Ok, so we all know that in today’s world that is full of social media, technology and new generations, there comes a certain accessory…jargon.
That’s right, everything has its’ own lingo. This can get confusing and leave you feeling rather dumb.
Trading jargon in stocks, forex or crypto is no exception. Knowing the lingo of the trade is vital to success.
Trading stocks is a very strategic hustle, if you will. That is why it is important to know when there are trading opportunities, trends and the entry points. These are the things that trade setups help you to identify. Knowing these things can help you reduce your anxiety about trading and enhance your trading productivity. Setups allow for you to make well-informed decisions and take strategic action when the time is right.
It is important to remember there are several different trade setups. Take some time to study and try a few different ones out.
As we have said many times and will remind many more times, it may take you a few different tries before you find one that works for you.
Although the setups are different, there are four key points to keep in mind with all of them.
- Follow chart patterns – Follow chart patterns that you have learned to identify. When following setups, it is important for you to be comfortable and confident following patterns within charts.
- Follow the trend – It’s one of the oldest and yet still one of the most popular followed guides, whatever the trend is, trade with it. This helps you minimise your risk of loss
- Stick to your plan – When you begin to bounce between trade setups in the middle of the process, you are almost certainly setting yourself up for problems. Having a clear plan that includes what securities you plan to buy, sell or trade, and which setup you will use and how you’re going to fund it will keep you on the right path.
- Keep up-to-date – There are several platforms you can utilise to help you find the best opportunities of the day.
Think of trading news and signal platforms as the dating sites of stock trading!
An entry trigger is simple. This simple trick allows you to see when you are in a trade area and tells you when to enter that trade. Blind dates usually don’t end well and neither do blind stock trades. Using an entry technique will keep you away from stocks that are not behaving in the manner you need them to be. If only dating had this technique!
Types of Entry
The internet is a beautiful thing and stock traders everywhere are relying on it more and more to make their trades. With that being said, it is important to know what types of orders you are wanting to enter. There are many different types of buy and sell orders you can use. These orders can restrict transactions by price or will constrain it based on time. Knowing the difference is what stands between you and successful trading! Let’s discuss a few!
Types of Order
- Market Order – Usually the most inexpensive type of order, this order demands the stock be sold immediately at the current price, no matter what it is.
- Limit Orders – These orders give you full control, allowing you to set the price. Your order cannot happen unless your desired price is fulfilled.
- Stop Loss Orders – These orders are placed at a price point that is below the current market value. These types of orders will allow your stock to be sold immediately if their prices drop below a certain amount. This will prevent you from suffering a big loss.
- Trailing Stops – These orders are very similar to stop loss orders. Except in these particular orders, you are protecting your profits. These limits are entered in as percentages and will allow your stock to be sold if the value drops below a certain percentage. As stock prices rise, your trailing stop order follows it up.
- Good till Canceled – These types of orders are combined with other types of orders that sets the specific time frame, but the main focus of this particular part is this allows your stock order to be active until you cancel it.
- Day Order – This is simply any order that is not a good till cancelled order. If your order is not filled within that day, you will have to re-enter it the next day.
- All or None – This type of order simply will not be filled unless it is in its entirety. If the order cannot be filled completely, then no part of the order will be filled.
Long or Short Positions
Long and short in the stock trading world have an entirely different meaning. A long trade simply means that you purchased a stock with the intentions of selling it for a profit in the future. This is like buying a designer bag that goes up in price, you can sell it for more.
A short trade is initiated by selling a stock with the intentions of buying it later at a lower price, resulting in a profit. This is like an IOU for a dress that goes on sale, when the price drops you can buy the same item cheaper. The difference in price is your profit.
Margin and Leverage Positions
Margin and leverage go hand in hand. Margin is a loan that is given to you by your broker. This loan is for the purpose of allowing you to leverage the funds and securities in your account and enter into bigger trades.
The bigger the trade, the bigger the profit, usually.
Leverage is kind of like having a special power.
Margin is what creates leverage.
If you have leverage, you have an increased buying power. Typically, leverage allows you to pay below price for a trade. This will essentially allow you to enter into bigger trades than what you would be able to solely on your funds. At also acts to increase your risk if you lose on your trade.
Stop loss orders are small but useful orders that can help you minimise your losses. By placing the initial stop just below the recent low, you will keep your losses small. It works by automatically closing your position once the price reaches it. Think of it like having a drink limit that you know is safe! Once you get to that limit, all drinks automatically turn non-alcoholic. It stops you getting deeper into a position you don’t want to be in.
A stop loss is like a drinking limit you set. Once you reach it all drinks turn non-alcoholic to stop your position getting any worse!
Obviously the positive side of this is you will not lose as much but the downside is small price fluctuations can flag a stop loss order prematurely, resulting in more regular losses.
Making a bad exit can devastate your account. Knowing when to exit can make all the difference when it comes to profits and losses. While there are many different exit strategies that you can utilise, exit when the stock clearly changes trend using a trailing stop as the indicator. That way your profits are protected!
Risk Management Rules for Trading
We could spend all day on rules for risk management. However, the three most important rules you must remember starts with only risking a very small fraction of the account on each trade so that each trade isn’t very significant, and losses are emotionally easy to take.
The second is know what you are doing. While it takes practice and you may still suffer a loss at some point after being a veteran of trading, do your homework and become familiar with trading.
Ignorance is not bliss.
The last rule of the top three is know what all you are risking and all that it involves. You wouldn’t want someone counting your change blindly. You want to be sure you get it all back, right? The same applies for stock trading.
Do not go into a trade blindly, know what you are risking.
Bull vs Bear
Both bull and bear are terms to describe the market. A bull market has a longer cycle and is considered to be a period of prosperity. When there is a bull market, the time to sell is then! Everyone seems to be on a shopping spree when the market is in “bull swing.” Get your sell on before it turns to bear…
Just as the market is on an upward trend in a bull market, the opposite can be said of a bear market. A bear market’s main characteristic is falling prices of twenty percent or more on a security for two or more months. This market can last anywhere from a few weeks to years.
FOMO in Trading
As women, it is hardwired into our anatomy to worry about everything. At least that is how it feels, right?
When it comes to stock trading, our anxiety can get the best of us if we are not extremely cautious.
Stocks can become volatile at times and cause your anxiety to rear its ugly head. This can result in you entering into a trade because you have a “Fear Of Missing Out”, aka FOMO.
A FOMO trade is not based on any chart or patterns but rather based on your mindset, which can be in not such a good place when your anxiety is flaring up. Even though it looks like the thing to do, think rationally.
If you have a good plan of execution and an exit plan if things go astray, enter into the trade. However, if you do not have those things, don’t enter.
Patience is a virtue and I promise other trades will come along.
The most important thing to remember is you want to protect your assets.
I’m sure most of us have a drunken post or text story to tell. Well that is how HODL came about, if you can believe that! A drunken guy went on a rant about his bad trading skills and long story short, he was trying to convey that he was holding but instead spelled it “hodling.” Who would have thought a drunken mistake could make it into the trading world?
Since that incident, the term HODL refers to “Hold On for Dear Life”, holding and not making a trade based on short price fluctuations. I’m definitely not saying to get drunk and go on rants and make trades, but I am definitely suggesting to just HODL until you know for sure it is the right time to sell!