Glossary

Every term the courses use, defined in plain English. If we use a word, it’s here — and we try to say it the way a person would.

312 terms

Core concepts

investing: Putting money into assets you expect to grow over time, accepting the risk of loss.
saving: Setting money aside somewhere secure, where it earns little and inflation erodes it.
portfolio— “everything you own”: The whole collection of investments you hold toward a goal.
asset class— “type of investment”: A family of investments that behave alike — stocks, bonds, cash, real estate.
return: What an investment gains or loses, usually as a percent per year. Can be negative.
capital appreciation— “the price going up”: Return that comes from an investment's price rising, realized only when you sell. Distinct from income paid to you along the way.
real return— “the return in what it buys”: What's left of a return after inflation — roughly the return minus the inflation rate. The only return you can actually spend. Can be negative while the nominal return is positive.
capital preservation— “keeping what you put in”: The goal of getting your original money back rather than growing it. A goal, not a promise — no investment can assure it.
risk: How much, and how unpredictably, an investment's value can move against you.
market risk: The risk of loss coming from the behavior of financial markets as a whole. No single company controls it, and analyzing one company doesn't protect you from it.
volatility— “how much the price jumps around”: How much a price swings up and down. High volatility does not mean high return.
inflation: The rising cost of goods and services, which shrinks what your money buys.
compounding: Growth earning its own growth, because returns get reinvested.
diversification: Spreading money across many investments so no single one can sink you.
asset allocation— “your mix”: How you split a portfolio across asset classes. The biggest driver of results.
time horizon: How long until you need the money.
risk tolerance— “what you can sleep through”: How much loss you can stomach without bailing out. Emotional, not financial — and distinct from risk capacity.
risk capacity— “what your situation can take”: How much loss your circumstances can absorb before real damage — set by time horizon, income stability, and cash on hand. Financial, not emotional.
wage replacement ratio: The share of your working income you'll need to replace in retirement.
liquidity: How fast you can turn something into cash without losing value.
rebalancing: Selling what grew and buying what lagged to return to your target mix.
dollar-cost averaging: Investing a fixed amount on a schedule regardless of price.
opportunity cost: What you give up by choosing one use of money over another.
time value of money: A dollar today is worth more than a dollar later, because waiting carries risk and today's dollar can be put to work meanwhile.
income portfolio— “the part that pays you”: The part of an overall portfolio held to pay its owner now and preserve principal. Defined by purpose, not by what it holds — the same investment can sit in an income or a growth portfolio.
growth portfolio: The part of an overall portfolio held to be worth more later, where returns are reinvested rather than spent. The counterpart to an income portfolio, and defined the same way — by purpose.
payment schedule— “when the money lands”: Your plan for which months dividend and interest income actually arrives, built by combining holdings that pay on different cycles. Only matters if you're spending the income.
even payment schedule: A payment schedule delivering roughly equal income each month, used when the income replaces a paycheck.
weighted payment schedule: A payment schedule deliberately concentrating income in certain months to meet large recurring expenses.
overweight— “more than you meant to have”: An asset class currently above its target allocation. What you sell when rebalancing.
underweight— “less than you meant to have”: An asset class currently below its target allocation. What you buy when rebalancing.

Accounts and taxes

tax-advantaged account: An account with a tax break for saving toward a specific goal.
taxable account— “regular account”: A regular investment account with no special tax treatment.
401(k): A retirement account through an employer, funded from your paycheck.
employer match: Money your employer adds when you contribute — part of your pay you only get by contributing.
IRA: Individual Retirement Account — a retirement account you open yourself.
Traditional IRA / Traditional 401(k)— “tax break now”: Contribute pre-tax now; pay tax on withdrawals later.
Roth IRA / Roth 401(k)— “tax break later”: Contribute after-tax now; qualified withdrawals are tax-free.
contribution limit: The most you may add per year. This limit changes every year — check the current official number.
rollover: Moving retirement money from one account to another without triggering tax.
required minimum distribution (RMD)— “the IRS collecting eventually”: The amount the IRS makes you withdraw from a tax-deferred retirement account each year once you reach the starting age, whether you need the money or not. The tax break was deferred, not forgiven, and this is where it comes due. Roth IRAs and designated Roth accounts have no RMD while the owner is alive — inherited ones are a different story.
capital gain: Profit when you sell for more than you paid.
marginal tax rate: The rate on your next dollar of income — not on all of it.
qualified dividend: A dividend taxed at lower long-term capital-gains rates.
ordinary dividend: A dividend that doesn't meet the qualified-dividend conditions, so it's taxed as ordinary income at your regular rate.
expense ratio: A fund's annual fee, as a percent of your money. Charged whether it wins or loses.

