Stock Trading Terminology
Glossary

Stock Trading Terminology is a unique technical language of stock market. Each stock trading terms have definite meaning. A doctor speaks using medical terms and a photographer uses his own language, so also a politician. (In political language, 'I assure you' means 'I will not guarantee you'! Hi!)

Like wise all professional stock traders use stock market terminology. In our language 'go long' means 'buy shares to sell later' and 'go short' means 'sell shares to buy later'.

Be familiar with them. Always use them in your conversation. Become a progressively evolving professional stock trader.

What are the different stock trading terminology used in stock market?

Most of the stock trading terminology, used in this site are explained below.


Click on the following letters to go to the stock trading definitions starting from that letter.


A : B : C : D : E : F : G : H : I : J : K : L : M

O : P : R :  S : T : V : W

Stock Trading Terminology - A

Abandoned Baby:
Abandoned Baby is a reversal chart pattern, formed by price action in a single time period, which is separated from rest of the price action by gaps. It is very reliable with 80% probability.

ADX Indicator:
The ADX Indicator or The Average Directional Movement Index Indicator is used to analyze the strength of the trend of a stock or a commodity. It is part of The Directional Movement System, developed by J.Welles Wilder. It was developed in 1978. Since then it is widely used in stock trading for the technical analysis of the stock.

All or None Order:
AON or All or None Order is an attribute attached to a buy or sell order, so that the order is either completely filled or not at all.

American Depository Receipt (ADR):
A stock representing a specified number of shares in a foreign corporation. ADR's are bought and sold in the American markets just like regular stocks. An ADR is issued by a U.S. Bank, consisting of a bundle of shares of a foreign corporation that are being held in custody overseas. The foreign entity must provide financial information to the sponsor bank. ADR's are listed on either the NYSE, AMEX, or NASDAQ.

American Depository Share (ADS):
A share issued under deposit agreement that represents an underlying security in the issuer's home country. ADS is the actual share trading while ADR represents a bundle of ADSs.

Arbitrage:
The business of taking advantage of difference in price of a security traded on two or more stock exchanges, by buying in one and selling in the other (or vice versa).

Ascending Triangle:
Ascending Triangle is a chart pattern, characterized by horizontal top and rising bottom. This is created when a bullish market pushes up against a resistance level.

Averaging:
The process of gradually buying more and more securities in a declining market (or selling in a rising market) in order to level out the purchase (or sale) price.

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Stock Trading Terminology - B

Bar charts:
Bar charts also called as OHLC charts or open-high-low-close charts, are stock charts used in charting and study of chart patterns in technical analysis. Each bar is a symbol created by connecting a series of price points, typically used to illustrate movements in the price of a financial instrument for a time period (i.e., hour, day, week, month, etc.). This is the most commonly used chart.

Bearish Engulfing Pattern:
Bearish Engulfing Pattern is a major bearish reversal candlestick pattern. They occur at the top of an up trend.

Bears:
Bears are traders, who expects the price of a financial security to fall, they sell and short sell more and more, which in turn fuels the momentum of a falling market.

Bear Market:
A bear market is any financial market, in which prices of a security or a group of securities keep falling.

Best ask:
The lowest price quoted for a particular stock to be sold.

Best bid:
The highest price quoted for a particular stock to be bought.

Bid and offer:
Bid is the price at which the market maker buys from the investor and offer is the price at which he offers to sell the stock to the investor. The offer is higher than the bid.

Bid/Ask spread:
The difference between the ask price and bid price.

Black Candles:
Black Candles or black candlesticks are bearish lines in candlestick and candlevolume charts. They signify that the closing is lower than opening for that time period.

Blue Chips:
Blue Chips are shares of large, well established and financially sound companies with an impressive records of earnings and dividends. Generally, Blue Chip shares provide low to moderate current yield and moderate to high capital gains yield. The price volatility of such shares is moderate.

Bond:
A debt security, or an IOU, issued by a company or government agency is called a bond. A bond investor lends money to the issuer and, in exchange, the issuer promises to repay the loan amount on a specified maturity date; the issuer usually pays the bondholder periodic interest payments over the period of the loan.

