A Glossary of All the Terms You Need to Know in Trading (P-S)

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Are you ready for more in 2020? Have you started working on your goals?

Here are the most important trading terms (from P to S) which will help you towards your trading goals.

In case you missed the earlier parts of this glossary, you can find A-C, D-F, G-L, M-O here.

P

Penny stocks (aka pink sheet stocks): Stocks that are priced at $5 or less. Such stocks tend to have a small market capitalization and low trading volume which makes it riskier than larger companies with a larger trading volume.

Pivot points: An indicator which helps to tell the trend of a chart based on the timeframe selected. This indicator also helps to predict the crucial price points which could act as support and resistance.

Monthly pivot points shown on the chart of Johnson & Johnson

Portfolio: The group of assets (physical, intangible, and financial) held by a trader or trading company.

Position (or open position): Market commitment held by the trader.
A long position means I am long in the stock I had bought.
A short position means that I am in short selling the stock.
Eg. I have bought shares of Apple. This means I have a long position in Apple.
On the other hand. I have a short position in Boeing. This means that I am short selling Boeing.

Position trading: A trading strategy which has a horizon of between 2 weeks and several months.

R

Rally: A sustained increase in the price of a stock.

A rally in Target’s share price.

Range: A boundary where prices fluctuate within.

Relative Strength Index (RSI): An indicator which notes the momentum of a stock.
A high value notes strong momentum.
Read more about the RSI and how it works.

Resistance: The zone where prices face a halt in an upward move.
Learn more from this article.

Reversal: A change in price direction.

Reverse stock split: A stock consolidation which consolidates the number of shares every shareholder has. This is usually done to increase the price of the stock.
Eg. In a 1 to 5 stock split, 1 share becomes 5. In a reverse stock split, 5 shares become 1, potentially increasing the share price by about 5 times.

Rights issue: Issuance by the listed company to shareholders to purchase additional shares at a discount. Shareholders who choose not to participate in this rights issue will have their holdings diluted by the increased number of shares in the market.

Risk to reward ratio: The amount of risk per share divided by the amount of reward per share.
Read here to get a complete understanding of risk to reward ratio.

S

Sectors: Categories which listed companies fall under.
Eg. Consumer Discretionary, Consumer Staples, Technology, Utilities.

Sell to close: Selling a stock to close out your open position of that stock.
Eg. I had bought shares of Facebook last week. I had just sold all of them today. This is sell to close.

Sell to open: Selling a stock to initiate or open a position of a stock.
Eg. I had just sold Netflix short. This is sell to open.

Chart of Netflix

Share buy back: The purchase of a company’s shares by the same company.

Short covering: The purchase of the stock which I have sold short to close this position.
See “Sell to close” above.

Short selling: Borrowing shares of a listed company to sell, expecting prices to fall. Purchase the shares (short covering) to return and pocket the price difference.

Chart of PCAR.

Simple moving average (SMA): A moving average indicator which takes the average of prices in the period defined by the trader.
Spot the difference between a SMA and EMA.

Slippage: The difference in the actual purchase or sale price and the price of the stock at that point of time.

The price of HOLX is $53.175. However if you were to purchase its shares now, you will have to pay $53.18 per share. .
If you were to sell its shares now, you will only get $53.17 per share.

Stock split: The splitting of the current number of shares. This increases the number of shares which shareholders will own and decreasing the price of each share proportionally.
Eg. In a 1 to 2 stock split, 1 share becomes 2.  The price for each share is expected to drop by half.

Stop loss: A price level which a trader sets to close his/her position. Read to find out how to utilize a stop loss well.

Support: The zone where prices face a halt in a downward move.
Learn more from this article.

Swing trading: A short term trading strategy which usually lasts for a couple of hours to a couple of weeks.

There is a lot to trading proficiently. This journey does not have to be confusing and tedious. Jay can help you. Find out now!