Stocks and funds

stock: A share of ownership in a company.
share: One unit of stock.
ticker: A company's short market code.
market capitalization— “company size”: A company's total value: share price × shares outstanding.
index: A defined list of investments used to measure a market.
index fund: A fund that holds everything in an index instead of picking winners.
mutual fund: A pooled fund priced once a day, after the close.
exchange-traded fund (ETF): A pooled fund that trades all day like a stock.
actively managed fund: A fund where a manager picks investments, aiming to beat an index. Costs more.
passively managed fund: A fund that tracks an index or a formula instead of picking investments, so it carries less overhead and usually lower fees. Whether active management earns its fee is a live disagreement.
load— “sales fee”: A sales charge on some mutual funds.
prospectus: A fund's official disclosure document: what it aims to do, what it holds, and what it charges. The place a fund's name gets checked against the facts — a name is marketing, the prospectus is not.
dividend: Cash a company pays shareholders out of profits.
dividend yield: Annual dividend ÷ share price, as a percent.
dividend reinvestment: Automatically buying more shares with dividends received.
payout ratio: The share of earnings paid out as dividends. High can mean unsustainable.
dividend stock: A stock in a company that regularly pays dividends. Usually an established, slower-growing business. Also called an income stock.
dividend fund: A mutual fund or ETF holding a basket of dividend stocks.
declaration date: The day a company's board announces a dividend's amount and schedule.
ex-dividend date: The cutoff for receiving an upcoming dividend: buy on or after it and the seller gets the payment. The share price typically drops by roughly the dividend amount that morning. The only one of the four dividend dates that changes what you receive.
record date: The day a company checks its books for who its shareholders are. Falls about a business day after the ex-dividend date.
payment date: The day the dividend cash actually arrives, often weeks after the ex-dividend date.
dividend cut: A board reducing or eliminating a dividend. Happens when business is bad — which is when investors relying on the income are most exposed.
dividend history— “the track record of payments”: A company's record of paying and raising its dividend. Evidence of a management culture that protects the payment — and backward-looking only. Every company that cut its dividend had an unbroken record until it cut.
reaching for yield— “chasing the big number”: Buying an investment because its yield is high, without asking whether the yield rose because the payment grew or because the price collapsed. The usual way income investors lose money.
price risk: The risk that an individual investment's price falls, for reasons specific to that business. Distinct from market risk, which comes from the market as a whole.
sector: A slice of the economy — technology, health care, energy.

