Trading has its own language. When you are starting out, hearing terms like "going long," "the spread," or "filling a gap" can be confusing. This guide defines the essential terms every beginner needs to know.
Market Direction Terms
Bullish
Expecting prices to rise. A "bull" is someone who believes the market will go up. A "bull market" is a prolonged period of rising prices.
Bearish
Expecting prices to fall. A "bear" expects the market to decline. A "bear market" is a prolonged period of falling prices (typically 20% or more decline).
Sideways (Range-Bound)
When prices move neither up nor down significantly, staying within a defined range.
Memory trick: Bulls attack by thrusting their horns UP. Bears attack by swiping their paws DOWN. This is why rising markets are "bullish" and falling markets are "bearish."
Position Terms
Long
Owning a stock or having bought it. "Going long" means buying with the expectation that the price will rise. If you are "long 100 shares," you own 100 shares.
Short (Short Selling)
Selling borrowed shares with the expectation of buying them back at a lower price. Shorts profit when prices fall.
Flat
Having no position in a particular stock or being entirely in cash.
Position
Your holdings in a particular security. Your position size is how much you own.
Position Examples
"I am long 500 shares of AAPL" = You own 500 Apple shares.
"I am short 200 shares of XYZ" = You have sold 200 borrowed shares.
"I closed my position" = You sold (or bought back) your shares.
Price and Order Terms
Bid
The highest price a buyer is currently willing to pay for a stock.
Ask (Offer)
The lowest price a seller is currently willing to accept.
Spread
The difference between the bid and ask prices. Tighter spreads mean lower trading costs.
Fill
When your order is executed. "My order filled at $50" means you bought or sold at $50.
Slippage
The difference between your expected price and the actual execution price. Usually occurs with market orders during volatility.
Liquidity
How easily you can buy or sell without affecting the price. Liquid stocks have high volume and tight spreads.
Account Terms
Margin
Borrowed money from your broker used to trade. A margin account allows you to borrow funds.
Buying Power
The total amount you can use to purchase securities, including your cash plus available margin.
Equity
The value of your account after subtracting any borrowed money. Equity = Assets - Liabilities.
Margin Call
When your account equity falls below the required minimum, your broker demands you deposit more money or sell positions.
Settlement
The process of completing a trade. Stock trades settle T+1 (one business day after the trade).
Chart and Technical Terms
Support
A price level where buying pressure tends to prevent further decline. Prices often "bounce" off support.
Resistance
A price level where selling pressure tends to prevent further advance. Prices often "reject" at resistance.
Breakout
When price moves above resistance or below support with conviction, often signaling a new trend.
Breakdown
When price falls below a support level, often signaling further downside.
Gap
When a stock opens significantly higher or lower than the previous close, leaving a "gap" in the price chart.
Support and Resistance Example
Stock XYZ has bounced off $45 three times over the past month.
$45 is now considered a support level.
If XYZ breaks below $45, that support becomes resistance.
Trend
The general direction of price movement. An uptrend has higher highs and higher lows. A downtrend has lower highs and lower lows.
Consolidation
When price moves sideways within a range, often after a significant move. Can precede a breakout.
Pullback
A temporary price decline within an uptrend. Often viewed as a buying opportunity.
Rally
A significant price increase, especially after a decline.
Volume Terms
Volume
The number of shares traded during a specific period. High volume confirms price moves.
Average Volume
The typical daily trading volume over a period (often 30 or 90 days).
Relative Volume
Today's volume compared to average volume. 2x relative volume means twice normal trading activity.
Risk and Money Management Terms
Stop Loss
An order to sell when price reaches a certain level, limiting potential losses.
Take Profit (Target)
The price level where you plan to exit a profitable trade.
Risk/Reward Ratio
The potential profit compared to potential loss on a trade. A 1:3 risk/reward means risking $1 to potentially make $3.
Position Sizing
Determining how many shares to trade based on your account size and risk tolerance.
Drawdown
The decline from a peak to a trough in your account value. A 20% drawdown means your account fell 20% from its highest point.
Trading Style Terms
Day Trading
Buying and selling within the same trading day, ending flat by market close.
Swing Trading
Holding positions for days to weeks to capture larger price moves.
Scalping
Making many quick trades for small profits, often holding positions for minutes.
Position Trading
Holding positions for weeks to months based on longer-term trends.
Pattern Day Trader (PDT): Someone who executes 4 or more day trades in 5 business days. PDT accounts must maintain $25,000 minimum equity.
Common Phrases
"Buy the Dip"
Purchasing a stock after it has declined, anticipating a rebound.
"Catch a Falling Knife"
Buying a rapidly declining stock, which can be dangerous if the decline continues.
"Dead Cat Bounce"
A temporary recovery in a declining stock that does not reverse the overall downtrend.
"FOMO" (Fear of Missing Out)
The urge to buy a stock because it is going up and you do not want to miss the move.
"Diamond Hands" / "Paper Hands"
Diamond hands: Holding through volatility. Paper hands: Selling at the first sign of trouble.
"Bagholder"
Someone stuck holding a losing position, often after a stock has declined significantly.
Fundamental Terms
Market Cap
Total value of a company's shares (Share Price x Shares Outstanding).
P/E Ratio
Price-to-Earnings ratio. Shows how much investors pay per dollar of earnings.
EPS
Earnings Per Share. Company's profit divided by number of shares.
Dividend
A payment made by companies to shareholders, usually from profits.
Yield
The dividend expressed as a percentage of the stock price.
See These Terms in Action
Pro Trader Dashboard shows your trading statistics using industry-standard terminology. Track your win rate, risk/reward, drawdown, and more.
Options-Specific Terms
Call Option
The right to buy a stock at a specific price by a certain date.
Put Option
The right to sell a stock at a specific price by a certain date.
Strike Price
The price at which an option can be exercised.
Premium
The price paid for an option contract.
Expiration
The date when an option contract expires.
In the Money (ITM)
An option with intrinsic value. For calls, when stock price is above strike. For puts, when stock price is below strike.
Out of the Money (OTM)
An option with no intrinsic value. For calls, when stock price is below strike. For puts, when stock price is above strike.
Summary
Learning trading terminology is an essential first step in your trading education. These terms will appear constantly in trading discussions, educational content, and on your broker's platform. Bookmark this page and refer back to it as you encounter new terms.
The more you trade, the more natural this vocabulary becomes. Soon you will be talking about support levels, risk/reward ratios, and breakouts without thinking twice.
Continue learning with our guide on common beginner mistakes or read about how to start trading.