Trading Glossary

Accumulation

Accumulation is a market phase where informed investors quietly buy an asset before prices rise significantly. During accumulation, price moves sideways or slightly down while smart money builds positions. It typically follows a downtrend and precedes a markup phase.

ADX

ADX measures trend strength on a scale from 0 to 100. It doesn't show direction, just how strong the current trend is. Above 25 = trending. Below 25 = ranging.

Ascending Triangle

An ascending triangle is a bullish chart pattern formed when price makes higher lows while hitting the same resistance level repeatedly. It looks like a right triangle with a flat top and rising bottom.

Bearish Engulfing

A bearish engulfing is a two-candle reversal pattern where a small green candle is followed by a larger red candle that completely engulfs the previous candle's body. It signals sellers overwhelming buyers.

Bollinger Bands

Bollinger Bands are three lines plotted on your chart—a middle moving average with an upper and lower band that expand and contract based on volatility. They show you when price is stretching too far from normal.

Breakout

A breakout happens when price moves above resistance or below support with conviction, usually accompanied by increased volume. It signals a new trend is starting.

Bullish Engulfing

A bullish engulfing is a two-candle reversal pattern where a small red candle is followed by a larger green candle that completely "engulfs" the previous candle's body. It signals buyers overwhelming sellers.

Candlestick Patterns

Candlestick patterns are specific formations created by one or more candlesticks that signal potential trend reversals or continuations. Each candle shows open, close, high, and low prices for a time period.

CCI

CCI measures current price relative to its average over a set period. It oscillates around zero, with readings above +100 indicating overbought and below -100 indicating oversold.

Channel

A channel is formed when price moves between two parallel trend lines—one connecting highs (resistance) and one connecting lows (support). Price oscillates within this range.

Consolidation

Consolidation is a period where price trades sideways within a defined range after a significant move. During consolidation, the market digests gains or losses, and neither buyers nor sellers dominate. It often precedes a continuation of the prior trend.

Cup and Handle

A cup and handle is a bullish continuation pattern that looks like a tea cup. Price forms a rounded bottom (the cup), rallies back to previous highs, then pulls back slightly (the handle) before breaking out.

Day Trading

Day trading means opening and closing all positions within the same trading day. You never hold overnight, avoiding gap risk but requiring constant attention and quick decisions.

Descending Triangle

A descending triangle is a bearish chart pattern where price makes lower highs while bouncing off the same support level. Picture a right triangle with a flat bottom and descending top.

Divergence

Divergence occurs when price and an indicator (like RSI or MACD) move in opposite directions. It signals momentum is weakening and a reversal might be coming.

Doji

A doji is a candlestick where the open and close prices are nearly identical, creating a cross or plus sign shape. The wicks can vary in length, but the body is minimal.

Double Bottom

A double bottom is a bullish reversal pattern where price tests a support level twice and bounces both times, forming two valleys at approximately the same price.

Double Top

A double top is a bearish reversal pattern where price hits a resistance level twice and fails to break through both times, forming two peaks at roughly the same height.

EMA

An EMA is a moving average that gives more weight to recent prices, making it more responsive to new information than a simple moving average. Common periods are 9, 21, 50, and 200.

Evening Star

An evening star is a three-candle bearish reversal pattern: a large green candle, followed by a small-bodied candle (gap up), followed by a large red candle that closes below the first candle's midpoint.

False Breakout

A false breakout occurs when price moves beyond a support or resistance level but quickly reverses back into the prior range. Also called a "fakeout," it traps traders who entered on the breakout and often leads to sharp moves in the opposite direction.

Fibonacci Retracement

Fibonacci retracement uses specific percentages (23.6%, 38.2%, 50%, 61.8%) derived from the Fibonacci sequence to identify potential support and resistance levels during pullbacks.

Flag Pattern

A flag is a continuation pattern that forms after a sharp price move (the pole), followed by a rectangular consolidation that slopes against the prior trend. Bull flags slope down; bear flags slope up.

Gap

A gap is an empty space on a chart where no trading occurred between two candles. Price jumps from one level to another, leaving a visible gap. Gap up: opens above previous close. Gap down: opens below previous close.

Hammer

A hammer is a bullish candlestick pattern with a small body at the top and a long lower wick (at least 2x the body). It forms after a downtrend and signals potential reversal.