Bonds and cash

bond— “an IOU you can buy”: A loan you make to a government or company that pays interest and returns principal at maturity.
issuer: Whoever borrowed the money and owes you.
par value— “face value”: The amount repaid at maturity, usually $1,000.
coupon: The interest rate a bond pays on its par value.
maturity: The date the issuer repays par value.
yield: What a bond actually returns at its current price — moves opposite to price.
price-yield relationship: When bond prices rise, yields fall, and vice versa.
secondary market: Where investments are traded between investors rather than bought from the issuer. Where almost every bond an ordinary investor buys comes from.
premium— “priced above face value”: A bond price above par value. Happens when the bond's coupon beats what new bonds pay.
discount— “priced below face value”: A bond price below par value. Happens when the bond's coupon trails what new bonds pay.
bond quote: The listing describing one bond for sale: its identifier, issuer, coupon, maturity, rating, yields, and price. Its price is a percentage of par, never dollars.
CUSIP— “the bond's barcode”: A bond's unique identifier code. One issuer can have many bonds on very different terms; the CUSIP is how you know which one you're looking at.
accrued interest: Interest the seller earned since the last coupon payment, which the buyer pays them on top of the price and gets back at the next payment. Not a fee — one payment split between two owners.
current yield— “what the payments give you per dollar in”: Annual coupon ÷ the price you actually pay. The cash-in-hand rate. Blind to the gap between price and par, so it is not the return on a bond held to maturity.
yield to maturity (YTM)— “what it pays if you hold it to the end”: The return you'd get buying a bond at today's price and holding it until the issuer repays.
pull to par: A bond's price converging on par value as maturity approaches, whatever it did in between. Why a price drop on a bond you hold to maturity is a paper loss — and why a bond fund, having no maturity, gets no such pull.
yield curve— “what the market charges to wait longer”: A plot of one issuer's yields to maturity against their maturities — usually Treasuries, so the line compares time rather than borrowers. Also called the term structure of interest rates. Upward-sloping is the usual shape; flat and inverted are the exceptions. The idea: longer usually pays more, because more can go wrong over more time.
inverted yield curve: A yield curve where short maturities yield more than long ones. Means lenders expect rates to be lower later, which usually means they expect a weaker economy. Has preceded downturns before — a signal, never a schedule.
duration: How much a bond's price moves when rates move. Longer = more sensitive.
interest-rate risk: The risk that rising rates push the price of an income investment down. For a bond, directly. For a dividend stock, indirectly: higher bond yields draw income investors away, and their selling lowers the price even when the business is fine.
inflation risk: The risk that rising prices eat your return, so the money coming back buys less than the money you lent. Hits bonds hardest because their payments are fixed, and worsens the longer the bond runs. The one risk that hurts you while the investment works exactly as designed.
call risk: The risk an issuer calls a bond — repays principal early and stops the coupons — ending the deal on their terms, usually when refinancing has gotten cheaper for them.
callable bond: A bond the issuer may repay before maturity. Typically called at slightly above par.
reinvestment risk: The risk that when principal comes back to you — called early or matured on time — you can't put it to work as well as before: new bonds pay less, or inflation shrank what it buys.
credit risk: The risk the issuer doesn't pay you back.
default: An issuer missing coupon payments or failing to repay principal at maturity. What credit risk is the risk of.
credit rating: An agency's opinion of an issuer's ability to repay — an opinion, not a certainty.
investment grade: Higher-rated bonds, seen as lower credit risk.
high-yield bond: A lower-rated bond paying more to compensate for higher credit risk.
Treasury: A bond issued by the U.S. government.
municipal bond: A bond issued by a state or local government; interest is often tax-advantaged.
general obligation bond: A municipal bond backed by the issuer's full faith and credit, including its power to tax.
revenue bond: A municipal bond backed by one specific stream of money — a toll, a fee — rather than the issuer's whole tax base. Narrower backing than a general obligation bond.
commercial paper: Corporate debt maturing in less than a year.
bond fund: A fund holding many bonds. It has no maturity date — an important difference.
average maturity— “how long the bonds inside run”: The average time until the bonds inside a bond fund come due. The fund's stand-in for a maturity date — and not a substitute for one, because no date returns your principal.
bond screener: A search tool that filters the bonds available to buy by criteria you set — issuer, rating, maturity, yield. Most brokers offer one.
bond ladder— “staggered maturity dates”: Bonds bought with staggered maturity dates, so one comes due each period and gets reinvested at whatever rates are then. Its value is that it works without a rate forecast; it also gives up the payoff from guessing right.
rung: One maturity slot in a bond ladder, and the bond or bonds filling it.
weighted ladder: A bond ladder tilted toward short or long maturities instead of spread evenly. A bet on rate direction.
equal-weighted ladder: A bond ladder with the same money on every rung, favoring no maturity. What "I don't know where rates are going" looks like built out of bonds.
interest rate outlook— “your read on rates”: Your view on the general direction rates are likely to move. One of the most contested forecasts in finance — professionals miss it routinely. Best understood as a way to see what a portfolio is exposed to, not as a prediction to act on.
Federal Open Market Committee (FOMC): The Federal Reserve body that sets U.S. interest rate policy and publishes a statement after each meeting. The number of meetings can change — check the current schedule.
monetary policy: A central bank's stance on interest rates and the money supply.
accommodative policy— “the Fed pressing rates down”: Central bank policy holding rates down or pushing them lower, usually to support a weak economy. Also called dovish.
restrictive policy— “the Fed pressing rates up”: Central bank policy holding rates up or pushing them higher, usually to cool inflation. Also called hawkish. The mirror of accommodative policy.
certificate of deposit (CD): A bank deposit at a fixed rate for a fixed term.
money market fund: A fund holding very short-term debt, used as a cash equivalent.
FDIC insurance: Government insurance on bank deposits up to a limit. Covers deposits, not investments.
Treasury bill (T-bill): A short-term Treasury, maturing in a year or less. Pays no coupon: sold below face value and repaid at face value, and the gap is the return.
cash sweep— “where your idle cash sits”: A broker automatically moving uninvested cash into something that pays interest. The destination is either a bank deposit account or a money market fund, and only one of them is FDIC insured.
SIPC protection: Coverage for the case where your broker fails and your securities go missing. It restores custody of what you held, up to a limit — it never insures what your holdings are worth. Not FDIC insurance and not a substitute for it. The limit changes — check the current official figure.
emergency fund— “the money that means you don't have to sell”: Money kept liquid specifically so an unplanned expense never forces you to sell an investment at a bad moment. Its job is availability, not return.

