Understanding what you are doing when it comes to day trading is obviously going to be a useful attribute, but it will also help if you can get a handle on all the relevant terms that you are likely to come across as an active investor.
Seeing the feedback on a site like timothysykes.com and noting what traders are up to, can give you a good insight, and once you are fully versed on the sort of language that you are going to encounter, it might help to make you feel more at home as a day trader.
Full of jargon
As you might expect from an industry with so many technical aspects attached to it, financial markets and day trading is an arena that is absolutely full of jargon that is commonplace to experienced investors, but more than a little confusing to newbies.
Some of the basic terms that you need to get to grips with include ask and bid.
Ask refers to the price that a seller is willing to get matched for, and the lowest ask price is the one that you will find is most commonly referenced. The Bid price refers to the price that a buyer is willing to pay, and the highest bid price is the one that you will see most commonly referenced.
You might also hear someone talking about candlesticks and covering.
A candlestick chart is used to provide an illustration in the form of a chart, where each candle represents the open and close, together with the high and low point for a stock. It makes it easy to see the scope of movement using a candlestick chart and might allow you to gauge a suitable entry point of you are thinking about a trade.
If you are covering, you will be buying back shares that were sold short.
Are you going to go short or are you flat?
In basic terms, when you go short on a stock, you have sold something with the view to buying it back later and hopefully making a profit in the process.
The general mindset of investors is to buy and their line of thinking is to buy at say $10 for example, and then sell the stock when it reaches $15, or whatever your chosen target price is.
Going short, means that you are employing the opposite strategy, but you need to be aware that there are rules surrounding short selling of stocks, which you need to abide by in order to stay on the right side with your trading strategy.
If you hear a trader describes their position as flat, this means that they currently have no trading positions.
It can also be a term that is used to describe a scenario where a trader has closed out their positions for the day and not managed to make either a profit or a loss of any note. There will be days when you break even and get little or no reward for your efforts, or you can’t find any worthwhile trading opportunities, so be prepared for a few flat days in your trading career.
Caitlin Morrison is a day trader and a stay at home mom. She shares her experiences and tips as a day trader on a range of websites from mommy sites to personal finance.
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