14 terms
What you buy on the stock market, where it trades, and how to measure what it earns.
Related terms: share, equity, shareholder
A unit of ownership in a publicly traded company: buy one and you become a shareholder, sharing in the rise (or fall) of its value.
A company divides its capital into millions of identical units called shares. Once it is listed on a stock exchange, anyone can buy or sell them, at a price that changes from moment to moment with supply and demand.
Owning a share entitles you to a slice of the company’s future profits, sometimes paid out as a dividend, and often to a vote at the shareholders’ meeting. If the company thrives, the share price tends to rise; if it struggles, the price can fall sharply, all the way to zero in a bankruptcy.
A stock is identified by its ticker symbol: AAPL for Apple in New York, RY for Royal Bank of Canada in Toronto (RY.TO on Boursicotbot).
Example
You buy 10 shares of Shopify at $150. If the price rises to $165, your position is worth $1,650 instead of $1,500: a $150 gain, or 10%, which stays “on paper” until you sell.
Related terms: stock exchange, equity market, exchange
The organized marketplace where buyers and sellers of stocks, ETFs and other securities meet, at prices set continuously by supply and demand.
An exchange is first of all a meeting place: every buy or sell order goes into an order book, and a trade happens when a buyer accepts a seller’s price. The last traded price becomes the quoted price.
North America’s main exchanges are the Toronto Stock Exchange (TSX) and, in New York, the NYSE and the Nasdaq. They are open weekdays from 9:30 a.m. to 4 p.m. Eastern time, and closed on holidays.
The word also means the market as a whole: “the market was up today” means the major indexes, such as the S&P 500 or the S&P/TSX Composite, gained ground.
Example
At 10:02 a.m., Apple’s last trade printed at US$230.15: that’s the quoted price. If a buyer then agrees to pay US$230.20, the price moves to US$230.20.
Related terms: Toronto Stock Exchange, S&P/TSX, TSXV, TSX Venture
Canada’s main stock exchange, in Toronto, home to large Canadian companies such as Royal Bank, Shopify and Enbridge.
The TSX (Toronto Stock Exchange), operated by TMX Group, is the largest exchange in Canada. Banks, energy and mining weigh heavily there. Its smaller sibling, the TSX Venture Exchange (TSXV), lists younger and smaller companies.
Its flagship index, the S&P/TSX Composite, tracks more than 200 of the largest companies listed in Toronto. Stocks trade there in Canadian dollars, from 9:30 a.m. to 4 p.m. Eastern time.
Boursicotbot offers five Toronto stocks: Shopify, Royal Bank, TD Bank, Enbridge and Canadian Natural. Because they are also listed in New York, their price is their New York price multiplied by the live USD/CAD rate, and their orders fill during New York’s regular session, except on Toronto holidays.
Example
If Enbridge trades at US$40 in New York and the US dollar is worth C$1.38, its price on Boursicotbot is about 40 × 1.38 = C$55.20.
Related terms: Wall Street, New York Stock Exchange, US stock exchanges
The two major US stock exchanges, both in New York: the NYSE, the largest exchange in the world, and the Nasdaq, known for its technology companies.
The NYSE (New York Stock Exchange), on Wall Street, is home to many large established companies: banks, industrials, health care. The Nasdaq, fully electronic since its launch in 1971, is the market of choice for tech giants such as Apple, Microsoft and Nvidia.
Both are open from 9:30 a.m. to 4 p.m. Eastern time, with extended sessions before and after. Stocks trade there in US dollars: to buy a US stock, a Canadian investor needs US dollars.
Their most-watched indexes are the S&P 500 (500 large US companies), the Nasdaq-100 and the Dow Jones. On Boursicotbot, US stocks and ETFs are quoted in real time.
Example
An Apple share (AAPL, listed on the Nasdaq) at US$230 costs $230 from your US-dollar account, not C$230.
Related terms: exchange-traded fund, index ETF, index fund
A fund that holds a whole basket of securities (often an entire index) and trades on an exchange like a single stock.
An ETF lets you buy hundreds of companies in one go. SPY, for example, tracks the S&P 500: a single unit gives you a small stake in the 500 largest US companies.
There are ETFs for almost everything: a broad index, a sector (technology, energy, banks), bonds, gold. Investors like them for their instant diversification and their generally low management fees.
Le Boursicoteur 3000 uses ETFs as barometers: SPY and QQQ to read the market regime, sector ETFs (XLK, XLE, XLF…) to see which sectors are leading.
Example
With a single unit of SPY, you indirectly own a small piece of Apple, Microsoft, Amazon and nearly 500 other companies, rather than a single stock.
Related terms: S&P 500, S&P/TSX Composite, Dow Jones, Nasdaq-100
A number that sums up how a group of stocks is doing, such as the S&P 500 for large US companies or the S&P/TSX Composite for Canada.
An index tracks the value of a basket of stocks picked by precise rules. Most are weighted by market capitalization: a giant like Apple moves the S&P 500 more than a company ten times smaller.
You can’t buy an index directly, but you can buy an ETF that tracks it. Indexes are also benchmarks: beating the market means doing better than your benchmark index over the same period.
The most quoted: the S&P 500 and the Nasdaq-100 in the US, the Dow Jones (30 large companies, price-weighted), and the S&P/TSX Composite in Canada.
Example
If the S&P 500 gained 8% over a year and your portfolio 6%, you underperformed the market, even though you made money.
Related terms: crypto, bitcoin, crypto asset
A digital currency that runs on a blockchain, with no central bank, such as bitcoin or ether; it trades 24 hours a day, 7 days a week.
Bitcoin (BTC), launched in 2009, is the first and largest cryptocurrency. Ether (ETH) powers the Ethereum network. Thousands of others exist, of widely varying size and seriousness.
Unlike a stock, a cryptocurrency is not a share in a company and produces no earnings or dividends: its price depends only on supply, demand and market confidence. That makes it far more volatile; daily moves of 5% are common.
On Boursicotbot, cryptocurrencies are quoted in US dollars (BTC/USD, ETH/USD…), in real time, and trade around the clock, weekends included. Le Boursicoteur 3000 sticks to the major pairs and holds a crypto session on Saturday and Sunday.
Example
You buy 0.01 BTC at US$100,000: you pay US$1,000. If bitcoin rises 5% overnight, your position is worth US$1,050, even with the stock market closed.