Bonus:
It is a free allotment of shares made in proportion to existing shares out of accumulated reserves. A bonus share does not constitute additional wealth to shareholders. It merely signifies recapitalization of reserves into equity capital. However, the expectation of bonus shares has a bullish impact on market sentiment and causes share prices to go up.

Book Closure:
Dates between which a company keeps its register of members closed for updating prior to payment of dividends or issue of new shares or debentures.

Bourse:
The floor of a Stock Exchange.

Breakout:
When the price of a stock surpasses its resistance level or falls below the support level, it is termed as break out in technical analysis.

Brokerage:
Brokerage is the commission charged by the broker. The maximum brokerage chargeable is determined by stock exchange controlling authority of each country.

Bullish Engulfing Pattern:
Bullish Engulfing Pattern is a major bullish reversal candlestick pattern. They occur at the bottom of a down trend.

Bull Market:
A bull market is any financial market, in which prices of a security or a group of securities keeps rising. The more it rises, higher is the risk of falling.

Bulls:
Bulls are traders, who expects the price of a financial security to rise, they buy more and more, which in turn fuels the momentum of a rising market.

Buy and Hold:
Buy and hold is a technique of investing and profiting in stock market. A stock is bought and held almost indefinitely, assuming that all financial markets, in spite of good times and bad times, give a good rate of return on investment, in the long run. It is a long term investment strategy.

Buyer:
A trading member who has placed the order for the purchase of the securities.

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Stock Trading Terminology - C

Call:
The demand by a company or any other issuer of shares for payment, like demand for full payment on the due date. A call by a company should not be confused with a call option.

Call Option:
This is the right, but not the obligation, to purchase shares at a specified price at a specified date in the future.

Candlestick Hammer:
A Candlestick Hammer is a reversal candlestick pattern with long lower shadow and no upper wick. They are bullish in nature.

Candlestick Patterns:
Candlestick Patterns are formed by variations and combinations of candle lines. They not only depict the price movements, but also graphically represent the psychology of the traders.

Candlevolume Chart:
Candlevolume Chart is a stock charts used in charting and study of chart patterns in technical analysis. They combine the features of Equivolume charts and Candlestick charts.

Candle Wicks:
Candle wicks along with the body are the story tellers of the simple candlestick patterns. They are the graphs which represent the mind of the market traders.

Capital Gain:
The amount by which an investment's selling price exceeds its purchase price.

Capitalization:
The total value of the company in the stock market.

Capital loss:
The negative difference between the selling price of the stock and purchase price of the stock.

Capital Market:
A market where debt or equity securities are traded.

Carry forward trading:
Trading where the settlement of trades is postponed on the stock exchange until a future settlement period involving payment of interest on the account.

Cash markets:
The markets where securities have to be delivered by the seller and cash to be paid by the buyer immediately.

Chart-patterns:
As the stock prices move up and down, they tend to form recognizable recurring designs or figurative diagrams, called chart patterns which give us more consistent profitable trades.

Circuit breaker:
When a stock price increases or decreases by a certain percentage in a single day it hits the circuit breaker. Once the stock hits the circuit breaker, trading in the stock above (or below) that price is not allowed for that particular day.

Clearing House:
Each Exchange maintains a clearing house to act as the central agency for effecting delivery and settlement of contracts between all members. The days on which members pay or receive the amounts due to them are called pay-in or pay-out days respectively.

Closing Price:
The last traded price of a security at the end of a trading day.

Commission:
A fee charged by a broker or distributor for his/her service in facilitating a transaction.

Consideration:
Consideration is the total purchase or sale amount associated with a transaction.

Continuation Patterns:
Continuation patterns are chart patterns, which are formed due to temporary profit booking, in an ongoing trend.

Contract:
This is the agreement between a buyer and a seller of a security, on any securities market.

Contrarian Investing:
Contrarian investing attempts to invest in a falling market and sell stock in a bullish market. Contrarian investor is one who takes a stock position against the opinion of majority and profits from it. Her opinion is contrary to the conventional wisdom.

