38 terms
Day Trading — 38 terms defined
Every day trading term in the StockTools glossary, in plain language with a worked example — and connected to the free calculator that puts it to work.
After-Hours TradingAfter-hours trading is the 4:00 p.m. to 8:00 p.m. ET electronic session that follows the regular close. It exists mostly to price the news that companies deliberately release after 4:00 — the bulk of earnings reports hit between 4:01 and 4:30 p.m.Day TradingBreakdownA breakdown is the bearish mirror of a breakout: price falls through a support level that held on multiple prior tests, and the selling continues instead of bouncing. The buyers who defended that floor are done, and everyone who bought against it is now underwater.Day TradingBreakoutA breakout is a push through a price level that has repeatedly capped a stock, usually a prior high or well-tested resistance, on volume heavier than the sessions that built the level. The level matters because sellers defended it before; the volume matters because it shows those sellers are finally absorbed.Day TradingCatalystA catalyst is the specific news event that gives a stock a reason to move: an earnings report, an FDA decision, a contract award, a merger headline, an offering, an activist filing. Day traders separate moves with a catalyst from moves without one, because catalyst-driven moves attract outside volume and can sustain, while newsless spikes usually retrace.Day TradingChasingEntering 3-5% or more above the price where a setup actually triggered is chasing: buying the move after it happened instead of when it signaled. The setup is the same; the math is not.Day TradingChoppy MarketA choppy market is tape with no follow-through: breakouts fail, breakdowns fail, and moves reverse before reaching any reasonable target in either direction. Range traders call it rotation; momentum traders call it a meat grinder.Day TradingCircuit BreakerMarket-wide circuit breakers halt all US equity trading when the S&P 500 falls 7% (Level 1), 13% (Level 2), or 20% (Level 3) from the prior day's close. Level 1 and Level 2 each trigger a 15-minute halt if they occur before 3:25 p.m. ET; after 3:25, trading continues unless Level 3 hits. A Level 3 decline stops trading for the remainder of the day.Day TradingConsolidationConsolidation is a compression phase after a directional move: price narrows into a tightening range as the market digests the move, volume contracts, and neither side presses. The prior trend is on pause, not necessarily over.Day TradingDip BuyA dip buy is a long entry into a pullback within a stock that is trending up, rather than a chase of the highs. The dip buyer wants strength on sale: a momentum name that ran from $5 to $7 and has pulled back to $6.40 at a logical support — VWAP, a prior breakout level, a round number.Day TradingFadeTo fade a move is to trade against it: shorting a vertical spike or buying a panic flush on the bet that the move is overextended and will snap back toward a mean, often VWAP. The fade trader is selling to the chasers and buying from the panickers.Day TradingFakeoutA fakeout is a break of a key level that fails almost immediately, trapping the traders who entered on the move and stopping out the ones positioned against it. Price pokes through resistance or support just far enough to trigger orders, then reverses back inside the range.Day TradingFloat RotationFloat rotation is when a stock's cumulative volume for the day exceeds its float — on paper, every freely tradable share has changed hands at least once. Traders count rotations as a live gauge of how crowded and fast a momentum name is trading.Day TradingGamma SqueezeA gamma squeeze is a rally driven by options dealers hedging the calls they sold. When traders buy large volumes of call options, market makers who sold those calls buy shares to stay delta-neutral; as the stock rises, gamma pushes each call's delta higher, forcing dealers to buy even more stock, which lifts price again.Day TradingGap and GoGap and go is a momentum setup where a stock gaps up on a catalyst and continues higher after the open instead of fading. The entry is early — often the break of the premarket high or the first opening range high — on the thesis that a strong gap with a hard catalyst attracts a full day of follow-on buying.Day TradingGap DownA gap down is an open below the prior session's close, with no trades printed in between. Sellers absorbed overnight news — an earnings miss, an offering, a downgrade — and the first print of the day already reflects it.Day TradingGap UpA gap up is an open above the prior session's close, leaving a stretch of prices where no shares traded. The gap exists because news landed while the market was closed and buyers repriced the stock before the opening bell rather than after it.Day TradingGapperA gapper is any stock set to open sharply away from its prior close — the trader's shorthand for the names a premarket scanner surfaces each morning. Most desks filter for a minimum gap (say 5%+), minimum premarket volume, and a price band that fits their strategy.Day TradingGreen-to-Red MoveA green-to-red move is an intraday cross from positive to negative against the prior close — a stock that was up on the day loses the entire gain and goes red. It is the bearish mirror of red-to-green, and on gapped-up momentum names it is a primary short trigger: the cross confirms that everyone who bought the open is now underwater.Day TradingHigh of DayHigh of day (HOD) is the highest price a stock has printed in the current regular session. It doubles as the most-watched intraday resistance level, because every long who sold there and every short who entered there is anchored to it.Day TradingLevel 2Level 2 is the live order book display: every visible bid and offer at each price