Swing-Trading Glossary

Get the definitions for the most important swing-trading terms.

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Accumulation

Accumulation refers to a period where institutional and/or seasonal retail traders steadily buy shares of a stock, often in small increments, to avoid driving the price up quickly. This typically occurs after a stock has experienced a significant price decline or has been trading sideways for an extended period. Accumulation can signal that the stock may soon enter a bullish phase or experience a breakout from a well developed base, as sustained buying pressure eventually pushes prices higher and out of accumulation and into a new trend higher.

Identifying accumulation often involves analyzing price action alongside increased volume at support levels. There are some indicators out there to help with this, such as the Accumulation/Distribution Line and On-Balance Volume (OBV).

Read more about recognizing accumulation phases in trading →

After-Hours Trading

After-hours trading refers to buying and selling securities outside the standard market trading hours (usually 9:30 AM–4:00 PM ET). This trading session typically occurs between 4:00 PM and 8:00 PM ET and allows investors to react to news released after regular market close, such as earnings reports or economic data. While after-hours trading provides opportunities, traders should be cautious due to lower liquidity, wider spreads, and potentially higher volatility. Traders often use limit orders during after-hours sessions to manage execution prices effectively.

Read more about trading after-hours →

Apes

Being an Ape means you’re one of those traders who dives into trades with zero brain cells, just pure, primal “smash buy” energy, while screaming “APES STRONG!”. They pile into whatever stock that is trending, swinging from hype to hype like it’s a jungle gym, too dumb to sell even when it’s cratering.

This phrase emerged as traders embraced the collective strength of retail investors against institutional short-sellers. Being an “ape” implies solidarity, persistence, and collective belief in a stock’s potential. But let’s be honest, these people aren’t sticking together – they only know each other through message boards on Reddit. The only thing these people have in common is the margin calls they are frequented with.

Learn more about the meme stock phenomenon →

AVWAP (Anchored Volume Weighted Average Price)

The Anchored Volume Weighted Average Price (AVWAP) is an advanced variation of VWAP, allowing traders to measure average price from a specific, significant starting point such as earnings releases, breakouts, or major market events. Unlike traditional VWAP that resets daily, AVWAP remains anchored to a chosen reference point, providing valuable insight into price action and sentiment since that particular event. Swing traders use AVWAP as dynamic support and resistance, helping them identify key entry and exit points with greater accuracy. Combining AVWAP with other indicators or price patterns strengthens trade setups and confirms underlying market trends.

Read more about effectively trading with AVWAP →

Bearish Divergence

Bearish divergence occurs when a stock’s price reaches higher-highs, but a momentum indicator, like RSI, Stochastic or MACD, creates lower-highs. This indicates weakening bullish momentum and suggests that the current uptrend may soon reverse to the downside. Traders often use bearish divergences to identify potential short-selling opportunities or as signals to exit existing long positions.

Read more about trading bearish divergences →

Bagholder

A “bagholder” is an investor who continues holding a losing position after its price has significantly declined, usually due to denial, emotional attachment, or hoping for a price recovery. Bagholders often hold positions long past logical exit points, increasing their losses over time. Avoiding becoming a bagholder requires disciplined risk management, clearly defined stop-losses, and objective assessment of trades. Accepting losses early and moving forward quickly are essential strategies to prevent severe capital erosion.

In the WSB world, a bagholder is some poor sap left clutching a worthless stack of shares or coins after the hype train crashes on some pump & dump.

Learn more about being a bagholder →

Beta

Beta is a statistical measure of a stock’s volatility relative to the overall market, typically represented by the S&P 500 index. A beta greater than 1 indicates the stock is more volatile than the broader market, while a beta below 1 signifies lower volatility. Swing traders often consider beta when selecting stocks to match their risk tolerance and trading objectives. For example, high-beta stocks can offer larger short-term moves but may involve greater risks, while lower-beta stocks provide more stable price action.

Listen to a podcast episode about the beta in your trading →

Breakout

A breakout occurs when the price of a stock moves beyond a defined level of resistance, typically accompanied by increased volume. Traders often interpret breakouts as signals of new trends or shifts in market sentiment, where previous levels of heavy selling are overcome now by great levels of buying that pushes through resistance. Breakouts above resistance levels may signal bullish opportunities.

