Stock Terms to Know

Question 1

When a company’s board of directors decides to give a portion of its earnings back to its shareholders:

Answer 1

dividend

Question 2

A strategic move done by the company’s board of directors to issue more shares of stock to the public:

Answer 2

stock split

Question 3

If a company did a seven to one (7:1) stock split, what does this mean?

Answer 3

It means that for every ONE share of the stock that you owned prior to the split, you’d now have seven, e.g. So, if you owned 100 shares prior to the split, you’d now have 700.

Question 4

____ are directional patterns that show supply and demand in stocks.

Answer 4

Trends

Question 5

The number of shares that are actually able to be traded in an open market A.K.A. the amount of shares that ANY ONE in the general public can buy or sell at any given time:

Answer 5

float (A.K.A. “free” float)

Question 6

The TOTAL number of shares that a company has issued, which includes the float AND restricted shares held by private investors, which can only be liquidated with special permission:

Answer 6

shares outstanding

Question 7

Mark Zuckerberg, CEO of Facebook, has to be transparent when selling his Facebook shares because of ___, which prevents stock manipulation and prevents insiders from getting out of an investment that they know is bound to fail.

Answer 7

The Securities Act of 1933

Question 8

The value of the companies outstanding shares represented in dollars, which is calculated by multiplying the current stock price by the number of shares outstanding. This is considered to be the market’s estimate of a company’s value:

Answer 8

market capitalization

Question 9

Market capitalization FORMULA:

Answer 9

outstanding shares X current stock price

e.g. 100,000 outstanding shares X $10/share= $1 million market capitalization

Question 10

For intraday trading, ___ timeframes are more useful to gauge the current stock’s volume.

Answer 10

smaller (e.g. 1 min, 5 min, 15 min, hourly)

Question 11

The average amount of shares that are traded per day of a security:

Answer 11

average volume

Question 12

The amount of shares that are owned by large institutions, such as investment banks, insurance companies, mutual funds, hedge funds, etc.:

Answer 12

institutional ownership

Question 13

True of False: If you have a low float stock with a high institutional ownership, then institutions can flash orders and highly manipulate the price. Therefore, making it much more risky to trade. Using hard stop losses are greatly needed when trading stocks with a high institutional ownership.

Answer 13

True

Question 14

When companies report their after tax net income, which tends to be quarterly:

Answer 14

earnings dates (When earnings expectations are positive, the stock will generally be bullish. When actual earnings are reported lower than forecasted, the stock will generally be bearish. Earnings can be some of the toughest trading sessions–therefore, many people avoid them. Options can be a good way to minimize risk and still trade earnings plays).

Question 15

True or False: When a stock releases its earnings, it tends to lead to severe swings in stock prices because traders and investors tend to speculate.

Answer 15

True (A lot of the movement in price will happen before regular market hours, which can cause the stock to “gap” up or down. These moves can lead to very violent moves up or down. Because of this, traders like to take a position based on what they project the earning to be in order to exploit it and make a profit. This is where understanding sectors analysis can be important).

Question 16

Buying back borrowed securities in order to close out an open SHORT position at a profit or a loss. It requires purchasing the same security that was initially sold short and handing back the shares initially borrowed for the short sale.

Answer 16

short covering (This type of transaction is referred to as “buy to cover”)

Question 17

SEC acronym:

Answer 17

U.S. Securities and Exchange Commission

Question 18

An independent federal government regulatory agency responsible for protecting investors, maintaining fair and orderly functioning of the securities markets and facilitating capital formation:

Answer 18

U.S. Securities and Exchange Commission (SEC)

Question 19

Areas on a chart where the price of a stock moves SHARPLY up or down with little to no trading in between. As a result, these assets show a gap in normal price pattern. Traders can interpret and exploit these for profits:

Answer 19

Gaps/gappers

Question 20

An area of the economy in which businesses share the same or a related product or service. It can be thought of as an industry or market that shares common operating characteristics–the overall group/category a stock falls into.

