Trading glossary

Return earned above what the market's risk (beta) alone would explain.

An indicator of how much an instrument typically moves per period.

Testing a trading strategy on historical data to estimate how it would have performed.

When longer-dated futures trade below the spot price.

The difference between a futures (or perp) price and the underlying spot price.

How much a position moves relative to its benchmark market.

The gap between the best buy price (bid) and best sell price (ask).

Price pushing decisively through a support or resistance level or range.

A bar that shows the open, high, low, and close of a period in one shape.

A period where price trades sideways in a tight range, coiling before a move.

When longer-dated futures trade above the spot price.

How closely two instruments tend to move together, from -1 to +1.

Opening and closing trades within the same session, holding nothing overnight.

A Sharpe ratio corrected for the number of strategy variations you tried.

When price and a momentum indicator move in opposite directions.

Spreading risk across uncorrelated positions so no single one dominates.

A candlestick whose open and close are nearly equal, signaling indecision.

The peak-to-trough drop in your account equity, usually shown as a percentage.

A repeatable reason your trades make money over a large sample.

A moving average that weights recent prices more, so it turns faster.

A chart of your account balance over time, trade by trade.

The average amount you can expect to win or lose per trade over many trades.

Chasing a move you didn't plan, driven by the fear of being left behind.

A periodic payment between longs and shorts that tethers a perpetual to spot.

A standardized agreement to buy or sell an asset at a set price on a future date.

A jump between one period's close and the next period's open, with no trading between.

Taking an offsetting position to reduce the risk of an existing one.

The market's forecast of future volatility, backed out of option prices.

A formula for the bet size that maximizes long-run growth of capital.

Using borrowed capital to control a position larger than your cash balance.

An order to trade only at a specified price or better.

A forced close of a leveraged position when its margin is exhausted.

How easily an instrument can be traded without moving its price.

A standardized trade size in forex, used to scale position value.

A momentum tool built from the difference between two moving averages.

The collateral your broker requires to open and hold a leveraged position.

A demand to add funds (or be liquidated) when losses erode your margin.

Valuing open positions at the current market price, not your entry.

A participant that continuously quotes both bid and ask to provide liquidity.

An order to buy or sell immediately at the best price currently available.

The largest peak-to-trough equity decline over a period.

The rate of change of price: how strongly it is moving in one direction.

A running average of price that smooths noise to reveal the underlying trend.

The total number of derivative contracts currently open and unsettled.

A contract giving the right, not the obligation, to buy or sell at a set price.

The live list of buy and sell limit orders waiting at each price.

Tuning a strategy so tightly to past data that it fails on new data.

The smallest standard price increment in a forex quote.

Deciding how large a trade to take so a single loss can't hurt you badly.

Holding trades for weeks to months to ride a long-term trend.

Gross profit divided by gross loss: how many dollars you make per dollar lost.

A temporary counter-trend move against the prevailing direction.

A trade's result measured in multiples of the amount you risked.

The profit or loss locked in once a position is actually closed.

Trying to win back a loss immediately by taking impulsive, oversized trades.

The probability that a string of losses wipes out your trading capital.

The ratio of how much you stand to make versus how much you risk on a trade.

A 0-100 momentum oscillator measuring the speed of recent gains versus losses.

A style of taking many tiny, very short-term trades for small gains each.

Return earned per unit of volatility: a measure of risk-adjusted performance.

The difference between the price you expected and the price you actually got.

A risk-adjusted return measure that penalizes only downside volatility.

A resting order that triggers once price crosses a set level.

A pre-set exit that caps the loss on a trade if price moves against you.

Price levels where buying or selling has repeatedly slowed or reversed a move.

Holding trades for several days to weeks to capture a larger price swing.

A pre-set order that closes a trade once it reaches your target.

The general direction of price: a sequence of higher highs or lower lows.

The paper profit or loss on an open position you have not closed yet.

How much and how fast a market's price moves over time.

The number of units or contracts traded over a period.

The average price over a session, weighted by the volume traded at each price.

The percentage of your trades that close in profit.