Trading Glossary
60 terms explained with the math that actually matters — no jargon padding.
Most trading glossaries are encyclopedia-style: technically correct, practically useless. This one's built for retail traders who want to understand what each term means in a real trading workflow — when to use it, when to ignore it, and what the actual math is. Every term links to the related ones so you can build mental models, not memorise definitions.
Candlestick Pattern
- Doji Candlestick — A candlestick where open and close are nearly equal — indicates indecision in the market.
- Engulfing Pattern — A two-candle reversal pattern where the second candle fully engulfs the first.
- Hammer Candlestick — A bullish reversal candle with a small body and long lower wick, appearing at the bottom of declines.
Chart Pattern
- Cup and Handle — A bullish continuation pattern resembling a teacup with a handle.
- Double Bottom — A bullish reversal pattern where price tests a support level twice and holds.
- Double Top — A bearish reversal pattern where price tests a resistance level twice and fails.
- Head and Shoulders Pattern — A bearish reversal pattern with three peaks — left shoulder, higher head, right shoulder.
Chart Type
- Candlestick Chart — Price chart format where each candle shows open, high, low, and close for a period.
Crypto
- Cryptocurrency Exchange — A platform for trading cryptocurrencies — either centralized (CEX) or decentralized (DEX).
- DeFi (Decentralized Finance) — Financial applications built on blockchain without traditional intermediaries.
- Stablecoin — A cryptocurrency designed to maintain a stable value, usually pegged to USD.
Derivatives
- Implied Volatility (IV) — Market-expected future volatility, derived from options prices.
- Options Contract — A derivative giving the right (but not obligation) to buy or sell an asset at a set price by a set date.
Fundamental Analysis
Market Indicator
Market Structure
- Breakout — A price move beyond an established support, resistance, or chart pattern boundary.
- Consolidation — A range-bound period of relatively quiet price action between trending moves.
- Support and Resistance — Price levels where buying or selling pressure historically halts price movement.
- Trend — The general direction of price movement over a period — uptrend, downtrend, or sideways.
Methodology
- Backtest — Simulating a trading strategy on historical data to estimate past performance.
- Fundamental Analysis — Evaluating an asset's intrinsic value based on financial and economic factors.
- Technical Analysis — Predicting future price movements by analyzing past price and volume data.
Order Type
- Limit Order — An order to buy or sell at a specified price or better — guarantees price, not execution.
- Market Order — An order to buy or sell immediately at the best available price — guarantees execution, not price.
- Stop Loss — A predefined exit price that limits losses if a trade moves against you.
- Take Profit — A predefined exit price that locks in gains when a trade reaches a target.
Risk Management
- Diversification — Spreading investments across different assets to reduce risk.
- Position Sizing — Determining how many shares or contracts to trade based on account size and risk tolerance.
- Risk Management — The systematic process of identifying and controlling exposure to losses.
Technical Indicator
Trading Concept
- Bid-Ask Spread — The gap between the highest price buyers will pay (bid) and the lowest price sellers will accept (ask).
- Drawdown — The peak-to-trough decline in account equity during a losing streak.
- ETF (Exchange-Traded Fund) — A pooled investment vehicle that trades on stock exchanges like a regular stock.
- Expectancy — The average profit or loss per trade, given win rate and average win/loss size.
- Leverage — Borrowed capital used to increase trade size beyond what cash alone allows.
- Liquidation — Forced closure of a leveraged position when collateral falls below maintenance margin.
- Liquidity — The ease with which an asset can be bought or sold without significantly affecting its price.
- Long Position — Owning an asset with the expectation that its price will rise.
- Margin — Borrowed money used to amplify trading positions beyond cash balance.
- Risk/Reward Ratio — The ratio of potential profit to potential loss on a trade.
- Sharpe Ratio — Risk-adjusted return — the excess return per unit of volatility.
- Short Selling — Selling an asset you don't own, betting on its price falling, then buying back later.
- Slippage — The difference between the expected fill price of an order and the actual execution price.
- Volatility — A statistical measure of how much an asset's price varies over a period.
- Win Rate — The percentage of trades that close profitably out of total trades taken.
Trading Psychology
Trading Strategy
- Day Trading — Opening and closing all positions within the same trading day, holding no overnight risk.
- Scalping — A trading style targeting tiny price movements held for seconds to minutes.
- Swing Trading — Holding positions for days to weeks, capturing multi-day price swings.