📙 Vocabulary

All terms you should know

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Last updated 29 days ago

📙 Vocabulary

All terms you should know

Look through these terms before you move on.

You don't need to learn by heart all these term right now. Some of them will be used in this course, and some will not. Feel free to return to this page if you need to double-check a term.

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Trader's Vocabulary

Ask: the price at which someone is willing to sell a security. if you buy at market, you often pay the ask.
Arbitrage: snagging profit by buying and selling the same asset in different markets at different prices, usually very quickly.
Averaging Down: buying more shares as price drops, lowering your average cost. risky if the stock keeps sliding.
Average True Range (ATR): a measure of how much a market typically moves day to day. it helps gauge volatility.

Backtesting: analysing the potential performance of a trading strategy by applying it to sets of real-world, historical data.
Balance Sheet: a snapshot of a company’s financial position—assets, liabilities, and equity.
Base Currency (in forex): the first currency in a pair. for EUR/USD, EUR is the base.
Bear Market: a market that’s trending down, usually by 20% or more from recent highs.
Bearish: a view that prices will drop.
Bid: the price at which someone’s willing to buy a security. if you sell at market, you usually take the bid.
Bid-Ask Spread: the gap between the highest price buyers offer (bid) and the lowest price sellers want (ask).
Blue Chip: a big, stable company with a history of solid profits.
Break-Even Point: the price at which your position neither makes nor loses money.

Cable: slang for the GBP/USD currency pair.
Candlestick: a chart type showing open, close, high, and low for a period. green or red bars help spot patterns at a glance.
Capital Gain: profit realized when you sell a security for more than you paid.
Carry Trade: borrowing in a low-interest currency to invest in one with a higher rate, pocketing the difference.
Cash Account: an account where you must pay the full amount for shares or trades. no margin.
Cash Market: a marketplace for immediate settlement of commodities or securities.
Chart: a visual layout of price action over time.
Close (Price): the final trading price when a session wraps. often used in daily chart data.
Commission: fee charged by a broker for placing a trade.
Confirmation: when an indicator or price movement backs up a signal you see.
Consolidation: when price moves sideways in a tight range. often a pause before the next big move.
Contract for Difference (CFD): a derivative allowing you to trade price changes of an asset without owning it.
Correction: a quick price drop (often 10% or so) within an uptrend, offering a possible dip-buy chance.
Cover: closing a short position by buying back shares.
Cross Currency Pair: a forex pair that doesn’t include the us dollar, like EUR/GBP.
Cryptocurrency: digital coins (e.g., bitcoin, ethereum) traded on various exchanges.

Dark Pool: private exchange for large trades, hidden from the public order book. helps big players trade without moving price too much.
Day Trader: someone who opens and closes trades within the same day. aims to profit from intraday price swings.
Dead Cat Bounce: a brief rally in a downtrend that soon fails, continuing the drop.
Debt-to-Equity (D/E) Ratio: total liabilities divided by shareholders’ equity. used to gauge a company’s leverage level.
Deflation: an overall drop in prices, often linked to reduced demand or tight monetary policy.
Delta: in options, shows how much an option’s price changes if the underlying moves by $1.
Derivative: a contract whose value depends on an underlying asset, like options or futures.
Divergence: when price moves one way but an indicator moves another, hinting a potential trend shift.
Dividend: a slice of a company’s earnings paid to shareholders, often quarterly.
Drawdown: the drop from a peak to a lower point in an account’s value or an asset’s price.

Earnings Per Share (EPS): net income divided by the total shares. helps measure profitability.
Economic Calendar: schedule of major data releases (like GDP or inflation) that can shake up the market.
Elliott Wave Theory: a method analyzing market movements in wave-like patterns.
Entry Point: the price or moment when you choose to open a trade.
Equity: ownership value in a company, or the net value of your trading account.
Exchange: a marketplace where buyers and sellers trade stocks, currencies, or other assets.
Exotic Pair: a less common forex pair, often involving an emerging-market currency, like USD/TRY.
Exhaustion Gap: a gap that appears late in a strong trend, hinting the move may be losing steam.

Fair Value: an estimate of what an asset is truly worth, based on fundamentals or other metrics.
Fill: when your order is executed in the market and you receive your shares or position.
Fibonacci Retracement: uses ratios (like 61.8%) from the fibonacci sequence to locate possible support or resistance.
Fill or Kill (FOK): an order that must be fully executed immediately or canceled on the spot.
Flat Market: a sideways market with little price momentum.
Float: the number of shares available for public trading. a low float often means bigger price swings.
Forex (FX): the global currency market, where pairs like EUR/USD trade around the clock.
Fundamental Analysis: examining economic data or company finances to gauge the value of an asset.
Futures: standardized contracts to buy or sell an asset at a set price on a future date.

