iif_kpmp_Borsellino_Day_Trader_s_Course.pdf

Basis contract: A forward contact in which the cash price is based on the basis relating to a specific futures contract.

Bear: One who believes prices will move lower.

Bear market: A market in which prices are declining.

Bearish key reversal: A bar chart formation that occurs in an uptrending market when the day’s high is higher, the low is lower, and the close is below the previous day’s. Can signal an upcoming downtrend.

Bid: The price that market participants are willing to pay.

Blowoff volume: An extraordinarily high-volume trading session that occurs suddenly in an uptrend signaling the end of the trend.

Bollinger Band: A trading band plotted at standard deviation levels above and below a moving average. Because standard deviation measures volatility, the bands widen during volatile markets and contract during calmer periods. The assumption used with Bollinger Bands is that prices tend to stay within the upper and lower band. When a price breaks through a boundary, either above the upper line or below the lower line, it usually signals that the move is strong enough to continue further. When the bands get closer together, it is more likely that there will be a price breakout.

Breakaway gap: A gap in prices that signals the end of a price pattern and the beginning of an important market move.

Broker: A firm or person engaged in executing orders to buy and sell stocks as well as futures and options contracts for customers. A fullservice broker offers market information and advice to assist customers in trading. A discount broker simply executes orders for customers.

Brokerage house: A firm that handles orders to buy and sell stocks as well as futures and options contracts for customers.

Bull: One who expects prices to rise.

Bull market: A market in which prices are rising.

Bullish key reversal: A bar chart formation that occurs in a downtrending market when the day’s high is higher, the low is lower, and the close is above the previous day’s. Can signal an upcoming uptrend.

Buy on opening: To buy at the beginning of a trading session at a price within the opening range.

Car: A term used loosely to describe contract quantities.

Carryover: Last year’s ending stocks of a storable commodity.

Cash commodity: The actual physical commodity as distinguished from a futures contract.

Cash price: Current market price of the actual physical commodity. Also called “spot price.”

Cash sales: The sale of commodities in local cash markets such as elevators, terminals, packing houses, and auction markets.

Cash settlement: Final disposition of open positions on the last trading day of a contract month. Occurs in markets where there is no actual delivery.

Chartist: One who engages in technical analysis.

Clearinghouse: An adjunct to the futures exchange, responsible for settling trading accounts, clearing trades, collecting and maintaining performance bond funds, regulating delivery, and reporting trading data.

Close: The period at the end of the trading session. Sometimes used to refer to the closing range.

Commission: For futures contracts, the one-time fee charged by a broker to cover the trades you make to open and close each position, payable when you exit the position. Also called roundturn.

Commitment: When a trader or institution assumes the obligation to accept or make delivery on a futures contract.

Commodity exchange: An organization that formulates rules and procedures for the trading of futures and options on futures contracts, provides physical facilities for trading and/or access to electronic trading technologies, and oversees trading practices.

Commodity Futures Trading Commission (CFTC): Government agency that regulates the U.S. commodity futures industry.

Contract: Unit of trading for a financial or commodity future. Also, actual bilateral agreement between the parties (buyer and seller) of a futures or options on futures transaction as defined by an exchange.

Contract month: The month in which futures contracts may be satisfied by making or accepting delivery. Also called the delivery month.

Day order: An order that will be filled during the day’s trading session or canceled.

Day trader: A trader who establishes and liquidates positions within one trading day, ending the day with no established position in the market.

Deferred pricing agreement: A cash sale in which you deliver the commodity and agree with the buyer to price it at a later date.

Delivery: The tender and receipt of an actual commodity or financial instrument in settlement of a futures contract.

Demand: The quantity of a commodity that buyers are willing to purchase from the market at a given price.

Futures: A term used to designate all contracts covering the purchase and sale of financial instruments or physical commodities for future delivery on a commodity futures exchange.

Futures commission merchant (FCM): A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange and who, in connection with solicitation or acceptance of orders, accepts any money or securities to margin any resulting trades or contracts. The FCM must be licensed by the CFTC.

Futures contract: A standardized agreement, traded on a futures exchange, to buy or sell a commodity at a specified price at a date in the future. Specifies the commodity, quality, quantity, delivery date, and delivery point or cash settlement.

Gap: A price area at which the market did not trade from one day to the next.

Gap theory: A type of technical analysis that studies price gaps.

Good-till-canceled (GTC) order: An order that remains in effect until it’s canceled or filled, or until the contract expires.

Head and shoulders: A sideways price formation at the top or bottom of the market that indicates a major market reversal.

Hedge: The purchase or sale of a futures contract as a temporary substitute for a cash market transaction to be made at a later date. Usually it involves opposite positions in the cash market and futures market at the same time.

Hedger: A person or firm who uses the futures market to offset price risk when intending to sell or buy the actual commodity.

Hedging: The purchase or sale of a futures contract as a temporary substitute for a cash market transaction to be made at a later date.

Initial performance bond: The funds required when a futures position is opened. Previously referred to as initial margin.

Intercommodity spread: A spread trade involving the same month of different but related futures contracts.

Intermarket spread: A spread trade involving same or related commodities at different exchanges. Also called an interexchange spread.

Intramarket spread: A spread trade involving different contract months of the same commodity. Also called an interdelivery spread.