Answer 20

Sector (Dividing the economy into different sectors allows for more in depth analysis of the economy as a whole. We want to look at the performance of a sector in relation to individual stock prices in order to quickly evaluate how strong or weak the stock is before trading it).

Question 21

True or False: If a stock has a high institutional ownership, low float and low volume, its an unpredictable trade.

Answer 21

TRUE

Question 22

The market for a stock is said to be ____ if the shares can be rapidly sold and the act of selling has little impact on the stock’s price.

Answer 22

liquid (This generally translates to where the shares are traded and the level of interest that investors have in the company)

Question 23

A stock’s VOLATILITY usually ___ BEFORE a company reports earnings.

Answer 23

INcreases

Question 24

When a stock moves up or down during after hours trading:

Answer 24

gap

Question 25

A technical indicator used in the analysis of financial markets. It is intended to chart the current and historical strength or weakness of a stock or market based on the closing prices of a recent trading period:

Answer 25

relative strength index (RSI)

Question 26

A person who is paid to help another person or organization to sell good or services. They pretend to have no association with the seller/group and gives onlookers the impression that he/she is an enthusiastic customer:

Answer 26

shill

Question 27

___ is the same thing in reverse in regards to buying/selling for profit. As the stock depreciated from where you entered the position, the more profit you make.

Answer 27

Shorting (E.g. if you sell short at $10, and the stock price drops down to $5, you make $5 once you leave the short position).

Question 28

When the highs are consistently making lower highs and lows are making lower lows:

Answer 28

downtrend

Question 29

When the highs are consistently making higher highs and lows are making higher lows:

Answer 29

uptrend

Question 30

In a ____triangle, demand decreases and the horizontal support shows where the price does NOT want to go below.

Answer 30

descending

Question 31

In a ___ triangle, the demand INcreases and horizontal resistance shows where the price does NOT want to go above.

Answer 31

ascending

Question 32

An ARITHMETIC moving average calculated by adding recent CLOSING prices and then dividing that by the number of time periods in the calculation average:

Answer 32

simple moving average (SMA)

Question 33

A WEIGHTED moving average (WMA) that gives more weighting/importance, to recent price data than the simple moving average (SMA) does. It is more sensitive/reactive to the temporary price changes in comparison to SMA because it responds more quickly to recent price changes. The formula for calculating it just involves using a multiplier and starting with the SMA:

Answer 33

exponential moving average (EMA)

Question 34

The price that people are willing to buy at:

Answer 34

bid (bid= BUYERS; If you want to sell the stock immediately, you can only sell on the bid to a buyer; if you want to short the stock immediately, you can only short on the bid to a buyer)

Question 35

The price people are willing to sell at:

Answer 35

ask (ask= SELLERS; If you want to buy the stock immediately, you can only buy on the ask from a seller; if you want to buy the stock back immediately, you can only buy from a seller on the ask)

Question 36

The gap (difference) between the bid and the ask prices of a stock.

Answer 36

spread (A.K.A. bid-ask spread)

Question 37

True or False: Once you are in a short, you can only get out at the ask; and when you are in a long, you can only get out at the bid.

Answer 37

True

Question 38

Describes the degree to which an asset or security can be quickly bought or sold in the market. The more buyers and sellers (participants), the more liquidity that there is:

Answer 38

liquidity (The more people that are willing to buy and sell, the smaller the spread usually is; Traders like liquidity because it provides plentiful opportunity to enter/exit the trade at desired prices)

Question 39

The measure of how quickly and by how much a stock price moves. It usually goes hand in hand with low float and higher than average volume:

Answer 39

volatility (When a stock is volatile, it moves up and down quickly and by a lot, so it can be difficult to manage risk because of how quickly price changes are occurring).

Question 40

This indicator depicts the total number of a security being traded within a certain timeframe. It shows how much buying/selling market participation is occurring:

Answer 40

volume

Question 41

____ are depicted by taking high and low points on a chart and marking the key ratios horizontally to produce a grid. The horizontal lines are used to identify possible price reversal points.