Real estate

real estate investment trust (REIT): A company owning income-producing property, which you can buy like a stock and which must pass most income to shareholders.
equity REIT: A REIT that owns property and collects rent.
mortgage REIT: A REIT that holds property loans rather than property. Different risks.
funds from operations (FFO): The standard measure of a REIT's earnings; standard net income misleads for REITs.
adjusted funds from operations (AFFO): FFO minus capital expenditures — a closer read on what a REIT can actually pay out and keep paying.
depreciation: A yearly accounting expense assuming a physical asset is wearing out. No cash moves. For a well-maintained building it often isn't true, which is why it distorts a REIT's net income.
management risk: The risk that the people running a company make decisions that damage it — overpaying for assets, taking on debt the income can't carry.
occupancy— “how much of it is full”: The share of a REIT's space that is actually rented. Rent is the whole mechanism, so falling occupancy breaks the income before the distribution admits it.
refinancing risk: The risk that when a REIT's debt comes due, replacing it isn't possible on survivable terms — lenders have tightened, rates have risen, or the property appraises lower. Why a leveraged REIT can fail while its buildings are performing perfectly.

Fundamental analysis

fundamental analysis: Valuing a company by its business — earnings, assets, growth.
financial ratio: One figure from a company's financial statements divided by another, so companies of different sizes compare on the same scale.
valuation ratio— “what you pay per dollar of…”: A ratio putting share price over something the business produces or owns — earnings, sales, book value.
time-series analysis— “against its own history”: Comparing a company's ratio to its own past.
cross-sectional analysis— “against its rivals”: Comparing a company's ratio to similar companies or its industry average. Only valid within an industry.
revenue— “the top line”: Money coming in from sales, before any expense is subtracted. Also called sales.
net profit margin: The share of each sales dollar that survives as profit.
value investing: Buying companies that look cheap relative to what the business is worth.
growth investing: Buying companies expected to grow earnings or revenue quickly.
income investing: Building a portfolio around what it pays you while you hold it — dividend stocks, bonds, REITs, and cash — treating that income as the return rather than the price move. Dividend stocks are one route, not the whole style.
value stock: A stock priced low relative to the company's earnings, sales, or assets. Usually an established business.
growth stock: A stock whose case rests on the company growing quickly, often priced high relative to what it earns today.
catalyst: News about a business that makes the market revise what it expects — and reprice the stock. Works in both directions.
intrinsic value— “what it's really worth”: Your estimate of what a business is actually worth.
valuation: The work of estimating a business's intrinsic value from its financials.
undervalued— “cheaper than it's worth”: Priced below your estimate of intrinsic value. Always relative to an estimate, never absolute — and it says something about the price, not about the company's quality.
overvalued— “pricier than it's worth”: Priced above your estimate of intrinsic value. Same caveat as undervalued.
company risk: The risk that something is genuinely wrong with the business — debt it can't service, a failing product. A stock is often cheap for a reason.
assumption risk: The risk that the assumptions behind your intrinsic value estimate are wrong, or that the market never agrees with your estimate inside your time horizon.
opportunity risk: The risk that money tied up waiting for a repricing would have done better elsewhere. The investing-specific face of opportunity cost.
margin of safety: The gap between intrinsic value and the price you pay, to absorb being wrong.
SWOT analysis: A four-part inventory of a business: strengths, weaknesses, opportunities, threats. Raw material for an investment thesis, not a verdict.
investment thesis: Your written reason for owning something, and what would prove you wrong.
earnings: A company's profit.
earnings per share (EPS): Profit divided by shares outstanding.
price-to-earnings (P/E) ratio: Share price ÷ earnings per share.
trailing P/E: A P/E using the last 12 months of reported earnings.
forward P/E: A P/E using estimated next-12-months earnings. Rests on a forecast.
price-to-sales (P/S) ratio: Share price ÷ revenue per share.
price-to-book (P/B) ratio: Share price ÷ book value per share.
book value: Assets minus liabilities, per the balance sheet.
shareholders' equity: The same figure as book value — assets minus liabilities — named for whose claim it is.
book value growth rate: The percentage change in shareholders' equity over time.
discounted cash flow (DCF) model: Estimating value by projecting future cash and discounting it to today. Output is only as good as the assumptions.
discount rate: The rate that converts future money to today's value, reflecting risk.
