Day Trading Glossary: Key Terms Explained

This day trading glossary explains the terms you'll run into most, in plain English. Each entry links to a full guide that goes deeper, including how a momentum trader actually uses it in a real trade.

If you're new, start with the order types and the chart-reading terms, then work through the rest as you need them.

Chart reading and indicators

Moving Average is a line that smooths out price to show the underlying trend.

Support and Resistance are the price levels where a stock tends to pause or reverse.

VWAP is the volume-weighted average price, a key intraday reference line for momentum traders.

Relative Volume (RVOL) compares a stock's current volume to its average, to show how active it is right now.

Order types

Market Order buys or sells right away at the best available price, putting speed first.

Limit Order buys or sells only at your set price or better, putting price control first.

Stop-Loss Order sells automatically at a level you choose, to cap your loss on a trade.

How the market works

Market Maker is a firm that keeps a stock easy to trade by quoting both a bid and an ask.

Bid-Ask Spread is the gap between the highest price a buyer will pay and the lowest a seller will accept.

Level 2 is the order book, showing the buy and sell orders stacked at each price beyond the best bid and ask.

Float is the number of a company's shares that are actually available to trade.

Margin Trading is borrowing money from your broker to buy more stock than your cash covers, which magnifies both gains and losses.

Short selling

Short Selling is betting a stock will fall by borrowing shares and selling them first.

Short Interest is the number of shares that have been sold short and not yet bought back.

Short Squeeze is a fast rise that forces short sellers to buy back, driving the price up even faster.

Hard-to-Borrow (HTB) is a stock a broker struggles to source shares of for short sellers, which makes it costlier to short.

Chart patterns

Bull Flag is a brief pause after a sharp move up, often before another leg higher.

Cup and Handle is a rounded base and a small dip that can lead to a breakout.

Bear Trap is a false breakdown that reverses up and traps the short sellers who chased it.

Small-cap and momentum terms

Gap Up is when a stock opens higher than the day before, leaving a blank space on the chart.

Penny Stocks are low-priced shares of small companies, usually under $5, and widely treated as high-risk.

More terms on the way

This glossary grows over time. If there's a term you want explained, it's probably already on the list to write.

This content is for educational purposes only and is not financial advice. Trading involves significant risk and may not be suitable for all traders.