Related terms: market cap, large cap, small cap
A company’s total stock market value: its number of shares multiplied by the price of one share.
Market cap tells you what the market thinks a company is worth today. It rises and falls with the share price: if the stock gains 10%, so does its market cap.
Companies are often sorted by size: large caps (over $10 billion), mid caps ($2 billion to $10 billion) and small caps (under $2 billion). Small caps are usually more volatile and harder to trade.
A share price on its own says nothing about a company’s size: a $500 stock is not “more expensive” than a $50 stock if the second has twenty times more shares outstanding.
Example
1.4 billion shares × $100 = $140 billion in market capitalization.
Related terms: dividend yield, ex-dividend date
The share of its profits a company pays out in cash to its shareholders, often every quarter.
A profitable company can reinvest its earnings or hand part of them back: that’s the dividend. In Canada, banks, pipelines and utilities are known for paying them regularly.
It is compared to the share price through the dividend yield: annual dividend ÷ share price. A very high yield isn’t always good news: it can mean the price has collapsed and the dividend is at risk of being cut.
On the day a stock starts trading “ex-dividend,” its price usually drops by roughly the amount of the dividend: the cash leaves the company for the shareholders. To collect the dividend, you must own the stock before that date.
On Boursicotbot, as at a broker, dividends are paid on the payment date, in the stock’s currency, for the shares held on the ex-dividend date. Dividends from US companies are subject to a 15% withholding tax, the Canada–US tax treaty rate.
Example
An $80 stock that pays $1 a quarter pays $4 a year: a dividend yield of 4 ÷ 80 = 5%.
Related terms: cash, cash balance, buying power, liquid stock
The money in your account that isn’t invested, ready for a purchase or a currency conversion.
Cash is the part of your portfolio that doesn’t move with the market. It cushions declines and lets you seize an opportunity without selling something else. Le Boursicoteur 3000 must always keep at least 10% of its portfolio in cash after a purchase (rule R4).
On Boursicotbot, you have two cash balances: one in Canadian dollars (the starting $100,000) and one in US dollars. A pending buy order sets aside the cash it needs: that money isn’t available for another order until the first one fills or is canceled.
Liquidity also means how easily a security can be bought or sold without moving its price: a heavily traded stock like Apple is called “liquid.”
Example
With $100,000 in cash and a $15,000 buy limit order pending, you have $85,000 left for other orders.
Related terms: investment portfolio, position, unrealized gain
Everything you own: your positions (stocks, ETFs, cryptocurrencies) and your cash, in every currency.
Your portfolio’s value is the sum of your positions at market prices plus your cash. It changes with every price move, even if you do nothing.
A position is the quantity of a security you hold, with its average purchase price. The difference between its current value and what it cost you is your unrealized gain or loss; it becomes realized when you sell.
On Boursicotbot, every member starts with a C$100,000 paper portfolio, all in Canadian cash. US-dollar positions and cash are converted at the market rate to work out the total value in Canadian dollars.
Example
C$60,000 in stocks, US$2,000 in crypto (at C$1.38 per US dollar) and C$37,000 in cash: your portfolio is worth 60,000 + 2,760 + 37,000 = C$99,760.
Related terms: diversify a portfolio, diversified portfolio
Spreading your money across several securities, sectors or asset classes so that no single bad pick can do too much damage.
Nobody knows which company will disappoint next month. Spread your capital, and a 30% drop in a stock that makes up 5% of your portfolio costs you only 1.5%; in a stock that makes up 50% of it, the same drop costs you 15%.
Diversifying isn’t just owning more stocks: five Canadian banks often react the same way to the same news. It’s better to mix sectors, countries and asset classes.
Le Boursicoteur 3000 is bound by rule R4: no more than 20% of its portfolio in any one security, and no more than 8 positions at a time.
Example
An S&P 500 ETF is diversified by design; a portfolio made only of tech stocks isn’t really diversified, even with 15 names.
Related terms: performance, rate of return, investment return
What your money earned (or lost), expressed as a percentage of what you invested.
Return is calculated as (ending value − starting value) ÷ starting value. It lets you compare investments of different sizes: making $500 on $1,000 (50%) beats making $500 on $100,000 (0.5%).
A return only means something alongside its time frame (a day, a month, a year) and the risk taken to earn it. It is also measured against a benchmark: making 6% when the market makes 15% is underperforming.
Mind the asymmetry: after a 20% loss, you need a 25% gain just to get back to where you started. On Boursicotbot, the leaderboards compare the returns of the players and of Le Boursicoteur 3000, all starting from the same capital.
Example
Your portfolio goes from $100,000 to $104,500 in a month: (104,500 − 100,000) ÷ 100,000 = +4.5%.
Related terms: volatile stock, price swings
How much a price moves, up or down: the more volatile a security, the bigger and faster its swings.
A utility stock may move less than 1% a day; a young tech company or a cryptocurrency, 5% or more. Volatility is neither good nor bad: it is a measure of uncertainty.
It is often measured by the standard deviation of returns, or more simply by the ATR, the average range of a trading day. Bollinger Bands widen when volatility rises and tighten when the stock calms down.
Its main use is sizing risk: a more volatile stock needs a wider stop, and therefore a smaller position to risk the same amount. That is exactly the calculation Le Boursicoteur 3000 makes with its 2 × ATR stop.
Example
Two stocks at $100: one moves $1 a day on average, the other $4. With a 2 × ATR stop, the first gets its stop at $98, the second at $92.
9 terms
How you tell the market to buy or sell: at what price, when, and how to protect yourself.
Related terms: buy at market, sell at market, at-the-market order
An order to buy or sell right away at the best available price, without setting a price.
It is the simplest order: you choose the quantity, the market chooses the price. You are sure to be filled (if the market is open), but not of the exact price.
On a heavily traded stock, the difference from the last quoted price is tiny. On a thinly traded stock or in a choppy market, you can pay noticeably more than expected: that’s slippage.
On Boursicotbot, as at a broker, a market order fills at the ask (a buy) or the bid (a sale) as soon as the security’s market is open. Placed outside the session (in the evening, on the weekend), it waits for the next regular session, except for crypto, which trades around the clock.