Read more about identifying and trading breakouts →

Bulls make money, bears make money, pigs get slaughtered

“Bulls make money, bears make money, pigs get slaughtered” is a popular phrase cautioning traders against excessive greed and lack of discipline. While traders can profit in both bullish and bearish market conditions, overly greedy or undisciplined traders (“pigs”) often take excessive risks, ignore prudent exit strategies, and ultimately suffer significant losses. Swing traders should always maintain realistic expectations, disciplined exit strategies, and appropriate risk management to ensure long-term trading success.

Originally a saying that Jim Cramer often said on his show “Mad Money” while his stock picks flop harder than a fish on a dock.

Here’s more about avoiding greed and practicing disciplined trading →

Bullish Divergence

Bullish divergence happens when the price of a stock makes lower-lows, but a momentum indicator, like RSI or MACD, forms higher- lows. This indicates decreasing bearish momentum and signals a potential reversal to the upside. Traders often use bullish divergences to anticipate trend reversals and identify buying opportunities. When combined with other signals such as volume confirmation, support levels, or bullish candlestick patterns, bullish divergences can provide even stronger signals for entering a long trade.

Read more about trading bullish divergences →

Buy the rumor, sell the news

“Buy the rumor, sell the news” refers to a common trading strategy where investors anticipate positive news or events by purchasing shares in advance, then sell those shares when the news is publicly released. Often, stock prices rise based on expectations leading up to the event, then decline as traders take profits after the news is announced, regardless of whether the news was positive. Swing traders who understand and anticipate market psychology behind news-driven events can capitalize by strategically timing entries and exits. Traders should remain cautious and avoid getting caught in post-news reversals. FOMC Statements, earnings and economic reports are classic examples.

Here’s more about trading news-driven market moves →

Candlestick Patterns

Candlestick patterns are visual formations created by price movements over specific time periods on stock charts, which traders use to identify potential market reversals or continuations. Common candlestick patterns include bullish engulfing, bearish engulfing, hammer, shooting star, and doji. Recognizing these patterns helps traders anticipate changes in market sentiment, manage risk, and pinpoint better trade entries and exits.

Here’s an example of a candlestick pattern (Bullish/Bearish Engulfing Candle) →

Chart Patterns

Chart patterns are recognizable formations that appear in stock price charts, representing periods of consolidation, continuation, or reversal of price trends. Traders use these patterns, such as head and shoulders, cup and handle, triangles, flags, and wedges, to forecast future price movements and to determine optimal entry and exit points. Identifying chart patterns can significantly improve odds for success on a trade by providing visual cues about potential market direction and momentum shifts.

Here’s an example of a chart pattern (bull flag) →

Circuit Breakers

Stock market circuit breakers are regulatory measures designed to temporarily halt trading on an exchange to curb panic-selling and provide a cooling-off period for investors. These mechanisms are triggered when significant declines occur in major stock indices, such as the S&P 500, within a single trading day. The primary objective is to maintain orderly market operations and allow investors time to assess information before making further trading decisions.

Current Thresholds:

As established by U.S. securities exchanges, the circuit breaker thresholds for the S&P 500 are:

• Level 1: A 7% decline from the prior day’s closing price halts trading for 15 minutes.
• Level 2: A 13% decline results in another 15-minute halt.
• Level 3: A 20% decline halts trading for the remainder of the trading day.

These measures apply to declines that occur before 3:25 p.m. ET; after this time, only a Level 3 halt would be implemented.

Read more about stock market circuit breakers and a history of them →

Consolidation

Consolidation is a period of price stability or sideways movement following a strong upward or downward move. During consolidation phases, stock prices typically trade within defined support and resistance levels on lower trading volumes, suggesting market indecision or pause before the next significant price move. Swing traders often monitor consolidations closely, as breakouts from consolidation ranges can offer attractive trade entries. Effective strategies include watching volume and waiting for price to break clearly above resistance or below support to signal the next potential trend direction.

Learn more about trading consolidation breakouts →

Continuation Patterns

Continuation patterns are specific chart formations indicating a temporary pause or consolidation before the prevailing and current trend resumes. Common continuation patterns include flags, pennants, and triangles. These patterns often form during lower trading volumes and become confirmed when prices break out of the consolidation range in the direction of the established trend. Traders frequently use continuation patterns to enter trades strategically on the breakout (or breakdown) of the pattern, placing stops beneath (for long setups) or above the pattern (for short setups) to manage risk effectively.

Learn more about trading continuation patterns →

Cut your losers short, let your winners run

“Cut your losses quickly, let your winners run” emphasizes disciplined risk management and capital preservation. Successful traders accept small losses quickly when trades move against them, rather than holding onto losing positions hoping for a reversal. Conversely, traders should allow winning trades to reach their full potential by raising their stop-losses and taking partial profits along the way. Practicing this principle ensures that the trader’s overall performance remains profitable, even with a moderate win rate.

