This is, literally, my trading journal; where I record all of my trades, what went right, what went wrong and what I can do better next time. It’s existed long before this blog has.
It started as a place to record my trades so that my coaches and I could go over them together when I was with a prop firm. Since leaving the prop firm, it’s evolved into the place I record everything: from relative strength and weakness analysis in Forex to more traditional stock market analysis to spreads in options. It’s even been a place for self-motivation, reflection and analysis of the mental tweaks I may need to make to continue to improve.
Since it’s been largely personal, and I plan for it to remain so, I use a lot of abbreviations. I realize my own personal jargon may be confusing, so I’ve made a stock, Forex, and options abbreviations and definitions page, here, to help. Broken out into these categories, I quickly go over my abbreviations, and then define various trading terms and how I use them.
I also realize that my journal isn’t very beginner-friendly (as I’ve been told by friends and family). So if you’re just getting started, you might want to check out some resources that provide more step-by-step instructions and training. My favorite, and #1 recommendation is babypips.com; their focus is on Forex, but the trading concepts can be used across all markets. It’s one of the training programs I used myself, and the last one that’s still free that I know of. There’s also a treasure trove of information on YouTube, and I still use Investopedia.com for specific definitions and explanations.
I’m sure other free, comprehensive guides exist, I’m just not aware of them. If you know if any robust, free trading programs that I should check out, and potentially recommend, let me know in the comments below.
Abbreviations
EOD – End of Day
IB – Interactive Brokers (Trading Broker/App)
MA’s – Moving Averages (Indicator)
OCO – One Cancels the Other Order
R:R – Risk to Reward Ratio
RSW – Relative Strength and Weakness
S/L/N – Short/Long/Neutral – In reference to which direction I plan to trade the security
SAR – Parabolic Stop And Reverse Indicator
TOS – Think or Swim (Trading Broker/App)
TP – Take-Profit Order
Definitions
Bearish
The belief that the security’s price will decrease in the near future.
Bullish
The belief that the security’s price will increase in the near future.
Candle/Candlestick
A way of visualizing the movement of a security’s price over a given amount of time. The time-frame of the chart determines the amount of “information” within each candle. I.e., if looking at a 1-hour chart, each candle represents one hour of trading activity and price movement.
The highlighted portion or “body” of the candle shows the open price and close price, while the upper and lower lines (known as “wicks” or sometimes “shadows”) show the highest and lowest prices that the security reached within that time-frame.
Candlestick Pattern
I’m separating this from Chart Patterns because there are some forms a single candle can make that will, in itself, suggest the near-future movement of a security.
Ultimately, what I’m looking for while looking at charts. As prices increase and decrease throughout the day and individual candlesticks are created; those candlesticks grouped together often move in such a way that has happened before. A trader can look at that group of candlesticks, identify the pattern, and make a prediction of the future movement of the asset based on that pattern.
The patterns have been around since, essentially, the founding of the stock market, when people would track prices manually in a ledger. Over time, these patterns have been studied and analyzed further and further to the point where we now have a blueprint of what to look for in the markets.
It’s not a guarantee that the expected action will happen when the pattern occurs, but historically speaking, there’s been shown to be a better-than-average chance that it will. Trading is a numbers game — we know the patterns aren’t perfect, but over a long enough time, and high enough number of trades, the edge plays out.
Check out my trade posts to see how I use various patterns, and check out the “Chart Patterns” link for a plethora of examples of tradable chart patterns.
Correction
A short price drop in a security during an up-trend.
Downtrend
When a security is continually making lower lows and lower highs.
Entry Order
A setting in your brokerage platform that will allow you to enter a trade near a price of your choosing automatically, so you don’t have to babysit a chart to get into the trade at your intended level.
Equities/Equity Market
I use this differently from it’s “actual” definition. When I talk about ‘Equities’ I’m referring to the major indexes used to monitor the market overall. Largely the S&P 500, but I also take a look at the NASDAQ and the DJIA.
ETF (Exchange Traded Fund)
A basket of stocks that can be purchased together under one symbol, grouped together based on a number of different factors. These factors can be very broad, such as ETFs that follow the entire technology industry, or quite specific: ETFs that only follow developments in artificial intelligence.
My portfolio consists of several different ETFs across 18 categories, if you’re interested in different types of these funds that exist.
Fakeout
When, based on the chart pattern you’ve identified and tried to trade, price moves in the direction you expected just enough to trigger you into the trade, but then moves sharply in the opposite direction.
Forex
The Foreign Exchange market, where you can trade the world’s currencies (not cryptocurrencies). They’re traded in pairs, and it allows you to take advantage of the shifting exchange rates between the currencies of different countries. For example, you can trade the United States Dollar vs the Japanese Yen (USD/JPY) or the Canadian Dollar vs the Swiss Franc (CAD/CHF).
Gap
Due to trading activity that occurs outside of normal market hours, prices sometimes open the next trading session at higher or lower prices than they closed the session prior. On the chart, the space between the close and the open is the Gap.
Higher High
When a stock’s price creates a new swing high that is above the prior swing high.