level, tagged with the market maker or ECN posting it and the size shown. Where Level 1 gives only the best bid and offer, Level 2 shows the depth stacked behind them.Day TradingLow FloatA low float stock has a small supply of freely tradable shares — commonly defined as under 10-20 million, with the most explosive movers under 5 million. Float excludes insider holdings, restricted stock, and other locked-up shares, so it can be a fraction of shares outstanding.Day TradingLow of DayLow of day (LOD) is the lowest price printed in the current regular session, and the intraday support level the most eyes are on. Longs place stops just beneath it; short sellers watch it as the trigger for a fresh leg down.Day TradingMomentum TradingMomentum trading buys strength and sells weakness — the bet that a stock already moving on volume will keep moving in the same direction, the direct opposite of mean-reversion strategies that fade extremes. Intraday, it means concentrating on the handful of stocks each day with a catalyst, outsized relative volume, and range.Day TradingOpening Range BreakoutAn opening range breakout (ORB) trade enters when price clears the high or low of the session's first minutes — traders commonly define the range with the first 5, 15, or 30 minutes of trading. The premise: the opening auction and early two-way fight establish the day's initial value area, and a decisive escape from it often sets the day's direction.Day TradingPattern Day Trader (PDT) RuleThe pattern day trader rule flags any margin account that places 4 or more day trades within 5 business days, when those day trades exceed 6% of the account's total trades in that window. Once flagged, FINRA rules require the account to maintain at least $25,000 in equity to continue day trading; below that, the broker restricts new day trades until the balance is restored.Day TradingPenny StockA penny stock is a low-priced stock, generally trading under $5 a share, often (though not always) a small or micro-cap company with thin trading volume and limited public information. The SEC's formal definition uses the $5 threshold; traders sometimes use the term more loosely for anything trading in the pennies to low single digits.Day TradingPremarketPremarket is the 4:00 a.m. to 9:30 a.m. ET session where US stocks trade electronically before the official open. Most brokers enable a narrower window (often 7:00 or 8:00 a.m. start) and many accept only limit orders during it.Day TradingRed-to-Green MoveA red-to-green move is an intraday cross from negative to positive against the prior session's close. A stock that opened down and fought back through yesterday's closing price flips every daily-change display from red to green at the same instant, and that shared reference point makes the cross a real momentum trigger rather than an arbitrary line.Day TradingRelative Volume (RVOL)Relative volume (RVOL) is current volume divided by the stock's average volume for the same point in the session; a reading of 3.0 means the stock has already traded three times its normal share count for that time of day. It is the standard screen for whether anything unusual is happening in a name.Day TradingScalpingScalping targets many small gains — a few cents to a fraction of a percent per trade — with hold times measured in seconds to minutes. A scalper might take 30-100 trades in a session, exploiting micro-moves that longer-timeframe traders ignore entirely.Day TradingShakeoutUnlike a breakdown, which starts a new leg lower, a shakeout is a brief dip below support that reverses right back into the range once the stops beneath it are triggered. The dip ends because it accomplished its purpose: the weak hands are out and their shares changed owners.Day TradingShort SqueezeA short squeeze is a rally amplified by forced buying from short sellers. As price rises, shorts sit on growing losses; when the pain or the margin department forces them to buy back shares, that covering is itself demand, which pushes price higher and squeezes the next tier of shorts.Day TradingTape ReadingTape reading is inferring buyer and seller behavior from raw prints and quotes instead of chart patterns. The tape reader watches time and sales against the Level 2 book, asking one question continuously: is aggression coming from buyers lifting offers or sellers hitting bids, and is it growing or fading?Day TradingTime and SalesTime and sales is the running record of executed trades — each print showing price, share size, timestamp, and venue. Traders call it the tape, and it is the ground truth of a session: quotes are intentions, prints are facts.Day TradingTrading HaltA trading halt is a temporary pause in trading of a single stock, imposed either for pending news or for excessive volatility. News halts (code T1) let material information disseminate before trading resumes; volatility halts fire automatically under the Limit Up-Limit Down (LULD) mechanism.Day TradingUnusual VolumeWhere relative volume puts a number on a volume spike, unusual volume is the broader flag: turnover far outside a stock's norm, often appearing before the reason for it is public. A sleepy name suddenly trading 10x its average is telling you someone knows or wants something.Day TradingVWAPVWAP — volume-weighted average price — is the session's average trade price with every print weighted by its share size: cumulative (price x volume) divided by cumulative volume, reset each day at the open. A stock at $20.60 with a $20.25 VWAP is trading above the average dollar paid so far today.Day TradingWashoutA washout is a fast, high-volume flush to the downside that runs stops, exhausts sellers, and often marks at least a short-term low. The move is indiscriminate: everyone with a resting stop or a weak stomach sells into the same few minutes.Day Trading