Glossary of Trading Terms

Buy Market Order – An order to buy a contract at the current ask price. There is no guarantee that the order will be filled at that price.

Limit Order – A limit order is an order to buy or sell a contract at a specified price or better. Using a Limit order ensures that the order will only execute at the price you specified or better, however, it does not guarantee that your order will execute.

Liquidity – The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity.

Long Position – Buying a stock or security in hope that the price continues to move upwards. The opposite of a short position or short selling.

Momentum Trading – Momentum traders look to find stocks that are moving significantly in one direction on high volume and try to jump on board to ride the momentum train to a desired profit.

Sell Market Order – An order to sell a contract at the current bid price. There is no guarantee that the order will be filled at that price.

Short Selling – Short selling involves borrowing stock from your broker and selling it in hope of buying the stock back later at a lower price. In the US most stocks are able to be short sold.

Stop Loss – An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a security position.

Stop Limit Order – A Stop Limit order is similar to a stop order in that a stop price will activate the order. However, the stop order becomes a market order when elected, but the stop limit order becomes a limit order.

Stop Order – A Stop order becomes a market order to buy or sell securities or commodities once the specified stop price is attained or penetrated. A Stop order is not guaranteed a specific execution price.

Swing Trading – Swing trading is a style of trading that attempts to capture gains in a stock within one to four days.

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