Higher Low
When a stock’s price creates a new swing low that is above the prior swing low.
Indicator
A supplement to the charts themselves, indicators are shown on or near charts and are mathematical equations that will help inform a trader’s decisions. There are many different indicators, and they’ll show you, for example: the number of shares that are being traded over a given period time, the average amount a security’s price changes each day, or whether or not a security is considered to be overbought or oversold.
They can also inform different things such as direction or entries and exits, so it’s a good idea to practice using different indicators to find out what works best for you.
Key Level
Can be either a support or a resistance area, but I often use this to mean an area that’s been both at various times in the past.
Limit Order
Placed in your brokerage account/application, a limit order will execute a trade for you automatically. A buy-limit order will attempt to buy the number of shares you designate at or below the price you set. A sell-limit order will attempt to sell the number of shares you designate at or above the price you set.
I say “attempt to” because, depending on the liquidity of the stock, not every share may be bought or sold immediately, and may fill at different prices if at all.
Limit orders can also be combined with stop orders to ensure you don’t get filled too far outside of the intended price. For example, if you want to trade a stock long at $100 but not willing to pay more than $105, you could set a buy-stop order at $100 (price will try to fill at or above) and a buy-limit order at $105 (price will try to fill at or below).
Loss (stop) Order
A setting in your brokerage platform that will allow you to exit a trade near a price of your choosing automatically. Used to get out of a position the minute price moves in a way that invalidates your opinion.
Lower High
When a stocks’ price creates a new swing high that is below the prior swing high.
Lower Low
When a stock’s price creates a new swing low that is below the prior swing low.
Market Order
When placing a trade, this order will get you into the trade as soon as possible, at the next available price.
Option
A security that can be purchased that gives you the ability, but not the requirement to purchase a stock at a given price (hence option). Each option typically equals 100 shares of the stock, and locks you in to said stock at the price you select (the strike price), no matter what the stock itself (the underlying) does.
For example: If you buy an AAPL (Apple Inc.) Option, at the strike price of $160, whether AAPL rises to $200 or falls to $100, you can exercise your option and always acquire shares of AAPL at $160.
(#)R
“R” is the Risk amount on a given trade. The per-share risk is calculated as the difference between your desired entry and stop-loss levels; which will help inform the number of shares you should buy, given the actual dollar amount you’re willing to lose (risk) on a given trade.
A number before ‘R’ indicates the amount of risk that was gained or lost on a given trade. For example, 2R equals double the dollar amount I was initially willing to lose on that trade, and .5R equals half the dollar amount I was initially willing to lose on that trade.
Rally
A short rise in prices in a security during a down-trend.
Relative Strength and Weakness
I’ve heard this term used in other contexts, but the way I use it is related primarily to Forex. I compare each of the 8 major currencies’ price movement and chart patterns against one-another; looking for the one’s whose price is increasing the most and decreasing the most. By pairing the “strongest” currencies with the “weakest” one’s, we hope to find opportunities where large price movements are going to happen.
Resistance Level
A price level — often a range — where a security’s price fails to trade consistently above, occurring in both up- and down-trends. They’re often areas that have acted as support in the past, as well, and will frequently serve as support again, in the future.
Security
A blanket term for the different assets that can be purchased. A Forex pair, a stock, an option, and an ETF are all examples of a security.
Stop Order
Placed in your brokerage account/application, a stop order will execute a trade for you automatically. A buy-stop order will attempt to buy the number of shares you designate at or above the price you set. A sell-stop order will attempt to sell the number of shares you designate at or below the price you set.
I say “attempt to” because, depending on the liquidity of the stock, not every share may be bought or sold immediately, and may fill at different prices if at all.
A price level — often a range — where a security’s price fails to trade consistently below, occurring in both down- and up-trends. They’re often areas that have acted as resistance in the past, as well, and will frequently serve as resistance again, in the future.
Swing High
When a stock’s price has been increasing, but reaches a peak (or high), and then begins to fall; creating a 3-candle pattern where the outside 2 candle’s highs are lower than the middle candle’s high.
Swing Low
When a stock’s price has been decreasing, but reaches a low-point, and then begins to rise; creating a 3-candle pattern where the outside 2 candle’s lows are higher than the middle candle’s low.
Target
The price that you expect the security you’re trading to reach, if your analysis is correct.
Technical Analysis
The process of determining the future movement of a security’s price, by looking at a chart of the changes of its price through history. Technical analysis traders use different chart patterns and indicators to create a plan of when and at what prices to enter and exit trades.
Uptrend
When a security is continually making higher-highs and higher lows.
Forex Currency Abbreviations
AUD – Australian Dollar (Aussie)
CAD – Canadian Dollar
CHF – Swiss Franc
EUR – Euro
GBP – Great Britain Pound
JPY – Japanese Yen
NZD – New Zealand Dollar (Kiwi)
USD – United States Dollar
This is, by no means, a comprehensive trading definitions guide. It’s simply a reference in case something in one of my posts needs further clarification. As I use and discover more terms and abbreviations I’ll update this, so that it’s as useful as possible; and if there are any additional definitions you think would be helpful for me to add, let me know in the comments!