Correction:
Correction is the temporary reversal of trend in share prices. This could be a reaction, that is a fall in an up trend or a rally, that is a rise in a down trend.

Cum-bonus:
The share is described as cum-bonus when a potential purchaser is entitled to receive the current bonus.

Cum-rights:
The share is described as cum-rights when a potential purchaser is entitled to receive the current rights.

Custodial fees:
The fees charged by the custodian for keeping the securities.


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Stock Trading Terminology - D

Dark Cloud Cover:
Dark cloud cover is a bearish reversal candlestick pattern. They occur at the top of an up trend.

Day Trading:
Day trading is a method of stock trading, where a trade is opened and closed on the same day. At the end of the day, stock position should be nil. Such traders are called as Day Traders.

Day Trading Psychology:
Day Trading Psychology is the mind set required to become successful in day trading.

Debenture:
Debenture is a certificate, issued against a loan raised by a company, paying a fixed rate of interest and is secured on the assets of the company.

Demat trading:
Demat trading is trading of shares that are in the electronic form or dematerialised shares. Dematerialisation is the process by which shares in the physical form are canceled and credited in the form of electronic balances and are maintained on highly secure systems at the depository.

Directional Index:
Directional Index or DI is used to analyze the trend of a stock or a commodity. It is part of The Directional Movement System, developed by J.Welles Wilder. It was developed in 1978. Since then it is widely used in stock trading for the technical analysis of the stock.

Derivatives:
Instruments derived from securities or physical markets. The most common types of derivatives that ordinary investors are likely to come across are futures , options , warrants and convertible bonds.

Descending Triangle:
Descending Triangle is a chart pattern, characterized by horizontal bottom and sloping top. This is created when a bearish market pushes down against a support level.

Diversification:
Investing in a basket of shares with different risk-reward profile and correlation so as to minimize unsystematic risk.

Dividend:
This is the income you receive as a shareholder from a company.

Dividend yield:
Annual dividend paid on a share of a company divided by current share price of that company.

Doji:
Doji candlestick is a candlestick pattern with out a real body. They represent the areas of uncertainty.

Double Bottom:
Double Bottom is a reversal chart patterns, where a stock in a down trend, hits a support level twice and reverses to continue in an up trend.

Double Top:
Double Top is a reversal chart patterns, where a stock in an up trend, hits a resistance level twice and reverses to continue in a down trend.

Dragonfly Doji:
Dragonfly Doji candlestick is a candlestick pattern with out a real body. They represent the areas of uncertainty.


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Stock Trading Terminology - E

Earnings Per Share (EPS):
This measure expresses how much the company is earning for every share held. It is calculated by dividing pre tax profit by the number of shares in issued. Earnings per share is more important than the overall reported profit figure, because the EPS provides a better measure of profitability.

Evening Doji Star:
Evening Doji Star is a bearish reversal candlestick pattern. They occur at the top of an up trend.

Evening Star:
Evening Star is a bearish reversal candlestick pattern. They occur at the top of an up trend.

Equivolume:
Equivolume Charts are stock charts used in charting and study of chart patterns in technical analysis. They display the relationship between price and volume in a bar.

Ex Bonus:
The share is described as ex-bonus when a potential purchaser is not entitled to receive the current bonus, the right to which remains with the seller.

Ex Dividend:
This is a share sold without the right to receive the declared dividend payment which is marked as due to those shareholders who are on the share register at a pre-announced date.

Ex Rights:
The share is described as ex-rights when a potential purchaser is not entitled to receive the current rights, the right of which remains with the seller.

Eurex Exchange
Eurex Exchange is one of the world's leading derivatives exchanges in Europe. It is jointly operated by German Derivative Exchange and six Swiss Exchanges.


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Stock Trading Terminology - F

Falling Wedge:
Falling Wedge is a continuation chart pattern, formed by price action, which is contained with in a converging and descending trend lines.

FOK or Fill or Kill order:
FOK or Fill or Kill order allows the order to completely fill immediately or it will be canceled.

