All About Intraday Trading Terminology

Intraday markets are where traders trade stocks, currencies and other market securities in the same trading day. Trades are made during normal trading hours and traders close any open positions prior to the market closing. This trading style is different than regular share trading where investors purchase shares and keep them for life. Intraday traders seek to profit from volatility in order to make profits within the same day. Volatility is an important aspect of intraday trades. The rules that govern intraday trading are quite different from regular day trading. The jargons and terminologies used in this market are also vastly different. Let's take a look at the intraday trading terminology from A to Z.

1. Ask price

The most commonly used day trading terminology is the ask price. It refers to the minimum or lowest price a potential seller is willing to pay for trading or exchanging a security.

2. Bid price

The bid price is an intraday term used often in conjunction with the asking price. It is the maximum or highest price a potential buyer will pay to trade or exchange a particular security.

3. Bid - Ask Spread

The intraday trading market has the highest and lowest bids. This is true for all major exchanges. The bid-ask spread is the difference between the highest and lowest ask.

4. Bull Markets

A bull market refers to a situation in financial markets where the prices of securities traded are rising or expected to rise. Because the prices of traded securities tend to fluctuate in day trading, intraday trading terminology can be used to refer to extended periods of time when large amounts of security prices are rising. A bull market can last for several months, or even years.

5. Bear Markets

A bear market is exactly the opposite of a bull. This market sees the stock prices fall for long periods. Bear markets see the securities prices fall by as much as 20% from their recent highs. This is due to investor negativity and widespread pessimism. Bear markets are associated with a general lack of movement in the market indices. Bear markets typically last for at least two months and can be associated with a general economic downturn, such as recession.

6. Trading hours and after-hours

Trading is allowed in the intraday market between 9:30 AM and 4:00 PM. The market is closed on Monday through Friday. Markets close on holidays. If they are open for trading on these days (with some exceptions), trading will stop at 1:00 PM. You can trade during the pre-, after, and evening trading hours. However, liquidity will be very low in these hours since buyers and sellers rarely trade after-hours.

7. 52 Week High/Low

Another common term used in intraday trading is the 52-week high/low. This is the highest or lowest price at that security traded in a given period, which can be 52 weeks or one calendar year. It is often used as a technical indicator. The 52-Week high/low is based on the closing price of each security traded on the markets on a daily basis. The 52-week high is the resistance level, while the 52 week low is the support level traders use to trigger trading decisions.

8. Breakout

A breakout is the moment when an asset's value moves above or below its resistance area. A breakout is a sign that a security's potential trend will begin, usually in the direction of the breakout. If you see a breakout to the upside in your technical chart pattern, it could be an indication that the security's price will trend higher.

9. Resistance Level

We used the terms support and resistance in the day trading terminology we discussed above. Let's take a look at the meanings of each term. The resistance level, also known as resistance, is the price at which an asset is under pressure, while it is rising. Multiple sellers are trying to sell securities at a certain price. Technical indicators can show a resistance level by drawing a line along the highest highs for a specific time. New information could change traders' attitudes towards an asset, so resistance levels may be temporary. It could also be very long-lasting.

10. Support level

Support is a crucial intraday trading term that is often used in conjunction with resistance. The price below which an asset/security does not fall for a certain period of time is called the support level. Market-entering buyers create the support level for an investment or security when the asset or security drops to a lower value. You can determine the support levels as a trader by using technical indicators, or simply drawing a line connecting the lowest lows over a period.

11. Market order

A market order, in trading terms, refers to an investor's request to purchase or sell a stock at the highest price on the market. This request can be made via an online brokerage platform, or by informing the broker service provider. Market orders are widely considered to be the fastest and most reliable way to enter and exit a trade. This allows traders to quickly access the most likely route to enter or exit trades.

