Aggressive Order – An aggressive order is one that removes liquidity that is posted on a stock exchange or ECN, to buy or sell. This is also known as taking liquidity. An aggressive order need not be a market order, but it could be. The defining characteristic is that the posted liquidity is removed by the order. This order type is used to improve the ability of the order to be executed over one posted to an exchanges books.
Ask– The ask refers to the asking price of a stock, which is the lowest price at which sellers are willing to sell shares of a stock.
Bid– The bid of a stock is the highest price at which buyers are willing to purchase shares of a stock.
Blotter– A list of each order entered by a trader and each execution that actually transacted. Usually uses a one day time period and is used by traders to review their trading methods.
Book– The book of a stock is the listing of all the shares that are being bid to buy and offered to sell. The book shows all shares on all light pools for a particular stock.
Capitulation– The period of intense selling as long positions rapidly exit, usually marks the bottom of a downward move.
Dark Pool-A dark pool is an electronic exchange which facilitates buying and selling of shares of a stock just like a light pool exchange. A dark does not display the liquidity that is posted to buy and sell within its books. The purpose of this is for large buyers and sellers to have less influence on the price movement of a stock. Dark pools are used mostly be very sophisticated investors. Dark pool volume consists of more than 10% of all trading volumes in the United States.
Day Trading– Day trading is the buying and selling of financial securities for the financial gain of the trader, while typically holding positions for less than a day.
ECN– ECN stands for electronic communications network. This is a purely electronic stock exchange used to connect buyers and sellers of stock shares. The purpose of the ECN is so traders and institutions transacting on the exchange can interact directly with each other, essentially removing the middleman of previous exchanges.
Exchange Traded Fund (ETF) – A fund traded like a stock which tracks an index, asset class, or commodity.
Light Pool (LIT Market)– A light pool refers to any ECN where shares of a stock for purchase and sale are posted publicly, for all those interacting on the exchange to see. This is opposed to a dark pool, which hides all liquidity.
Limit Order– A limit order is an order entered to transact at a specific price. While it is not guaranteed that the order will be transacted, it is guaranteed that it will not transact at any other price.
Long Position– A position is defined as being “long” if the trader owns shares of a stock or security, or has an interest in the price of the security rising.
Market Maker– A market maker is a brokerage who maintains an inventory of shares of a security for which they are the designated market maker. A market maker must offer a certain quantity of shares on both the bid and offer at all times on a stock’s books in order to facilitate an orderly marketplace for traders.
Market Order– A market order is an order type that will remove liquidity posted from the books until the entire order is filled. A market order essentially ensures that an order will get filled, but it is not discriminate with price, and will continue to seek liquidity at higher (or lower) price levels until the order is entirely filled.
Moving Average– A moving average is a common trading indicator used to show trend by smoothing data and to identify areas of support and resistance. Moving average is calculated by averaging the value of a stock over a defined past period. Common time periods used as indicators are 10,15,20,50, and 200, but any time period can hypothetically be used if the trader considers the information valuable.
Offer– An offer is the lowest price at which sellers of a stock are willing to sell shares. It is the same as the asking price of a stock.
Passive Order (fill)– A passive order or fill is a limit order that gets posted to a stock exchange’s books. It does not fill immediately like an aggressive order, because it is adding liquidity to the books instead of removing it. When a passive order gets filled, the fill would be considered passive as well. The advantage of a passive order is that the trader can define the price, the disadvantage is that the order is not guaranteed to be filled.
Price– The price of a stock or other financial security is the current dollar value of one share or unit of the security. Price is normally defined by the last transaction, but also could be quoted by the current bid or offer.
Relative Strength Index – A technical indicator used to determine when a stock is in an overbought or oversold state.
Scalping– Scalping refers to the practice of capturing small price changes in a stock for profit. This strategy is done either many times, or will very large position sizes so even small price movement can create sizable profits.
Series 56– The Series 56 is the FINRA exam required by the SEC for all United States based proprietary traders to trade a proprietary trading account.
Share-A share of stock is represents an ownership stake in a company. A share is what traders buy and sell to take advantage of changes in value.
Short Position– A short position is one in which the trader has an interest in the price of a security going down. A short position in a stock is done by selling shares that the trader does not own, and receiving the value of the sale. A trader would then hope to buy back the same number of shares later at a lower price, and keep difference in value.
Spread– The spread is the difference between the bid and the ask of a stock or other security, and is influenced by a number of factors including stock price, volatility, volume, and market maker activity.
Stock– Stock refers to shares of a company; the ownership of stock denotes ownership in the underlying company.
Strategy– The strategy is the approach that a trader will take in trying to extract profits from the market. There aremany strategies such as scalping, momentum, fading, and pivot strategies.
Stock Option– A right that gives the owner the choice to purchase or sell shares of a stock at a previously agreed upon price at a predetermined future date.
Tape– The tape of a stock is the list of all transactions that take place for that stock. The tape lists time, price, size, and market the execution took place on. By looking at the tape of a stock traders can get an idea of what direction the stock will move in the future.
Trading Hours– Regular trading hours on the New York Stock Exchange take place from 9:30 a.m. to 4:00 p.m. Pre-market trading is open from 4:00 a.m. to 9:30 a.m. and after market trading is open from 4:00 p.m. to 8:00 p.m. Pre-market and after-market trading takes place over electronic exchanges only.
The Stock Market– This is a term for the collective market for the buying and selling of shares of publicly traded companies. The stock market is not a physical location, but a term for the aggregate market of the exchanging of shares of stock for money. The stock market takes place over both various ECN markets and the New York Stock Exchange floor, as well as in hundreds of dark pools.
Trade– A trade is the term for the buying or selling of stock in exchange for money.
Trader (Day Trader)– A trader is a person whose profession is to place trades in the marketplace. A trader can make money either from transacting securities trades for another party, or from buying and selling financial securities himself to capture changes in value. A day trader trades for his own account and takes advantage of short term price movements, normally closing all positions by the end of the trading day.
Volume– Volume is a measure of the quantity of shares exchanged for a particular stock for a chosen period of time.
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