Example
Apple shows US$230.10. You place a market order for 10 shares: it fills at US$230.12, the price at that moment, for a total of US$2,301.20.
Related terms: buy limit, sell limit, limit price
An order that sets your price: a buy fills only at that price or lower, a sell only at that price or higher.
With a limit order, you control the price but not the execution: if the market never reaches your limit, the order stays open and nothing happens. A market order is the reverse: execution is guaranteed, the price is not.
It is used to buy on a pullback (“I want Shopify, but not above $140”) or to sell at a target (“I’ll sell if the stock hits $180”). It also protects you from a surprise price on a thinly traded stock.
On Boursicotbot, a buy limit fills as soon as the price is at or below your limit, a sell limit as soon as it is at or above. While it waits, a buy order sets aside the cash it needs.
Example
The stock is at $52. You place a buy limit at $50. Two days later, the price dips to $49.80: your order fills at $49.80, a price equal to or better than your limit.
Related terms: stop market order, buy stop, sell stop, stop-limit order
An order that sleeps until the price reaches a threshold, the stop, then executes at the market price.
A sell stop triggers when the price falls to the stop or below: it is the classic tool for limiting a loss. A buy stop triggers when the price rises to the stop or above: it is used to buy a breakout, when the stock clears a resistance level.
Once triggered, it becomes a market order. So the fill can be worse than the stop if the price jumps past it, for example at the open after bad news: that’s gap risk.
Don’t confuse it with a limit order: a buy limit waits for the price to fall, a buy stop waits for it to rise. On Boursicotbot, a stop order triggers when the last price reaches or crosses the threshold, then fills at the bid or ask of that moment.
Its cousin, the stop-limit order, becomes a limit order once triggered: no nasty surprise on the price, but no guarantee of a fill if the price runs past the limit.
Example
You own a stock bought at $50 and place a sell stop at $46. One morning, the stock opens straight at $44 after disappointing earnings: the stop triggers and the sale fills at $44, not $46.
Related terms: stop-loss order, protective stop, stop loss
A sell stop placed below your purchase price to cap your loss automatically if the stock falls.
A stop-loss is your maximum loss, decided in advance and in cold blood, before emotions get involved. If the stock drops that far, you’re out, period. Without one, a small loss can turn into a big one while you hope for a bounce.
Where to put it? Far enough that a normal day’s swings won’t trigger it, close enough that the loss stays acceptable. Two common reference points: just below a clear support level, or 2 × ATR below your entry. The distance between entry and stop sets your risk per share, and therefore your position size.
For Le Boursicoteur 3000, it’s mandatory: every purchase gets its stop placed immediately (rule R2), and a stop can move up but never down (rule R11). Lowering a stop to “give the stock a chance” is the classic mistake it forbids itself.
Example
Buy at $50, ATR of $2: stop at 50 − 2 × 2 = $46. With 250 shares, the planned maximum loss is $4 × 250 = $1,000 (barring an opening gap).
Related terms: trailing stop order, trailing stop-loss
A stop that rises as the stock advances, to lock in part of your gains without cutting the rally short.
At first, the stop protects your capital. As the stock climbs, raising the stop locks in part of the gain: if the trend reverses, you exit with a profit rather than at your original stop.
It moves by a simple rule: a percentage below the high, a multiple of the ATR, the last significant low or a short moving average. It never moves back down; otherwise it is no longer protection.
On Boursicotbot, the trailing stop order does it for you: you set a distance in percent, and the stop follows the highest price reached since you placed the order (the lowest, for a buy), never moving back. Le Boursicoteur 3000 moves its stops by its own rules: at +1R, it raises its stop to the entry price; past +2R, it trails the rally every session.
Example
Buy at $50, initial stop at $46 (a $4 risk, or 1R). The stock rises to $54 (+1R): the stop moves up to $50, and the trade can no longer lose you money. At $58, you raise it to just below the last low, at $55.
Related terms: spread, bid price, ask price, bid/ask
The gap between the best price a buyer is offering (the bid) and the best price a seller is asking (the ask) at any given moment.
At any moment, there is a price at which someone is willing to buy (the bid) and a slightly higher price at which someone is willing to sell (the ask). A market buy pays the ask; a market sell receives the bid.
On a large stock like Apple, the spread is a cent or two. On a small, thinly traded company, it can reach 1% of the price or more: buying and selling right away then costs you that spread. It is one of the hidden costs of frequent trading.
On Boursicotbot, as at a broker, a buy pays the ask and a sale receives the bid, slightly worse still for a large order relative to the stock’s volume. On top of that comes the 1.5% spread on currency conversions.
Example
Bid $19.95, ask $20.05: the spread is $0.10, or 0.5%. Buying 1,000 shares at market and selling them right away costs about $100.
Related terms: trading hours, regular session, market open, market close
When an exchange is open: in Canada and the US alike, the regular session runs from 9:30 a.m. to 4 p.m. Eastern time, Monday to Friday.
The regular session is where most of the trading happens. The open and the close are often the busiest moments: overnight orders arrive all at once in the morning, and large funds adjust their positions late in the day.
Exchanges close on weekends and holidays, which differ between Canada and the US: Canada Day and Canadian Thanksgiving close Toronto but not New York, and US Thanksgiving does the opposite. Cryptocurrencies trade nonstop.
On Boursicotbot, US stocks and the five Toronto stocks fill during New York’s regular session; an order placed outside it waits for the open, except a limit order on a New York stock placed for extended hours. Le Boursicoteur 3000 holds its sessions at 10 a.m., after the first 30 minutes, and at 3:30 p.m.
Example
You place a market order on Apple on a Saturday: it waits and fills on Monday at the 9:30 a.m. open, at a price that may be far from Friday’s.
Related terms: extended hours, pre-market trading, after-hours trading
New York’s extended sessions, before the open (from 4 a.m.) and after the close (until 8 p.m. Eastern time), when trading volume is thinner.
Companies often release their earnings before the open or right after the close. The first reactions therefore show up in the pre-market and after-hours sessions, when few traders are around.
Take those prices with a grain of salt: with little volume, the bid-ask spread widens and a small order can move the price. A stock up 6% in the pre-market can open much lower, or much higher.
On Boursicotbot, you see New York’s pre-market and after-hours prices. Only a limit order placed for extended hours can fill then; market orders and stops wait for the regular session, from 9:30 a.m. to 4 p.m.