growth rate: The assumed rate at which a company's earnings grow over the projection period. Usually the input the estimate leans on hardest.
projection period: The span of years a DCF models explicitly, commonly about five, before terminal value takes over.
terminal value: The estimated value of everything beyond the forecast period.
exit multiple: The price multiple — often the industry average P/E ratio — applied to the final projected year's earnings to estimate terminal value.
trailing twelve months (TTM)— “the last four quarters”: The four most recent quarters a company has actually reported, used as its current figure.
capital asset pricing model (CAPM): A model estimating required return given an investment's market risk.
risk-free rate: The baseline return available without meaningfully risking principal; long-term investors commonly use the 30-year Treasury yield. A live figure that changes — check the current number.
market risk premium: The extra return investors demand for holding stocks rather than the risk-free asset: market return minus the risk-free rate. Estimated, not published — methods disagree, so check a current figure.
beta: How much a stock moves relative to the overall market. Backward-looking and unstable.
forecasting error: A wrong number in a projection — from bad data, misread accounting, or arithmetic. Compounds over a long forecast, so small errors don't stay small.
income statement: The report of what a company sold and what it earned over a period.
cash flow statement: The report of where a company's money actually came from and where it went over a period.
cash flow— “money that actually moved”: Money that actually moved in and out of the company, after the cost of maintaining and acquiring assets. Unlike earnings, it carries no accounting judgment.
cash from operations: Money the core business brought in over a period, before what the company spends on physical assets.
capital expenditures: What a company spends on the physical assets that keep it running — equipment, maintenance, buildings.
free cash flow— “what's left to actually spend”: Cash from operations minus capital expenditures: the cash a business generated and got to keep, available for dividends, debt, or reinvestment.
return on equity (ROE): Profit measured against the money shareholders have put in — a read on how well management turns a dollar into more than a dollar. Ignores debt entirely, so borrowing can inflate it. Varies widely by sector; compare within an industry.
return on assets (ROA)— “what a dollar of stuff earns”: Earnings ÷ total assets: what one dollar of what a company owns produces in a year. Unlike ROE, borrowing can't inflate it — all the assets sit in the denominator, funded or borrowed. A high ROA usually signals riskier assets, not better ones.
leverage— “how much it owes”: A company borrowing to fund assets. Not automatically bad — but debt payments are contractual and come before anything reaches shareholders.
degree of financial leverage (DFL): Total assets ÷ shareholders' equity: how many dollars of assets each dollar of owner money carries. A DFL of 5 means a 10% move in the assets is a 50% move in the owners' slice — in both directions.
current ratio: Current assets ÷ current liabilities. Covers only the short term — bills due within a year. Above 1 means a dollar on hand for every dollar coming due.
long-term debt to capital: Long-term debt ÷ total capital. Lower means less leverage. "Normal" differs enormously by industry.
shares outstanding: The number of shares a company currently has in investors' hands. The denominator in EPS.
share buyback: A company buying its own shares back, which shrinks the share count and raises EPS without changing profit.
historical growth— “the track record”: A company's demonstrated ability, over recent periods, to increase revenue, earnings, and cash flow. Evidence about the past, never a forecast.
revenue growth: The rate revenue rises over time. The closest direct read on demand.
EPS growth: The rate earnings per share rises over time. Can diverge from revenue growth via cost cuts or buybacks — that gap is a tell.
cash flow growth: The rate cash generated by the business rises over time.
stock screener: A search tool that filters the market down by criteria you set. Most brokers offer one.
analyst forecast: A published estimate of a company's future results by a professional who covers it. An informed guess.
analyst recommendation: An analyst's published opinion on a stock, usually "buy," "sell," or "hold." An opinion about a stock in the abstract, not about your portfolio.
consensus— “what the market expects”: The average of the covering analysts' recommendations or estimates. An average of guesses, not what a company will earn. Useful only as a read on what the market expects.
earnings estimate: An analyst's projection of what a company will earn in a coming period. Checkable after the fact, unlike a rating.
revision: An analyst raising (positive) or lowering (negative) a previously published recommendation or estimate.
guidance: A company management's own published expectation for its coming results. An input to analyst models, not a commitment.