Flag Patterns:
Flag Patterns are continuation chart patterns, formed by a minor consolidation, which is contained with in a small rectangle or a parallelogram.

Fundamental analysis:
Fundamental analysis is a method to determine the health of the financial statements and focuses on the strengths and weaknesses of the underlying company and is unconcerned about daily price movements and volume variations.

Futures:
A contract for the purchase and sale of a commodity, financial instrument or index at a fixed price at a fixed date in the future. Futures markets were created to allow producers or consumers to hedge the risk of the possible price change in the future.


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Stock Trading Terminology - G

Gaps:
Gaps are continuation chart pattern, formed by an unfilled space between trading session. Gaps are referred as Tasuki, meaning window in candlestick charting.

Good Till Cancellation:
GTC or Good Till Cancellation is an attribute attached to a buy or sell order, to keep the order in system until it gets executed or canceled.

Good Till Day:
GTD or Good Till Day is an attribute attached to a buy or sell order, to keep the order in system, until a date if not canceled or executed. They are also known as GTT orders, meaning Good Till Time.

Gravestone Doji:
Gravestone Doji candlestick is a candlestick pattern with out a real body. They represent the areas of uncertainty.


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Stock Trading Terminology - H

Hanging Man:
A Hanging Man candlestick is a reversal candlestick pattern with long lower shadow and no upper wick. They are bearish in nature.

Harami:
Harami is a candlestick pattern, which shows the indecision of the market. In Japanese language, it means, pregnant. It is made of two candles, one containing the other.

Head and Shoulder:
Head and Shoulder is one of the very common and profitable chart patterns. It is very reliable with 95% probability. Its similarity to to head and shoulder of a man gives it its name. It can be a bullish pattern or a bearish pattern.

Hedging:
Offsetting or guarding against investment risk. A perfect hedge is a no-risk-no gain precaution. A conservative strategy for reduction of risk through futures, options or some other derivative, by opening an opposite position to that already held in the underlying market. Taking positions in securities so that each offsets the other.


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Stock Trading Terminology - I

Iceberg Order:
Iceberg order is a large order which has been divided into smaller orders, usually by the use of an automated program, for the purpose of hiding the actual order quantity.

IOC or Immediate Or Cancel:
IOC or Immediate Or Cancel is an attribute attached to a buy or sell order, to execute the transactions immediately or to cancel it.

Inverted Hammer:
Inverted Hammer is a bullish reversal candlestick pattern. They occur at the bottom of a down trend.

Island Formation:
Island Formation is a reversal chart pattern, formed by price action in a multiple time period, which is separated from rest of the price action by gaps. It is very reliable with 80% probability.


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Stock Trading Terminology - J

Japanese Candle Charts:
Japanese Candle chart or simply candlesticks are stock charts used in charting and study of chart patterns in technical analysis. Candlesticks dramatically illustrate supply and demand concepts defined by classical technical analysis theories.


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Stock Trading Terminology - K

Kagi Charts:
Kagi Charts are stock charts used in charting and study of chart patterns in technical analysis. It differs from traditional stock charts, such as the Candlestick chart by being independent of time and volume.


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Stock Trading Terminology - L

Lagging Indicators:
Lagging Indicators are stock trading technical indicators, which indicate the change in the trend or momentum after the actual market action.

Leading Indicators:
Leading Indicators are stock trading technical indicators, which indicate the change in the trend and momentum in advance.

LOC or Limit On Close Order:
LOC or Limit On Close Order allows the trader to buy or sell in the post market auction at a limit price.

LOO or Limit On Open Order:
LOO or Limit On Open Order allows the trader to buy or sell in the market open auction at a limit price.

Limit Order:
Limit order is an attribute attached to a buy or sell order, which will allow you to trade at your price or a better price.

Line Charts:
Line charts are stock charts used in charting and study of chart patterns in technical analysis. These charts are created by connecting a series of data points together to form a line. This is the basic type of chart common in many fields.


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Stock Trading Terminology - M

MACD:
MACD indicator is an abbreviation of Moving Average Convergence Divergence indicator. It is a technical indicator created by Gerald Appel in the late 1970s.