Example
A company reports earnings at 7 a.m. At 8 a.m., its stock trades up 8% in the pre-market on tiny volume: a hint of the reaction, not a guarantee of the opening price.
Related terms: gap up, gap down, price gap
A price jump between one session’s close and the next session’s open, with no trading in between the two levels.
If major news breaks overnight (earnings, an acquisition, a regulatory decision), the stock can open well above or well below the previous day’s close. On the chart, that leaves a “hole” between two candles.
Gaps are the main danger of a stop order: a stop doesn’t guarantee the price. If the stock opens below your stop, the sale fills at the opening price. That’s why Le Boursicoteur 3000 doesn’t buy any stock in the 3 sessions before its earnings (rule R13).
It also avoids chasing a gap up of more than 5% at the open, unless it follows strong earnings (its “earnings reaction” setup).
Example
Close at $100, disappointing earnings after the bell, open the next day at $88: a 12% gap down. A stop at $95 triggers… at $88.
17 terms
Reading a stock’s chart: its trend, its momentum, its volatility, and the levels where the price reacts.
Related terms: chart analysis, charting, technical indicators
The study of a stock’s past prices and volume, on a chart and with indicators, to judge its trend and the right time to buy or sell.
Technical analysis starts from a simple idea: price reflects what buyers and sellers are actually doing. It looks for trends, for levels where the price reacts (support and resistance), and for signs of acceleration or exhaustion.
It relies on indicators computed from prices: moving averages, RSI, MACD, Bollinger Bands, ATR, volume. They summarize the past; they don’t predict anything, and they know nothing about the company or the news.
On each stock’s page, Boursicotbot shows a technical reading: five indicators vote (trend, RSI, MACD, Bollinger, volume), from “strong sell” to “strong buy”; the ATR informs without voting, and candlestick patterns from the last 5 sessions are flagged.
Example
Price above its 50- and 200-day averages, MACD above its signal line, a rise on 1.8 times normal volume, RSI at 58 and %B at 0.7: three buy votes, two neutral. Score: (3 − 0) ÷ 5 = 0.6, a “strong buy” (from 0.5 up).
Related terms: uptrend, downtrend, trend following
The underlying direction of a price over weeks or months: up (higher highs and higher lows), down, or sideways.
Day to day, a price zigzags. The trend is the direction that remains when you step back. An uptrend strings together higher lows and higher highs; a downtrend, lower and lower ones.
It is often read with moving averages. Boursicotbot calls the trend up when the price is above its 50-day moving average, itself above the 200-day; down when the price is below its 50-day, itself below the 200-day; otherwise, there is no clear trend. The ADX measures its strength.
“The trend is your friend”: buying in the direction of the underlying trend is usually less risky than betting on a reversal. Le Boursicoteur 3000’s first setup is precisely the pullback in an uptrend.
Example
Price $120, 50-day average $112, 200-day average $98: everything is stacked upward, so the trend is up. The price is 22% above its 200-day moving average.
Related terms: 50-day moving average, 200-day moving average, SMA, simple moving average, 200 DMA
The average closing price of the last N sessions, recalculated every day: it smooths out the noise to show which way the price is heading.
The 50-day moving average is the average of the last 50 closes, about two and a half months of trading: it shows the trend of recent months. The 200-day, the average of the last 200, covers roughly a year: it is the long-term trend, the one fund managers watch most closely.
A price above its 200-day moving average is considered in a long-term uptrend; below it, in a downtrend. Moving averages also act as moving support and resistance: in a rally, the price often bounces off its 20-day or 50-day average.
Their limit: they look backward. They confirm a trend more often than they announce it, and a sharp reversal takes weeks to show up in them. There are also exponential moving averages (EMAs), which give more weight to recent days, like the ones in the MACD.
Example
The last 5 closes are $10, $11, $12, $11 and $13: the 5-day moving average is (10 + 11 + 12 + 11 + 13) ÷ 5 = $11.40. Tomorrow, the oldest close drops out of the calculation and the new one comes in.
Related terms: moving average crossover, 50/200 crossover
A golden cross happens when the 50-day moving average crosses above the 200-day (a bullish sign); a death cross, when it crosses below (a bearish sign).
When the average of recent months overtakes the average of the year, recent prices are clearly higher than earlier ones: the long-term trend is turning up. The opposite, the death cross, signals that it is turning down.
These signals are slow: they often arrive after much of the move, and they give false starts when the market goes sideways. They are used as confirmation, rarely as a trigger.
On Boursicotbot, a stock’s technical reading flags a cross if it happened within the last 30 sessions.
Example
A stock’s 50-day average rises from $97 to $101 in three weeks while its 200-day stays around $99: it crosses it from below, a golden cross.
Related terms: Average Directional Index, trend strength, DMI
An indicator from 0 to 100 that measures how strong a trend is, without saying whether it is up or down.
The ADX, developed by J. Welles Wilder, answers a single question: is the stock trending or going sideways? It is usually computed over 14 days from directional movement (highs moving up against lows moving down).
Below 20, the trend is weak or absent: crossovers and breakouts are unreliable there. Above 25, the trend is well established, up or down. A rising ADX says the trend is gaining strength.
Le Boursicoteur 3000 uses it in its “momentum” setup: it looks for stocks with an ADX above 25 and five up sessions on volume.
Example
A stock falling steadily for two months can have an ADX of 35: a strong trend… but a downtrend. The ADX measures intensity; the price’s position relative to its moving averages gives the direction.
Related terms: RSI 14, Relative Strength Index, oversold, overbought
An indicator from 0 to 100 that measures the speed of recent gains and losses: below 30, a stock is called oversold; above 70, overbought.
The RSI, created by J. Welles Wilder in 1978, compares the average daily gain to the average daily loss, usually over 14 days. Only gains give 100, only losses give 0, and equal amounts of both give 50.
Above 50, buyers are in control; below it, sellers. Below 30, the stock has fallen a lot in a short time and a bounce is common; above 70, it has risen a lot and a pullback is common. These are the thresholds of Boursicotbot’s technical reading: an RSI 14 below 30 is a buy signal, above 70 a sell signal.