Read more about disciplined risk management →

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Dead Cat Bounce

A “dead cat bounce” is a temporary and typically small rebound in the price of a declining stock, followed by a resumption of the downward trend. The phrase humorously suggests that even a dead cat will bounce slightly if dropped from high enough. Traders should exercise caution when interpreting short-term rebounds during downtrends, as they might mistake them for genuine recoveries. Recognizing a dead cat bounce early, especially by observing weak volume and lack of follow-through buying, can help traders avoid premature entries.

Here’s more about identifying dead cat bounces →

Diamond Hands

Diamond hands are the absolute chads who grip their bags tighter than a vice, no matter how brutal the market gets. They’re the ride-or-die crew holding onto their stocks, crypto, or whatever play they’re in, even when it’s dumping hard and the paper hands are bailing like rats. It’s all about that “I ain’t selling, fam” vibe – an unshakeable belief, flexing their ice-cold resolve while the charts bleed red. However, almost all of these traders got wrecked!

Read more about trading psychology →

Distribution

Distribution refers to a period where institutional or large traders systematically sell their positions in a stock, typically in smaller quantities to avoid rapidly driving the price down. This selling often occurs after a sustained upward move and can indicate a possible reversal or weakening of bullish momentum in the stock. Distribution phases frequently appear as sideways or choppy price action near or at resistance, accompanied by higher-than-average selling volume. Traders can use volume indicators and price action to identify distribution early, potentially avoiding losses by exiting long positions before prices decline.

Read more about identifying distribution phases →

Don’t catch a falling knife

“Don’t catch a falling knife” warns traders against trying to buy stocks during rapid and steep price declines. Attempting to pick the bottom of a falling stock can be dangerous, as prices may continue to drop significantly, leading to severe losses. Swing traders should instead wait for clear signs of support, reversal patterns, or other technical indicators confirming the stock is stabilizing before initiating a buy. Patience and disciplined entry criteria are key to successfully avoiding the risks of prematurely entering downward-moving stocks.

Here’s more about safely trading falling stocks →

Earnings Gap

An earnings gap occurs when a stock opens significantly higher or lower compared to its previous close, typically triggered by unexpected earnings results or company announcements released after market hours. Traders closely analyze earnings gaps to determine if the gap represents a breakaway, continuation, or exhaustion move.

Here’s more about trading earnings →

Entry Point

An entry point is the specific price level at which a trader initiates a new position in a stock. Effective entry points are usually determined by technical analysis methods such as support levels, breakouts, or candlestick formations, and are critical for managing risk and optimizing potential gains. Carefully choosing entry points helps traders reduce risk by placing stops closer to the entry, and thereby minimizing potential losses. Good entry points also increase the likelihood of achieving favorable reward-to-risk ratios, significantly contributing to overall trading success.

Here’s more about identifying optimal entry points →

Exit Strategy

An exit strategy outlines clear conditions or price targets at which a trader will close out a trade, to either maximize profits or to limit losses. Having a predefined exit strategy ensures disciplined trading, reduces emotional decisions, and significantly enhances long-term profitability. Effective exit strategies often incorporate raising stops or taking partial profits, based on technical resistance levels or measured moves. Regularly reviewing and refining exit strategies helps traders adapt to changing market conditions and maintaining consistent trading performance over time.

Read more about creating effective exit strategies →

Exponential Moving Average (EMA)

The Exponential Moving Average (EMA) is a technical indicator that calculates the average price of a stock over a specific period, placing greater weight on more recent price data. Unlike the Simple Moving Average (SMA), the EMA responds more quickly to recent price movements, making it particularly useful for short-term traders. Traders frequently use EMAs to identify trends, potential entry points, and stop-loss levels. Common EMA periods used in swing trading include the 9-day, 20-day, and 50-day EMAs, with crossovers between these averages signaling bullish or bearish shifts in momentum.

Here’s more about using moving averages in swing trading →

FDs

FDs are the glorious, brain-dead gambles those WallStreetBets numbskulls drool over, which is short for “fancy derivatives,” but really just turbo-charged options bets that expire fast and bleed cash even faster. They are extremely risky, short-term options contracts that can rapidly lose value. These options often have short expiration periods (as in days, or same day), and their prices fluctuate dramatically with underlying stock volatility.