MIT or Market if touched order:
MIT or Market if touched order allows the trader to buy at a lower and sell at a higher than the prevailing price.

Market Maker:
A brokerage firm or a bank, who creates or felicitates stock trading, by providing quotations both for buy and sell prices.

MOC or Market On Close Order:
MOC or Market On Close Order allows the trader to buy or sell in the post market auction at a market close price.

MOO or Market on open order:
MOO or Market on open order allows the trader to buy or sell in the market open auction at a market price.

Market Order:
Market order is an attribute attached to a buy or sell order, which will allow you to buy or sell at the best available price.

Market Trends:
Market trends signifies the movement of the stock prices, in any one direction compared to its historical prices. Understanding the trend of a stock is the first step in technical analysis.

Marubozu:
Marubozu candlestick is a candlestick pattern with out shadows. They represent strong trends in the market.

MF or Minimum Fill Order:
MF or Minimum Fill Order is an attribute attached to an order, so that a minimum number of shares has to be available, for the order to get triggered.

Momentum Day Trading:
Momentum Day Trading is a method of stock trading, where in a trade is made, when the stock is making a trending movement and the trade is closed at the end of the day.

Momentum Trading:
Momentum Trading is a method of stock trading, where in a trade is made, when the stock is making a trending movement.

Money Management:
It is a process of managing capital, to reduce the risk and increase the reward.

Morning Doji Star:
Morning Doji Star is a bullish reversal candlestick pattern. They occur at the bottom of a down trend.

Morning Star:
Morning Star is a bullish reversal candlestick pattern. They occur at the bottom of a down trend.

Multiple Top:
Multiple Tops is a reversal chart patterns, where a stock in an up trend, hits a resistance level several times and reverses to continue in a down trend.


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Stock Trading Terminology - O

Oco or One cancels other order:
Oco or One cancels other order allows a trader to execute only one of the possible two trades.


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Stock Trading Terminology - P

Patterns Formations:
Pattern formations or chart formations are resting areas in a trending market, where the prices consolidate to form figurative chart patterns.

Pennants:
Pennants are continuation chart patterns, formed by a minor consolidation, which is contained with in a small symmetrical triangle.

Piercing Pattern:
Piercing Pattern is a bullish reversal candlestick pattern. They occur at the bottom of a down trend.

Pivot Points:
In technical analysis the significant price levels, which might act as support and resistance for the future price movement, are called Pivot Points.

Point and Figure charts:
Point and Figure charts are stock charts used in charting and study of chart patterns in technical analysis. Like in Kagi charts, these charts also disregard the passage of time and the chart changes only when the price changes. Rather than having price on the y-axis and time on the x-axis, these charts display price changes on both axis.

Price Action Trading:
Price Action Trading is a technique of day trading and profiting in stock market. This is a simplistic and minimalistic approach to trading. Such traders are referred as Price action Traders.

Price Channel:
Price Channel can be both continuation and reversal chart patterns. The stock prices tend to move between two horizontal support and resistance lines.


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Stock Trading Terminology - R

Range Trading:
Range Trading is a technique of stock trading, where a stock is bought and sold, when the prices move up and down with in a definable range.

Rebate Trading:
Rebate Trading is a technique of day trading and profiting in stock market. Here instead of trader paying the commission for buying and selling, he is being paid by the service provider. ECN rebate is the primary source of profit.

Rectangle Formation:
Rectangle Formation can be both continuation and reversal chart patterns. The stock prices tend to move between two horizontal support and resistance lines.

Renko Charts:
Renko charts are stock charts used in charting and study of chart patterns in technical analysis. They disregard the time factor in X axis.

Resistance:
Resistance in a stock chart are the pressure areas which tries to block a rising price.

Reversal Patterns:
Reversal patterns are chart patterns, which are formed due to reversal of demand and supply, seen at the end of a trend.

Rising Wedge:
Rising Wedge is a continuation chart pattern, formed by price action, which is contained with in a converging and ascending trend lines.