12. Limit Order

Most intraday trading terms can be used together, as is evident from the majority of the terms. Limit orders are the same. They can be used with market orders. Limit orders are the type of order that allows you to purchase or sell a security at a certain price or at a higher price. A buy limit order is executed at the limit price you prefer, or at a lower price. Sell limit orders, on the other hand are executed only at the limit price. Limit order provisions allow you to better control the price at which your trades are placed. You are guaranteed to pay the same price or less when you place a buy limit purchase. However, your order filling is not guaranteed and your limit order might not be executed if the security price does not meet the requirements. If the price of the asset to be traded falls below the set price, the order might not be fulfilled and you could miss a trading opportunity. Limit orders can also be placed online through your brokerage firm's online trading platform, just like market orders.

13. Long Place

Intraday trading terminology, long position, helps investors identify what they have bought when they purchase a security or derivative. They also expect the traded security's value to increase. You can invest in securities such as stocks, currencies, mutual funds, and derivatives like options and futures. This term is used when traders have a long put option or long call option based on the output of an option contract.

14. Short position

Shorting is the opposite of the long-term position. It's when a trader sells a security but plans to repurchase or cover it later at a lower price. Traders will shorten a security if they think the price of the security will decrease in the near future. There are two types of short positions: naked and covered. The first is when traders sell their security and do not have it in their possession. The latter allows traders to borrow shares from brokers by paying a margin amount and interest.

15. Margin, and buying on margin

Margin refers to money that traders can borrow from their brokerage company to purchase shares or other securities. It is the difference between the total amount of securities in an investor's account, and the amount borrowed from the broker. The act of borrowing money to invest in securities is called buying on margin. This practice allows the buyer to pay a small percentage of the asset's value and borrow the remainder from the broker. As collateral, the broker uses securities from the traders account.

16. Short Interest 

Short interest, a day trading term, refers to the number shares that have been shorted but not yet closed out or covered. Short interest is usually expressed in percentages or numbers and serves as an indicator of market sentiment. A high short interest can indicate that investors are extremely pessimistic or even over-pessimistic. It is possible for traders to be very cynical and cause a sharp price increase. A stock's price rise could also be a sign of a trader becoming more bearish or bullish if there are large changes in its short interest.

17. High Frequency Trading

HFT, or High-Frequency Trading, is a trading technique that makes use of powerful computer programs to execute large orders. The transaction happens in a fraction of seconds, regardless of how large the volume. Complex algorithms are used to analyze multiple markets and place orders based on current market conditions. The result is that traders with faster execution speeds are able to place trades more quickly and make better profits than those who execute slower. High-frequency trading has high order speeds and high turnover rates.

18. Scale in

Scale-in is a trading strategy where traders buy shares when their stock price falls. Scaling in is essentially when traders set a target price. They will then invest in volume if the stock price falls below that target price. Traders will continue buying shares until the stock price falls or they reach their target trade size. Scaling in can lower the average price because traders pay less every time the share price drops. The trader might end up buying a stock that is losing if it does not return to its target price.

19. Scale out

Scale-out is a day trading term that refers to selling one or more shares while the price rises. Scaling out is the act of selling shares or getting out of a position. This happens in increments with the increase in the share price. Scaling allows investors to make profits even though the share price is rising, rather than trying to predict the peak price. Investors may have to sell winning stocks if the stock's actual value continues rising.

20. Short squeeze

When a share or other traded asset goes up sharply, it is called a short squeeze. This phenomenon forces traders, who bet that the security's price would drop, to buy it so they can avoid any more, larger losses. The stock's price will rise as traders rush to buy more shares.

Last note: This article about intraday trading terminology can be a useful guide. It is best to begin with the most basic terms if you are new to intraday trades. These terms include the ask price and bid price, bull or bear markets, trading hours, and trading hours. These terms will help you understand more complex terminology like support and resistance levels and scaling in and out. These terms are essential and you should be able to understand their meanings. However, it is also important to familiarize yourself with different types of intraday charts patterns and trading strategies to gain a complete understanding of day-trading. These aspects can be used as a guideline for intraday trading. You might also consider online intraday simulators to help you get started with intraday trading.

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