Technical analysis

technical analysis: Studying price and volume history to judge probable future movement.
technician— “someone who trades off charts”: An investor who uses technical analysis.
chart: A picture of price over time.
trend: The general direction of price: up, down, or sideways. Defined by the pattern of highs and lows, not by a straight line.
uptrend: A sequence of higher highs and higher lows. Ends when that sequence breaks.
downtrend: A sequence of lower highs and lower lows.
sideways trend: A sequence of roughly equal highs and roughly equal lows. Distinguish from an absence of trend, where no repeatable levels exist at all.
supply: The number of shares people are willing to sell at a given price.
demand: The number of shares people are trying to buy at a given price.
bullish: Expecting prices to rise.
bearish: Expecting prices to fall.
rally: A move up in price.
pullback: A move down within an uptrend, before it resumes. Also called a retracement.
selloff: A move down driven by heavy selling.
institutional investor— “the big funds”: A large money manager — mutual fund, pension fund, insurance company. Accumulates and unloads in slices over time, which is a real reason charts move in steps rather than lines.
tenet— “what the method assumes”: One of the three assumptions technical analysis rests on: price moves in trends, the market discounts everything, history repeats itself. Premises, not proven laws.
indicator: A calculation run on price or volume data that produces a signal from a formula.
discretionary— “you decide”: Of a technician: reading a chart and judging it personally. Adapts to the unusual; drifts and is hard to repeat.
non-discretionary— “the rule decides”: Of a technician: acting only on signals a formula produces, with judgment removed. Consistent, including when conditions have changed.
support— “a floor buyers keep defending”: A price area where buying has repeatedly stopped a decline. A zone drawn by judgment, never an exact price — more touches, stronger level.
resistance— “a ceiling sellers keep defending”: A price area where selling has repeatedly stopped an advance. A zone drawn by judgment, never an exact price — more touches, stronger level.
price channel: The corridor between roughly parallel support and resistance trendlines.
gap: A hole in the chart where a period opens away from the previous close, so no trading happened in between. Its edges often act later as support or resistance.
Fibonacci retracement: A tool drawing horizontal levels at fixed percentages of a completed move, marking possible support. A widely watched convention, not a law of markets.
breakout: Price moving decisively through support or resistance.
false breakout— “a break that didn't hold”: A breakout that fails back inside the old range. Indistinguishable from a real one at the moment it happens.
entry— “when you get in”: When you open a trade. Used instead of "buy" because opening is buying in a long trade and selling in a short one.
exit— “when you get out”: When you close a trade. Used instead of "sell" for the same reason. The half of a trade that decides what you keep.
long trade— “betting it goes up”: A bullish trade: buy to open, sell to close. Loss is capped at what you put in.
short trade— “betting it goes down”: A bearish trade: sell borrowed shares to open, buy them back to close. Loss is unbounded, because price has no ceiling.
stop order: A standing order at your broker: if price reaches a set level, a market order triggers and the position closes at the next available price — not necessarily your level. Umbrella term for sell-stop and buy-stop.
sell-stop order: The stop order closing a long position. The bullish exit; same instrument as a stop-loss order.
buy-stop order: The stop order closing a short position. The bearish exit.
trailing stop: A stop moved up as price makes new highs and never moved down, to protect gains without capping a winner. The "never down" half is the whole discipline.
bounce: Price reaching support or resistance and rebounding the other way, instead of going through.
CAHOLD: A Close Above the High Of the Low Day — the rule confirming a support bounce.
CBLOHD: A Close Below the Low Of the High Day — the rule confirming a resistance bounce. The mirror of CAHOLD.
target— “where you plan to get out”: A price decided in advance for exiting a trade. An estimate, never an appointment.
lagging indicator: An indicator built from past prices, so it can only describe what price has already done. A moving average is one.
relative strength line: An indicator plotting one security's price divided by another's. Rising = the top security is stronger. Says nothing about whether either made money.