Hanging Man

A hanging man looks identical to a hammer (small body at top, long lower wick) but appears after an uptrend instead of a downtrend. It's a bearish warning signal.

Harami

A harami is a two-candle pattern where a small candle's body is completely contained within the previous larger candle's body. Bullish harami: large red candle followed by small green. Bearish harami: large green candle followed by small red.

Head and Shoulders

Head and shoulders is a bearish reversal pattern with three peaks—a higher peak (head) between two lower peaks (shoulders). When the neckline breaks, it signals the uptrend is over.

Ichimoku Cloud

Ichimoku Kinko Hyo ("one glance equilibrium chart") is a comprehensive indicator system showing support/resistance, trend direction, and momentum using five lines and a "cloud" (kumo).

Inverse Head and Shoulders

An inverse head and shoulders is a bullish reversal pattern that forms at market bottoms. It's the upside-down version of head and shoulders: left shoulder (low), head (lower low), right shoulder (higher low), then breakout above the neckline.

Keltner Channel

Keltner Channels are volatility-based bands around an EMA. The upper and lower bands are typically set at 2x ATR above and below the 20-period EMA.

MACD

MACD tracks the relationship between two moving averages of price. It shows you momentum shifts through a signal line and histogram, helping you catch trend changes before they're obvious.

Momentum

Momentum is the tendency of an asset's price to continue moving in its current direction. Momentum trading involves buying assets showing strength and selling (or shorting) assets showing weakness. It's based on the idea that trends persist.

Morning Star

A morning star is a three-candle bullish reversal pattern: a large red candle, followed by a small-bodied candle (gap down), followed by a large green candle that closes above the first candle's midpoint.

Moving Average

A moving average smooths out price action by calculating the average price over a specific period (like 50 or 200 days). It cuts through the noise so you can see the actual trend.

OBV

OBV is a cumulative volume indicator. When price closes up, that day's volume is added. When price closes down, it's subtracted. The running total creates a line that should confirm price trends.

Overbought

Overbought describes a condition where price has risen too far too fast, and a pullback or reversal is likely. It's often signaled when RSI goes above 70.

Oversold

Oversold means price has dropped too far too fast, suggesting a bounce or reversal might be coming. RSI below 30 typically indicates oversold conditions.

Parabolic SAR

Parabolic SAR (Stop and Reverse) is a trend-following indicator that places dots above or below price. Dots below = bullish. Dots above = bearish. When price crosses the dots, the trend flips.

Pennant Pattern

A pennant is a continuation pattern similar to a flag, but instead of a rectangular consolidation, price forms a small symmetrical triangle after the pole. Think of it as a triangle on a stick.

Pivot Points

Pivot points are calculated support and resistance levels based on the previous period's high, low, and close. They include a central pivot and multiple support (S1, S2, S3) and resistance (R1, R2, R3) levels.

Price Action

Price action is a trading methodology that analyzes raw price movement without lagging indicators. Traders read candlestick patterns, support/resistance, and market structure directly from charts. It's based on the belief that price reflects all available information.

Pullback

A pullback is a temporary reversal within a larger trend—a brief pause or dip that doesn't change the overall direction. It's the market catching its breath.

Ranging Market

A ranging market (also called sideways or choppy market) is when price oscillates between support and resistance without establishing a clear trend. Range-bound conditions frustrate trend traders but create opportunities for mean-reversion strategies.

Rectangle Pattern

A rectangle is a consolidation pattern where price bounces between horizontal support and resistance, creating a sideways channel. It's also called a range or trading range.

Resistance

Resistance is a price level where selling pressure typically overwhelms buying, causing price to stall or reverse. It's the ceiling that price keeps bumping its head against.

Retracement

A retracement is a temporary price reversal against the prevailing trend. Unlike a reversal, a retracement is a shorter-term pullback before the main trend resumes. Traders use Fibonacci levels and other tools to anticipate where retracements might end.

Reversal

A reversal is a change in the overall price trend direction: an uptrend becomes a downtrend, or vice versa. Unlike retracements which are temporary, reversals signal a fundamental shift in market sentiment and can last months to years.

Rounding Bottom

A rounding bottom (also called saucer bottom) is a long-term reversal pattern where price gradually transitions from downtrend to uptrend, forming a U-shape. It takes weeks to months to form.

Rounding Top

A rounding top is a long-term reversal pattern where price gradually transitions from uptrend to downtrend, forming an inverted U-shape. It's the bearish counterpart to a rounding bottom.