Here’s more about starting out in options trading →

Fibonacci Retracement

Fibonacci retracements are horizontal lines drawn at specific percentages (typically 23.6%, 38.2%, 50%, 61.8%, and 78.6%) between significant highs and lows on a price chart, based on the Fibonacci number sequence. Traders use these retracement levels to identify potential support or resistance areas where price may pause or reverse during corrections. Fibonacci levels are especially valuable when combined with other technical signals, such as candlestick patterns or moving averages. For example, traders often look to buy at the 38.2% or 61.8% retracement levels when prices retrace during an overall bullish trend.

Here’s more about trading Fibonacci retracements →

Fundamental Analysis

Fundamental analysis involves evaluating a stock’s intrinsic value based on financial and economic factors, such as company earnings, revenue growth, financial ratios, management performance, and overall market conditions. Unlike technical analysis, fundamental analysis seeks to determine whether a stock is overvalued or undervalued relative to its true value. While swing traders typically focus on technical factors, understanding key fundamentals can provide additional confirmation and help avoid unexpected moves driven by earnings announcements or economic events. For instance, swing traders might avoid positions just before an earnings release or significant economic report to minimize risk.

Here’s more about incorporating fundamental analysis in swing trading →

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Gap Trading

Gap trading involves strategies built around significant price gaps that occur when a stock opens substantially higher or lower than the previous day’s close, usually due to overnight news, earnings, or market sentiment. Traders classify gaps into categories such as breakaway gaps, continuation gaps, exhaustion gaps, and common gaps, each with different trading implications. Swing traders frequently look for gaps that indicate new trend directions or strong momentum shifts. For example, a breakaway gap above resistance with strong volume might signal a bullish trend beginning, while an exhaustion gap after a prolonged uptrend could indicate an impending reversal.

Here’s more about gap trading strategies →

Golden Cross

A Golden Cross is a bullish technical signal that occurs when a short-term moving average (usually the 50-day MA) crosses above a longer-term moving average (typically the 200-day MA). This crossover indicates potential bullish momentum and suggests a possible long-term upward trend is forming. Traders often use the Golden Cross as a confirmation signal to enter or hold long positions, particularly when supported by increased trading volume. However, it’s important to confirm signals with additional technical indicators or price action analysis to avoid false breakouts. Also, the Golden Cross can be a very laggy indicator, where much of the price move is already underway by the time the confirmation occurs.

Here’s more about trading the Golden Cross →

Institutional Buying

Institutional buying refers to large-scale purchases of a stock by institutional investors such as mutual funds, pension funds, hedge funds, or insurance companies. Institutional buying is usually identified by higher-than-average volume and can signal strong bullish sentiment, potentially leading to sustained upward momentum. Swing traders pay close attention to institutional buying, as it can validate trade setups, strengthen support levels, and signal early stages of new trends. Monitoring volume and institutional accumulation indicators can help traders detect these opportunities early.

Here’s more about institutional buying →

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Liquidity

Liquidity refers to the ease with which a stock can be bought or sold in the market without significantly affecting its price. Highly liquid stocks typically have high trading volumes, narrow bid-ask spreads, and ample market depth, allowing traders to execute larger positions easily. Low-liquidity stocks, in contrast, are harder to trade efficiently and can lead to significant slippage (executions at worse prices than anticipated). Swing traders generally prefer highly liquid stocks because liquidity enables more accurate entries, exits, and tighter stop-loss management.

Here’s more about liquidity and its importance to traders →

Limit Order

A limit order is an instruction given to a broker to buy or sell a stock at a specific price or better. Unlike market orders that execute immediately at the current market price, limit orders allow traders precise control over their entry or exit prices. Traders frequently use limit orders to enter trades at favorable prices or to secure profits at defined targets without the risk of slippage. For example, setting a limit buy order below the current market price allows traders to enter positions at more ideal levels, especially during short-term pullbacks.

Learn more about trade entries →

Liquidity Trap

A liquidity trap occurs when interest rates are extremely low, yet consumers and businesses are reluctant to spend or invest, leading monetary policy interventions to become ineffective. This economic scenario can result in prolonged periods of low market volatility and stagnant price action, challenging traders to find attractive trading opportunities. Swing traders should recognize liquidity traps by observing sluggish markets and lower trading volume, adjusting strategies accordingly, such as trading in more volatile sectors or awaiting clearer market conditions.