Gap: a price jump from one candle’s close to the next candle’s open, leaving a space on the chart.
Gearing: another word for leverage, multiplying both potential gains and losses.
Golden Cross: when a short-term moving average crosses above a long-term one, often seen as bullish.
Good ’Til Canceled (GTC): an order that stays open until it’s filled or manually canceled.
Greenback: trader slang for the us dollar.
Gross Margin: the difference between revenue and cost of goods sold, shown as a percentage.
Growth Stock: a company expected to expand faster than average, often trading at higher valuations.

Haircut: a discount subtracted from the value of an asset when it’s used as collateral. it reduces the lender’s risk if the asset drops in price.
Hammer: a bullish candlestick pattern with a small body near the top and a long lower wick. it usually appears after a sell-off and suggests a possible rebound if confirmed by the next candle.
Hanging Man: looks like a hammer but shows up in an uptrend. it can warn that buyers may be losing momentum, especially if the next candle closes lower.
Hard Fork: in crypto, a permanent split in a blockchain that creates two separate versions. it usually happens when the community can’t agree on protocol changes.
Hedge: an offsetting position meant to reduce risk in a primary trade. for example, shorting an index to protect a long portfolio from a market drop.
Hedge Fund: a private investment pool that can use flexible, often high-risk strategies—like short selling or derivatives—to chase bigger returns.
High-Frequency Trading (HFT): lightning-fast, algorithm-driven trading that exploits small price gaps. it often involves servers placed close to exchange data centers for minimal lag.
Hit the Bid: selling a security at the bid price. you’re accepting the buyer’s offer right away, usually for a quick exit.

Illiquidity: a condition where an asset has few buyers or sellers, leading to wide spreads and possible price slippage.
Implied Volatility (IV): an options metric showing how much the market expects the underlying to move. higher iv can mean pricier option premiums.
Index: a basket of stocks or other assets grouped together to track a specific market or sector, like the S&P 500.
Index Fund: a fund designed to mirror an index. investors get diversified exposure with lower management costs.
Initial Coin Offering (ICO): a crypto crowdfunding method. new coins are sold to raise capital for a project. it’s risky and largely unregulated in many places.
Initial Margin: the up-front deposit required to open a leveraged position. it covers part of your potential losses.
Insider Trading: using nonpublic info to trade shares and gain an unfair edge. it’s illegal and heavily policed by regulators.
Institutional Investor: a large organization—like a bank, pension fund, or insurance company—managing big pools of money.
Interest Rate: the cost of borrowing money, set by central banks or the market. it influences currency exchange rates and overall lending.
Intrinsic Value (options): how much an option is worth if exercised now, calculated by the difference between the strike price and current market price (for calls, market price minus strike; for puts, strike minus market price).

J-Curve: an economic concept where a measure (like trade balance) dips after a policy change but later recovers above the starting point.
Jobber: an old-school term for a floor trader who buys and sells quickly to capture small price differences. now replaced by scalpers and high-frequency traders.
Joint Account: an account owned by more than one person, where each party can deposit or withdraw funds.
Junk Bond: a high-yield corporate bond with lower credit ratings. it pays more interest but carries a bigger default risk.

Kaizen: a japanese term for continuous improvement in processes or systems. not specific to trading, but some traders apply it to refining their strategies.
Key Level: a support or resistance point on the chart where price tends to react. traders often watch these levels for breakouts or bounces.
Keynesian Economics: a theory stating that government spending and monetary intervention can smooth out economic cycles and boost demand when the private sector slows.
Knock-Out Option: a barrier option that expires worthless if the underlying hits a set barrier price. it reduces risk but also caps potential profits.
Kurtosis: a statistical measure indicating how heavy the tails of a distribution are compared to a normal distribution. in trading, high kurtosis can mean bigger-than-expected price swings.

Lagging Indicator: an indicator that reacts to price changes after they occur. it’s useful for confirming trends but can signal late entries or exits.
Last Trading Day: the final session in which a futures or options contract can be traded before it expires. after that, it settles or delivers.
Leverage: borrowing capital to increase trading size. can magnify both gains and losses.
Limit Order: an order to buy or sell at a specific price or better. it prevents you from getting filled at worse levels.
Liquidity: how quickly you can buy or sell without causing big price changes. heavily traded markets like major forex pairs are very liquid.
Liquidity Trap: a situation in which lower interest rates fail to stimulate lending or spending because demand for cash remains high.
Long: holding a position that benefits if price goes up. you buy first and hope to sell later at a higher price.
Lot: a standardized trading size, especially in futures or forex (like 100,000 units for a standard forex lot).
Low Float: a small number of shares available to trade. can trigger sharp price moves if buying or selling volume spikes.