Introducing broker (IB): A firm or person engaged in soliciting or accepting and handling orders for the purchase or sale of futures contracts, subject to the rules of a futures exchange, but not in accepting any money or securities to margin any resulting trades or contracts. The IB is associated with a correspondent FCM and must be licensed by the CFTC.

Leverage: The use of a small amount of assets to control a greater amount of assets.

Limit order: An order that can be filled only at a specified price or better.

Liquidation: Any transaction that offsets or closes out a long or short futures or options on futures position.

Long: Describes one who has bought futures or a stock to establish a market position and who has not yet closed out this position through an offsetting procedure. The opposite of short.

Long hedge: The purchase of a futures contract in anticipation of an actual purchase in the cash market.

Lot: The term used to describe a designated number of contracts.

Margin performance bond: A sum, usually smaller than the initial performance bond, that must remain on deposit in the customer’s account for any position. A drop in funds below this level requires a deposit back to initial performance bond levels. Previously referred to as maintenance margin.

Market-if-touched (MIT) order: A price order that becomes a market order when the market trades at a specified price at least once.

Market-on-close (MOC) order: A market order filled during the close of a trading session.

Market order: An order filled immediately at the best price available.

Maximum price fluctuation: The maximum amount the contract price can change up or down during one trading session, as stipulated by exchange rules.

Minimum price fluctuation: The smallest increment of price movement possible in trading a given contract, often referred to as a tick.

Moving averages: A type of technical analysis using the averages of settlement prices.

Moving averages chart: A chart recording moving averages.

Nasdaq composite index: An index of all Nasdaq stocks, often used as a barometer of performance of smaller companies, although the index also includes larger firms such as Microsoft.

Nasdaq 100: An index based on the 100 largest stocks traded on the Nasdaq.

National Futures Association (NFA): A self-regulatory organization for the commodity futures industry comprised of firms and individuals that conduct business with the public.

Nearby: The nearest active trading month of a futures or options on futures contract.

Not-held (NH): A discretionary note on an order telling the floor broker that he or she won’t be held accountable if the trade is executed outside the requirements of the order. This gives the broker discretion on getting the order filled.

Offer: Indicates a willingness to sell a futures contract at a given price.

Offset: Selling if one has bought, or buying if one has sold, a futures or options on futures contract.

Offsetting hedge: For a short hedger, to buy back futures and sell a commodity. For a long hedger, to sell back futures and buy a commodity.

Open outcry: The method of trading publicly so that each trader has a fair chance to buy or sell.

Opening: The beginning of the trading session.

Opening range: The range of prices at which the first bids and orders were made or first transactions were completed. Must be initiated by at least one trade.

Option: The right, but not the obligation, to sell or buy the underlying security or futures contract at a specified price within a specified time.

Order-cancels-other (OCO): An order that includes two orders, one of which cancels the other when filled. Also referred to as one-cancels- other.

Out-trades: A situation that results when there is some confusion or error on a trade—for example, when both traders think they were buying.

Overbought/oversold: A technical opinion of a market that has risen or fallen too much in relation to underlying fundamental factors.

Performance bond: Funds that must be deposited by a customer with his or her broker, by a broker with a clearing member, or by a clearing member with the clearinghouse. The performance bond helps to ensure the financial integrity of brokers, clearing members, and the exchange as a whole. Previously referred to as margin.

Performance bond call: A demand for additional funds to bring the customer’s account back up to the initial performance bond level whenever adverse price movement has caused the account to go below the maintenance. Previously referred to as margin call.

Point-and-figure chart: A graph of charts with Xs for price increases and Os for price decreases, used by the chartist for buy and sell signals.

Position: An interest in the market, either long or short, in the form of open contracts.

Position trader: A trader who takes a position in the market and might hold that position over a long period of time.

Price order: An order to sell or buy at a certain price or better.

Pure hedger: A person who places a hedge to lock in a price for a commodity, and then offsets that hedge and transacts in the cash market simultaneously.

Rally: An upward movement of prices following a decline.

Range: The high and low prices or high and low bids/offers recorded during a specified time.

Relative Strength Index (RSI): A technical indicator developed by Welles Wilder to help investors gauge the current strength of a stock’s price relative to its past performance. The usefulness of this indicator is based on the premise that the RSI will usually top out or bottom out before the actual market top or bottom, giving a signal that a reversal or at least a significant reaction in stock price is imminent. RSI readings above 70 indicate the shares are overbought and are likely to start falling. Readings below 30 indicate the shares are oversold and a rally can be expected. The time period specified determines the volatility of the RSI, with the shorter the time period the more volatile the reading.

Resistance line: A price level above which prices tend not to rise due to selling pressure.

Retracement: A price move in the opposite direction of a recent trend.

Runaway gap: A gap in prices after a trend has begun that signals the halfway point of a market move.

S&P 500: A widely followed benchmark of stock performance that includes 400 industrial firms, 40 financial stocks, 40 utilities, and 20 transportation stocks. All the firms in the index are large.

Scalp: To trade for small gains. Scalping normally involves establishing and liquidating a position quickly, usually within the same day, hour, or even just a few minutes.

Selective hedger: A person who hedges only when he or she believes that prices are likely to move against him or her.

Settlement price: A figure determined by the closing range that is used to calculate gains and losses in futures market accounts, performance bond calls, and invoice prices for deliveries.

Short: Describes one who has sold a futures contract or a stock to establish a market position and who has not yet closed out this position through an offsetting procedure. The opposite of long.