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Day Trading QuickStart Guide
Day Trading QuickStart Guide
AU D I O B OO K C O M PA N I O N
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TABLE OF CONTENTS
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TABLE OF CONTENTS
Continued
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CHAPTER 1
Challenges and Rewards
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APPENDIX 59
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APPENDIX 60
APPENDIX II
Key Forex Pairs
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APPENDIX 61
APPENDIX III
Designing Your Trading Room
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APPENDIX 62
GLOSSARY
Bid Entry
A standing offer to buy an asset. The price where a trade is initially Key level adjustment
executed. An adjustment to the entry, the stop, the
target, or any combination of the three,
Bracket order based on the location of a key level.
A special type of order where the target Equity curve
and the stop bracket the entry, usually A graphical representation of a day trader’s
with the use of OSOs and OCOs. account balance, depicting profits and Leverage
losses over time. The ability to trade a large position using a
small amount of trading capital.
Chasing performance Limit order
A common folly in trading whereby a trader Exchange-traded funds
Prediversified, tradeable securities that An order to purchase or sell a security at a
prematurely abandons a strategy in favor
can be used to buy or sell representative specific price.
of another that has recently shown strong
performance. shares in an entire market, sector, or
portfolio. Liquidity
The extent to which a security is traded
Chicago Board Options Exchange frequently and buyers and sellers can be
(CBOE) Exercised
The state of an option contract after the easily found.
The largest options exchange in the Unites
contract owner chooses to purchase or sell
States; the site of the first stock option
contract listings in the 1970s.
the assets in accordance with the contract Maintenance margin
terms. A specific amount of funds, less than the
initial margin, needed to maintain an open
Commission futures position.
The fees charged by brokers for buying and
Fast-testing
A fast way to test ideas—by quick-counting
selling securities.
results—with a premise or question you Margin
want to answer in mind. A loan from a brokerage firm to a customer
Congestion area for a down payment on a stock purchase.
An area of stagnant or choppy price
action, where an asset price may bounce
Fibonacci retracement levels
around but does not breach any support or
Specific ratios, such as 23.5%, 38.2%, Margin call
50%, and 61.8%, that some traders use to A request from a broker for a customer
resistance areas.
predict the endpoints of reaction moves. to deposit additional funds to reestablish
initial margin levels, or liquidate a position,
after the value of the position drops below
the maintenance margin threshold.
GLOSSARY 63
Market order Profit factor ($ won/$ lost) Standardization
An order to purchase or sell a security at The ratio of dollars won to dollars lost in a The process by which futures contracts
the best available price. tradeplan. are formatted so that their terms are easily
understood.
Markup Profit target (target)
The second phase of the Wyckoff Market The goal of a trade, where the trader exits Stop entry
Cycle in which the demand for an asset is some or all of the position to take profits. An entry into a trade that usually comes
driven upward on increasing volume. in the form of a stop market or stop-limit
Range bar chart order.
Mechanical rules A bar chart in which each bar has the same
Rules of a tradeplan that include highly range of price from high to low. Stop-loss
specific parameters, such as specific entry An order that is placed at a certain price
and exit points that are known in advance Range extension point that will limit a trader’s losses if the
of the trade setup. Each leg of movement higher in an uptrend price moves against his position.
or lower in a downtrend, extending the
Moving average range of the dominant trend. Strike price
A popular chart indicator that depicts the The price at which shares (or other
average value of a security over a fixed Round turn underlying assets) are bought or sold if an
trailing timeline. The opening and closing of a position, such options contract is exercised.
as buying crude oil futures to enter a trade
Multiplier and then selling them to exit. Subsequent action
A multiple that defines the value of an A predictable movement that follows a
options contract. Reaction move reaction move and reasserts the movement
Price action that moves in opposition to a of the dominant trend; the subsequent
Net profit (or loss) per trade dominant trend; the reaction move follows action often (but not necessarily) mirrors
The average amount won (or lost) per trade the “action move” and is followed by the the action move in terms of shape and
in a tradeplan. “subsequent action.” length.
Pip
Short for “point in percentage,” a small Risk profile Tick
measure of price movement in a currency The distance between a trade’s entry and The minimal increment of price movement
pair, defined by the fourth decimal place its stop. per symbol.
in most currency pairs (or the second in all
JPY pairs). Risk/reward Trailing stop
A ratio of how much money is being put at A tactic whereby the trader progressively
Premium risk compared to potential profit. adjusts the stop-loss closer to the target
The price paid to own an options contract. so as to lock in profits.
Setup bar
Price action A bar on a chart that serves as a critical Underlying asset
The ebbs and flows, higher and lower, of reference point with the potential to A security that has its price and delivery
the price of an investment security driven determine where a position is opened, date dictated by the terms of an options or
by market sentiment throughout the where the stop is placed, and where other futures contract.
trading day or period. important elements of a trade are defined.
Winning percentage
Price action confirmation Slippage The percent of winning trades in a
When a trader waits for price action An added expense on a trade when an tradeplan.
to push past a certain level in order to order is filled at a price that is worse than
confirm a trend or a likely move in a expected. Wyckoff Market Cycle
certain direction. A theory of market behavior outlined
Spot price in four phases: accumulation, markup,
Price rejection point Also called cash price; the current price distribution, and markdown.
A point or area where prices stop moving (most recent transaction) at which
in one direction and begin to move in the underlying asset is trading in the
another. marketplace.
GLOSSARY 64