Answer 41

Fibonacci retracement levels

Question 42

The 3 key Fibonacci ratios:

Answer 42

23.6%, 38.2% and 61.8%

Question 43

A complex mathematical theory that depicts naturally occurring patterns in nature. Since trading is the representation of mass human psychology, these tools can assist in identifying natural areas where the likelihood of certain things happening are greater.

Answer 43

Fibonacci

Question 44

This indicator is most useful for determining market participation at a certain price and is a good representation of a support/resistance point:

Answer 44

VWAP (volume-weighted average price)

Question 45

Technical analysis is used for:

Answer 45

Gaining visual representation of supply and demand levels

Question 46

What does the UPPER wick of a chart candle indicate on a negative (RED) candle?

Answer 46

The high price for that time increment

Question 47

Why would a trader look at MACD (moving average convergence/divergence) before entering a trade?

Answer 47

To determine if there is a short term change in price direction. (But, because the MACD is comprised of moving averages, the indicator still lags the price event like any other moving average.)

Question 48

A ___ order is an order to buy/sell a stock at a specific price or BETTER.

Answer 48

limit (A BUY limit order can only be executed at the limit price or LOWER, and a SELL limit order can only be executed at the limit price or HIGHER. However, a limit order is NOT guaranteed to execute)

Question 49

A ___ order is a buy/sell order to be executed immediately at the current market price. As long as there are willing sellers/buyers, the orders are filled. It is the simplest of the order types.

Answer 49

market (Market orders will always fill, so it’s a guaranteed entry).

Question 50

Pre-market trading hours:

Answer 50

0400-0930 EST

Question 51

Post-market trading hours:

Answer 51

1600-2000 EST

Question 52

A ___ order is an order to buy/sell a stock once the price of the stock reaches a specified price known as the ____ price. When the price is reached, it becomes a market order.

Answer 52

stop/stop-loss order (A BUY stop order is entered at a stop price above the current market price)

Question 53

A BUY stop order is entered at a stop price ____ the current market price.

Answer 53

ABOVE

Question 54

If you’re trying to buy a $30 stock and the stock ha a $0.30 spread, and your stop loss is $0.50 from your desired entry, what order type should you use?

Answer 54

limit order

Question 55

If you are currently long 100 shares of the stock XYZ and you want to liquidate your position, will you click on the bid or the ask if you want to get out instantly?

Answer 55

bid (Because I’m the seller, so I need a buyer…bid=BUYER)

Question 56

If you are currently short 100 shares of the stock XYZ and you want to liquidate your position, will you click on the bid or the ask if you want to get out instantly?

Answer 56

ask (Because I’m the buyer, so I need a seller…seller=ASK)

Question 57

What do trend lines show us?

Answer 57

Supply and demand imbalances causing support and resistance levels.

Question 58

Evaluating a trading system and determining what needs to be improved upon in order to increase profits:

Answer 58

back testing

Question 59

A purchasable equity stake in a company:

Answer 59

a stock

Question 60

Tools that allow us to filter through thousands of stocks in the stock market based on criteria that we select as traders in order to find the best possible trade opportunities, since when we trade a certain system, we look for certain types of setups and need to find stocks that are going to provide good opportunities:

Answer 60

scanners

Question 61

A ___ is an options contract that gives the owner the right, but NOT the obligation, to sell a certain amount of the underlying asset, at a set price within a specific time. The buyer of a ___ option believes that the underlying stock will DROP below the exercise price before the expiration date.

Answer 61

put

Question 62

A ___ option gives the holder the right to buy a stock.

Answer 62

call

Question 63

A ___ option gives the holder the right to sell a stock.

Answer 63

put

Question 64

Buying or selling: puts is betting that a stock price will stay above a certain price. This is BULLish behavior.

Answer 64

Selling

Question 65

Buying or selling: puts is betting that a stock price will fall below a certain price. This is BEARish behavior.