Learn more about navigating liquidity traps in trading →

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MACD (Moving Average Convergence Divergence)

The Moving Average Convergence Divergence (MACD) is a momentum indicator that shows the relationship between two moving averages, typically calculated using a 12-day EMA minus a 26-day EMA. Traders look at the MACD histogram and signal line (9-day EMA of the MACD) to identify bullish or bearish momentum shifts, crossovers, and divergences. A bullish crossover occurs when the MACD line crosses above the signal line, signaling a potential upward move, while a bearish crossover indicates potential downward momentum. Traders often use MACD divergences—where price moves in one direction and the indicator moves in another—as signals for possible reversals.

Learn about conflicting trade signals →

Margin

Margin refers to borrowed money provided by brokers to traders, enabling them to purchase stocks beyond their available cash. Trading on margin allows traders to leverage their capital, potentially amplifying returns but also increasing risks. Swing traders using margin must carefully manage risk, as losses can significantly exceed initial investments if markets move against their positions. To use margin responsibly, traders should practice disciplined risk management, position sizing, and clearly defined stop-loss strategies.

Read more about trading smart →

Market Sentiment

Market sentiment refers to the overall attitude or mood investors have toward the financial markets or even a particular stock. Sentiment can range from extremely bullish (optimistic) to extremely bearish (pessimistic), influencing trading decisions and price movements. Traders often assess market sentiment through economic reports (i.e. Consumer Sentiment), volatility indexes (VIX), put/call ratios, and AAII Investor Sentiment. Understanding market sentiment helps swing traders gauge when markets or stocks are becoming overly optimistic or pessimistic, potentially signaling opportunities for contrarian trades.

Learn more about understanding and trading market sentiment →

Mooning / To the Moon

“Mooning” or “To the Moon” describes a stock rapidly rising in price, often beyond typical market expectations. Popularized Reddit & WalStreetBets, this phrase expresses enthusiasm and optimism for significant upward moves. Traders often use the phrase as encouragement or excitement around a promising trade or breakout. However it is nothing more than a war cry of the clowns when they think their latest idiotic trade, is about to blast off into insane gains. It’s their misplaced dream of prices soaring sky-high, followed by a crash that leaves them bagholding and living off of food stamps.

Learn more about breakout trading and managing expectations →

Moving Average

A moving average (MA) is a widely used technical indicator that calculates the average price of a stock over a specified period of time, helping traders smooth out short-term fluctuations and identify underlying trends. Common moving averages include the 20-day, 50-day, 100-day, and 200-day MAs, each suited to different timeframes and trading styles. Traders use moving averages to identify potential support and resistance levels, crossovers, and trend directions. For example, when a shorter-term moving average (such as the 20-day MA) crosses above a longer-term moving average (like the 50-day MA), it can signal a bullish momentum change in the underlying asset and create potential trading opportunities.

Learn more about using moving averages in swing trading →

Overbought

Overbought refers to a condition where a stock’s price has risen significantly in a short period, often leading technical indicators, like RSI or Stochastics, to reach elevated levels (commonly above 70 on the RSI scale or 80 on the Stochastics). This suggests that the stock might have advanced too quickly, making it vulnerable to profit-taking or a reversal. Traders typically watch for overbought conditions as a potential signal to sell existing long positions or to look for short-selling opportunities. However, traders should use caution, as stocks can remain overbought for extended periods in strong uptrends, even when the moves themselves seem completely irrational.

Learn more about trading overbought stocks effectively →

Oversold

Oversold refers to a situation where a stock’s price has fallen sharply in a short period, causing momentum indicators, such as RSI or Stochastics, to reach very low levels (typically below 30 on the RSI scale and 20 on the Stochastics). This condition indicates that the stock may have declined excessively and could be due for a rebound or reversal. Traders often look for oversold conditions as potential buying opportunities or signs to cover short positions. However, as with overbought scenarios, stocks can remain oversold longer than expected, particularly during strong bearish trends, so traders should confirm oversold signals with other indicators or price action before entering trades.

Learn more about identifying oversold trading opportunities →

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Paper Hands

“Paper Hands” describes traders who quickly sells his positions due to fear, uncertainty, or volatility. It contrasts directly with “Diamond Hands,” as paper-handed traders often exit trades prematurely, missing potential future gains that diamond hand traders are simply delusional and convinced will happen. The phrase gained popularity among online trading communities criticizing emotional or reactive trading decisions. Those with paper hands that managed the risk are likely still trading today, while the diamond hands are currently living in their mom’s basement.

