Analysis

Key Trading Terms (Glossary)

Understanding key trading terminology is essential for navigating the financial markets. The following are some of the most important terms every investor should know:

Term Definition
Support A price level below current prices where buying demand is expected to prevent further decline.
Resistance A price level above current prices where selling pressure is expected to prevent further rise.
Stop Loss A pre-set order to close a position at a specific price level to limit losses or protect realized profits, advised when the market closes below it for two consecutive days.
Take Profit Reducing or closing positions at price levels where actual gains can be locked in.
Range Trading A strategy of buying near support and selling near resistance in a sideways-trending market.
Upward Correction A temporary upward movement against a primary downward trend; typically a short-term reversal that creates an opportunity to lighten long positions near resistance.
Downward Correction A temporary downward movement against a primary upward trend; can create an opportunity to add long positions near support.
Uptrend A pattern where the stock forms higher highs and higher lows on the chart.
Downtrend A pattern where the stock forms lower highs and lower lows on the chart.
Sideways Trend A pattern where the stock moves within a relatively stable range between defined support and resistance levels.

16 Rules of Successful Investing

The following sixteen rules represent timeless principles of disciplined investing, distilled from decades of market experience. They serve as a practical guide for investors at every level.

  1. Study stock movement and compare it with trading volume, while also analyzing the overall market condition.
  2. Never use margin trading until you have mastered reading the market and controlling your emotions.
  3. Buy stocks on the way up, not on the way down.
  4. Learn the importance of cutting losses at the right time.
  5. Study the company’s book value, growth in profits, share price, and trading volume.
  6. Do not rely too heavily on online advisory services, and do not be influenced by people who often express only personal opinions.
  7. Train yourself in technical analysis and chart reading.
  8. When in doubt, exit the market — and only re-enter when you are confident.
  9. Do not fight the market or stand against the trend.
  10. Do not put all your eggs in one basket — diversify your investments across multiple sectors and companies to minimize risk.
  11. Do not overtrade, and avoid frequent entries and exits from the market.
  12. Always use stop-loss orders, and never cancel them once placed.
  13. Do not lose potential profits — turn them into real profits by selling without hesitation, so they do not turn into losses.
  14. Always reduce the amount you invest after a loss.
  15. Trade only in liquid markets and active stocks with high trading volumes.
  16. Be patient — do not rush into the market. Wait for the right time and the right opportunity, which will inevitably come.