Finding Stocks Using Trading-Pattern Variables
Online investors have all sorts of methods for picking which stocks to buy. Some investors examine trading-patterns to try to predict how a stock will behave. These investors, generally known as technical analysts, believe stocks follow certain patterns. And if you detect the pattern fast enough, you can figure out where the stock is going and make money.
Some screening variables are designed to find technical stock patterns, including
Average daily volume: Some investors think if there’s heavy trading in a stock when it rises or falls, that means more than if there’s light trading volume. If a stock goes up, these investors look at trading volume to find out how many investors are buying. If the stock is rising and trading activity is strong, that tells these investors there’s great demand for the stock and the uptrend might continue.
Proximity to moving averages: This indicator tells you whether the current stock price is higher or lower than where it has been in the past. The 200-day moving average, for instance, tells you what the stock’s average price has been over the course of the past trading year. If the stock falls below the 200-day moving average, some see that as a bad sign because it means everyone who bought the stock in the past year, on average, is losing money and might be eager to sell.
Proximity to a stock’s price highs and lows: You can use screens to find out whether a stock’s price is close to its high price over the past year, called the 52-week high, or its low price, the 52-week low.
Stock performance: This is a simple measure that shows you how much the stock has risen or fallen in a set period of time.

Online Investing Glossary
60 percent margin requirement
The requirement that you must put up 60 cents of every $1 you invest.

Online Investing Glossary
annual report to shareholders
A document that contains all the required financial statements and information contained in the 10-Ks presented in a colorful format.

Online Investing Glossary
average daily share volume
The number of shares that usually trade hands in a given day.

Online Investing Glossary
balance sheet
A document that tells you what a company owns and what it owes.

Online Investing Glossary
bond
An IOU issued by a government, a company, or another borrower.

Online Investing Glossary
brokerage
A fee paid to a broker to handle investment transactions for you.

Online Investing Glossary
capital gains
Income you’ve made on the capital you’ve invested.

Online Investing Glossary
cash account
A brokerage account into which you deposit cold hard cash your broker uses to buy stocks for you.

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commission
The price brokers charge for executing trades.

Online Investing Glossary
Consumer Price Index
The measure of how much prices for the things individuals buy are changing.

Online Investing Glossary
days to cover
The number of days it would take, on average, for the number of shares that are being shorted to trade.

Online Investing Glossary
diversifying
To spread your risk over a wide swath of investments.

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dividend yield
The amount of return you’re getting in the form of a dividend, in other words, how big the dividend is relative to what you’ve invested.

Online Investing Glossary
dividends
Cash payments made by companies to their investors.

Online Investing Glossary
earnings reports
A document that tells you how much the company made during the quarter. Earnings reports also contain all the vital financial results for the quarter, including the net income (or total profit) as well as earnings per share, which is how much of the company’s profit you can lay claim to as a shareholder.

Online Investing Glossary
Exchange Traded Funds; ETFs
Groups of stocks, much like mutual funds, that trade like stocks.

Online Investing Glossary
geometric mean
The way to correctly measure stock return.

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holding period
The length of time you hold a stock.

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income statement
A document that outlines how much money a company made.

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limit orders
Trades in which you set the price you’re willing to accept.

Online Investing Glossary
maintenance margin
The percentage of ownership of stocks relative to what has been borrowed (typically 30 percent or higher at most firms) most online brokers require investors to maintain.

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margin account
An account type that lets you borrow money you can use to buy stocks.

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mutual funds
Money collected from many investors and used to invest in a basket of assets.

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number of shares outstanding
The number of shares that are in the hands of investors.

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options
If you own an option, you have the right, but not the obligation, to buy or sell an investment, including shares of stock by a certain preset time in the future.

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penny stocks
Stocks that trade for less than a dollar.

Online Investing Glossary
Producer Price Index
Tracks prices paid by companies that create goods. When prices are rising, both bond and stock investors pay attention because that affects the value of their investments. Stock investors typically don’t like inflation because it drives up costs and makes their investments worth less.

Online Investing Glossary
proxy statement
A document that describes company matters to be discussed and voted on by shareholders at the annual meeting.

Online Investing Glossary
shareholders’ equity
The difference between assets and liabilities is what portion of the company shareholders own, called.

Online Investing Glossary
short squeeze
What happens when the short sellers get nervous that a stock they’re betting against will rise and they rush out and buy the stock back so that they can return it to the brokers they borrowed it from.

Online Investing Glossary
taxable accounts
The standard accounts that come to mind when you think about investing online.

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tax-advantaged accounts
Accounts that are sheltered in some way for some period or other from the Internal Revenue Service.

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total return
The amount a stock has gone up plus its dividend.

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turnover
The amount of buying and selling a fund does.

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valuation ratios
An estimation a stock’s value computed by comparing the stock price with a measure taken from the company’s financial statements.

Online Investing Glossary
volume
A measure of how many times shares of a stock or ETF trade hands.