RSI

RSI is a momentum indicator that measures how fast price is moving on a scale from 0 to 100. It helps you spot when an asset might be overbought (above 70) or oversold (below 30).

Shooting Star

A shooting star is a bearish candlestick pattern with a small body at the bottom and a long upper wick (at least 2x the body). It forms after an uptrend and signals potential reversal.

SMA

An SMA calculates the average closing price over a specific number of periods. All periods are weighted equally. The 50-day and 200-day SMAs are the most widely watched.

Spinning Top

A spinning top is a candlestick with a small body and relatively equal upper and lower wicks. It shows indecision between buyers and sellers.

Stochastic Oscillator

The stochastic oscillator measures where price closed relative to its range over a set period (usually 14). It oscillates between 0 and 100, with readings above 80 overbought and below 20 oversold.

Support

Support is a price level where buying pressure is strong enough to prevent price from falling further. Think of it as a floor that keeps catching the price when it drops.

Symmetrical Triangle

A symmetrical triangle forms when price makes both lower highs and higher lows, converging toward an apex. It's a neutral pattern that can break either direction.

Three Black Crows

Three black crows is a bearish pattern consisting of three consecutive long red candles, each opening within the previous candle's body and closing lower than the previous close.

Three White Soldiers

Three white soldiers is a bullish pattern consisting of three consecutive long green candles, each opening within the previous candle's body and closing higher than the previous close.

Trend Following

Trend following is a trading strategy that attempts to capture gains by riding market trends. Trend followers buy assets making new highs and sell assets making new lows. They don't predict turns; they react to them after they're confirmed.

Trend Line

A trend line is a diagonal line connecting two or more price points that shows the direction and slope of a trend. It acts as dynamic support or resistance.

Volume Profile

Volume Profile shows you where the most trading volume occurred at different price levels, creating a horizontal histogram on your chart. It reveals where buyers and sellers were most active.

VWAP

VWAP is the average price weighted by volume for the trading day. It shows the average price institutional investors paid. Resets daily.

Wedge Pattern

A wedge is a chart pattern where price moves between two converging trendlines that both slope in the same direction. Rising wedges are bearish; falling wedges are bullish.

Crypto & DeFi

(69 terms)

Airdrop

An airdrop is free tokens distributed to wallet addresses, usually to promote a new project, reward early users, or decentralize token ownership.

Altcoin

Altcoin means any cryptocurrency that isn't Bitcoin. It's everything else—Ethereum, Solana, Cardano, and thousands of other tokens.

AMM

An AMM is a decentralized exchange mechanism that uses liquidity pools and algorithms to price assets instead of traditional order books. Users trade against smart contracts, not other traders.

APR

Annual Percentage Rate (APR) is the simple interest rate earned or paid over one year, without accounting for compounding. In DeFi, APR represents the base rate before compound interest is factored in.

APY

Annual Percentage Yield (APY) is the real rate of return earned on an investment over one year, accounting for compound interest. In crypto, APY is commonly used to advertise staking and DeFi yields, though rates can be highly variable.

Atomic Swap

An atomic swap is a peer-to-peer exchange of cryptocurrencies between different blockchains without needing a centralized intermediary. The swap either completes entirely or doesn't happen at all (hence "atomic"), eliminating counterparty risk.

Bonding Curve

A bonding curve is a mathematical formula that determines a token's price based on its supply. As more tokens are bought, the price increases along the curve. When tokens are sold back, the price decreases. It's commonly used in token launches and automated market making.

Bridge

A bridge allows you to transfer assets between different blockchains. It locks your tokens on one chain and mints equivalent tokens on another.

CEX

A CEX is a traditional cryptocurrency exchange run by a company (like Binance, Coinbase, or Kraken) where you deposit funds and they facilitate trades on their platform.

Chain

A chain (or blockchain) is a distributed digital ledger that records transactions across many computers in a way that makes records extremely difficult to alter. Each block contains transaction data and links cryptographically to the previous block, forming a chain.

Cold Wallet

A cold wallet stores cryptocurrency completely offline, never connecting to the internet. Hardware wallets (Ledger, Trezor) and paper wallets are common examples.

Consensus

Consensus is the mechanism by which blockchain participants agree on the current state of the ledger. Without a central authority, these algorithms ensure all nodes reach the same conclusion about valid transactions and block ordering.

