Swing Trading Terminology
Here are some of the most popular Swing Trading terms used by short term traders.
1. ADX – Abbreviation for Average Directional Index.
2. Ask – The best listed offer to SELL a certain security.
3. ATR – Abbreviation for Average True Range.
4. Bar chart – Also referred to as OHLC. Simple charting method using vertical “bars” to document price action for a specific time interval.
5. Bid – The best listed offer to BUY a certain security.
6. Buy Stop – An order to buy a security above the current price. Activated once the price reaches your buy price.
7. Buy to Cover – An order used to close out (some or all) of a SHORT position.
8. Candlestick – or Japanese Candlestick. Very popular method of charting used by traders and investors today. Price action is depicted as a “candlestick” which shows the open, high, low, close and range of a security over a specific time period.
9. Down trend – Identified by price making a series of LOWER highs and LOWER lows.
10. EMA – Abbreviation for Exponential Moving Average.
11. ETF – Exchange Traded Fund – Actively traded security that tracks an index or group of stocks.
12. Extended – Term used to describe when a security has moved too far (either up or down) too fast.
13. Limit order – An order used to buy or sell a set number of shares or contracts at a specific price or better.
14. LONG – Term used by traders or investors that own a security and will profit if price increases.
15. Market order – An order to BUY or SELL a security immediately at the best available price.
16. Pull back – Described as a non-dominant move after a price move in the direction of a trend. Same as Retrace (below).
17. Relative strength – Term used to describe a situation where one security or index is stronger than another.
18. Relative weakness – Term used to describe a situation where one security or index is weaker than another.
19. Retrace – Described as a non-dominant move after a price move in the direction of a trend.
20. RSI – Abbreviation for Relative Strength Index.
21. Sector – A group of stocks in the same industry (i.e. airlines, semi conductors, energy).
22. Sell Stop – An order to SELL a security below the current price. Activated once the price reaches your sell price.
23. SHORT – The opposite of LONG (see above) or “going long”. Short sellers profit if the security goes down in price.
24. SMA – Abbreviation for Simple Moving Average.
25. Stop loss order – An order placed to buy or sell a security at a specific price to limit a trader's loss on a position. Used at a price level that tells the trader he/she is wrong and the position is not moving in their favor.
26. Trailing stop – An order placed that “trails” an open position. Can be set as a limit or market order. Several methods are used by traders to determine where and when to place a trailing stop.
27. Trend line – Used to visually establish a trend on a price chart. For an UP trend, drawn by connecting the lowest low of 2 price bars where the second is higher than the first. Reverse the procedure for a DOWN trend.
28. UP trend – Identified by price making a series of HIGHER highs and HIGHER lows.
29. Volume – The total number of shares or contracts traded for a specific security over a specific time period.
By no means is the list of Swing Trading Terms above a complete or exhaustive list. It should, however, give you a BASIC understanding of the terminology used by short term traders and active investors.