Margin: the collateral required to open and hold a leveraged position. it’s a fraction of the total trade value.
Margin Call: a broker’s demand for more funds or securities if your account’s value drops below the required margin.
Market Maker: a firm or individual providing liquidity by continuously quoting both buy (bid) and sell (ask) prices.
Market Order: an order to buy or sell immediately at the best available price. you sacrifice price control for speed.
Market Sentiment: the overall attitude or mood of participants toward a market. bullish sentiment often drives up prices, while bearish sentiment can push them down.
Mark-to-Market: adjusting the value of an asset or position to its current market price at the end of each trading day.
Markup: the amount added to a security’s cost price by a market maker or broker, often seen in the spread.
Mean Reversion: a theory that price or a performance metric eventually reverts to its long-term average.
Momentum: the speed or strength of a price move. traders often use indicators like RSI or stochastics to gauge momentum shifts.

Naked Option: writing (selling) an option without owning the underlying or another offsetting position. has high profit potential but carries big risk.
Nasdaq: a major u.s. stock exchange known for tech-focused companies. also refers to the nasdaq composite index.
Net Asset Value (NAV): total value of a fund’s assets minus liabilities, divided by the number of shares. used for mutual funds and ETFs.
Net Exposure: the difference between a trader’s long and short positions. reflects overall risk to market moves.
Net Position: your overall holdings in a market after longs and shorts are accounted for.
Noise: random price fluctuations that obscure the bigger trend. high noise can lead to false signals.
Nominal Value: the stated value of a security or bond, not adjusted for factors like inflation or premium.
Non-Farm Payrolls (NFP): a key u.s. jobs report released monthly. it often causes big market moves in forex and equities.

Offer: another term for the ask price. it’s what sellers want if you decide to buy.
On-Balance Volume (OBV): a cumulative volume indicator that adds volume on up days and subtracts it on down days. used to spot buying or selling pressure.
Open Interest: the total number of outstanding derivative contracts (futures or options) that haven’t been closed yet.
Opening Price: the first traded price of the day (or session). can gap up or down from the previous close.
Option Chain: a list of all available option contracts for a stock or index, with their strikes, expirations, and premiums.
Option Premium: the price paid by the buyer to the seller for an options contract, reflecting the contract’s time value and intrinsic value.
Oscillator: a technical indicator that swings above and below a centerline or range, like RSI or stochastics.
Overbought: a condition in which price has risen too far, too fast. some expect a pullback or correction.
Oversold: a condition in which price has fallen too far, too fast. a bounce may follow if buyers step in.
Over-the-Counter (OTC): trades done directly between parties, not on a centralized exchange. often used for forex, some derivatives, or bonds.
Overnight Position: a trade left open after the market closes, exposing it to after-hours news or price swings.

Paper Trading: practice trading with virtual money. helps you test strategies without risking real funds.
P/E Ratio (price-to-earnings ratio): the share price divided by earnings per share. a quick way to gauge a stock’s valuation.
Pip: the smallest price movement in forex, usually the fourth decimal place in most pairs.
Pivot Point: a technical tool that identifies potential support and resistance levels based on previous high, low, and close.
Poison Pill: a takeover defense used by companies to discourage hostile acquisitions, often by allowing existing shareholders to buy more shares at a discount.
Portfolio: a collection of holdings across stocks, bonds, or other assets.
Position: your total exposure in a trade, either long or short.
Price Action: the movement of price, analyzed with minimal indicators.
Price-to-Book (p/b) Ratio: a stock’s price divided by its book value per share. reflects how the market values a firm’s assets.
Profit and Loss (p&l): the difference between your gains and costs, tracking how much you’ve made or lost.

Quantitative Trading: strategies based on mathematical models or algorithms to find trading edges.
Quarterly Earnings: company reports every three months that can cause big stock moves if results vary from forecasts.
Quote: the current bid and ask for an asset.
Quote Currency: in a forex pair, the second currency in the quote. in EUR/USD, usd is the quote currency.

Rally: a strong upward price move, often after a downturn.
Range-Bound: when price is stuck between clear support and resistance, moving sideways.
Rate Cut: when a central bank lowers interest rates, often to fuel spending or fight a slowdown.
Rate Hike: when a central bank raises rates to cool inflation or slow an overheated economy.
Realized Gains: profits secured once a position is closed.
Red Candle: a candle on the chart that closes below its open price.
Resistance: an overhead price zone where sellers often step in.
Retracement: a pullback within a larger trend.
Return on Investment (roi): a profitability measure: (profit ÷ cost) x 100%.
Risk/Reward Ratio: compares potential profit to potential loss. a crucial part of trade planning.
Rollover: extending a futures or forex contract to the next expiry, or the daily interest credit/debit in forex.