Cross Chain

Cross-chain refers to technology and protocols that enable interaction between different blockchains. This allows assets and data to move between chains that don't natively communicate, expanding what's possible in DeFi and crypto applications.

DAO

A DAO is an organization governed by smart contracts and token holder votes rather than traditional management. Code enforces decisions, and members vote on proposals.

DApp

A dApp (decentralized application) is an application built on a blockchain that operates without central control. The backend logic runs on smart contracts, making it censorship-resistant and transparent. Users interact through familiar web interfaces.

DeFi

DeFi refers to financial services (lending, borrowing, trading, earning interest) built on blockchain without traditional banks or intermediaries. Code replaces institutions.

DePIN

DePIN (Decentralized Physical Infrastructure Networks) are blockchain-based systems that incentivize people to build and maintain real-world infrastructure. Contributors earn tokens for providing resources like storage, computing power, wireless coverage, or sensor data.

DEX

A DEX is a cryptocurrency exchange that operates without a central authority. You trade directly from your wallet using smart contracts—no account, no KYC, no middleman.

Dividend

A dividend is a portion of company profits distributed to shareholders, typically quarterly. It's passive income for holding shares.

ERC-20

ERC-20 is a technical standard for fungible tokens on the Ethereum blockchain. It defines a common set of rules that all compliant tokens follow, enabling wallets, exchanges, and dApps to interact with any ERC-20 token the same way.

Flash Loan

A flash loan is an uncollateralized loan that must be borrowed and repaid within a single blockchain transaction. If not repaid, the entire transaction reverts as if it never happened.

FOMO

FOMO is the emotional impulse to buy an asset because it's pumping and you don't want to miss gains. It's buying high because everyone else is getting rich.

FUD

FUD refers to negative information (often exaggerated or false) spread to create panic and drive prices down. It's psychological warfare in financial markets.

Gas Fees

Gas fees are transaction costs you pay to miners or validators for processing your blockchain transaction. They fluctuate based on network demand and transaction complexity.

Gas Limit

Gas limit is the maximum amount of computational work you're willing to pay for in a blockchain transaction. It acts as a safety cap, preventing transactions from consuming unlimited resources. If a transaction needs more gas than the limit, it fails but still costs fees.

Governance Token

A governance token gives holders voting rights in a protocol's decisions. One token typically equals one vote on proposals ranging from fee changes to treasury allocation.

Halving

A halving reduces the block reward miners receive by 50%. Bitcoin's halving occurs every 210,000 blocks (roughly four years), cutting new supply issuance in half.

Hard Fork

A hard fork is a permanent divergence in a blockchain's protocol that makes previously invalid blocks valid (or vice versa). All nodes must upgrade to the new rules, or the chain splits into two separate networks. Hard forks can be planned upgrades or contentious splits.

Hot Wallet

A hot wallet is a cryptocurrency wallet connected to the internet. Mobile wallets, browser extensions (MetaMask), and exchange accounts are all hot wallets.

Impermanent Loss

Impermanent loss is the difference between holding tokens in a liquidity pool versus just holding them in your wallet. It occurs when the price ratio of pooled tokens changes.

Launchpad

A launchpad is a platform that hosts token sales for new crypto projects, giving early investors access to tokens before public trading begins.

Layer 1

Layer 1 (L1) refers to the base blockchain network that handles its own security and consensus. These are the foundational chains that Layer 2 solutions build upon. L1s prioritize security and decentralization but often sacrifice speed and cost.

Layer 2

Layer 2 solutions are blockchains or protocols built on top of a main blockchain (like Ethereum) to increase speed and lower fees while inheriting the security of the base layer.

Liquidity Pool

A liquidity pool is a collection of cryptocurrencies locked in a smart contract that enables decentralized trading. Users provide pairs of tokens and earn fees when others trade against the pool.

Mainnet

Mainnet is the primary production blockchain network where real transactions with real value occur. It's the live, fully operational version of a blockchain, as opposed to testnets used for development and testing.

Market Cap

Market cap is the total value of a cryptocurrency, calculated by multiplying the current price by the circulating supply. It shows you the size and relative importance of a crypto asset.

Market To Book

Market-to-book ratio (also price-to-book) compares a company's market value to its book value. Book value is total assets minus liabilities. A ratio below 1 means the stock trades below the accounting value of its net assets, potentially indicating undervaluation.

