BREAKOUT: A "breakout" occurs when a stock suddenly moves higher out of a area of consolidation. Consolidation simply means that a stock has traded in a limited range for a period of time.

BUY LONG: Buying "long" a stock means that you actually purchase the stock, in hope that it will go higher.

CUP WITH HANDLE PATTERN: A cup with handle pattern forms when a stock breaks out to a new 6 month or 52 week high then pulls back gradually in a shallow bowl-like pattern over the next few weeks. If you look at the price chart, it looks like a tea cup pointing to the left with a handle pointing over the the right. A key aspect of the cup with handle is that the volume declines substantially while the stock price pulls back during the handle formation. The stock should be bought as the price breaks back up to a new 6 month or 52 week high.

DOJI: A doji pattern occurs when a stock or an index opens and closes at the same (or close to the same) price. The doji can signal a trend change, or perhaps just a pause in the trend. For this reason, a stock forming a doji pattern should be watched the next day for clues that it may be reversing its trend.

EXPONENTIAL MOVING AVERAGE (EMA): The EMA is an average that is calculated from the previous closing prices in a stock. The number is said to be a "moving" average because it changes from day to day as the stock price moves. The 13 day EMA and the 50 day EMA are key EMA's that we refer to. The 13 day EMA is calculated using the past 13 days of closing prices and the 50 day EMA is calculated using the past 50 days of closing prices. The 13 and 50 day EMA's provide support for stocks in an uptrend and resistance for stocks trending down. We often use these numbers to buy or sell stock.

FLAG FORMATION: A flag formation or pattern forms when a stock moves up sharply over a 1 or 2 day period of time, then trades in a tight range without gaining or losing much in value. The pattern looks like a flag on a daily stock chart. Flags often will breakout upward, offering quick gains.

HAMMER: A "hammer" pattern forms when a stock opens near its high of the day, then sells off sharply, but then by the close of the day the price climbs all the way back up to close at or near the highs of the day (where it opened). The hammer usually occurs at the bottom of a downmove and acts as the final "washout" of sellers. Often a stock will reverse trend after a hammer formation, especially if the hammer pattern forms on heavy volume.

HOLDING LONG: "Holding long" means that we are holding our long position in a stock, waiting for it to go higher so that we may sell for a profit.

HOLDING SHORT: "Holding short" means that we have sold the stock short (see above) and we are waiting for the stock to go lower, before buying to cover.

LIMIT ORDER BUY OR SELL: A limit order executes as soon as a stock hits a certain price. If you own AAA company and wish to sell it as soon as it hits $50, you would set a limit order sell at $50. If you do not own the stock and you wish to buy it if it dips to $40, you set a limit order buy at $40.

SELL SHORT: Selling short is a technique in which the trader is allowed to "borrow" shares of a stock which they do not own. The trader sells those borrowed shares and is credited with the money from the sale. In the future, the trader must purchase the shares, in order to replace the borrowed shares. This is called "buying to cover" or "covering". The idea is to sell high, then buy the shares back later after the stock price has fallen. The trader keeps the difference. (SEE ALSO our tutorial on short selling)

STOP LOSS BUY: A stop loss buy is used when shorting a stock. The stop loss buy is an automatic buy order used to cover a short sale if the stock goes higher than a designated price. This order is used to limit losses if a short sales goes against you.

STOP LOSS SELL: The stop loss sell is an sell order set up through your online broker in which you automatically sell a stock that you own if it moves below a certain price (which you set). The stop loss sell is used to exit a position that is going against you before your losses get out of hand.