Answer 65

Buying

Question 66

A ___ is a significantly large limit sell order placed at any price level, which can likely cause the price to drop substantially. They can be placed and removed continuously on the order book by whale for price manipulation.

Answer 66

sell wall (A buy wall is the opposite)

Question 67

The ___ technical chart pattern is a universal sign of strength of a stock because it is considered a bullish signal extending an uptrend and is used to spot opportunities to go long.

Answer 67

u-shaped A.K.A.. cup and handle

Question 68

Buying calls is bearish or bullish?…Selling calls is bearish or bullish.

Answer 68

bullish…bearish

Question 69

The ___ measures the change in prices paid by consumers for goods and services. It reflects spending patterns.

Answer 69

consumer price index (CPI)

Question 70

A mega cap stock is a value of:

Answer 70

$200 billion and greater

Question 71

A big cap stock is a value of:

Answer 71

$10 billion, but less than $200 billion.

Question 72

A mid cap stock has a value of:

Answer 72

$2-10 billion (The largest publicly traded companies fall within this range and are known as “blue chip” companies, such as GE, Walmart)

Question 73

A small cap stock has a value of:

Answer 73

$300 million, but less than $2 billion.

Question 74

A micro cap stock has a value of:

Answer 74

$50 million, but less than $300 million.

Question 75

A nano cap stock has a value of:

Answer 75

LESS than $50 million.

Question 76

Betting on the stock price going down is known as:

Answer 76

shorting

Question 77

In Fibonacci, the “golden ratio” is at the ___ level, which is the level that the stock will most likely pull down to.

Answer 77

61.8

Question 78

The ___ Fibonacci level is also known as the reversal level.

Answer 78

50

Question 79

The ___ Fibonacci level is the SECONDARY level where the security CAN continuing moving upwards.

Answer 79

38.2

Question 80

The ___ Fibonacci level is the FIRST level that the security will hit on the retracement. If it bounces off of this level and continues making new highs, this indicates the strength of the security because it is reacting off of the first level and continuing to move up higher.

Answer 80

23.6

Question 81

A minor pullback or change in the direction of a security, which can be seen within the trend. This most frequently occurs after impulsive moves, as the market “takes a breather”.

Answer 81

retracement

Question 82

A trend-following MOMENTUM indicator that shows changes in direction. It can be used as SUPPLEMENTAL evidence of entry-exit points of a trade based on the level of bullish/bearish momentum:

Answer 82

MACD (moving average convergence divergence)

*momentum: the strength or force that something has when it is moving.

Question 83

A breakthrough in this indicator shows greater buying than selling.

Answer 83

VWAP

Question 84

This “lagging” indicator is used to determine entry/exit points for a trade by focusing on price and volatility (while ignoring a lot of other relevant information) based on oversold/overbought conditions:

Answer 84

bollinger bands (Are more narrow during consolidation and the stock is overextended when trading outside of the bollinger bands)

Question 85

When a stock’s trading range is in a more narrow channel:

Answer 85

consolidation

Question 86

True or False: Moving averages are good for estimating long-term analysis.

Answer 86

True

Question 87

___ catalyzes movements in a stock/security.

Answer 87

Market participation

Question 88

A period of sustained increases in the prices of stocks, bonds or related indexes. Usually involves rapid or substantial upside moves over a relatively short period of time. It will typically follow a period of flat or declining prices. This type of price movement can occur during either a bullish or bearish market.

Answer 88

rally

Question 89

This MOMENTUM indicator compares the magnitude of recent gains to recent losses in an attempt to determine oversold and overbought conditions of a stock. Large rallies and drops in prices may affect it, by creating false buy/sell signals, so it is NOT used alone, but as a supplemental indicator combined with other indicators:

Answer 89

RSI (relative strength index)

Question 90

RSI (relative strength indicator), ranges from ___.

