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.