Learn more about emotional control in trading →

Position Sizing

Position sizing refers to determining the appropriate number of shares to buy or sell in each trade, based on the trader’s account size, risk tolerance, and desired risk per trade. Proper position sizing is crucial for effective risk management, as it ensures that no single trade will significantly damage your trading capital. Commonly, swing traders limit their risk per trade to 1%–2% of their total account size. For instance, with a $50,000 account, risking 1% ($500) on a trade with a stop-loss of $2 per share would lead to a position size of 250 shares. Another approach (and this is my preferred method) is to determine the position size for each trade based on percentage of overall capital. So on a $100,000 account, a 10% position size would be $10,000 for each trade.

Learn more about effective position sizing strategies →

Price Action

Price action refers to analyzing a stock’s price movements without relying heavily on indicators or oscillators, focusing instead on patterns formed by candlesticks, trends, support and resistance, and volume. Traders use price action to make decisions by interpreting how buyers and sellers are interacting in the market. Popular price action setups include breakouts, reversals, and consolidations, each providing clear and direct signals without excessive reliance on indicators. Mastering price action trading allows swing traders to better understand market psychology, timing their entries and exits more effectively.

Learn more about using price action in swing trading →

Pullback

A pullback occurs when a stock’s price temporarily retraces or declines after a strong upward move, typically seen as a normal correction within an ongoing uptrend. Traders often view pullbacks as attractive buying opportunities, especially when prices retrace to key support levels, moving averages, or Fibonacci retracement areas, to name a few. To increase success when trading pullbacks, traders frequently look for confirmation signals such as bullish candlestick patterns or increasing volume as the stock stabilizes. Effective pullback trading helps manage risk by allowing traders to enter positions at more favorable prices with tighter stop-losses, and to often times play the bounce off of short-term overbought conditions.

Learn more about how to trade pullbacks effectively →

Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a momentum oscillator developed by J. Welles Wilder that measures the speed and magnitude of recent price movements, typically over a 14-period timeframe. RSI values range from 0 to 100, with readings above 70 indicating overbought conditions and below 30 indicating oversold conditions. Traders commonly use RSI to spot divergences, reversals, and potential entry or exit signals. For instance, a bullish divergence occurs when price makes lower lows while RSI makes higher lows, suggesting a potential upward reversal may soon occur.

Learn more about trading with RSI →

Resistance Level

A resistance level is a price level where selling pressure consistently prevents the stock from rising further. Resistance levels often form due to previous highs, psychological price points, or technical indicators such as moving averages and trendlines. When a stock price approaches resistance, traders typically monitor price action closely to identify potential reversals or breakout opportunities. A decisive break above a resistance level, accompanied by increased volume, often indicates a strong bullish signal and a potential trend continuation upward.

Learn more about identifying and trading resistance levels →

Reversal Patterns

Reversal patterns are specific chart formations indicating a potential end to the current trend and the beginning of a new trend in the opposite direction. Common reversal patterns include head and shoulders, double tops/bottoms, and rounding tops/bottoms. Swing traders use reversal patterns to anticipate major changes in market sentiment, identifying timely entry and exit points. For instance, a confirmed double-bottom pattern often signals a bullish reversal, suggesting traders consider entering long positions after a breakout above the pattern’s neckline.

Learn more about recognizing reversal patterns →

Reward-to-Risk Ratio

The reward-to-risk ratio is the comparison of the potential profit of a trade relative to its potential loss. For example, a 3:1 reward-to-risk ratio indicates that a trader risks $1 in potential loss to achieve a profit of $3. Maintaining favorable reward-to-risk ratios, typically at least 2:1 or better, significantly improves long-term trading profitability by ensuring gains outweigh inevitable losses. Calculating and adhering to strict reward-to-risk ratios helps traders manage risk effectively, allowing consistent profitability even with moderate win rates.

Learn more about optimizing reward-to-risk ratios →

Risk Management

Risk management involves identifying, analyzing, and controlling risks associated with trading to protect a trader’s capital and ensure consistent profitability. Effective risk management techniques include using appropriate position sizing, setting stop-loss orders, and maintaining favorable reward-to-risk ratios. Adhering to disciplined risk management practices helps traders preserve capital, reduce emotional decision-making, and achieve sustained success.

Learn more about swing trading risk management →

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Scaling In

Scaling in refers to gradually entering a trading position by incrementally adding shares over time, rather than buying the full position immediately. This strategy helps traders manage risk, particularly when initial market direction is uncertain or volatility is high. By scaling in, traders can reduce average entry prices and limit potential losses. For example, a swing trader might initially purchase half of their intended position, then add the remaining half after confirmation of trend direction or a breakout signal.