Its limit: in a strong trend, the RSI can stay overbought or oversold for weeks. On its own, it is not a reason to buy or sell. Le Boursicoteur 3000 uses it in context: a pullback to 40–50 in an uptrend, or an RSI below 30 above the 200-day moving average together with a reversal pattern.
Example
Over 14 days, the average gain is $1.20 and the average loss $0.40: a ratio of 3. RSI = 100 − 100 ÷ (1 + 3) = 75: the stock is overbought.
Related terms: Moving Average Convergence Divergence, MACD 12 26 9, MACD histogram
A momentum indicator that compares a fast exponential moving average (12 days) with a slow one (26 days), with a 9-day signal line.
The MACD is the difference between the 12-day and the 26-day exponential moving averages. When it grows, recent prices are pulling away above older ones: upside momentum is accelerating. Its signal line is the 9-day average of the MACD itself.
The histogram is the MACD minus its signal line. Positive, upside momentum dominates; negative, downside momentum does. The most-watched moment is when the MACD crosses its signal line; Boursicotbot flags it if it happened within the last 5 sessions.
Its limit: when the stock goes sideways, the MACD keeps crossing its line and gives false signals. It is most useful in a trending market, which the ADX lets you check.
Example
12-day exponential average: $104.20; 26-day: $102.70. MACD = 1.50. If the signal line is at 1.10, the histogram is +0.40: upside momentum.
Related terms: Bollinger, %B, Bollinger squeeze, band width
A channel around the price made of a 20-day moving average and two bands set two standard deviations above and below it.
Created by John Bollinger in the 1980s, the bands widen when the stock moves a lot and tighten when it is calm. They tell you whether the price is high or low relative to its last few weeks.
%B places the price within the channel: 0 on the lower band, 0.5 in the middle, 1 on the upper band (it can go outside that range). On Boursicotbot, a %B below 0.05 gives a buy signal, above 0.95 a sell signal.
When the width between the bands is among the narrowest 10% of the last 120 sessions, it is called a “squeeze”: unusual calm, often followed by a big move, without saying in which direction. Le Boursicoteur 3000 watches for these squeezes followed by a breakout on volume. Beware: a stock in a strong rally can ride the upper band for a long time.
Example
20-day average: $50; standard deviation: $2. Upper band at $54, lower band at $46. With a price of $53, %B = (53 − 46) ÷ (54 − 46) = 0.875.
Related terms: trading volume, relative volume
The number of shares (or units) traded over a period, usually a session: it tells you whether a price move carries weight.
A rise driven by lots of buyers counts for more than a rise in a deserted market. Volume confirms breakouts: a stock that clears resistance on twice its usual volume is more likely to hold.
On Boursicotbot, the last session’s volume is compared to the average of the previous 20 sessions. Above 1.5 times that average, the day’s move is considered well supported: a buy signal if the stock rose, a sell signal if it fell. A one-off piece of news can, however, inflate a single day’s volume with no follow-through.
Average volume is also a measure of liquidity. Le Boursicoteur 3000 only buys stocks and ETFs that trade at least 1 million units a day on average, at a price of at least $5 (rule R8).
Example
Average volume over 20 sessions: 2 million shares. Today, the stock rises 3% on 4.2 million shares traded: 2.1 times the average, a well-supported rise.
Related terms: Average True Range, ATR 14, 2 × ATR stop
A measure of how much a stock usually moves in a day, computed over 14 days; its main use is placing a stop.
For each day, take the largest of three distances: high − low, high − previous close, previous close − low. The last two account for overnight jumps. The ATR is the average of those distances over 14 days, in dollars or as a percentage of the price.
The ATR doesn’t say whether to buy or sell: on Boursicotbot, it informs but doesn’t vote in the technical reading. Its real use is the stop: too close, and a normal day’s noise triggers it; at 2 × ATR below the price, it gives the position room to breathe.
That is the stop each stock’s page suggests, and the one Le Boursicoteur 3000 uses for its initial stop (or just below a clear support level, if that is tighter and makes sense). Its limit: before earnings, a stock can move far more than its ATR.
Example
A $80 stock has a 14-day ATR of $2.40 (3% a day). Suggested stop: 80 − 2 × 2.40 = $75.20.
Related terms: support level, price floor
A price level where a stock has often stopped falling and bounced, because buyers keep stepping in there.
If a stock has bounced three times after touching $45, many investors remember that level: those who missed it want to buy there, those who bought there defend it. It is a floor… until proven otherwise.
When support breaks, especially on volume, it often turns into resistance: trapped buyers are happy to sell at breakeven when the price climbs back up to it. A stop placed just below a clear support level is a classic: if the level doesn’t hold, the idea was wrong.
On Boursicotbot, support and resistance levels come from the lows and highs of the last 120 sessions, grouped together when they are within 1.5% of each other.
Example
Lows at $45.10, $44.80 and $45.40 in six months: support around $45. A buyer at $48 can put a stop at $44.50, just below it.
Related terms: resistance level, price ceiling, breakout
A price level where a stock has often topped out, because sellers keep showing up there; clearing it is called a breakout.
Resistance is the opposite of support: at that price, investors take profits or unload a position bought higher. The stock bumps into it once, twice, three times.
When the price finally clears it on volume, it is a breakout: the sellers’ supply is exhausted, and the old resistance often acts as support afterward. A breakout without volume, on the other hand, often fails and the price falls back below the level.
Le Boursicoteur 3000’s second setup is built on this: tight Bollinger Bands, then a breakout through resistance on volume of at least 1.5 times the average.
Example
A stock tops out three times near $60 in four months. One day, it closes at $61.50 on twice its usual volume: that’s a breakout, and $60 becomes the level to watch.
Related terms: candle, candlestick chart, candlestick patterns, Japanese candlesticks
A way to draw each session: a body running from the opening price to the closing price, and wicks showing the high and the low.
Each candle sums up a period (a day on a daily chart). The body is green if the stock closed higher than it opened, red if it closed lower. The wicks, above and below, show how far the price went.
A candle’s shape tells the story of the day’s battle: a big green body with no wicks, buyers dominated from start to finish; a long upper wick, they pushed but sellers pushed them back. Some shapes, alone or in sequences of two or three candles, are well-known patterns: doji, hammer, engulfing, morning star.
On Boursicotbot, patterns from the last 5 sessions are detected and shown on the chart: in green if they lean bullish, red if they lean bearish, black for indecision. A pattern is a clue, not proof: it matters most near support or resistance, or with volume.
