A:

"

Hand signal" is the sign language used by traders to transmit basic information on the trading floor. The use of hand signals on the trading floor is said to have originated for many reasons. Two major reasons for the use of hand signals are:

Speed
In an environment where the difference between potential profits or losses could be one second, fast communication between brokers and traders is very important. It is much faster for traders and brokers to communicate by hand signals across the trading floor, as opposed to walking back and forth between the trading pit and the order desks above it.

Noise Level
The noise level in trading pit is very high and makes it near impossible to clearly hear, which makes it sensible to communicate by hand signals.

Common Signals
The 'Buy' signal is represented by the palms facing the head.

Source: http://www.futurestech.net/hand1.htm

The 'Sell' signal is represented by putting up the hands with the palms facing away from the face.

Source: http://www.futurestech.net/hand1.htm

The 'Stop' or stop order signal is represented by putting a fist into a palm.

Source: http://www.futurestech.net/hand1.htm

The 'Out' or cancel order signal is represented by slashing hand across throat.

Source: http://www.futurestech.net/hand1.htm
RELATED FAQS
  1. What do traders' hand signals mean on the trading floor?

    Stock market traders use a series of hand gestures to communicate with runners in the pit. There are nine common hand gestures ... Read Answer >>
  2. How do I implement a Forex Signal System into a forex trading strategy?

    Learn how traders use different types of forex signal systems such as trend-based or range-based to create or supplement ... Read Answer >>
  3. How do experienced traders identify false signals in the market?

    Learn how traders identify false signals in the market when using indicators and strategies to better identify true market ... Read Answer >>
  4. Why are traders on the floor of the exchange?

    Before the advent of electronic trading platforms, the floor of the stock exchange was the location for market transactions ... Read Answer >>
  5. What are the best ways to protect trade positions against false signals?

    Find out why it is important that traders learn to protect themselves against false signals, and read about some of the most ... Read Answer >>
  6. What does membership in the New York Stock Exchange entail, and why is it known as ...

    Owning a seat on the New York Stock Exchange (NYSE) enables a person to trade on the floor of the exchange, either as an ... Read Answer >>
Related Articles
  1. Active Trading Fundamentals

    Trading With Support And Resistance

    Learn more about these two technical analysis levels and how traders use them as signals to buy or sell a security.
  2. Professionals

    Crossing Stock

    A floor broker from time to time may get an order from both a buyer and a seller in the same security. The floor broker may be allowed to pair off or “cross” the orders and execute ...
  3. Noise Traders

    “Noise trader” is a financial term introduced by Albert Kyle (1985) and Fischer Black (1986). It refers to a stock trader who lacks access to inside information and makes irrational ...
  4. Options & Futures

    Testing Point-And-Figure Patterns

    Learn the patterns that will help you pinpoint and profit from breakouts.
  5. Personal Finance

    Hewlett-Packard and Palm

    In April 2010, Hewlett-Packard purchased the company synonymous with mobile devices: Palm. Unfortunately, Palm had last been synonymous with mobile devices about a decade earlier.
  6. Home & Auto

    6. Reveal and Restore Hardwood Floors

    These home upgrades can be achieved for surprisingly little money.
  7. Forex Education

    5. Sort Out Trading Systems And Signals

    Thanks to the resources available to aspiring traders, getting into FX is now easier than ever.
  8. Technical Indicators

    The Four Most Commonly-Used Indicators In Trend Trading

    Here are the top indicators and tools trend traders use to establish when trends exist and to find entry/exit points.
  9. Forex

    Moving Average Flavors

    Get a better understanding of moving averages in this walkthrough.
  10. Insurance

    Exploring Oscillators and Indicators: RSI

    By Chad Langager and Casey Murphy, senior analyst of ChartAdvisor.com The relative strength index (RSI) is another one of the most frequently used and well known momentum indicators in technical ...
RELATED TERMS
  1. Pit

    A specific area of the trading floor that is designated for the ...
  2. Floor Broker (FB)

    An independent member of an exchange who is authorized to execute ...
  3. Rings

    The locations on the floors of futures and options exchanges ...
  4. Signal Line

    A moving average plotted alongside a technical indicator and ...
  5. Trading Floor

    The floor where trading activities are conducted. Trading floors ...
  6. Floor Trader - FT

    An exchange member who executes transactions from the floor of ...

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center