Ask Price
The lowest price a seller is willing to accept for a security. Also known as the offer price.
Day Trading Glossary
Essential trading terms and definitions every day trader should know. Use the search below to quickly find specific terms.
Bid Price
The highest price a buyer is willing to pay for a security.
Bid-Ask Spread
The difference between the bid price and ask price. Tighter spreads indicate higher liquidity.
Breakout
When price moves above resistance or below support with increased volume, potentially signaling a new trend.
Candlestick Chart
A price chart showing open, high, low, and close prices for each period as "candles." Popular for technical analysis.
Day Trading
Buying and selling financial instruments within the same trading day, closing all positions before market close.
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of company profitability.
Fibonacci Retracement
Technical analysis tool using horizontal lines to indicate support/resistance at key Fibonacci levels.
Gap
A price level where no trading occurred, appearing as a blank space on a chart. Often occurs between trading sessions.
Leverage
Using borrowed capital to increase potential returns. Also increases potential losses proportionally.
Limit Order
An order to buy or sell at a specific price or better. May not execute if price isn't reached.
Liquidity
The ease of buying or selling a security without affecting its price. High volume stocks have high liquidity.
Long Position
Buying a security with the expectation its price will rise. Opposite of short position.
Margin
Borrowed money from a broker to purchase securities. Requires maintaining minimum account balance.
Market Order
An order to buy or sell immediately at the best available current price. Guarantees execution but not price.
Moving Average
Technical indicator showing average price over a specific time period. Common periods: 50-day, 200-day.
Pattern Day Trader (PDT)
The former U.S. designation for certain frequent day traders in margin accounts. FINRA’s replacement intraday margin standards became effective June 4, 2026, with a broker transition period through October 20, 2027.
Pip
Smallest price move in forex trading. Stands for "percentage in point" or "price interest point."
Position Sizing
Determining how much capital to allocate to each trade based on risk tolerance and account size.
Relative Strength Index (RSI)
Momentum oscillator measuring speed and magnitude of price changes. Range: 0-100. Above 70 = overbought, below 30 = oversold.
Resistance
Price level where selling pressure prevents further upward movement. Psychological ceiling.
Risk-Reward Ratio
Comparison of potential profit to potential loss on a trade. Good trades have favorable ratios (e.g., 2:1 or 3:1).
Scalping
Strategy of making numerous small trades to profit from tiny price movements. Requires intense focus and quick execution.
Short Position
Selling borrowed securities with expectation of buying back at lower price. Profits from price decline.
Slippage
Difference between expected trade price and actual execution price. Common in fast-moving or illiquid markets.
Stop-Loss Order
Order that sells a security when it reaches a specific price, limiting potential losses.
Support
Price level where buying pressure prevents further downward movement. Psychological floor.
Technical Analysis
Study of past price and volume data to predict future price movements using charts and indicators.
Tick
Minimum price movement of a security. For stocks over $1, typically $0.01.
Trailing Stop
Stop-loss order that moves with price, protecting profits while allowing upside potential.
Trend
General direction of price movement: uptrend (higher highs/lows), downtrend (lower highs/lows), or sideways.
Volatility
Degree of price variation over time. Higher volatility = larger price swings and greater risk/opportunity.
Volume
Number of shares or contracts traded during a specific period. Confirms strength of price movements.
VWAP
Volume Weighted Average Price. Shows average price weighted by volume. Used to assess trade quality.
Whipsaw
When price quickly moves in one direction then reverses, causing losses for traders on both sides.
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Educational Purpose Only
This glossary is for educational purposes only. Understanding these terms does not qualify you to trade. Always consult qualified financial professionals. See our full disclaimer.