Example
Open $50, high $53, low $49.50, close $52.50: a green body from $50 to $52.50, a short upper wick to $53 and a lower wick to $49.50.
Related terms: indecision candle, doji candle
A candle whose open and close are almost equal: buyers and sellers canceled each other out, a sign of indecision.
A doji looks like a cross: a tiny body, sometimes just a line, with wicks on both sides. The stock moved during the session, but ended roughly where it started.
On its own, it says little. After a long rise or a long decline, it signals that the dominant force is running out of steam: indecision often comes before a change. Wait for the next session to see which way it goes.
Example
After eight up sessions, a stock opens at $72.00, rises to $73.40, dips to $71.10 and closes at $72.05: a doji, a cue for caution.
Related terms: hammer candle, inverted hammer, hanging man, shooting star
A hammer is a candle with a small body and a long lower wick that appears after a decline: sellers pushed, then buyers took back control.
A hammer has a small body at the top of the candle and a lower wick at least twice as long as the body. After a decline, it shows that buyers absorbed everything sellers dumped during the session: a sign of a possible bounce.
Its cousins: the inverted hammer (a long upper wick after a decline: buyers test higher prices, to be confirmed), the shooting star (a long upper wick after a rise: the rally was rejected) and the hanging man (the hammer’s shape, but after a rise: sellers are waking up).
Context is everything: the same shape is encouraging at the bottom of a decline and worrying at the top of a rally. Le Boursicoteur 3000 looks for this kind of reversal pattern when a stock is oversold (RSI below 30) while still above its 200-day moving average.
Example
After a 15% drop, a session opens at $40, plunges to $37, then closes at $40.30, near its high: a hammer, especially telling if it touches support.
Related terms: engulfing pattern, bullish engulfing, bearish engulfing
A two-candle pattern in which the second candle’s body completely engulfs the first one’s, in the opposite direction: a shift in the balance of power.
In a bullish engulfing pattern, a red candle is followed by a green candle whose body starts lower and ends higher: buyers erased the whole previous session, and then some. After a decline, it is a sign they are taking control.
The bearish engulfing pattern is its mirror image: a green candle swallowed by a big red one, a sign that sellers are taking control after a rise. The bigger the second candle and the heavier the volume, the more credible the pattern.
Example
Day 1: open $31, close $30 (red). Day 2: open $29.80, close $31.60 (green). Day 2’s body engulfs day 1’s: a bullish engulfing pattern.
Related terms: morning star, evening star, three white soldiers, three black crows
Three-candle patterns: a decline, a small indecision candle, then a strong rise for the morning star (a bottom); the reverse for the evening star (a top).
The morning star tells a reversal in three acts: a big red candle (sellers dominate), a small candle with a narrow body (nobody wins), then a big green candle that climbs well into the first one’s body (buyers take back control). It is a classic bottoming pattern.
The evening star is its mirror image at the top of a rally: big green, small indecision candle, big red. In the same family, three white soldiers (three strong up days in a row, each closing higher) and three black crows (three strong down days in a row) signal a firm trend.
Example
Day 1: from $60 to $56. Day 2: from $55.60 to $55.80. Day 3: from $56.20 to $59.40. The third candle climbs past the midpoint of the first ($58): a morning star.
7 terms
Reading the company behind the stock: its sales, its earnings, its margins and what it is worth.
Related terms: fundamentals, fundamental grade, CAN SLIM
The study of a company’s health and value from its financial results: sales, earnings, margins, debt, valuation.
Where technical analysis looks at the price, fundamental analysis looks at the company: is it selling more than before? Is it earning more on each dollar of sales? Is it carrying too much debt? Is its stock expensive relative to its earnings?
The data comes from the financial reports listed companies publish every quarter; in the US, they are filed with the SEC (Forms 10-Q and 10-K). Investors track revenue, earnings per share and margins over several quarters.
Le Boursicoteur 3000 combines both approaches: “earnings tell the company’s story, the chart tells the buyers’ story.” For each US stock, it reads an 8-quarter fact sheet and a grade from A to E based on six criteria inspired by the CAN SLIM method: EPS growth of at least 25% year over year, revenue growth of at least 15%, accelerating EPS, a rising operating margin, at least 3 of the last 4 reports above expectations, and positive net income over 12 months.
Example
A company whose EPS goes from $1.00 to $1.35 in a year (+35%), with sales up 18% and an improving operating margin, already ticks three of the grade’s six boxes.
Related terms: sales, top line, revenue growth
A company’s total sales over a period, before subtracting its costs.
It is the first line of the income statement. It tells you how much customers paid for the company’s products and services during the quarter or the year.
It is mostly tracked as year-over-year growth: a quarter is compared to the same quarter a year earlier, to strip out seasonal effects (a retailer always sells more in December). Accelerating sales growth is a sign of strength; slowing growth, a signal to watch.
Rising revenue isn’t enough: it still has to turn into profit. Hence the importance of margins.
Example
Third-quarter sales: $5.2 billion, versus $4.4 billion a year earlier. Year-over-year growth: (5.2 − 4.4) ÷ 4.4 = +18%.
Related terms: EPS, EPS growth, diluted EPS
A company’s net income divided by its number of shares: the share of the profit that belongs to each share.
EPS brings profit down to the scale of one share, which lets you track its growth even if the share count changes. It is the first number markets look at on earnings day, compared with what analysts expected.
Fast, steady EPS growth is the hallmark of the companies growth investors look for. Watch out for dilution: if the company issues lots of new shares, the same profit is split among more shares and EPS goes down.
It is the first criterion of Le Boursicoteur 3000’s fundamental grade: EPS growth of at least 25% year over year, ideally accelerating from one quarter to the next.
Example
Net income of $900 million and 600 million shares: EPS = 900 ÷ 600 = $1.50 per share.
Related terms: gross margin, operating margin, net margin, profit margin
The share of each dollar of sales the company keeps after its costs, expressed as a percentage of revenue.
Gross margin only subtracts the direct cost of the goods sold. Operating margin also subtracts operating expenses (salaries, marketing, research). Net margin, finally, accounts for everything, interest and taxes included: it is net income divided by sales.
Rising margins say a company has pricing power or is becoming more efficient. Falling margins while sales grow means growth that costs a lot: be wary.
