A Beginner’s Guide to Day Trading Terms You Need to Know Today
A Beginner’s Guide to Day Trading Terms You Need to Know Today
Day trading terms for beginners
Stepping into the world of day trading can feel overwhelming. The fast-paced nature of the market, combined with complex trading jargon, might leave you wondering where to start. Understanding key day trading terms is your first step toward building confidence and navigating the market successfully.
At Uncommon Education, Jeremy Lieber often says, “Trading is a skill, and every skill begins with a strong foundation.” This guide simplifies essential day trading terminology, empowering you to start trading with clarity.
1. What is Day Trading?
What is day trading? How does day trading work?
Day trading refers to the practice of buying and selling financial instruments—such as stocks, options, or futures—within the same trading day. The primary goal is to profit from short-term price movements. Unlike long-term investing, day trading requires focus, a solid strategy, and the ability to act decisively.
Whether you’re seeking supplemental income or working toward financial independence, day trading can offer great potential—if approached with knowledge and discipline.
2. Key Day Trading Terms You Need to Know
a. Bid and Ask
Bid and ask explained, spread in trading
- Bid: The highest price a buyer is willing to pay for an asset.
- Ask: The lowest price a seller is willing to accept.
- Spread: The difference between the bid and ask prices. Tight spreads indicate high liquidity, making it easier to execute trades.
Example: If the bid is $50 and the ask is $51, buying at $51 and selling when the bid rises to $52 results in a $1 per share profit.
b. Candlestick Chart
What is a candlestick chart? How to read candlestick patterns
A candlestick chart is a visual representation of price movements within a specific time frame. Each candlestick includes:
- Open Price: Where the price started during the time frame.
- Close Price: Where the price ended.
- High Price: The highest price reached.
- Low Price: The lowest price reached.
Pro Tip: Patterns like dojis, hammers, and engulfing candles can indicate potential market reversals or continuations. Start by mastering one pattern before moving on to others.
c. Volatility
What is volatility in trading? High volatility stocks
Volatility measures how much an asset’s price fluctuates over time. High volatility creates opportunities for day traders but also comes with higher risks.
Example: Stocks often experience high volatility during earnings announcements or major market events.
🔑 “Volatility is your playground, but only if you understand the rules of the game,” says Jeremy Lieber. Proper risk management is essential in volatile markets.
d. Leverage
What is leverage in trading? Leverage risk explained
Leverage allows traders to control larger positions with smaller capital. A 10:1 leverage ratio means you can trade $10,000 worth of assets with just $1,000 in your account.
⚠️ Caution: While leverage amplifies profits, it also increases potential losses. At Uncommon Education, students learn how to use leverage responsibly to maximize gains while minimizing risks.
e. Stop-Loss Order
Stop-loss strategy, how to use stop-loss in trading
A stop-loss order automatically closes your position when the price hits a predefined level, limiting your losses.
Example: If you buy a stock at $100, setting a stop-loss at $95 ensures you won’t lose more than $5 per share.
Jeremy Lieber stresses: “Your priority is to protect your capital. Profits come second.”
f. Support and Resistance
Support and resistance trading strategy
- Support: A price level where demand prevents further price decline.
- Resistance: A price level where selling pressure prevents further price increases.
Example: If a stock bounces off $50 (support), buying near that level could be a good strategy. Similarly, selling near $60 (resistance) might help lock in profits.
g. Scalping
Scalping strategy in day trading
Scalping is a fast-paced trading style focused on making multiple small profits throughout the day. Scalpers often hold positions for only a few seconds or minutes.
Why It’s Popular: Scalping allows traders to avoid overnight risks and capitalize on intraday price swings.
h. The First Candle Strategy
Day trading strategies for beginners
A signature strategy taught at Uncommon Education, this involves analyzing the first candlestick of the day to predict short-term momentum.
Example: If the first candle shows strong upward momentum, it may indicate a bullish trend for the morning.
i. Options and Futures
Day trading options vs futures
- Options: Contracts give you the right (but not obligation) to buy or sell an asset at a specific price before expiration.
- Futures: Contracts obligating you to buy or sell an asset at a fixed price on a future date.
Both tools can amplify gains but carry additional risks. Learn how to use them effectively with mentorship from Jeremy Lieber.
3. Why Understanding These Terms Matters
Why learn day trading terms
Understanding these day trading terms will help you:
- Analyze market movements accurately.
- Communicate effectively with other traders.
- Execute trades with confidence.
At Uncommon Education, we simplify complex concepts, empowering traders to turn knowledge into actionable strategies.
4. Take the Next Step with Uncommon Education
Best day trading course for beginners
Learning the language of trading is your first step to success. At Uncommon Education, Jeremy Lieber offers comprehensive programs to help you master day trading.
What You’ll Gain:
- Confidence in understanding market terms.
- Access to a supportive trading community.
- Guidance from expert trader Jeremy Lieber.
👉 Download our free “The Quick Guide to Day Trading Stocks & Options“ or join a live webinar today.