Answer 90

0-100

Question 91

When evaluating RSI, a stock is considered to be overBOUGHT as it approaches ____, which may indicate that it is overvalued and may have a pullback/reversal.

Answer 91

70

Question 92

When evaluating RSI, a stock is considered to be overSOLD as it approaches ____, and therefore likely to reverse.

Answer 92

30

Question 93

___ are a visual depiction of volatility. When the market is volatile, they are wider and move further away from the average and contract during LESS volatile conditions, moving closer to the average. If the stock price is outside of them, this is an overextended state.

Answer 93

bollinger bands

Question 94

True or False: With MACD, when the two lines cross, there is a temporary change in direction.

Answer 94

True

Question 95

___show four price points (open, close, high, and low) of a specific period of time within the stock chart and therefore, determine possible price movement based on past patterns.

Answer 95

candlesticks

Question 96

___ depict four price points (open, close, high, and low) of a specific period of time within the stock chart and therefore, determine possible price movement based on past patterns.

Answer 96

candlesticks

Question 97

The study of historic price movements in order to make accurate decisions of what the market MAY do next:

Answer 97

technical analysis

Question 98

A red candlestick is a representation of a closing price, within a specific time period, that ____ from it’s opening price.

Answer 98

decreased

Question 99

A green candlestick is a representation of a closing price, within a specific time period, that ____ from it’s opening price.

Answer 99

increased

Question 100

___ are big moves within a trend that break into new highs or lows.

Answer 100

Impulsive moves

Question 101

___ represents a price point that an asset struggles to fall below over a given time period, and therefore, is likely to be supported by or “bounce up” from that price level.

Answer 101

support (support level)

Question 102

___ represents a price point that an asset has had trouble exceeding within a given time period, and therefore, is likely to be rejected at that price level.

Answer 102

resistance (resistance level)

Question 103

___ and ___ are areas in the market that price is likely to react from.

Answer 103

support, resistance

Question 104

Support and resistance levels are useful for these 3 reasons when trading:

Answer 104

1. To identify possible reversals
2. For entry points into a trend continuation model/pattern or trending market.
3. To help determine stop and target prices.

Question 105

A ___ refers to prices reversing direction after a break and returning to the breakout level to see if it will hold.

Answer 105

retest

Question 106

The ____ strategy occurs when an asset makes a bullish or bearish breakout and then retests the previous resistance or support and then continues moving in the original trend.

Answer 106

break and retest

Question 107

A ___ occurs when a margin account runs low on funds, usually because of a losing trade, which consequently, demands for additional capital or securities to bring the account up to the minimum maintenance margin. Brokers may force a trader to sell assets, regardless of the market price, to meet “it” if the trader doesn’t deposit funds.

Answer 107

margin call

Question 108

The___ indicator depicts the average movement of price of the last 14 candles in order to stay in line with the volatility of a market, currency pair or timeframe. It adds up the price movement in total (the total amount of “pips” [percentage in point/price interest point] that each candle moved DIVIDED by 14).

Answer 108

Average True Range (ATR)

Question 109

The 3 ways that moving averages can be used in short-term trends:

Answer 109

1. To help define trends
2. As an area of value (ONLY using the 20, 50 and 200-period moving averages–because these 3 are the most commonly used by traders worldwide, so, you are aligning with them and the price will be increased if longing)
3. As a trailing stop (Can better increase profitability of [R:R] because may capture better targets of the trend).

Question 110

___ help to clarify what security prices are actually doing.

Answer 110

Indicators

Question 111

Any price movement that occurs over a few hours or days:

Answer 111

short-term trend

Question 112

When combined with support/resistance structure, higher timeframe trend, etc. the ____ indicator may be useful in trading reversals, WHEN: (1) at a previous level of MAJOR resistance (2) at an overbought scenario (RSI >70) and (3) RSI divergence is present (price is at higher HIGHS and RSI is at lower HIGHS to make an engulfing candlestick pattern).

