Investing glossary

The official reports US companies file with the SEC: the 10-K is annual (audited), the 10-Q is quarterly.

The Accounting and Auditing Organization for Islamic Financial Institutions. Its Shariah standard is widely used for stock screening.

Key thresholds: interest-bearing debt and interest-bearing assets each below 30% of market capitalisation, impermissible income below 5% of total revenue.

A certificate issued by a US depositary bank representing shares of a foreign company, traded in dollars on a US exchange.

Trading after the regular session (typically 16:00–20:00 ET). Many companies release earnings during this window.

Deciding in advance what share of the portfolio sits where: for example 70% in a broad ETF, 20% in individual stocks and 10% in cash.

Average true range — how far a stock typically moves per period. Useful for setting stop distance.

A snapshot on one date: what the company owns (assets), what it owes (liabilities) and what belongs to shareholders (equity). Assets = liabilities + equity.

A base is a sideways consolidation after an advance that lasts weeks or months: cup and handle, flat base, VCP. The pivot is the exact level whose breakout triggers a buy; entries are usually made 0–5% above it.

Bid is the highest price buyers are currently willing to pay; ask is the lowest price sellers will accept.

A debt security issued by a company or government: the holder receives fixed interest and the principal at maturity. Because it is interest-based, conventional bonds are not used in a halal portfolio.

Price breaks the previous high (in an uptrend) or low (in a downtrend) in the trend's direction — confirming the trend continues.

A failed order block that flips its role once price breaks through it. For example, after a close and a BOS above a bearish OB, that zone can later act as support.

Moving the stop to the entry price once the trade is in profit. It removes the loss, but done too early a normal pullback closes the trade at 0R.

Price moving decisively through a resistance or support level. More reliable when accompanied by heavy volume.

A licensed intermediary that routes your orders to the market and holds your shares in custody.

When choosing a broker, verify its licence and regulator (in the US — SEC/FINRA, via FINRA BrokerCheck).

A bull market is a sustained rise; a bear market is a decline of 20% or more from the peak.

A chart bar for one period: the body shows open and close, the wicks show the high and the low.

Money spent on long-lived assets — plants, equipment, servers. Subtract it from operating cash flow to get FCF.

Shows how much cash actually came in and went out, in three parts: operating, investing and financing activities.

Contract for difference: a bet with the broker on the price, not ownership of the stock. Usually leveraged, with overnight financing fees.

Recurring shapes on a price chart: triangles, flags, head and shoulders, double tops. They hint at continuation or reversal.

The first break against the trend: in an uptrend the last HL low breaks down. An early hint of a reversal, not a confirmation.

Returns earning returns: growth is added to the base and next year grows from a larger amount. The longer the time, the bigger the effect.

Seeing only information that supports your view and ignoring evidence against it. In trading: missing the warning signs because "the stock will go up anyway".

Several independent pieces of evidence lining up in one price zone — for example a Fibonacci level, old resistance and an order block. Such a zone is considered more reliable than a single level.

The average of the EPS and revenue estimates of analysts covering a company. Reported results are compared with this number.

The exact midpoint (50%) of a fair value gap. When price returns to an FVG it often reacts around this level; traders use it as an entry or exit reference.

A 10–20% decline from a recent peak. Common even within long uptrends.

A continuation base: a rounded "cup" (typically 12–35% deep), then a shallow, low-volume "handle" just below the rim. The signal is a breakout above the handle's high (the pivot) on volume.

Current assets ÷ current liabilities. Below 1, the company may struggle to meet the bills due within a year.

A preset maximum loss for the day (for example 2% of the account or 2 losing trades). Once it is hit, trading stops for that day.

The mirror of the piercing line: after a rally, a green candle is followed by a red candle that opens above the green close and closes below the middle of the green body.

A faster moving average crossing below a slower one (classically the 50-day below the 200-day). A lagging confirmation that the long-term trend has weakened.

Interest-bearing debt divided by market capitalisation. The AAOIFI limit is below 30%.

Interest-bearing debt ÷ shareholders' equity. Shows how much of the business is funded by borrowing.

The halal-screening debt ratio is different: it divides debt by MARKET capitalisation, not by book equity.

When a company issues new shares (offerings, stock-based pay, conversions), existing shareholders' stake and EPS shrink.

