Averaging – The addition of contracts to an existing position. A trader usually does this when a position is losing. The addition of contracts to a position averages out all the prices at which contracts were bought or sold and changes the break-even price of the position.
Breakthroughs – A sharp movement of the market in an upward or downward direction, following a period of treading water.
Broker – A person authorized by the securities exchange to buy and sell securities for his clients.
Candlestick chart – A chart that displays the price movements in trade on the stock exchange, for specific time intervals (usually a day, but can also be as little as 15 minutes or as much as a week or more). Each candlestick represents the high, low, opening and closing prices of an asset. The tip of the wick represents the highest price reached during the time interval and the bottom of the tail is the lowest price. The body of the candlestick is created by the opening and closing prices. When the opening price is lower than the closing price the body of the candlestick will be an empty outline (usually in green) and when the opening price is higher than the closing price, the candlestick will be filled in (usually in red). Thus the color of the candlestick shows trends in market fluctuations. The candlestick chart is the most common one used by technical analysts, because the data is presented very clearly.
Chart – A two-dimensional graphic representation of data, used to present information on the price of an asset (share, currency, index, future contract, etc.) traded on the capital market.
Collateral in the trading account – Trading in future contracts is leveraged trading, so a trader can trade assets worth much more than the money in his trading account. In order to offer leveraged trading, the broker and the stock exchange set a monetary value required for each contract. The maximum number of contracts a trader can order is the sum of money in the trading account divided by the collateral required for each contract.
Daily clearing – The calculation that the stock market makes on a daily basis for every trader concerning his earnings or losses each day. The clearing is done at the end of the trading day on the New York Stock Exchange. If all of a trader’s positions have yielded a net profit by that time, the money will be transferred to the trader’s bank account. If all of a trader’s positions have yielded a net loss by clearing time, the amount lost will be taken out of the trader’s trading account.
DAX index – The leading share price index in Germany, consisting of the 30 German companies with the largest market value and the highest tradability on the German stock exchange.
Day trading or intra-day trading – The purchase and sale of securities during the same trading day, such that positions are closed before the end of the trading day.
Death of Market (DOM) – The window in the trading software that displays the trade transactions by the buyers and sellers. This window allows us to see the supply and demand and the market’s current lowest and highest price levels.
DMI, Slow Stochastic – Oscillators that are used in technical analysis to identify market trends.
Dow Jones index – The adjusted index of the shares of the 30 largest companies traded on the New York Stock Exchange.
ETF – An investment fund traded on the stock exchange, similar to shares. An ETF holds assets such as shares, commodities or bonds and trades at close to the net value of its assets during the trading day.
Financial quote – The setting of a price for the purchase or sale of a financial product.
The quote has a purchase price (bid price) and a sale price (ask price). The bid price is the price a buyer is willing to pay and the ask price is the price a seller is willing to accept for the product.
Foreign currency (Forex) – Currency of another country, usually a currency accepted for international trade. Forex traders trade on the fluctuations in the exchange rates between foreign currencies.
Future contract – A commitment to provide (or to buy) a particular asset (commodity, foreign currency, security, etc.) at a future date, at a pre-determined price, with the payment to be made upon the delivery of the asset or commodity.
Gamma, theta and standard deviation – Mathematical tools for calculating the worthwhileness of the purchase or sale of an option.
Index point – Every index is divided into points on a price scale. The value of each point in a contract is determined by the stock exchange and varies from one contract to another.
An increase or decrease in the index price will always be equal to the monetary value set for each point.
Level 2 – The order book for Nasdaq shares, showing the types of traders buying and selling shares and the price at which a share can be expected to be trading in the short term.
Leveraged trade – Trade that is financed by an outside party. The trader uses other people’s money in order to increase his earnings by leveraging the investment portfolio he is managing.
Limit order – A capital market order placed for the purchase or sale of a security at a limited price. The order can by at a lower or higher price than the security’s current market price.
Line on Close Chart – A chart that looks like a continuous line, depicting the last price movement at the end of trading at a specific time.
Long position – A transaction in which the holder of a specific security expects the market to move upward and the price to increase.
Market order – A capital market order used for purchasing or selling a security at the most available price. This type of order is executed immediately.
Nasdaq 100 index – The largest and most well-known technology shares index in the world and the leading technology shares index in the U.S., consisting of the 100 largest non-financial companies traded on the New York Stock Exchange.
Option – A trading asset that is a document whose holder has the right to exchange the document for shares or corporate bonds of the company that issues the option, at a particular price (exercise price) and by a particular date that are set in advance when the option is issued.
Oscillators – RSI, Stochastic, MACD, Bollinger bands, moving averages – all these are technical analysis tools that are placed on the price chart and give statistical signals for changes in the market’s direction.
PIPS – One PIP is the smallest movement possible between one price level and the next. For example, in an S&P 500 contract each point is worth $50 and is divided into 4 PIPS, such that each PIPS is worth $12.50.
Profit – A Long position earns a profit when the market rises and a Short position earns a profit when the market declines. Traders place a Take Profit order in advance, at a profit target price.
Resistance line – A price level at which the price of a security stops rising and supply increases. As a result, at resistance lines the price starts to decline.
Russel 2000 index – The index of the shares of the 2,000 smallest companies in the Russell 3000 index of the 3,000 largest companies traded on the New York Stock Exchange.
S&P 500 index – The leading shares index in the U.S., consisting of the shares in the 500 companies with the highest market value in trading on the New York Stock Exchange, and which represent the activities of the entire American economy.
Short position – A transaction in which the holder of a specific security expects the market to move downward and the price to decline.
Stop-loss – A Short position loses when the market rises and a Long position loses when the market declines. Traders place a Stop-loss order in advance, at a maximum-loss target price.
Support level – A price level at which the price of a security stops declining and demand starts to rise. As a result, at support levels the price starts to rebound.
Swing – A position defined as the purchase or sale of a capital market asset for a period of more than two days.
Technical analysis – The method used for analyzing the financial assets traded on the stock exchange (shares, commodities, foreign currency). Technical analysis is done using charts, in order to identify trends and patterns that will help predict future movements in the market.
Time & sale – (also known as the Ticker) – Information used by professional day traders to observe the current price movements in closer detail. Time & sale shows every transaction as it happens and is usually displayed as a scrolling list.
Trade on spreads – A trading method for trading on the spread between two securities or contracts. In this method there is no need to guess whether the market will move up or down. Trading on spreads also requires relatively low margin. Geva Gazit is a world leader in the method of trading in spreads. Geva succeeded in adapting this method to trading mini contracts and traders with small trading accounts.
Trailing stop – The shifting of the stop with the direction of the market market’s movement to beyond the position’s entry price once a position starts earning. This way, the position can only gain a profit.
Trend – The direction of the market’s movement over time. There are two trends: upward, when the market price is steadily rising; and downward, when the market price is steadily declining. When the market is not moving steadily either direction, but is fluctuating, this is called “treading water” or trading within a range.
Trend reversal patterns – Graphic formations of candlesticks that indicate a change in the market’s direction.
Wall Street – A street in south Manhattan, New York. The location of the New York stock exchange, considered the heart of the city’s financial district. The name Wall Street has become synonymous with the U.S. financial markets in general.