Day Trading Glossary

A

After-hours trading

Trading after the 16:00 ET close, usually until 20:00 ET. Many companies report earnings just after the close, so the first reaction often happens here. Volume is thin and spreads are wide, so prices can jump around more than they do in the regular session.

Ask (offer)

The lowest price at which someone is currently offering to sell. If you buy with a market order you usually pay the ask.

ATR (Average True Range)

The average size of a stock's daily range, counting overnight gaps, usually over the last 14 days. It tells you what a normal day looks like for that stock: a $2 move is huge for a stock with a $0.50 ATR and ordinary for one with a $5 ATR. Traders use it to judge whether a move is unusual and to place stops outside normal noise.

Average daily volume (ADV)

The average number of shares traded per day over a lookback period, such as 30 days (ADV30). It is a quick test of liquidity. PremarketPlay only considers stocks averaging at least 500,000 shares a day.

B

Bear, bearish

Expecting prices to fall. A bearish trader leans short; a bear market is a long, broad decline. A bearish bias in the Playbook means the premarket evidence points downward.

Bias

The direction you lean before the open, based on the evidence you have. In the PremarketPlay Playbook every published stock has a bullish or bearish bias with the reasons shown. It describes premarket conditions; it is not an instruction to trade. How bias is assigned.

Bid

The highest price someone is currently willing to pay. If you sell with a market order you usually receive the bid.

Breakdown

Price falling below a support level, such as the premarket low or the previous day's low, often on rising volume. Short sellers watch breakdowns as possible entries.

Breakout

Price pushing above a resistance level, such as the premarket high or the opening range high, often on rising volume. A breakout that quickly reverses back under the level is called a failed breakout.

Broker

The firm that holds your account and sends your orders to the market. Brokers set their own rules for premarket and after-hours trading, margin, short selling and fees, so check yours before you trade.

Bull, bullish

Expecting prices to rise. A bullish trader leans long; a bull market is a long, broad advance. A bullish bias in the Playbook means the premarket evidence points upward.

Related: Bear, bearish, Long, Trend · Back to top

Buying power

How much your broker will let you buy right now: your cash plus any margin available. A margin account can show buying power well above its cash balance, which magnifies both gains and losses.

C

Candlestick

A chart bar showing the open, high, low and close for one period, such as one minute or one day. The thick body spans the open and close; the thin wicks reach the high and low. A green (or hollow) candle closed above its open, a red one below.

Related: Timeframe, Volume, Reversal · Back to top

Catalyst

The news or event behind a move: earnings, guidance, an FDA decision, an analyst rating change, a deal, an offering and so on. A stock moving on real news tends to keep attention longer than one moving on nothing. Each stock in the PremarketPlay Playbook has a short catalyst summary in our own words, or a plain note when no company news was found. How catalysts are written.

Consolidation

A period when price moves sideways in a tight range after a move, as buyers and sellers pause. Traders often watch for a breakout or breakdown from the range.

Related: Breakout, Support, Resistance · Back to top

D

Day trading

Opening and closing positions within the same session, so nothing is held overnight. Day traders focus on stocks that are moving and liquid today, which is why they build a premarket watchlist of Stocks in Play.

Day-2 (second-day) play

A stock that made a big move yesterday and is watched today for continuation. In PremarketPlay a Day-2 stock qualifies when yesterday it gapped and closed near the extreme of its range in the gap direction, and today's premarket isn't moving against it.

Dollar volume

Shares traded multiplied by price. It shows how much money changes hands: 1 million shares of a $2 stock is far less money than 1 million shares of a $200 stock. PremarketPlay requires at least $10 million in average daily dollar volume.

E

Earnings report

A company's quarterly results, usually released before the open or after the close. Results and guidance that differ from expectations are among the most common reasons a stock gaps.

Economic calendar

The schedule of government and industry data releases, such as jobs, inflation (CPI) and Fed decisions. Many U.S. releases come out at 08:30 ET and can move the whole market in the premarket.

EMA (Exponential Moving Average)

A moving average that gives more weight to recent prices, so it reacts faster than a simple moving average. Intraday traders often watch the 9 and 20 EMA on short timeframes.

ETF (Exchange-Traded Fund)

A fund that trades on an exchange like a stock. SPY tracks the S&P 500 and QQQ tracks the Nasdaq-100, so traders use them as a quick read on the overall market.

Extended hours

Premarket and after-hours trading together: any trading outside the 09:30–16:00 ET regular session. Liquidity is lower, spreads are wider, and many brokers accept only limit orders.

F

Fill

The execution of your order. A partial fill means only some of your shares traded. The price you were filled at can differ from the price you saw, especially in fast markets.

Float

The number of shares available for the public to trade, excluding shares held by insiders and other locked-up holders. A low-float stock can move very fast because a small amount of buying or selling shifts the price.

G

Gap (gap up, gap down)

When a stock trades well above (gap up) or below (gap down) the previous close, leaving an empty space on the daily chart. Gaps usually follow news released outside regular hours. Premarket gappers are one of the two setups PremarketPlay looks for.

