricted to 3 day trades within a rolling 5 (trading) day period. Over $25,000, you are granted unlimited day trades under the PDT (pattern day trader). These accounts also allow you to borrow money and trade on leverage.

Example: If you have a $25,000 account on TD Ameritrade, they offer 4x leverage, giving you $100,000 buying power

Answer 23

Margin

Question 24

____________ (margin/cash) accounts do not have a restriction on how many day trades you can make. You can trade with the funds available in your account until you have used your buying power for the day. Shares take 1-3 days to settle (depending on broker), while options settle overnight.

Example: If you have $1200 in your account, and you buy a TSLA call worth $400, you now have $800 left to trade for the rest of the day. The next morning, the profit or loss you realized on your contract will be available to trade with again

Answer 24

Cash