Memecoin

A memecoin is a cryptocurrency created around an internet meme, joke, or cultural reference, typically with no utility beyond speculation. Dogecoin and Shiba Inu are famous examples.

Mempool

The mempool (memory pool) is where pending transactions wait before being included in a block. Validators and miners select transactions from the mempool, typically prioritizing those with higher fees. It's essentially the blockchain's waiting room.

MEV

MEV is the profit extractable by reordering, inserting, or censoring transactions within a block. Searchers and validators compete to capture value from other users' transactions.

Minting

Minting is the process of creating new tokens or NFTs on a blockchain. It's the first time an asset comes into existence on-chain.

Multi-Sig

A multi-sig wallet requires multiple private keys to authorize transactions. Common setups include 2-of-3 or 3-of-5, meaning that many signatures are needed from that many total keys.

NFT

An NFT is a unique digital token on a blockchain representing ownership of a specific asset—art, collectibles, music, virtual land, or any one-of-a-kind item.

Node

A node is a computer that runs blockchain software and maintains a copy of the ledger. Nodes validate transactions, relay data to other nodes, and ensure the network operates correctly. Anyone can run a node to participate in network security.

Oracle

An oracle is a service that feeds external, real-world data to blockchain smart contracts. Prices, weather, sports scores—anything the blockchain can't access natively.

P/E Ratio

The price-to-earnings (P/E) ratio compares a stock's price to its earnings per share. It shows how much investors are willing to pay for each dollar of earnings. Higher P/E suggests growth expectations or overvaluation; lower P/E suggests value or pessimism.

Proof of Stake

Proof of Stake is a consensus mechanism where validators are chosen to create blocks based on how many tokens they stake (lock up) as collateral.

Proof of Work

Proof of Work is a consensus mechanism where miners compete to solve complex mathematical puzzles. The winner adds the next block and receives block rewards plus transaction fees.

Pump And Dump

A pump and dump is a market manipulation scheme where promoters artificially inflate an asset's price through false hype, then sell their holdings to unsuspecting buyers at the top. It's illegal for securities but common in unregulated crypto markets.

Rollup

A rollup is a Layer 2 scaling solution that executes transactions off the main chain but posts transaction data back to Layer 1 for security. This approach dramatically increases throughput while inheriting the security of the underlying blockchain.

Rug Pull

A rug pull is a crypto scam where developers abandon a project after draining funds, whether by selling their tokens, removing liquidity, or exploiting smart contract backdoors.

Seed Phrase

A seed phrase (recovery phrase) is a sequence of 12 or 24 words that generates all your wallet's private keys. It's the master backup—lose it and your funds are gone forever.

Sidechain

A sidechain is an independent blockchain connected to a main chain via a two-way bridge. It operates with its own consensus mechanism and security model but allows assets to move between chains. Unlike L2s, sidechains don't inherit security from the main chain.

Slashing

Slashing is a penalty mechanism in proof-of-stake blockchains where validators lose a portion of their staked tokens for malicious behavior or severe negligence. It's designed to economically punish bad actors and ensure network security and reliability.

Slippage

Slippage is the difference between the expected price of a trade and the actual execution price. It occurs when market conditions change between order placement and execution.

Smart Contract

A smart contract is self-executing code on a blockchain that automatically enforces agreements when conditions are met. No lawyers, no middlemen, just code.

Soft Fork

A soft fork is a backward-compatible upgrade to a blockchain protocol where old nodes can still validate new blocks (though they may not understand all new features). Unlike hard forks, soft forks don't require all participants to upgrade simultaneously.

Stablecoin

A stablecoin is a cryptocurrency designed to maintain a stable value, typically pegged to $1 USD. Types include fiat-backed (USDC, USDT), crypto-backed (DAI), and algorithmic (FRAX).

Staking

Staking means locking up your cryptocurrency to support a blockchain network's operations (like validating transactions) and earning rewards in return. It's like earning interest on crypto.

Testnet

A testnet is a blockchain network used for testing and development without risking real money. Testnet tokens have no value and can be obtained free from faucets. Developers use testnets to find bugs before deploying to mainnet.

Token Burning

Token burning permanently removes tokens from circulation by sending them to an inaccessible wallet address. It's the crypto equivalent of stock buybacks.