Answer 112

RSI

Question 113

The 3 ways that candlestick patterns can be used:

Answer 113

1. To identify reversals
2. To provide clarity on market sentiment
3. For entry into trend continuations

Question 114

The GREEN ___ candle is a huge bullish sign of buying pressure because market sellers pushed the price all the way down, BUT, market buyers came in and took control, pushing the price all the way back up near the highs, and bullish buying pressure is LIKELY to occur within the market.

Answer 114

38.2% candle (In order to OBJECTIVELY identify these candles, use a fib retracement from swing low to swing high. If the entire body is above the 38.2%, it is this candle type). If it is located at the top of an uptrend AT a previous resistance level, it is a possible entry point for long due to a possible breakout.)

Question 115

True or False: Unless there are rules for them, candlestick patterns are subjective. But, in order to have consistency in trading, you must be objective.

Answer 115

TRUE

Question 116

The RED ___ candle is a huge bearish sign of selling pressure because market buyers pushed the price all the way up, BUT, market sellers came in and took control, pushing the price all the way back down near the lows, and bearish selling pressure is LIKELY to occur within the market.

Answer 116

38.2% (In order to OBJECTIVELY identify these candles, use a fib retracement from swing high to swing low. If the entire body is below the 38.2%, it is this candle type). If located at the top of an uptrend, it MAY be the sign of a reversal. If occurred in a downtrend on a pullback, may be a sign of trend continuation.

Question 117

An ___ candle has a larger body than AND is the opposite color of the previous candle.

Answer 117

engulfing

Question 118

A ___ candle is when the candle to the right (of two candles) has closed below the low of the previous candle. It identifies selling pressure.

Answer 118

close below

Question 119

A ___ trader trades companies based on fundamental analysis, which examines corporate events such as actual or anticipated earnings reports, stock splits, reorganizations, or acquisitions.

Answer 119

fundamental (Most are actually swing traders since changes in corporate fundamentals typically require several days or even weeks to produce a price movement sufficient enough for the trader to claim a reasonable profit.)

Question 120

A ___ trader is an individual who makes dozens or hundreds of trades per day in an attempt to “scalp” a small profit from each trade by exploiting the bid-ask spread.

Answer 120

scalper

Question 121

A ___ trader seeks stocks that are moving significantly in one direction in high volume, attempting to ride the trend to the desired profit.

Answer 121

momentum

Question 122

A ___ trader focuses on charts and graphs. They watch lines on stock or index graphs for signs of convergence or divergence that might indicate buy or sell signals.

Answer 122

technical

Question 123

A ___ trader is a type of fundamental trader whom hold their positions longer than a single day.

Answer 123

swing

Question 124

A ___ candle is when the candle to the right (of two candles) has closed above the low of the previous candle. It identifies selling pressure.

Answer 124

close above………………………………

Question 125

The average movement of price over a certain period of time, which is represented by a line. It is a good objective way to help define trends–in short-term trends, if price is trading above it, a highly volatile uptrend is present and vice versa for a downtrend:

Answer 125

Moving average ( [e.g. The 20-period moving average is the closing price of the last 20 candles DIVIDED by 20] Would buy during an uptrend and…………………… ).

Question 126

With MACD, when the ___ line crosses the ___, this usually means a price INCREASE.

Answer 126

blue, orange
…………………………………………………………………..
BUT, at that specific timeframe/candlestick???

Question 127

___ refers to the difference between the expected price of a trade and the price at which the trade is executed. It can occur at any time, but, is most prevalent during periods of higher volatility when market orders are used.

Answer 127

Slippage

Question 128

True or False: Traders can use limit and stop-limit orders to prevent trades above or below a set price and avoid slippage. Stop-loss orders can also be used to minimize slippage when a stock’s price is moving unfavorably. It’s also important to avoid trading during major news events, as these can be prime opportunities for slippage.

Answer 128

True.

Question 129

A low ___ may create a scenario where it is more difficult to enter/exit a trade due to low market participation.

Answer 129

average volume