Related: Gap fill, Gap and go, Premarket · Back to top

Gap and go

A gap that keeps moving in the gap direction after the open instead of filling. Traders often look for it with an opening range breakout in the gap direction.

Gap fill

When a gapping stock trades back to the previous day's close, closing the gap. Some gaps fill within minutes, others never do.

I

Intraday

Within a single trading day. An intraday chart shows bars of minutes or hours rather than days.

Related: Day trading, Timeframe · Back to top

K

Key levels

Prices where a stock is likely to react because many traders are watching them: the premarket high and low, the previous day's high, low and close, round numbers and recent highs and lows. The Playbook lists the key levels for every stock.

L

Limit order

An order to buy at or below, or sell at or above, a price you set. You control the price but may not get filled. Most brokers require limit orders in premarket and after-hours trading.

Related: Market order, Stop-loss, Fill · Back to top

Liquidity

How easily you can trade a stock without moving its price. Liquid stocks have heavy volume and tight spreads; illiquid ones have thin volume, wide spreads and more slippage.

Long

Owning shares, or leaning toward a rise. You go long by buying and profit if the price goes up.

M

MAE (Maximum Adverse Excursion)

The furthest price moved against a position, or against a reference entry, before the end of the period. PremarketPlay reports MAE from the 09:35 reference to the close, in dollars, percent and R. See the outcome rules.

Margin

Money borrowed from your broker to buy securities, using your account as collateral. In the U.S., Regulation T generally lets you borrow up to half the cost of a stock purchase. You need a margin account to sell short. Margin magnifies losses as well as gains, and you pay interest on what you borrow.

Margin call

A demand from your broker to add money or reduce positions because your account equity has fallen below the required minimum. If you don't act, the broker can close positions for you at the market price.

Related: Margin, Buying power · Back to top

Market capitalisation (market cap)

Share price multiplied by shares outstanding: the market value of the whole company. Small caps are roughly $300 million to $2 billion, large caps above $10 billion. Smaller companies tend to move more on news.

Related: Float · Back to top

Market context (risk-on, risk-off)

What the overall market is doing, which affects every stock. PremarketPlay labels the premarket Risk-on when SPY and QQQ are both up 0.30% or more, Risk-off when both are down 0.30% or more, and Mixed otherwise.

Market order

An order to buy or sell immediately at the best available price. It almost always fills, but in fast or thin markets the price can be much worse than the last quote.

MFE (Maximum Favourable Excursion)

The furthest price moved in your favour after a position, or a reference entry, before the end of the period. It shows the best that was available, not what a trader actually captured. PremarketPlay reports MFE from the 09:35 reference to the close.

Momentum

The strength and speed of a price move. Momentum traders buy what is rising fast (or short what is falling fast) and expect the move to continue in the short term.

Moving average

The average closing price over a set number of bars, recalculated with each new bar, drawn as a line on the chart. It smooths out noise; price above a rising average suggests an uptrend.

O

Opening bell (the open)

09:30 ET, when the regular U.S. session starts with each exchange's opening auction. The first minutes are usually the most volatile of the day.

Opening range

The high and low of the first minutes after the open, for example the first 5 or 15 minutes. Its high and low often act as levels for the rest of the day.

ORB (Opening Range Breakout)

A setup that enters when price breaks out of the opening range, with a stop on the other side of the range. PremarketPlay's outcome grading uses the 09:30–09:34 five-minute candle as a fixed reference in a similar way, for measurement only.

P

Pattern day trader (PDT) rule

A U.S. rule for margin accounts: four or more day trades within five business days (if they are more than 6% of the account's trades) flags the account as a pattern day trader, which must then keep at least $25,000 in equity to keep day trading. FINRA has proposed changing this rule, so check your broker's current requirements.

Related: Day trading, Margin, Broker · Back to top

Penny stock

A low-priced stock, usually under $5, often thinly traded and volatile. PremarketPlay excludes stocks below $5 and OTC-traded stocks.

Position size

How many shares you trade. A common method is to decide the dollar amount you will risk, then divide it by the distance to your stop: risking $100 with a stop $0.50 away gives 200 shares.

Premarket

Trading before the 09:30 ET open. Most U.S. brokers offer it from 04:00 ET, some earlier. Volume is lighter than in the regular session, but news released overnight shows up here first, which is why traders build their watchlists in the premarket. PremarketPlay records every 1-minute premarket bar from 04:00 ET and freezes the Playbook at 09:00 ET.

Premarket high and low

The highest and lowest prices traded before the open. They are among the most watched levels after 09:30: a move through the premarket high is a classic breakout signal for a gap-up stock.

Related: Premarket, Key levels, Breakout · Back to top

Previous day high, low and close (PDH, PDL, PDC)

Yesterday's regular-session high, low and closing price. The previous close is the base for measuring a gap, and the high and low often act as resistance and support.