Le Boursicoteur 3000’s fundamental grade awards a point for an operating margin up year over year, and it treats a shrinking margin on a stock it holds as a warning sign.
Example
Sales of $10 billion, cost of goods of $6 billion, operating expenses of $2 billion, interest and taxes of $0.5 billion: a 40% gross margin, a 20% operating margin and a 15% net margin.
Related terms: P/E, P/E ratio, earnings multiple, valuation
The share price divided by the last 12 months’ earnings per share: how much the market pays for each dollar of profit.
A P/E of 20 means you pay $20 for $1 of annual earnings. It is the most common valuation measure: it lets you compare companies of different sizes.
A high P/E isn’t necessarily “expensive”: the market pays more for a company whose earnings are growing fast. A low P/E isn’t necessarily a bargain: earnings may be about to fall. It is best compared with the sector and with the stock’s own history, and it means nothing when earnings are negative.
Le Boursicoteur 3000 reads the P/E and the price-to-sales ratio on a trailing 12-month basis. For it, a high valuation is not a reason to sell a winner, but a risk to name in the bear case of its thesis.
Example
Stock at $90, trailing 12-month EPS of $3: P/E = 90 ÷ 3 = 30. If earnings rise 50% and the price doesn’t move, the P/E falls to 20.
Related terms: earnings season, earnings report, earnings surprise, earnings beat
The financial results a listed company publishes every three months: sales, earnings, margins, and often its outlook.
Four times a year, every listed company reveals its numbers, usually before the open or after the close, then discusses them on a conference call with analysts. The dates are announced in advance.
The market reacts less to the numbers themselves than to how they compare with analysts’ expectations: the “surprise.” Earnings up 20% can sink the stock if 30% was expected. Gaps of 10% or more the next morning are not unusual.
That’s why Le Boursicoteur 3000 opens no position in a stock during the 3 sessions before its earnings (R13), and must decide in writing, the day before, whether to hold, trim or sell what it owns (R14); holding the full position requires a gain cushion of at least 1R.
Example
Analysts expect EPS of $1.20. The company reports $1.32: a 10% positive surprise. Le Boursicoteur 3000’s fundamental grade counts how many of the last 4 reports beat expectations.
Related terms: company guidance, outlook, analyst revisions
The numbers a company’s management announces for the coming quarters, often more decisive for the stock than past results.
Along with its results, a company often gives a range for the next quarter or the year: sales, earnings per share, margins. The market looks ahead: raising guidance often lifts the stock, even after an average quarter; cutting it can sink the stock despite excellent numbers.
Analysts then adjust their own estimates: those are revisions. A string of upward revisions is a tailwind for the stock.
This information isn’t in the tables of numbers. For Le Boursicoteur 3000, assistants (Claude models with web search) look up guidance, conference-call highlights and analyst revisions, with their sources cited.
Example
A company beats the quarter’s expectations (EPS of $2.10 versus $2.00 expected) but guides annual sales below consensus: the stock loses 8% the next day.
6 terms
What separates the traders who last from the ones who blow up: how much to risk, how much to buy, when to slow down.
Related terms: 1% rule, trade risk, position risk
The amount you accept to lose on a trade if your stop is hit, often expressed as a percentage of your portfolio.
Risk is not the amount invested: it’s what you lose if you’re wrong. It is calculated as (entry price − stop) × quantity. A $20,000 position with a stop 5% lower only risks $1,000.
Professional traders cap this risk at a small fraction of their capital, often 0.5% to 2%. At 1% per trade, even ten losses in a row cost only about 10% of the portfolio: you stay in the game and can recover.
It is Le Boursicoteur 3000’s rule R1: at most 1% of the portfolio per trade (entry-to-stop distance × quantity, converted to Canadian dollars). After an 8% drop from its peak or three losses in a row, that risk is cut to 0.5% (R9, R10).
Example
$100,000 portfolio, 1% risk: $1,000. Entry at $40, stop at $37: $3 of risk per share, so at most 1,000 ÷ 3 = 333 shares ($13,320 invested).
Related terms: 1R, R, expectancy
The unit of risk of a trade: 1R is what you lose if your stop is hit; a 2R gain is worth twice that risk.
Popularized by Van Tharp, the R expresses every result relative to the risk taken at the outset. A trade that makes $600 while risking $300 is +2R; an exit at the stop is −1R. That way, you can compare trades of different sizes and in different stocks.
A method’s expectancy is measured in R: the average result of all its trades. With 40% winners at +2.5R and 60% losers at −1R, the expectancy is 0.4 × 2.5 − 0.6 × 1 = +0.4R per trade: the method makes money even though it loses more often than it wins.
Le Boursicoteur 3000 thinks in R: it moves its stop up to the entry price at +1R, sells half at +2R, exits after 10 sessions if the stock hasn’t gained at least 0.5R, and publishes the result of every trade in R.
Example
Entry at $50, stop at $46: 1R = $4 per share. The stock rises to $58: +$8, or +2R.
Related terms: risk/reward ratio, risk-reward, R:R
The ratio between a trade’s target gain and its possible loss: (target − entry) ÷ (entry − stop).
Before buying, you set three prices: the entry, the stop and the target. The ratio compares the distance to the target with the distance to the stop. A ratio of 2 means you are aiming for a gain twice the size of the loss you accept.
The higher the ratio, the less often you need to be right. The minimum win rate to break even is 1 ÷ (1 + ratio): 50% with a ratio of 1, 33% with a ratio of 2, 25% with a ratio of 3 (before costs).
Le Boursicoteur 3000 rejects any purchase with a target ratio below 2 (rule R3). A realistic target, based on resistance or a previous high, matters as much as the number: a ratio of 5 on an imaginary target is worthless.
Example
Entry at $40, stop at $37, target at $46: (46 − 40) ÷ (40 − 37) = 6 ÷ 3 = 2. The trade passes rule R3, just barely.
Related terms: position size, how many shares to buy, position size calculator
How many shares to buy, calculated so that the loss at your stop matches the risk you set: allowed risk ÷ (entry − stop).
Rather than buying “$5,000 worth” at random, start from the risk: if you accept losing $1,000 and your stop is $2 from the entry, you buy 500 shares; if it is $5 away, only 200. A more volatile stock, with a wider stop, therefore gets a smaller position.
