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GLOSSARY

 

all or none order The order will be executed if and only if all the shares specified in the order can be sold (or bought). It is important to note that some brokers give lower priority to all or none orders than any amount (see below) orders.

any amount order This is the type of order where the trader is willing to sell (or buy) any amount up to the maximum amount specified in the initial order. The drawback of this type of order is that some brokers will charge full commission fees for partially filled orders. Be sure to check with your broker.

limit order The order will be executed only at a specified price.

long position a position where the trader has bought shares with the expectation that the price will go higher. The idea is to sell the shares later at a higher price with profit.

market depth An ordered list of bid and sell orders; the ordering is usually with respect to price. The ability to see beyond the current bid and ask is a powerful tool when used by experienced traders.

market order One of the most aggressive orders where the trader is willing to pay (for long positions) or sell (for short positions) at the first ask (long positions) or bid (short positions). Could be quite risky since the trader has no control of the price where his/her order will be filled.

paper trading A popular term used to describe trading without using real capital. Useful in testing trading methods and developing new ones.

short position A position where the trader has sold (borrowed) shares with the expectation that the price will go down. Note that you do not have to own the shares to put in a short sell order. The idea is to buy-back the shares later at a lower price and make a profit. Most brokers require a "margin account" be opened before the trader is allowed to short. The shares may not always be available for shorting from a given broker, so the trader may have to shop around to find the shares to borrow for the transaction. Shorting can be quite risky, especially if the positions are carried overnight. Theoretically, the price can go up indefinitely resulting in unlimited losses. It is always prudent to trade with stop-buy orders in such a position.

stop-buy order Usually used as a protective stop in a short trade. If the price goes up and triggers the stop, the order will become a market order and the broker will cover the short (that is buy back the shares) at the market price. Some brokers have stop-buy limit orders. This means that when the stock trades through the stop-buy price, the broker is given a limit price up to which the shares may be bought back, but no higher.

stop-loss order Usually used as a protective stop in a long trade. If the price goes down and triggers the stop, the order becomes a market order. Some brokers have stop-loss limit orders. This means that when the stock trades through the stop-loss price, the broker is given a limit price below which he will not sell the shares.





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