top-down analysis: Narrowing from the broadest level to the narrowest — market, sector, industry, security — keeping the strongest at each step.
market posture— “your read on it”: Your standing bullish or bearish bias on a market or security, formed from evidence like moving averages across time frames.
trend trading: Trading the intermediate-term trend, aiming to hold through an uptrending or downtrending stretch.
swing trading: Trading the short-term highs and lows inside a larger trend.
short selling— “betting it falls”: Selling shares borrowed from your broker, profiting if the price falls. Losses are not capped the way a purchase's are.
volume: How many shares traded in a period.
moving average: Average price over a rolling window, used to smooth noise.
simple moving average (SMA): A moving average weighting every day equally.
exponential moving average (EMA): A moving average weighting recent days more heavily than older ones, so it reacts sooner than an SMA. Sooner is not the same as better.
relative strength: How one investment performs compared to a benchmark. Not the RSI indicator.
benchmark: The index you measure performance against.
open / high / low / close: The four numbers describing one trading period: first price, highest price, lowest price, last price. Bar and candlestick charts show these same four — they differ only in how they draw them.
line chart: A chart connecting each period's closing price. The least detail of the three styles, and the least noise.
bar chart: A chart drawing open, high, low, and close as a vertical line spanning the period's range, with a tick left for the open and right for the close.
candlestick: A chart mark showing open, high, low, and close for one period: a body between open and close, wicks to the high and low, hollow if price closed up and filled if it closed down.
sentiment: The market's mood for a period, read from whether price closed above or below where it opened.
trendline: A straight line drawn through a series of highs or a series of lows, used to see support or resistance that isn't horizontal.
consolidation— “the sideways part”: A stretch where price stops trending and moves sideways in a range. What indecision looks like on a chart.
price pattern: A common shape formed by support and resistance when they run at angles rather than flat. It names the shape, not a mechanism; the supply-and-demand story underneath is what explains it.
continuation pattern: A chart pattern suggesting the existing trend resumes. Only identifiable once the breakout picks a side.
reversal pattern: A chart pattern suggesting the trend turns. Complete only after price breaks the pattern's support or resistance, never at the shape alone.
triangle: A consolidation whose support or resistance runs at an angle, so the range narrows. Symmetrical (both sides tilt in), ascending (flat ceiling, rising floor), descending (flat floor, falling ceiling).
apex: The point where a triangle's two trendlines would meet if extended right.
base: The widest part of a pattern, measured at its left edge. Its height is what gets projected from the breakout to set a target.
pennant: A triangle that forms over a short window rather than months.
bull flag: A continuation pattern: a sharp rally, then a short sideways or slightly lower drift, then a resumption of the rally. Only a flag once it resolves upward — while forming it is indistinguishable from a rally ending.
flagpole— “the run-up before the pause”: The sharp move preceding a flag's drift. Its height is what gets added to the breakout point to set the price target.
double top: A reversal pattern where an uptrending stock matches its previous high instead of exceeding it, then breaks the support below. Two peaks are the setup; the support break is the signal.
head and shoulders: A reversal pattern: a high, a higher high, then a lower high, completed by a break of the neckline drawn under the two pullback lows. Inverted in a downtrend.
neckline: The support line under a head-and-shoulders pattern's pullback lows. Breaking it completes the pattern.
price target: Where a pattern suggests price may reach, found by measuring the pattern's height and projecting it from the breakout.
invalidation level— “what would prove me wrong”: The price that would prove your read wrong, chosen and written down before entering. What separates a hypothesis from a prediction.
failed breakout: A breakout that reverses back into the pattern instead of running. Routine.
stop-loss order: A standing order to sell if price falls to a set level, capping a loss.
price alert: A notification that a price reached a set level. Tells you; does not act. The alternative to a stop-loss order, with different failure modes.