Price and an indicator (RSI, MACD) moving apart: price makes a new high but the indicator does not — the move is weakening.

Spreading money across many companies, sectors and assets so that one company's failure cannot do major damage to the whole portfolio.

Diversification all but removes company risk, but it does not protect against a broad market decline.

The portion of a company's profit paid out to shareholders, usually in cash.

Annual dividends divided by the share price. A $100 stock paying $3 a year yields 3%.

A candle whose open and close are nearly equal — buyers and sellers in balance, a sign of indecision.

Investing the same amount every month (or week) regardless of price. It removes the need to time the market.

A reversal pattern: price tests a level twice and fails twice. A double top (M) forms after a rise, a double bottom (W) after a decline. It is confirmed only when the neckline between them breaks on a close.

When screening cannot reach a clear conclusion — for example a ratio is right at the limit or the financial report is out of date.

The decline from an account's peak to its subsequent low. Recovering from −50% requires +100%.

The quarterly revenue and profit results a company publishes. Prices can move sharply around these dates.

The gap between the actual result and the consensus estimate. Better is a beat, worse is a miss.

EPS ÷ price, i.e. 1 ÷ P/E. A P/E of 25 is a 4% earnings yield: $4 of annual profit per $100 of price.

Exponential moving average: weights recent prices more heavily, so it reacts faster than an SMA.

A two-candle pattern where the second body fully covers the first. A bullish engulfing suggests buyers have taken control.

Earnings per share: net profit divided by the number of shares outstanding.

An exchange-traded fund: one purchase gives you exposure to a whole basket of securities, traded like a stock.

Enterprise value (market cap + debt − cash) ÷ earnings before interest, tax, depreciation and amortisation. Lets you compare companies with different debt and cash.

The mirror of the morning star: at the top of a rally, a large green candle, a small-bodied "star" and a large red candle that closes below the middle of the first body. A hint that the rally is ending.

Shares bought on or after this date do not receive the next dividend. You must own the stock before it.

The average result per trade: win rate × average win − (1 − win rate) × average loss.

The approximate move (± %) the market expects after a report, derived from option prices. It indicates size, not direction.

A gap in a three-candle pattern: the zone between candle 1's high and candle 3's low where little trading happened. Price often returns to fill it.

Price appears to break a level but quickly reverses back. Common on low-volume breakouts.

Points at 127.2% or 161.8% of the impulse length — profit targets beyond the prior high. For an $80 → $100 impulse, 1.272 = $105.44 and 1.618 = $112.36.

The 23.6%, 38.2%, 50% and 61.8% portions of an impulse move. Used to estimate where a pullback might stop.

A government body that licenses and supervises brokers and investment firms: the SEC and FINRA in the US, the FCA in the UK, CySEC in Cyprus, and so on.

Check a licence in the regulator's register yourself, not through a link the broker sends: clone sites exist.

A short, quiet pause after a sharp move (the pole): a flag is a small parallel channel, a pennant a small triangle. It usually resolves in the trend's direction; the target adds the pole's length to the breakout point.

The number of shares freely tradable by the public, excluding insider and restricted holdings.

"Fear of missing out" — jumping late and without a plan into a stock that has already run up.

Price ÷ analysts' EPS estimate for the NEXT 12 months (or year). Trailing P/E uses the actual EPS of the past 12 months instead.

Buying part of a share — for example, $50 buys 0.1 of a $500 stock.

Operating cash flow minus capital spending — the money that can fund dividends, debt repayment or buybacks.

When price opens well above or below the prior close, leaving an empty space on the chart. Often after news or earnings.

Excessive uncertainty or ambiguity in a contract, considered to invalidate it in Islamic finance.

A faster moving average crossing above a slower one; the classic version is the 50-day crossing above the 200-day. It confirms a trend change but lags.

The narrow zone between the 61.8% and 65% Fibonacci retracement levels. Because many traders watch it, pullbacks often pause there — but there is no guarantee.

The share of revenue left after the cost of goods sold. 60% means $60 of gross profit from every $100 of sales.

A company growing revenue fast (20%+ a year). Usually a high P/E and little or no dividend.

Management's own forecast of revenue and profit for the next quarter or year. It often moves the price more than the results themselves.