Pullback

A short move against the main trend before it resumes, such as a dip in an uptrend. Many traders prefer entering on a pullback to a level instead of chasing the move.

R

R (R-multiple)

A result measured in units of initial risk. If you risk $1 per share (entry to stop) and make $2, that is +2R; losing the full risk is −1R. It lets you compare trades of different sizes and prices. PremarketPlay grades outcomes in R from a fixed 09:35 reference.

Relative volume (RVOL)

Volume compared with normal for the same stock, often at the same time of day. RVOL of 3 means three times the usual volume. High relative volume is a sign that a stock is in play.

Resistance

A price area above the current price where selling has tended to stop rises. A clean break above resistance can turn it into support.

Related: Support, Breakout, Key levels · Back to top

Reversal

A change in direction, such as a gap-up stock that fails at the open and trades lower all day. Unlike a pullback, a reversal does not resume the earlier trend.

Related: Trend, Gap fill, Pullback · Back to top

Risk/reward ratio

The potential gain of a trade compared with what you risk. Risking $1 to target $3 is 1:3. A good ratio lets you be wrong more often than right and still come out ahead.

RTH (Regular Trading Hours)

The main U.S. stock session, 09:30 to 16:00 ET on trading days, with early 13:00 ET closes on some days around holidays. Most volume happens in RTH, and the official open, high, low and close come from it.

S

Scalping

A very short-term style aiming at many small gains, holding for seconds to minutes. It depends on tight spreads and fast execution.

Short (short selling)

Selling borrowed shares, hoping to buy them back cheaper later. You profit if the price falls. You need a margin account and shares available to borrow (a locate), and the potential loss is unlimited because price can keep rising.

Short interest

The number of shares currently sold short, often shown as a percentage of the float. It is reported twice a month, so it lags.

Short squeeze

A sharp rise driven by short sellers buying back shares to cut their losses, which pushes the price higher still. Stocks with high short interest and a low float are the most prone to it.

SIP (consolidated feed)

The Securities Information Processor: the official feed that combines quotes and trades from every U.S. exchange. Single-exchange feeds see only part of the volume. PremarketPlay uses SIP data for all prices and volume.

Related: Volume, Premarket · Back to top

Slippage

The difference between the price you expected and the price you got. It grows with fast moves, wide spreads and large orders in thin stocks.

Related: Fill, Market order, Liquidity · Back to top

Spread (bid-ask spread)

The gap between the bid and the ask. Liquid stocks often trade with a one-cent spread; thin stocks, and most stocks in the premarket, have wider spreads, which is a hidden cost every time you trade.

Related: Bid, Ask (offer), Liquidity · Back to top

Stock in play

A stock with unusual activity today, usually from news, a large gap and heavy premarket volume, that is likely to attract traders and move more than normal. Finding the day's Stocks in Play is the main premarket task for many day traders, and it is what the PremarketPlay Playbook does each morning. How they are selected.

Stop-loss

A price at which you exit a losing trade, often placed as a stop order with your broker. A stop order becomes a market order when the price is reached, so in fast markets or across gaps it can fill worse than the stop price.

Support

A price area below the current price where buying has tended to stop declines. A clean break below support can turn it into resistance.

Swing trading

Holding positions for several days to a few weeks to capture a larger move. Unlike day trading, positions are held overnight and carry gap risk.

Related: Day trading, Trend · Back to top

T

Ticker (symbol)

The short code that identifies a stock on the exchange, such as AAPL for Apple.

Timeframe

The period each chart bar covers: 1-minute, 5-minute, daily and so on. Day traders usually combine a daily chart for levels with short intraday charts for entries.

Related: Candlestick, Intraday · Back to top

Trading halt

A pause in trading in one stock. Exchanges halt stocks pending major news, and Limit Up-Limit Down (LULD) rules pause a stock for at least five minutes when it moves too far too fast. Orders can't execute during a halt, and the stock can reopen far from where it stopped.

Related: Volatility, Catalyst · Back to top

Trend

The general direction of price. An uptrend makes higher highs and higher lows; a downtrend makes lower highs and lower lows.

V

VIX

The Cboe Volatility Index, which measures the volatility expected in the S&P 500 over the next 30 days, based on option prices. A high VIX signals a nervous market.

VIXY

An exchange-traded fund (ProShares VIX Short-Term Futures ETF) that tracks short-term VIX futures. It usually rises when traders expect more volatility, so its premarket change is a quick read on how nervous the market is. It is not the VIX index itself, and it loses value over time when volatility stays calm.

Volatility

How much and how fast a price moves. Day traders need some volatility to profit, but more volatility also means larger losses when wrong.

Volume

The number of shares traded in a period. Rising volume behind a move suggests real participation; a move on thin volume is easier to reverse.

VWAP (Volume-Weighted Average Price)

The average price paid for every share traded today, weighted by volume, usually starting from the open. Many traders treat price above VWAP as buyers in control and below as sellers in control, and watch for a reclaim or rejection of it.

Related: Moving average, Pullback, Volume · Back to top