Reference

The Momentum Dictionary

Every term used in Ride The Leaders™, in plain English. If a letter ever says something you don't recognize, it's on this page.

Reading the market

Market regime: The market's overall condition — offensive, neutral, or defensive. It answers the first question that matters: is it safe to be long right now? Roughly three of four stocks follow the general market, so the regime decides how aggressive to be before any individual stock is considered.
Distribution day: A day the index falls meaningfully (down 0.2% or more) on higher volume than the day before — big institutions selling into the market. One means little. A cluster of them within a few weeks is how corrections announce themselves. We count them the same way every time.
Accumulation: The opposite of distribution: institutions building positions over weeks or months, visible as persistent buying on above-average volume. A months-long uptrend is usually the footprint of accumulation — big money physically can't finish buying in a day.
Breadth: How many stocks are participating in a move. A rally led by five giant stocks while everything else falls has poor breadth — and less to stand on.
Rotation: Money moving between groups — out of one sector, into another — without leaving the market. The damage in one corner of the tape often funds the strength in another.

Reading a stock

Relative strength (RS): How a stock performs versus the market itself — not whether it went up, but whether it went up more, and fell less. Sustained relative strength over months is the single most important trait of the market's biggest winners.
Moving average (10-day, 20-day, 50-day, 200-day): The average closing price over the last N days, drawn as a line. Leaders in strong trends tend to "ride" their 10- or 20-day line; the 50-day is the line serious institutions defend; the 200-day (or 30-week) separates long-term uptrends from downtrends.
The four stages: Every stock is always basing (going sideways, Stage 1), advancing (uptrend, Stage 2), topping (Stage 3), or declining (Stage 4). You only ever buy Stage 2. The full ten-second test is Lesson 3 of Momentum Investing 101.
Base / flag: A rest period after a big move — price goes sideways or pulls back gently while the stock digests its gains. Tight, quiet bases on shrinking volume are healthy; wide, violent ones are not.
Breakout: Price pushing out of a base through a defined level, ideally on a clear jump in volume. Breakouts follow through in healthy markets and fail in weak ones — which is why the regime gets checked first.
Higher low: A pullback that bottoms above the previous pullback's bottom. A sequence of higher lows means buyers are getting less patient — the signature of demand in control.
Undercut-and-reclaim: Price dips just below an obvious level (flushing out weak holders and triggering stops), then quickly reclaims it. One of the strongest reversal signatures — the dip proved there was nothing below.
Extended: Too far above any reasonable support level to buy sanely. An extended stock can keep rising — but an ordinary pullback would stop you out, which makes it a bad entry even when it's a great stock.
ADR% (average daily range): How much a stock moves in a normal day, as a percentage. A 12% ADR stock swinging 6% means nothing happened; a 3% ADR stock doing the same just made a statement. ADR sets position size — the wilder the stock, the smaller the position.

The trade plan

Trigger: The specific price action that would earn an entry — a level reclaimed, a range broken on volume, a higher low that holds. A trigger is evidence, not a prediction. If it never happens, there was no trade.
Stop zone: Where the setup is wrong. If price gets here, the reason for owning the stock no longer exists, and the position gets sold — before opinions get involved. Decided before entry, when you're calm.
Chase line: Our term for "too late." Beyond this price, an ordinary wiggle would shake you out — the same stock becomes a bad trade purely because of the entry. Paying a bad price for a good stock is Leak #1 in Lesson 1.
R (risk unit): Your risk on a trade, used as the measuring stick. If you buy at 100 with a stop at 95, 1R = 5 points. Sell at 110 and you made +2R; stopped at 95 is −1R. Reporting in R makes wins and losses comparable across every trade.
Position sizing: Deciding how much to buy from the risk, not the conviction: distance to the stop and the account's per-trade risk limit determine the share count. The math, not the mood.
Spec size: A deliberately small position for higher-risk names (wide ADR, repair setups) — sized so that being wrong costs little and being right still matters.

The vocabulary of this letter

Leader: A stock outperforming the market for months, near its highs, under visible accumulation, liquid enough for big money to own. The entire strategy in one word: own these, and only these.
Laggard: The opposite — cheap because it deserves to be. "It's down a lot" is a description, not a reason.
Repair sequence: How broken charts (and markets) heal: a low that holds → a higher low → the key moving average reclaimed on real volume. Until the sequence completes, a bounce is just a bounce.
Cash is a position: Not being invested is an active decision, and some weeks it's the best trade available. Great investors aren't always invested — they're aggressively invested when conditions deserve it.

Educational content only. Nothing in Ride The Leaders™ constitutes investment advice or a recommendation to buy or sell any security. Always do your own research.