Day Trading Glossary
Plain-English definitions of 41 day trading and stock market terms.
- RVOL (Relative Volume)
- A measure of how much a stock is trading today compared to its average. RVOL of 5x means 5 times more people are trading it than normal. High RVOL often means something important is happening.
- ATR (Average True Range)
- The average amount a stock moves up or down in a day, measured in dollars. A higher ATR means the stock is more volatile and has bigger price swings.
- VWAP (Volume Weighted Average Price)
- The average price of a stock weighted by how many shares were traded at each price. It acts like a fair value line — stocks above VWAP are considered strong, below is weak.
- Float
- The number of shares available for the public to trade. Low float stocks (under 5 million shares) can move very fast because there are fewer shares for everyone to buy and sell.
- Gap
- When a stock opens at a much higher or lower price than yesterday's close. Gaps usually happen because of overnight news. "Gapping up" means it opened higher.
- Catalyst
- The specific event or news that causes a stock to move. Common catalysts include FDA approvals, earnings beats, contracts, and short squeezes.
- Momentum
- The speed and strength of a stock's price movement. High momentum means the stock is moving strongly in one direction with heavy volume behind it.
- RSI (Relative Strength Index)
- A number from 0 to 100 that tells you if a stock is overbought (too expensive, may drop) or oversold (cheap, may bounce). Above 70 is overbought. Below 30 is oversold.
- MACD (Moving Average Convergence Divergence)
- An indicator that shows whether buying or selling momentum is getting stronger. A "bullish crossover" means buying momentum is increasing.
- Bull Flag
- A chart pattern that looks like a flag on a pole. After a strong move up (the pole), the stock pauses briefly (the flag) before continuing higher.
- Bear Flag
- The opposite of a bull flag — after a sharp drop, the stock bounces briefly before continuing lower.
- Short Squeeze
- When traders who bet against a stock (short sellers) are forced to buy shares to limit losses as the price rises, which pushes the price even higher.
- Short Float
- The percentage of a stock's float that has been sold short (borrowed and sold by traders betting the price will drop). High short float means potential for a short squeeze.
- Long
- Buying a stock because you expect the price to go up. When you "go long," you buy shares and profit when the price rises.
- Short
- Borrowing and selling a stock because you expect the price to go down. You profit when the price falls. Shorting is riskier because losses can be unlimited if the stock goes up.
- Stop Loss
- A preset price where you automatically sell to limit your loss. Every day trader should use stop losses on every trade.
- Take Profit
- A preset price where you automatically sell to lock in gains. Setting a take profit level helps you avoid giving back profits.
- Market Order
- An order to buy or sell immediately at the current price. Market orders execute instantly but you might not get the exact price shown.
- Limit Order
- An order to buy or sell at a specific price or better. It only executes if the stock reaches your price. Safer but might not fill.
- Pre-Market
- Trading that happens before the official market open (4:00 AM - 9:30 AM ET). Pre-market volume is usually lower and prices can be more volatile.
- After-Hours
- Trading that happens after the official market close (4:00 PM - 8:00 PM ET). After-hours trading usually has lower volume and wider spreads.
- Level 2
- A screen showing all the buy and sell orders waiting to execute at different prices. It helps you see where buyers and sellers are concentrated.
- Bid
- The highest price a buyer is currently willing to pay for a share. When you sell, you typically sell at or near the bid price.
- Ask
- The lowest price a seller is currently willing to accept for a share. When you buy, you typically pay at or near the ask price.
- Spread
- The difference between the bid and ask price. Tighter spreads mean more liquidity and lower cost to trade.
- Volume
- The total number of shares traded today. Higher volume means more interest and usually tighter spreads.
- Market Cap
- The total value of all a company's shares. Calculated by multiplying share price × total shares outstanding. Small cap stocks tend to be more volatile.
- Sector
- The industry a company belongs to. Stocks in the same sector often move together. Main sectors include Technology, Healthcare, Energy, Finance, and Consumer.
- Breakout
- When a stock moves above a key resistance level with strong volume. Breakouts often signal the start of a bigger move.
- Reversal
- When a stock changes direction — either from going up to going down, or from going down to going up. Reversals can be dangerous to trade.
- Consolidation
- When a stock trades sideways in a narrow range after a big move. It is "resting" before the next move. Can lead to a breakout or breakdown.
- Support
- A price level where buyers tend to step in and prevent the stock from falling further. Think of it as a floor.
- Resistance
- A price level where sellers tend to step in and prevent the stock from rising further. Think of it as a ceiling.
- Moving Average
- The average price of a stock over a set number of time periods. It smooths out price action and shows the overall trend direction.
- EMA (Exponential Moving Average)
- A type of moving average that gives more weight to recent prices. The 9 EMA and 20 EMA are commonly used by day traders to gauge trend direction.
- Candlestick
- A chart element that shows the open, high, low, and close price for a time period. Green candles mean the price went up; red candles mean it went down.
- Day Trading
- Buying and selling stocks within the same day. Day traders close all positions before the market closes and do not hold overnight.
- Swing Trading
- Holding stocks for several days to weeks, aiming to profit from larger price swings. Less stressful than day trading but requires patience.
- Scalping
- Making many quick trades for small profits — usually holding for seconds to minutes. Scalpers aim for $0.05 to $0.50 per share on each trade.
- PDT Rule
- Previously, traders with under $25,000 were limited to 3 day trades per week. As of June 4, 2026, the new rule allows unlimited day trading with as little as $2,000.
- Margin
- Borrowed money from your broker to trade. Trading on margin amplifies both gains and losses. Use with extreme caution as a beginner.