Then check the other limits: the stock’s weight in the portfolio, the cash available, the total exposure. The tightest one wins.
For Le Boursicoteur 3000, a tool in the code computes the largest quantity all the rules allow: the risk (R1), a weight of at most 20% per stock and at least 10% in cash (R4), and the maximum exposure for the market regime (R5). It also says which limit was the deciding one.
Example
$100,000 portfolio, 1% risk ($1,000), entry at $25, stop at $24: 1,000 shares by risk, or $25,000. But the 20% maximum weight caps the position at $20,000, so 800 shares.
Related terms: max drawdown, maximum drawdown, peak-to-trough decline
How far a portfolio has fallen from its highest point, as a percentage; the maximum drawdown is the worst such decline over a period.
If your portfolio peaked at $120,000 and is now worth $102,000, your drawdown is 15%, even though you are still up from your starting $100,000. It is the measure of pain: the worst slide a method has put you through.
Losses are hard to win back: after −10%, you need +11% to get back to the peak; after −25%, +33%; after −50%, +100%. Hence the value of cutting losses early and scaling back when things go badly.
Le Boursicoteur 3000 has a circuit breaker (R9): at 8% below its peak, its risk per trade drops from 1% to 0.5%; at 15%, it is no longer allowed to buy as long as the drawdown stays at that level. It can then only manage its positions.
Example
102,000 ÷ 120,000 = 0.85: a 15% drawdown. To get back to $120,000, you need to make $18,000, or +17.6%.
Related terms: exposure, percent invested, market regime
The share of your portfolio invested in the market, the rest being cash: the higher it is, the more you follow the rallies… and the declines.
With $70,000 in positions in a $100,000 portfolio, your exposure is 70%. If the market drops 10% and your stocks follow, you lose about 7%, not 10%.
Adjusting your exposure to the environment is a simple form of risk management: invest more when the wind is at your back, hold more cash when the market deteriorates.
Le Boursicoteur 3000 is required to (R5). At each session, the code classifies the market based on SPY and QQQ: an offensive regime (exposure up to 100%), neutral (60%) or defensive (30%), the latter when SPY falls below its 200-day moving average.
Example
Neutral regime, $100,000 portfolio, $55,000 already invested: it can add only $5,000 in positions before hitting the 60% ceiling.
4 terms
A few days, a few minutes or a few decades: three ways to approach the market, and one way to practice.
Related terms: swing trader, swing trade, medium-term trading
A trading style that aims to capture a price move lasting from a few days to a few weeks, between two “swings” of the market.
A swing trader is neither an investor who holds stocks for years nor a day trader who closes everything at night. They buy when a trend seems to be resuming (a pullback that is ending, a breakout) and sell when the move runs out of steam or the target is reached, usually after a few days or a few weeks.
Swing trading relies mostly on technical analysis for the timing of entries, often combined with fundamental analysis to pick the stocks. Every trade has a written plan: entry, stop, target, and a reason to exit if the thesis doesn’t play out.
It is Le Boursicoteur 3000’s style: two sessions per trading day, five allowed setups (pullback in an uptrend, breakout after a contraction, momentum, oversold bounce, earnings reaction) and exits planned in R. It suits a simulator well: you have time to think between decisions.
Example
A stock in an uptrend pulls back toward its 50-day moving average with an RSI at 45. You buy at $98, stop at $93, target at $108 (a ratio of 2). Three weeks later, the target is hit: +2R.
Related terms: intraday trading, day trader, scalping
A trading style in which every position is opened and closed the same day, to profit from small price moves.
A day trader holds nothing overnight: that avoids opening gaps, but the moves have to be big enough within minutes or hours. Day traders watch 1- or 5-minute charts, volume and the bid-ask spread.
It is the most demanding style: it takes time in front of the screen and fast execution, and costs (commissions, spreads) add up quickly over dozens of trades. Studies on the subject, in Brazil and in Taiwan, show that a large majority of retail day traders lose money over time.
On Boursicotbot, US stocks and crypto are quoted in real time: you can practice without risking anything. Le Boursicoteur 3000, for its part, doesn’t day trade: two sessions a day, and positions held for several days.
Example
A day trader buys 500 shares at $20.00 at 10:15 a.m. and sells them at $20.12 at 11:40 a.m.: a $60 gross gain, before costs, on $10,000 committed.
Related terms: buy and hold, passive investing, index investing
Buying stocks or ETFs to hold for years, betting on the growth of companies and the economy rather than on short-term moves.
A long-term investor doesn’t try to time the market: they buy regularly, often diversified index ETFs, and let time do the work through compounding and reinvested dividends.
Historically, the major stock indexes have risen over long periods, despite sometimes severe crashes: about −57% for the S&P 500 between 2007 and 2009, −34% in a few weeks in 2020. The main danger is selling at the wrong moment, out of fear.
For real savings (in a TFSA or an RRSP, for example), it is the most common approach among individual investors. A stock market game over a few weeks doesn’t replace it: it helps you understand the mechanics without risking that money.
Example
$10,000 earning 7% a year, dividends reinvested, grows to about $19,700 after 10 years and $38,700 after 20: that is the power of compounding (an illustrative return, never guaranteed).
Related terms: stock market simulator, virtual portfolio, stock market game, virtual trading, demo account
Practicing investing with fictitious money at real market prices, to learn without risking anything.
The term dates back to when people wrote their imaginary trades down on paper. Today, a stock market simulator executes your fictitious orders at real prices: you see the effect of your decisions, your stops and your mistakes, without losing a cent.
It is the best way to understand how orders work, to test a method and to discover how you react to losses. Its limit: without real money, fear and greed weigh less, and you sometimes take risks you would never take for real. Treat your virtual portfolio as if it were real.
Boursicotbot is a free stock market simulator: C$100,000 in fictitious money, US stocks and cryptocurrencies in real time, Toronto stocks, Canadian- and US-dollar accounts, market, limit, stop, stop-limit and trailing stop orders, dividends paid. And an opponent: Le Boursicoteur 3000, an AI that trades by public rules and explains every one of its decisions.
Example
You create your account, convert C$20,000 to US dollars and buy an S&P 500 ETF with a stop-loss. A week later, you compare your return with the AI’s on the leaderboard.