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Stock Trading Terminology - S

Scalping:
Scalping is a technique of investing and profiting in stock market. It is a day trading strategy. It involves taking quick and small profits, using the ask and bid differences. When there is bigger differences, as happens during increased volatility, such situations are used to chip off small profits.

Share:
A unit ownership proportional to the investment made in a company.

Share certificate:
This is a legal document which can be used as proof of ownership of a shareholding.

Shooting Star:
Shooting Star is a bearish reversal candlestick pattern. They occur at the top of an up trend.

Security:
A Security is a valid and unique combination of Symbol and Series. Securities are traded in the Capital Market. Shares and Debentures are some examples of securities.

Spinning Top:
Spinning Top candlestick is a candlestick pattern with small real body. They represent the areas of uncertainty.

Stock:
A financial instrument that signifies an ownership of a company, and represents a claim on its proportional share in the company's assets and profits.

Stock Chart:
A stock chart is a visual representation of data, in which the data is represented by symbols such as lines in a line chart, bars in a bar chart or candles in a candlestick chart.

Stock Exchange:
Stock Market are the places, where exactly you do your business. Your transactions are executed at the stock exchanges through your broker, unless you have a membership with that exchange.

Stock Trading:
Buying and selling of securities and commodities.

Stock Trading Orders:
Stock Trading Orders are a set of instructions, given to the stock broker, regarding buying or selling a stock.

Stock Trading plan:
Stock Trading plan is a set of instructions to yourself, to take action, right from first order placing to enter a trade, to the last order placing to book profit or loss, as case may be.

Stop Limit Order:
Stop Limit order is an attribute attached to a buy or sell order, so that the order gets executed as a limit order, only after the price has reached a specific trigger price.

Stop Loss Order:
Stop Loss order is an attribute attached to a buy or sell order, so that the order gets executed as a market order, only after the price has reached a specific trigger price.

Support:
Support in a stock chart are the pressure areas which tries to hold a falling price.

Swing Charts:
Swing charts are stock charts used in charting and study of chart patterns in technical analysis. They plot the price swings of a stock disregarding time factor. They are also called as Gann charts because their construction is based on W.D.Gann's method of trading.

Symmetrical Triangle:
Symmetrical Triangle is a chart pattern, characterized by converging top and bottoms. This is created when there is indecision in the direction of the market.


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Stock Trading Terminology - T

Technical Analysis:
Technical analysis is a security analysis based on stock's market data like, price and volume, and open interest in case of futures.

Technical Indicators:
Technical Indicators in stock trading shows you the direction of the market, when probably to buy or sell, when probably to book profit and importantly when not to do anything. They are derived from the price and volume values.

Three Black Crows:
Three Black Crows is a candlestick pattern, which shows the strength of the declining market.

Three Line Break Charts:
Three Line Break Charts are stock charts used in charting and study of chart patterns in technical analysis. They use three blocks, an up block (line), a down block (line) and a reversal block (line), for charting. These charts disregards the time factor, which is usually plotted on the X axis, in commonly used stock charts.

Three White Soldiers:
Three White Soldiers is a candlestick pattern, which shows the strength of the advancing market.

Trend Lines:
Trend lines are formed by joining two or more support or resistance pressure points. This when extended offers support and resistance levels into the future. These are the basic technical analysis tools.

Trend Line Break:
Trend Line Break is a reversal chart patterns, where a stock in an up trend, breaks out of a support trend line and a stock in a down trend, breaks out of a resistance trend line.

Trend Trading:
Trend Trading is a technique of stock trading, where a trade is entered after confirmation of a trend and is carried on to the end of the trend.

Triple Top:
Triple Top is a reversal chart patterns, where a stock in an up trend, hits a resistance level thrice and reverses to continue in a down trend.


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Stock Trading Terminology - V

Value Investing:
Value Investing is a method of stock trading, where in investment is made in undervalued companies which have high intrinsic value.


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Stock Trading Terminology - W

White Candles:
White Candles or white candlesticks are bullish lines in candlestick and candlevolume charts. They signify that the closing is higher than opening for that time period.


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