Terminology Guide - "P"

Paper Trade: Practice trading with fake money. This is a common method and we highly recommend it for any new trader to ensure that your strategy and portfolio management style is profitable before trading with real money.

Pennant: A continuation pattern that is commonly used by momentum traders. It consists of a pole (sudden move to the upside) and consolidation within a triangle formation. When it breaks to the upside, the stock gives a buy signal.

Penny Stock: A stock that has a small market cap and price per share. Penny stocks usually trade under $1 per share, but a smaller share structure can categorize even a $15 stock as a penny stock. These stocks usually offer higher risk/reward scenarios due to their volatility.

Pivot Point: Levels of support and resistance that could potentially reverse the current trend. Many short-term traders use pivot points for entering and exiting positions.

Price/Earnings Ratio: One of the most commonly used multiples that allows investors to analyze how much you must pay in order to earn $1 of the company’s earnings. It is calculated by dividing the price by the EPS.

Put: An options agreement that gives a trader the right to sell a stock at a specific price before a specific date.