A small-bodied candle with a long lower wick. After a decline it shows buyers pushed price back up.

A hammer-shaped candle (small body, long lower wick) that appears after a rally, often near resistance. It shows sellers could push price down sharply intraday; it needs confirmation from the next candle.

A two-candle pattern: a large candle followed by a small one whose body sits inside the first body. It shows the move has paused; weaker than an engulfing and needs confirmation.

A three-peak reversal pattern with the middle peak (head) highest. Confirmed when the neckline breaks.

A trend-continuation sign: in an uptrend price makes a higher low while RSI makes a lower low. Unlike regular divergence, it points to the end of a pullback, not a reversal.

The share of a company's revenue from prohibited sources (mostly interest). The AAOIFI limit is below 5% of total revenue.

The report showing how much a company sold over a period (a quarter or a year), what it spent and how much profit was left.

A measure of how a basket of stocks performs. The S&P 500, for example, tracks about 500 large US companies.

A candle whose whole range (high to low) fits inside the previous "mother" candle. A sign of a squeeze; whichever side of the mother bar breaks shows who won.

Operating income ÷ interest expense. Shows how many times profit covers interest; below about 2 is a danger zone.

Cash and interest-bearing securities divided by market capitalisation. The AAOIFI limit is below 30%.

A candle with a small body near the low and a long upper wick that appears after a decline. A weak bullish hint that needs strong confirmation.

A company's first sale of shares to the public, listing it on an exchange.

Controlling a large position with a small amount of capital. It multiplies gains and losses alike: at 10×, a 10% move is 100%.

An order that executes only at your price or better. The price is guaranteed; the fill is not.

How easily a stock can be bought or sold quickly without moving its price. High volume usually means high liquidity.

A price area where many resting orders (stop-losses, breakout orders) cluster: below equal lows, above equal highs, around round numbers and the prior day's high or low.

Price briefly spikes through a level where many stops sit (for example, below equal lows) and then reverses.

Buying a stock expecting its price to rise. The most you can lose is the amount invested.

The psychological tendency to feel a loss more strongly than a gain of the same size. In traders it leads to holding losers and selling winners too early.

The difference between the 12- and 26-period EMAs plus a 9-period signal line. Crossovers indicate shifts in momentum.

Trading with money borrowed from the broker. The loan usually carries interest, and losses can exceed your own capital.

On a leveraged account, the broker's demand for more funds, or the forced closing of positions, once losses push equity below a set level. Positions are often closed near the low.

For example, at 1:10 leverage with a close-out at 50% of required margin, a 5% price drop is enough.

A company's total market value: share price × shares outstanding.

An order executed immediately at the best available price. Fast, but the exact price is not guaranteed.

The sequence of highs and lows: HH/HL — uptrend, LH/LL — downtrend. A change in structure is the first sign of a trend change.

A long-bodied candle with little or no wicks. One side (buyers or sellers) controlled the period from open to close.

Gambling — transactions where the outcome depends on chance rather than effort or a real asset.

A way to project a target from a pattern: the pattern's height (or the flagpole's length) is added from the breakout point in the direction of the move. E.g. head $120, neckline $104 → target $104 − $16 = $88. A guide, not a guarantee.

Price returning to an order block zone for the first time. That touch uses up the unfilled orders in the zone, so later touches are usually weaker.

A three-candle reversal: a large red candle, a small-bodied one, then a large green candle. Hints that a decline is ending.

The average of the last N closing prices. Smooths out noise to show the trend direction (e.g. the 50- and 200-day).

Reading the direction on a higher timeframe (daily) and timing the entry on a lower one (1-hour).

The line joining the lows between the peaks of a head and shoulders or double top (the highs, in the inverse patterns). The pattern is confirmed only when price CLOSES beyond it.

Net income ÷ revenue: how much profit is left from every $100 of sales after all costs and tax.

The four prices behind every candle: Open, High, Low and Close.

Operating income ÷ revenue: how much of every $100 in sales is left after cost of revenue and running expenses (salaries, marketing, research).

The zone of the last opposite candle before a strong move (the last red candle before a rally). Large orders are expected to show up again when price returns.

The list of all resting limit orders in a stock: how many shares are bid for, and offered for sale (ask), at each price.