basing pattern— “the decline has stalled”: A stretch where a falling price stops making lower highs and lower lows and starts making roughly level ones.
position size: How much of your portfolio one investment takes up.
trade risk— “what one share can cost you”: The loss per share you take if a position fails and your exit fires: entry price minus stop price. The input to position sizing.
portfolio risk— “what one trade may cost you”: The amount of your whole account you accept losing on one trade if the stop fires — total portfolio value × the percentage you'll risk. Not the position's cost; confusing the two is the common sizing error.
position sizing— “how much to buy”: Deciding how many shares to buy so that being wrong stays survivable: portfolio risk ÷ trade risk, rounded down.
watch list criteria: The written rules deciding what earns a place on a watch list. A filter on eligibility, not a buy list — and answerable to the plan's objective.
objective— “what this plan is for”: The one sentence opening a trading or investing plan, naming its style, market conditions, time frame, and tools. What makes every rule below it checkable rather than arbitrary.
routine: The scheduled management activities that run a trading plan — daily, weekly, quarterly. The enforcement mechanism: it catches drift from the written rules before it costs you.
target price: The price at which a plan says to exit at a profit. For a value investor, the current estimate of intrinsic value — past it, the stock is no longer undervalued.
backtesting: Testing rules against historical data. Past results don't assure future ones.
overfitting— “tuned to a past that won't come back”: Tuning rules until they match one stretch of history so closely that they describe its noise rather than anything that repeats. The tighter a backtest fits, the stronger the suspicion.
paper trading— “a dress rehearsal”: Practicing a system at real prices with money that isn't real. Removes the money, not the habits.
reward/risk ratio— “what you stand to make per dollar you're risking”: Average winner ÷ average loser. Decided before you enter, not awarded after. Above 1 means winners are bigger than losers — it says nothing about how often you win.
win rate— “how often you're right”: The share of trades that make money. Alone it says nothing about whether a system makes money — always pair it with reward/risk ratio or expectancy.
expectancy— “what a trade is worth on average”: Average profit or loss per trade, weighting the average win and the average loss by how often each happens: (win rate × average win) − (loss rate × average loss). Positive is the bar. Describes a long run of trades, never the next one.
trading plan: Written rules for what you buy, when you exit, and how much you risk.
rules-based investing: Buying and selling by rules written in advance rather than by judgment in the moment. What a trading plan puts into practice.
watch list: The investments a plan allows you to trade, filtered by criteria set in advance.
entry rules— “when you get in”: The part of a plan specifying exactly what must happen before you buy (or sell short).
exit rules— “when you get out”: The part of a plan specifying what closes a position, at a profit or at a loss.
deal breaker— “the thing that means you were wrong”: A condition written down in advance that ends your reason for owning something, and therefore triggers an exit. For an income investor it is a dividend cut or an unsustainable payout ratio — not a price move.
money management: The rules deciding how much of your portfolio one trade may risk, and therefore how large the position can be. Works with exit rules, never alone.
slippage: The gap between the price you expected and the price you got. Why a stop-loss order caps a loss but cannot lock in an exact level.
bid-ask spread: The gap between the highest price a buyer is offering and the lowest a seller will accept.
trading journal: A record of trades and reasoning, kept to learn from.

Behavior

cognitive bias: A predictable thinking error that costs investors money.
loss aversion: Losses hurt more than equal gains feel good, pushing people to sell at the worst time.
herd behavior: Doing what everyone else is doing because everyone is doing it.
confirmation bias: Noticing evidence you're right and ignoring evidence you're wrong.
recency bias: Assuming whatever just happened will keep happening.
hindsight bias— “of course it was going to do that”: Believing an outcome was obvious once you know it happened. Why testing rules against a history you've already read is so easy to fool yourself with.
market timing: Trying to buy the bottom and sell the top. Reliably beating it is very rare.

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