Tokenomics

Tokenomics is the study of a cryptocurrency's economic model—supply, distribution, inflation rate, utility, and incentives. It's the economics behind the token.

TVL

TVL measures the total value of crypto assets deposited in a DeFi protocol or blockchain. It's expressed in USD and tracks how much capital the protocol has attracted.

Validator

A validator is a node operator in a proof-of-stake blockchain responsible for verifying transactions and proposing new blocks. Validators stake cryptocurrency as collateral and earn rewards for honest participation. Malicious behavior results in slashing (losing staked funds).

Wash Trading

Wash trading is the illegal practice of buying and selling the same asset simultaneously to create artificial trading activity. It inflates volume figures, manipulates prices, and misleads other traders about genuine market interest. Common in unregulated crypto exchanges.

Whale

A whale is an individual or entity that holds massive amounts of cryptocurrency—enough to move markets with their trades. They're the big money players that can create or crush rallies.

Wrapped Token

A wrapped token is a tokenized version of a cryptocurrency from another blockchain. Wrapped Bitcoin (WBTC) is Bitcoin on Ethereum; wrapped ETH (WETH) is ETH in an ERC-20 format.

Yield Farming

Yield farming means moving your crypto between different DeFi protocols to maximize returns. You're chasing the highest yields by lending, staking, or providing liquidity wherever rates are best.

ZK Proof

A zero-knowledge proof (ZK proof) is a cryptographic method where one party proves to another that a statement is true without revealing any information beyond the validity of the statement itself. In blockchain, ZK proofs enable scalable, private transactions.

Trading Fundamentals

(67 terms)

ATR

ATR measures volatility by calculating the average range between high and low prices over a specific period (usually 14 days). Higher ATR means more volatility.

Backtesting

Backtesting means testing a trading strategy on historical price data to see how it would have performed. You're checking if your idea actually works before risking real money.

Balance Sheet

A balance sheet is a financial statement showing a company's assets, liabilities, and shareholders' equity at a specific point in time. It follows the fundamental equation: Assets = Liabilities + Equity. It's one of three core financial statements investors analyze.

Bear Market

A bear market is a prolonged period of declining prices, typically defined as a 20% or greater drop from recent highs. Bear markets are characterized by pessimism, reduced trading activity, and widespread capitulation. They can last months to years.

Bid-Ask Spread

The bid-ask spread is the difference between the highest price buyers will pay (bid) and the lowest price sellers will accept (ask). It's the cost of immediate execution.

Blue Chip

Blue chip refers to established, financially sound companies (stocks) or top-tier, battle-tested crypto projects. They're considered safer investments with proven track records.

Bull Market

A bull market is a prolonged period of rising prices, typically defined as a 20% or greater increase from recent lows. Bull markets are characterized by optimism, increasing participation, and FOMO. They can last years and create substantial wealth.

Call Option

A call option gives the holder the right (not obligation) to buy an asset at a specific price (strike) before a specific date (expiration). You profit if the asset rises above the strike price.

Cash Flow

Cash flow measures the actual money moving into and out of a business during a period. Unlike earnings (which include non-cash items), cash flow shows real liquidity. The cash flow statement breaks this into operating, investing, and financing activities.

Correction

A correction is a decline of 10-20% from a recent high in an asset or market. Corrections are normal, healthy pullbacks within larger uptrends that allow overextended prices to reset. They differ from bear markets in both depth and duration.

Covered Call

A covered call strategy involves owning an asset and selling call options against it. You collect premium in exchange for limiting your upside if the asset rises above the strike price.

DCA

DCA means investing fixed amounts at regular intervals regardless of price. Instead of buying $10,000 of Bitcoin once, you buy $1,000 every week for 10 weeks.

Dead Cat Bounce

A dead cat bounce is a temporary recovery in price during a larger downtrend, followed by a continuation lower. The term comes from the idea that even a dead cat will bounce if dropped from high enough. It traps buyers who mistake the bounce for a reversal.

Debt To Equity

Debt-to-equity ratio measures a company's financial leverage by comparing total liabilities to shareholders' equity. Higher ratios indicate more debt financing relative to equity. It helps assess financial risk and a company's ability to handle economic downturns.

Delta

Delta measures how much an option's price changes when the underlying asset moves by $1. It ranges from 0 to 1 for calls and 0 to -1 for puts. Delta also roughly represents the probability an option expires in the money.