A market order eats through the offers on the ask side one after another — that is how eager buyers push the price up.

Taking far more trades than the plan justifies: costs and mistakes pile up.

Market cap ÷ shareholders' equity (book value). Useful where assets are the main wealth; less meaningful for brand and software companies.

Price divided by earnings per share. Shows how many dollars investors pay for each $1 of profit.

Market cap ÷ annual revenue. Used instead of P/E for companies that are not yet profitable.

Practising with a virtual account at real market prices, without risking real money.

P/E ÷ earnings growth (% a year). Around 1 — price in line with growth; well above — expensive for its growth.

A very cheap stock (under $5 by the SEC's definition), usually a small, illiquid company. Prone to manipulation.

A two-candle pattern after a decline: a red candle, then a green candle that opens below the red close and closes above the middle of the red body (but below its open).

A candle with a small body at one end and a long "tail" (wick) that sticks out clearly beyond the neighbouring candles. The tail marks a price that was tested and rejected.

A fraud in which "returns" to earlier investors are paid from newcomers' money. Usually sold with high guaranteed returns and referral bonuses; it collapses when new money stops.

The amount you would lose if every open stop were hit at once, as a % of the account. Closely related (correlated) stocks count, in practice, as one big trade.

How many shares to buy in one trade. Formula: (account × risk %) ÷ (entry − stop).

After a strong surprise, price is often seen to keep drifting in the same direction for weeks rather than adjusting in one day. A tendency, not a guarantee.

Trading before the regular session (typically 04:00–09:30 ET). Volume is thin and spreads wide, so price moves are often unreliable.

A notification sent when price crosses above or below a level you set. It does not trade; it only tells you it is time to look at the chart.

Gross profit divided by gross loss. Above 1 means the system is net profitable.

A fraud scheme: promoters hype a cheap stock to push the price up, then sell their shares at the top and the price collapses.

Giving to charity the part of a dividend that corresponds to impermissible income: dividend × (impermissible income ÷ total revenue).

A trade's result measured in units of initial risk: result ÷ (entry − stop). A stopped-out trade is −1R; a profit of twice the risk is +2R.

Potential profit divided by the amount risked: (target − entry) ÷ (entry − stop). 1:2 means $2 of target per $1 at risk.

At 1:2 you only need to win about 33% of trades to break even: required win rate = 1 ÷ (1 + R).

Bringing a drifted portfolio back to its target allocation: trimming the part that grew most and adding to the underweight part, or directing new money there.

The main US exchange session: 09:30–16:00 New York time. In Tashkent that is 18:30–01:00 in summer and 19:30–02:00 in winter.

Current volume divided by typical (average) volume. 2× means twice the usual trading activity.

A price level where selling tends to increase and a rally is likely to stall.

Price returning to a level it just broke through to test it from the other side.

Trading bigger and without a plan right after a loss to "win it back" quickly.

A company's total sales before any expenses are deducted.

Interest (usury) charged or paid on a loan. Prohibited in Islam.

The amount you accept losing if the stop is hit, as a % of the account. Many traders use 0.5–2%, often 1%.

Net income ÷ shareholders' equity. Shows how much annual profit each $100 of shareholders' money produces.

Heavy debt shrinks equity and inflates ROE artificially — so read ROE together with debt and ROIC.

After-tax operating profit ÷ (equity + debt). Shows how productively ALL the money invested in the business is working.

A 0–100 momentum oscillator (usually 14 periods). Above 70 is considered overbought, below 30 oversold.

Selling a position in stages: for example half at the first target and the rest at the next. The result is the average R of the stages.

A group of companies in the same line of business: technology, healthcare, energy and so on.

The official transfer of shares and cash after a trade. In the US it has been one business day after the trade (T+1) since May 2024.

A company buys its own shares on the market, reducing the share count — each remaining share gets more profit (EPS).

Checking a stock in two stages: business activity (no prohibited lines of business) and financial ratios (debt, interest-bearing assets, impermissible income).

An ETF that holds only stocks passing a Shariah screen.

A small-bodied candle with a long upper wick. After a rally it signals selling pressure.

The number of shares sold short and not yet covered, often shown as a % of float. Published twice a month in the US.

