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Important Day Trading Terms To Learn When You’re A Day Trader

Charts used for day trading tend to be simple with a few indicators and a few lines of text shown. To succeed in day trading, you must be able to digest information rapidly and make quick judgments. Consequently, it is impossible to monitor too many signs.

Indicators in your charts and other day trading terms will be discussed in this post.

What Are Chart Indicators

Indicators are a collection of tools used to better understand a trading chart.

As an example, they can determine whether or not the market is trending or range. When an asset is overbought or oversold in a range, indicators may tell you when it's time for a change in direction.

Here is what most traders have on their charts:

  • Price action in the form of candlesticks
  • Volume of shares being traded
  • 9 Exponential Moving Average (9 EMA)
  • 20 Exponential Moving Average (20 EMA)
  • 50 Simple Moving Average (50 SMA)
  • 200 Simple Moving Average (200 SMA)
  • Volume Weighted Average Price (VWAP)
  • Previous day’s closing price
  • Daily levels of support or resistance

These indicators will be automatically calculated and plotted by my DAS Trader Pro platform or yours.

Some systems do not automatically detect and depict daily levels of support or resistance for polls. Traders must manually identify these levels. In the pre-market screening for Stocks in Play on their watchlist or during the day when a new stock hits their scanners, traders often find and plot these levels. Because they trade based on nearby substantial intraday support and resistance, they can't do so without this information.

Traders' moving average indicators, with the exception of the VWAP, are all gray. Day traders rely heavily on VWAP, which must be distinguished from other moving averages quickly and easily. Some traders prefer a white background with primarily red and black shading because they don't want their charts to be overly busy. Charts with a lot of color are difficult to read and can cause eye irritation and vision problems in the long run.

What Are Buy And Sell Orders

Essentially there are three important types of orders you can use for day trading:

  • Market orders
  • Limit orders
  • Marketable limit orders

Market Orders

"At whatever price, buy me now!" At whatever price, I'll buy it! NOW!"

At whatever price, your broker is required to buy or sell the stock for you if you utilize market orders. At ALL costs, to be exact. A market order will be completed at the current price, regardless of what it was when you placed it. On the other side, you may define a maximum or minimum price for your purchase using a limit order.

This means you're being filled on the wrong side of bid-ask spreads in market orders. In a market order, an investor buys at the ask and sells at the bid. You may end up getting your order filled at a terrible price if you use market orders since the market may suddenly shift and so can the bid-ask spread.

The difference between the bid and ask prices, for example, is $10.95-$10.97, thus market orders should automatically purchase at $10.97 for you, right? There might be a sudden change in market conditions and consequently, your purchase market order at $11.15 will be filled. Those 15 pennies are missing. And that's a huge problem.

It's not uncommon for market makers and other professionals to earn a decent income by completing orders on the open market. Market orders are discouraged by certain dealers. I prefer to think of it as an open-ended check. Even though market orders are usually honored at or around the bid or ask price stated, unpleasant surprises might occur from time to time. Whenever feasible, place orders with a maximum number of items.

Day trading charts with green and red candlesticks
Day trading charts with green and red candlesticks

Limit Orders

"This is the only time I'll be selling at this price!" That's too high! 'Sell me only for this much!' This cannot be lowered."

You may restrict the price you're prepared to pay for a stock by using a limit order instead of a market order. There is no limit to the amount of shares that you may acquire at any given price. For example, you instructed your broker \sto purchase you 100 shares of TEVA at $34.75, and another 100 shares at $34.74. As you may remember, "SIZE" refers to the number of standard lots, each of which consists of 100 shares. Level 2 is where your orders are now waiting to be completed, as you can see. At such costs, you can't count on getting anything. If the price increases higher, you will never be filled and my order will sit in the Level 2 until the price falls back down. If the stock price rises too rapidly, the order may only be partly completed. Limit orders are a frequent trading strategy for swing traders.

Marketable Limit Orders

"But only up to this price would you buy me now! That's too high!"

"Please sell me immediately, but at this price or less. This cannot be lowered."

Thirdly, a marketable limit order is the most significant sort of order for day traders. Once you've placed a marketable limit order, you'll be given as many shares as feasible within your price range. When you place a marketable limit order, you instruct your broker to buy or sell a security for you immediately, but you also indicate the maximum price you're ready to pay for the stock in question.

Summary

Despite the fact that day trading has gained some notoriety, it is still a legitimate means of making money. Maintaining efficient and liquid markets is the primary function of day traders, whether they are institutional or individual investors or traders. Despite the fact that day trading is still popular among novice traders, it should only be attempted by those who have the necessary knowledge and resources to do it well.

About The Authors

Camilo Wood

Camilo Wood - Every day, to make a conscious decision to do something, say something, or act in a way that will improve my work experience. I assist organisations in disrupting the status quo of transition. I teach them how to turn their community from enduring change to evolving through change using a realistic and repeatable structure.

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