Diamond Hands

Diamond hands refers to holding an asset through extreme volatility without selling, no matter how much the price drops or how tempting it is to take profits.

Distribution

Distribution is a market phase where informed investors sell their holdings to retail buyers before prices fall significantly. Price moves sideways or slightly up while smart money exits positions. It typically follows an uptrend and precedes a markdown (decline) phase.

Drawdown

Drawdown is the peak-to-trough decline in an investment or trading account before a new high is reached. It measures the maximum loss experienced during a specific period. Max drawdown is a key risk metric for evaluating trading strategies.

Earnings Report

An earnings report is a company's quarterly financial disclosure including revenue, profit, earnings per share (EPS), and forward guidance. Public companies release them four times per year.

Equity Curve

An equity curve is a graphical representation of a trading account's value over time. It shows the growth (or decline) of capital as trades are executed. Analyzing equity curves helps traders evaluate strategy performance and consistency.

Fill Rate

Fill rate is the percentage of an order that gets executed at the requested price. A 100% fill rate means the entire order was filled as requested. Partial fills occur when there isn't enough liquidity at your price, common with large orders or illiquid markets.

FOK Order

A FOK order must fill completely and immediately, or it cancels entirely. No partial fills allowed—it's all or nothing.

Gamma

Gamma measures the rate of change in an option's delta for every $1 move in the underlying asset. High gamma means delta changes quickly, making the option more sensitive to price swings. It's highest for at-the-money options near expiration.

GTC Order

A GTC order remains active until it executes or you manually cancel it. Unlike day orders that expire at market close, GTC orders can sit for days, weeks, or months.

High Frequency Trading

High-frequency trading (HFT) uses powerful computers and algorithms to execute thousands of trades per second, profiting from tiny price discrepancies. HFT firms invest heavily in speed advantages, including co-located servers and microwave transmission lines.

HODL

HODLing (a misspelling of "holding" that became crypto culture) means buying and holding long-term regardless of short-term price swings. It's the buy-and-forget strategy.

Iceberg Order

An iceberg order hides the majority of a large order from the public order book, only showing small portions at a time. As each visible portion fills, more is revealed.

Implied Volatility

Implied volatility (IV) is the market's forecast of how much an asset's price will move over a specific period. It's derived from option prices and expressed as an annualized percentage. Higher IV means options are more expensive.

Insider Trading

Insider trading is buying or selling securities based on material, non-public information. It's illegal and heavily prosecuted by securities regulators. Legal insider trading (executives buying their own stock) must be disclosed publicly through regulatory filings.

IOC Order

An IOC order attempts to fill immediately. Any portion that can't fill instantly is cancelled. You get whatever is available at your price, and the rest disappears.

Iron Condor

An iron condor is an options strategy that involves selling both a put spread and a call spread on the same underlying asset with the same expiration date. It profits when the price stays within a defined range, making it ideal for low-volatility environments.

Leverage

Leverage lets you control a larger position than your account balance by borrowing funds from the exchange. 10x leverage means $1,000 controls $10,000 worth of assets.

Limit Order

A limit order executes only at your specified price or better. Buy limits fill at your price or lower. Sell limits fill at your price or higher.

Liquidation

Liquidation is when your leveraged position is forcefully closed by the exchange because your margin fell below the maintenance requirement. You lose your collateral.

Long Position

A long position means you own an asset and profit when its price increases. It's the most straightforward way to invest: buy low, sell high. Going long expresses bullish conviction and is the default position for most investors.

Margin

Margin is the collateral you put up to open a leveraged position. It's your skin in the game—the amount you can actually lose if the trade goes south.

Market Maker

A market maker is a firm or individual that provides liquidity by continuously quoting buy and sell prices for an asset. They profit from the bid-ask spread while taking on inventory risk. Market makers ensure traders can always find a counterparty.

Market Order

A market order executes immediately at the best available price. You're saying "buy/sell now at whatever price the market offers."

OCO Order

An OCO order combines two orders—when one executes, the other automatically cancels. Typically pairs a take-profit limit order with a stop-loss order.

Options Chain

An options chain is a table displaying all available options contracts for a specific asset, organized by expiration date and strike price. It shows bid/ask prices, volume, open interest, and Greeks for both calls and puts.

Order Flow

Order flow is the analysis of actual buy and sell orders entering the market, including their size, timing, and aggression. Unlike price-based analysis, order flow shows what's happening behind price movements and reveals supply/demand imbalances in real-time.

