Before
learning the basics of Intraday trading, it is essential for one to familiarize with the basic terms often used in daytrading.
Long Trade:
In long
trades also called long postions, you buy stocks first with the intention of
selling it later if the market goes up.
Short Trade:
As opposed
to long trade, short trade or short position means selling the stocks first
with the intention of buying it later when the stock price comes down.
Profit Booking:
Closing the
position to book profit by selling shares at higher price in long trades and by
buying shares at lower price in short trades.
Square off:
Closing the
position by taking opposite action. For eg, selling the shares in long trade
and buying the shares in short positions. Squaring off may be booking profit or
loss or breakeven.
Long trend or Rally:
It refers to
the increase in the price of shares or the rise in overall stock market continuously
.
Down trend:
This refers
to the decrease in the price of shares or the fall in the overall stock market
continuously.
Rangebound:
This refers
to the movement of market or share prices side ways without taking any
direction.
Stop loss:
Stoploss
refers to the counter order placed below the entry price in long position or
the order placed above the entry level in short position in order to limit the
loss of existing position in case the market goes against the position. Stop
loss is very important in daytrading .
Support and Resistance:
Support is
the price region where buyers are dominant and hence the market does not fall
below it so easily. But if the support level is broken, the fall may be
enormous.
Resistance
is the price region where sellers are dominant and hence the market does not go
above it so easily. But if the resistance is broken, the market may rally up.
Target Price:
This refers
to the pretermined price above the entry level in case of long trade and the
predetermined price below the entry price in case of short position where the
order is already placed so that the position is automatically squared off to
book profit when the market direction favors our position.
Technical analysis:
It is
forecasting method of market using the past price of the stock using graphs and
charts. Technical analysis is used both by day traders and position traders.
Day Trading:
It refers to
the method of trading in the market where the trader enters the market and
comes out of the market on the same day without carrying over the position to
the next day.
Position Trading:
It refers to
the method of trading where the trader takes position and carry it to the next
few days or weeks or months.
Swing Trading:
It refers to
the position trading but the days they hold position are often very less
ranging from few days to a week.
Trend line:
Trend line
is the straight line drawn connecting consecutive lows or consecutive highs in
the charts used in the technical analysis of a stock.