Learn more about scaling into trades effectively →

Scaling Out

Scaling out involves gradually reducing or exiting a trading position by selling shares incrementally as the stock price moves in a favorable direction. This approach helps traders lock in partial profits and manage risk without fully closing a winning trade prematurely. Scaling out can also reduce emotional pressure and anxiety around precise timing of market exits. For example, a trader might sell half of their shares at the first profit target, then sell the remaining half at subsequent profit targets or upon signs of a reversal.

Learn more about scaling out of trades for profit-taking →

Short Selling

Short selling involves borrowing shares of a stock from a brokerage and immediately selling them with the expectation that the price will decline. The short seller aims to repurchase the shares at a lower price later, profiting from the difference between the selling and repurchase prices. Short selling allows swing traders to profit in bearish market conditions or downward-trending stocks. Due to its increased risk, short selling requires careful management of risk and adherence to disciplined stop-loss strategies to minimize potential losses.

Learn more about short selling strategies →

Short Squeeze

A short squeeze occurs when a heavily shorted stock experiences an abrupt upward price movement, forcing short-sellers to rapidly buy back shares to cover their short positions. The accelerated buying pressure from short-sellers amplifies the price increase, often causing dramatic spikes in the stock’s value. Short squeezes are especially common in stocks with low liquidity or high short interest. Traders often watch short interest metrics and trading volumes closely to identify potential short squeeze opportunities.

Learn more about short squeeze strategies →

Simple Moving Average

The Simple Moving Average (SMA) calculates the average price of a stock over a specific period, assigning equal weight to each data point. SMAs help traders smooth price fluctuations and identify the direction of price trends. Common SMA periods for swing traders include the 20-day, 50-day, and 200-day SMAs, frequently used as dynamic support and resistance levels. Traders often watch for SMA crossovers, where a short-term SMA crossing above a longer-term SMA signals bullish momentum, while the opposite indicates bearish sentiment.

Learn more about trading with Simple Moving Averages →

Stochastic Oscillator

The Stochastic Oscillator is a momentum indicator that compares a stock’s closing price to its price range over a defined period, usually 14 days. Stochastics oscillate between 0 and 100, where readings above 80 suggest overbought conditions and below 20 indicate oversold conditions. Traders use stochastics to identify potential reversals, divergences, and optimal entry or exit points. For instance, bullish signals often occur when the stochastic oscillator moves out of oversold territory, combined with bullish candlestick confirmations or other supportive indicators.

Learn more about using Stochastic Oscillators effectively →

Stonks

Stonks are what those WallStreetBets goofballs on Reddit call stocks. It’s their dumb little chant for any random ticker they’re throwing cash at, while simultaneously screaming “STONKS GO BRRR”. Meanwhile, their latest brain-dead bet either moons or flops. It started as a meme with a janky stick-figure dude in a suit, but now it’s just the battle cry of the apes stumbling through the market, chasing tendies with zero risk management.

Learn about smart trading practices →

Stop-Limit Order

A stop-limit order combines features of a stop order and a limit order, triggering a buy or sell order when a stock reaches a specific stop price, but only executing within a defined price range (limit). This provides traders precise control over entry and exit prices, helping manage risk and preventing unfavorable trade execution. For example, a trader might use a stop-limit sell order with a stop price at $50 and limit at $49.75 to ensure they don’t sell below a certain threshold during a rapid decline.

Learn more about using stop-loss orders effectively →

Stop-Loss Order

A stop-loss order is a type of trade order designed to limit losses by automatically selling a stock if its price drops to a predetermined level. Stop-losses are critical to effective risk management, preventing large losses and preserving trading capital. Traders typically set stop-loss orders below key support levels or based on volatility measures to avoid premature exits due to temporary price swings. For example, a trader entering a position at $100 might set a stop-loss at $95 to limit potential loss to $5 per share. It is worth noting that a stop-loss doesn’t guarantee you will get out at that price; factors such as gaps below your stop-loss can increase the losses for a trader.

Learn more about setting effective stop-loss orders →

Support Level

A support level is a price at which a stock consistently finds buying interest strong enough to prevent it from declining further. Support typically emerges due to previous price lows, moving averages, or psychological price points. Traders frequently look for bullish reversal signals or strong volume near support as opportunities to enter trades. A confirmed break below support, however, indicates potential bearish momentum, prompting traders to reconsider their positions or initiate short trades.