Paper Hands

Paper hands refers to selling an asset at the first sign of trouble or volatility, lacking the conviction to hold through drawdowns.

Paper Trading

Paper trading is practicing with fake money on a simulated account. You make all the same trades you would with real money, but there's zero financial risk.

Position Sizing

Position sizing is the process of determining how much capital to risk on a single trade based on your account size, risk tolerance, and the trade's stop loss distance.

Profit Margin

Profit margin measures how much of each revenue dollar becomes profit. It's expressed as a percentage and comes in several types: gross margin (after cost of goods), operating margin (after operating expenses), and net margin (after all expenses including taxes).

Put Option

A put option gives the holder the right (not obligation) to sell an asset at a specific price (strike) before a specific date (expiration). You profit if the asset falls below the strike price.

Rally

A rally is a sustained increase in prices, typically driven by positive sentiment, buying pressure, or bullish catalysts. Rallies can occur within uptrends, as corrections within downtrends (bear market rallies), or as reversal moves from lows.

Revenue

Revenue is the total income a company generates from selling goods or services before any expenses are deducted. Also called sales or top-line, revenue is the starting point for calculating profitability. Growing revenue is essential for long-term business success.

Risk Management

Risk management is the practice of protecting your capital through position sizing, stop losses, diversification, and emotional discipline. It's about surviving bad trades so you can profit from good ones.

Risk-Reward Ratio

Risk-reward ratio compares the potential loss of a trade (distance to stop loss) against the potential gain (distance to take profit). A 1:3 ratio means you risk $1 to make $3.

Scalping

Scalping is ultra-short-term trading where you hold positions for seconds to minutes, aiming for tiny profits per trade but doing dozens of trades per day.

Sharpe Ratio

The Sharpe ratio measures risk-adjusted return by comparing excess returns to volatility. It shows how much return you earn per unit of risk taken. Higher Sharpe ratios indicate better risk-adjusted performance.

Short Position

A short position means you've borrowed and sold an asset, profiting when its price decreases. To close, you must buy back the asset to return what you borrowed. Going short expresses bearish conviction and carries theoretically unlimited risk.

Short Squeeze

A short squeeze occurs when heavily shorted assets rise sharply, forcing short sellers to buy back shares to cover losses. This buying pressure pushes prices even higher, triggering more covering in a feedback loop that can create explosive moves.

Spread Trading

Spread trading involves simultaneously buying and selling related assets to profit from the price difference between them rather than absolute price direction. It reduces directional risk and focuses on relative value or convergence/divergence of prices.

Stop Loss

A stop loss is a predetermined price level where you automatically exit a losing trade to limit your loss. It's your escape hatch when you're wrong.

Stop Order

A stop order becomes a market order once price reaches your specified trigger price. Buy stops trigger above current price. Sell stops trigger below current price.

Stop-Limit Order

A stop-limit order triggers at a stop price but executes as a limit order. You set two prices: the stop (trigger) and the limit (execution price).

Straddle

A straddle is an options strategy where you buy (or sell) both a call and put option at the same strike price and expiration date. Long straddles profit from big moves in either direction, while short straddles profit when price stays flat.

Strangle

A strangle is an options strategy involving the purchase (or sale) of a call and put option with different strike prices but the same expiration. It's cheaper than a straddle but requires a bigger price move to profit.

Swing Trading

Swing trading involves holding positions for days to weeks, capturing "swings" in medium-term price trends. It's between day trading (hours) and investing (months/years).

Take Profit

A take profit is a predetermined price level where you automatically exit a winning trade to lock in gains. It's your discipline against greed.

Theta

Theta measures how much an option's price decreases each day due to time decay, assuming all other factors stay constant. It's one of the "Greeks" used in options trading and is always negative for long option positions.

Tick

A tick is the minimum price movement of a trading instrument. Each price change, regardless of size, is also called a tick in market data terminology. Tick data is the most granular level of market information available.

Trailing Stop

A trailing stop automatically adjusts your stop loss as price moves in your favor. It trails price by a fixed amount or percentage, locking in profits while letting winners run.

Value Investing

Value investing is a strategy of buying securities that appear underpriced relative to their intrinsic value. Value investors analyze fundamentals to find bargains the market has overlooked or unfairly punished. They have long time horizons and require patience.