Scalping: a fast-paced trading style seeking small gains from brief price moves.
Sector: a group of related industries, like tech or healthcare.
Sell-Off: a quick drop in price caused by heavy selling.
Share: a unit of equity in a company’s stock.
Short (short selling): borrowing shares to sell them now, hoping to buy back later at a lower price.
Short Covering: buying back shares to exit a short, which can push prices up if many shorts do it at once.
Signal: a trigger or an indicator that suggests an investor or trader to either buy or sell a particular stock, commodity, or any other financial asset.
Slippage: the difference between your intended order price and the actual fill, often caused by fast markets or low liquidity.
Smart Money: institutional players or seasoned traders believed to have deeper insight or resources.
Spoofing: placing fake orders to trick the market, then canceling them. banned in most jurisdictions.
Spread: the gap between bid and ask prices. tight spreads often mean higher liquidity.
Stagflation: a mix of slow economic growth and rising prices.
Stochastic Oscillator: a momentum indicator that compares a security’s closing price to its range over a set period.
Stop Limit Order: becomes a limit order once price hits a specified stop level, giving you more control over execution price.
Stop Loss: a preset order closing your position if price hits a certain level, aiming to cap losses.
Support: a lower price zone where buyers typically emerge, slowing or reversing a decline.
Swing Trading: a style holding positions for days or weeks, looking to catch medium-term price swings.
Systemic Risk: the risk that trouble in one part of the financial system spreads to the rest.

Take Profit: a preset order to close a position once a specific profit level is reached.
Taker: someone who accepts the current bid or ask, removing liquidity from the market.
Tape Reading: watching real-time order flow and trades on the tape to gauge market sentiment.
Technical Analysis: using charts and indicators to forecast future price moves.
Theta (options): shows how much an option’s value decays each day as expiration nears.
Tick: the smallest price increment an asset can move.
Ticker Symbol: a code representing a traded asset, such as AAPL for Apple.
Time Decay: the option premium loss over time, especially as expiry gets closer.
Time Horizon: the length of time a trader expects to hold a position.
Total Return: gains or losses including price changes and dividends or interest.
Trading Halt: a temporary pause in trading, often due to news or volatility.
Trend: the general direction of price over time — up, down, or sideways.
Trendline: a drawn line connecting swing highs or lows to show a market’s slope.

Underlying Asset: the financial instrument upon which a derivative’s value is based.
Unemployment Rate: the percentage of the labor force without a job, closely watched by traders for economic clues.
Uptick: a trade executed at a higher price than the prior trade.
Uptick Rule: a restriction that requires a short sale to be executed on an uptick or zero-plus tick.
Utility Stock: a share in a utility company (electric, water, gas), often viewed as defensive due to stable demand.

Value Investing: focusing on undervalued stocks based on fundamentals, hoping the market will eventually reprice them higher.
Value Stock: a stock trading at a lower price relative to its earnings or book value.
Vega (options): measures how an option’s value changes as implied volatility shifts.
Velocity of Money: how fast money changes hands in the economy, linked to spending and inflation.
Venture Capital: funding provided to startups with high growth potential in exchange for equity.
Vesting: the schedule under which stock options or retirement benefits become owned by the recipient.
Volatility: the degree of variation in price, often measured by standard deviation or implied volatility.
Volume: the number of shares or contracts traded during a given period.

Wash Sale: a tax rule disallowing a loss deduction if you buy the same (or substantially identical) asset within 30 days before or after selling it at a loss.
Whale: a trader or investor with huge capital who can influence market prices with large orders.
Whipsaw: when price abruptly reverses direction, causing quick gains to flip into losses (or vice versa).
White Knight: a more friendly buyer who steps in to acquire a takeover target to save it from a hostile bidder.
Window Dressing: when fund managers buy popular stocks near the end of a reporting period to make their holdings look more appealing.

X-Day: short for ex-dividend date, the day after which new buyers of a stock no longer receive its upcoming dividend.
Xetra: an electronic trading system on the frankfurt stock exchange, used for stocks and ETFs.
Xmas Rally: a term sometimes used for a short uptrend in stock prices around the holiday season.

YTD (Year to Date): the period starting at the first day of the current year and running up to today.
Yield: the income return on an investment, typically shown as a percentage. for stocks, it’s often dividends per share divided by the share price.
Yield Curve: a chart showing yields across bonds of different maturities. a normal curve slopes upward; an inverted curve can hint at recession worries.

Z-Score: a statistical measure showing how many standard deviations a value sits from the mean. traders might use it to spot outliers or anomalies in price data.
Zero-Cost Collar: an options strategy that combines a protective put and a covered call to limit both downside and upside.
Zero-Sum Game: a scenario where one participant’s gain is exactly offset by another’s loss, often used to describe options or futures markets.

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