Read more about identifying and trading support levels →

Swing Trading

Swing trading involves holding positions in stocks from a few days up to several weeks, capturing short-to-medium-term price movements or “swings.” Swing traders use technical analysis to identify trading opportunities based on patterns, trends, and indicators. This trading style allows traders to avoid constant market monitoring while benefiting from meaningful price moves. Effective swing trading relies on disciplined entry and exit strategies, careful risk management, and a strong understanding of market dynamics.

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Technical Analysis

Technical analysis involves evaluating stocks based on historical price movements, patterns, and indicators rather than fundamental factors. Traders employing technical analysis believe past price behavior can predict future price trends and market sentiment. Common tools include moving averages, chart patterns, candlestick formations, and oscillators like RSI or MACD. Swing traders rely heavily on technical analysis to pinpoint ideal entry and exit points, manage risk, and capitalize on short-to-medium-term price moves.

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Tendies

Tendies are the shiny prizes that stumble into the grubby paws of those WallStreetBets clowns, total dinguses who fling cash at the dumbest trades, like sketchy options or whatever coins that are trending on their sticky phone screens. Often times you’ll see one of these goobers posting on social media “TENDIES BABY” as their unhinged YOLO bet somehow staggers into a win, turning their ramen noodles fund into a fleeting burger budget. It’s the cosmic joke of the market handing a W to these reckless knuckleheads, leaving the smart folks baffled but the memes still flowing. You can find most of these people living in their mom’s basement, living rent free, with dried BBQ sauce still on their face from last night’s midnight run to McDonalds.

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Trailing Stop

A trailing stop is an adjustable stop-loss order that automatically moves with the price of a stock, securing profits as the trade progresses favorably. Trailing stops allow traders to lock in gains while keeping trades open for potential further upside. For instance, a trader with a $2 trailing stop would move the stop-loss upward every time the stock reaches a new high in the trade, while keeping a $2 spread between the high price of the trade and the stop-loss.

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The trend is your friend

“The trend is your friend” emphasizes the importance of trading in alignment with the overall market direction or stock trend. Traders who follow this advice generally see better results, as trends often persist longer than anticipated. Attempting to trade against established trends can be risky and may result in unnecessary losses. To effectively trade with the trend, swing traders typically rely on trend-following indicators, moving averages, and consistent price-action analysis.

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Trendline

A trendline is a straight line drawn on a price chart connecting consecutive highs or lows, clearly illustrating the direction and strength of a price trend. Trendlines help traders identify dynamic support or resistance levels, guiding decisions on trade entries, exits, and stop-loss placements. A break above or below a trendline, especially when accompanied by strong volume, can signal potential reversals or trend accelerations. Swing traders frequently rely on trendlines as foundational tools to analyze market structure and momentum.

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V-Z

Volatility

Volatility refers to the degree of variation in the price of a stock over time, indicating how rapidly or unpredictably prices move. Stocks with high volatility experience larger, more rapid price swings, offering potentially greater trading opportunities but also higher risks. Conversely, stocks with low volatility move more slowly and predictably, appealing to conservative traders. Swing traders often seek stocks with moderate-to-high volatility to capitalize on meaningful short-term price movements, adjusting their position sizes and risk management accordingly.

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Volume

Volume represents the total number of shares traded for a particular stock over a specified period, indicating the strength or weakness behind price moves. High trading volume typically validates price movements, showing strong market participation and conviction behind the direction. Conversely, low volume can suggest lack of interest or uncertainty, often leading to weaker price moves or reversals. Swing traders closely monitor volume to confirm breakouts, identify accumulation or distribution phases, and gauge the reliability of technical signals.

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VWAP (Volume Weighted Average Price)

The Volume Weighted Average Price (VWAP) is an intraday indicator that calculates the average price at which shares are traded throughout the day, factoring in both price and volume. VWAP serves as a benchmark to measure trading efficiency and market sentiment, often acting as dynamic support or resistance levels for intraday and swing traders. Traders frequently use VWAP to evaluate market trends and time trade entries or exits more precisely. Stocks trading consistently above VWAP generally indicate bullish intraday sentiment, while sustained trading below VWAP can signal bearish momentum.

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YOLO

A YOLO trader is a straight-up degenerate who yeets their cash into the wildest, most balls-to-the-wall trades without a second thought. Think pumping their rent money into some sketchy penny stock or FOMOing into a memecoin at the top. It’s all about that “screw it, we ball” energy, chasing a fat W for the clout, and not giving a single care if it all crashes and burns. They’re the type to post “LFG TO THE MOON” on X before diamond-handing a 90% L like a champ. Pure chaos, no cap.

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