Selling borrowed shares hoping to buy them back cheaper. Losses are theoretically unlimited.

Most Shariah standards (including AAOIFI) do not permit selling what you do not own. Limitup's demo and calculators are long-only.

The gap between the expected price and the actual fill. Larger in fast markets and illiquid stocks.

A "blank-cheque" company that raises money in an IPO and later merges with a private company to take it public.

A small-bodied candle with wicks on both sides. Both sides tried and neither won — a sign of indecision.

The difference between the ask and the bid. A few cents for liquid stocks, much wider for thinly traded ones.

A security representing a fractional ownership stake in a company. Shareholders participate in the company's profits and growth.

A regulated marketplace where stocks are bought and sold. The largest in the US are the NYSE and Nasdaq.

A tool that filters thousands of stocks by criteria such as price, volume, sector or indicators.

Dividing shares: in a 4-for-1 split each share becomes four and the price falls by four. Total value is unchanged.

An order that becomes a market order once price reaches a set level. Usually used to protect an open position (a stop-loss).

In a gap a stop can fill well below the set level, because price jumps straight over it.

Turns into a limit order once the stop price is hit. If price gaps through, it may not fill at all.

An order that automatically closes a position when price reaches a set level, to cap the loss.

A stop limits the loss, but if price gaps past it, the fill can be worse than the stop price.

Islamic certificates used instead of bonds: they pay returns from a share in a real asset or project rather than interest.

Sticking with a bad decision because of money or time already lost: "I've lost so much, I can't sell now". The market does not know your entry price.

A price level where buying tends to increase and a decline is likely to pause.

When a broken resistance level later acts as support (and vice versa).

A clear turning point on the chart: a swing high is a peak above the candles on both sides, a swing low a trough below them. A common rule is at least 2 candles on each side.

A level or order that closes the position to lock in profit when price reaches the target.

Three long red candles in a row, each opening inside the previous body and closing near its low. A sign that sellers have taken control.

Three long green candles in a row, each opening inside the previous body and closing near its high. A sign that buyers are holding the initiative.

A stock's short exchange symbol: Apple is AAPL, Microsoft is MSFT.

The period one candle covers: 15 minutes, 1 hour, 1 day. Higher timeframes show the bigger picture.

The full return on an investment: price change plus dividends received, usually as a percentage.

The full history of a signal service's or strategy's past results, losers included. A trustworthy track record is uncurated, timestamped and explains how it is computed.

Screenshots of winners only are not a track record. Past results do not guarantee future ones.

An alert a scanner sends when a predefined rule is met, with entry, stop and target levels. Not a guarantee.

A log of every trade with the reasoning, entry/exit, result and lessons learned.

A stop that follows price as it moves in your favour — for example, always 5% below the highest price reached.

The general direction of price. An uptrend makes higher highs and higher lows (HH/HL); a downtrend the opposite (LH/LL).

A line connecting a trend's lows (or highs). Two parallel lines form a trend channel.

A consolidation in which the range keeps narrowing. Ascending: flat top, rising lows. Descending: flat bottom, falling highs. Symmetrical: both lines converge. The signal is a close outside a line.

Two (or more) neighbouring candles share the same low (bottom) or the same high (top). Price tested that level twice and was rejected twice.

A stable, slower-growing company priced cheaply relative to its earnings. Often pays a dividend.

A stock that looks cheap on low multiples but keeps getting cheaper because the business is deteriorating.

How sharply and quickly a price moves. High volatility means bigger opportunity and bigger risk.

The number of shares traded over a period. Price moves on heavy volume are generally more meaningful.

Volume-weighted average price: Σ(price × volume) ÷ Σvolume since the session open. It resets every day.

A list of stocks you are tracking. It is not a "buy now" list but a set of candidates waiting for their entry condition.

Around 15–30 stocks is usually enough to watch properly; a screener handles the wider search.

A pattern whose two boundary lines slope the SAME way and converge. A rising wedge usually breaks down, a falling wedge up — it shows a trend losing momentum.

The thin line above and below a candle's body, marking the period's high and low.

Winning trades divided by all closed trades. On its own it is not enough — average win and loss size matter too.

The obligatory 2.5% annual alms on wealth above the nisab held for a lunar year. Methods for stocks vary.