Glossary · 65 trading terms
Every word a trader uses, defined.
Definitions, formulas, and worked examples for the 65 terms traders run into across metrics, orders, options, technicals, psychology, and risk.
Metrics(15)
Mean loss on losing trades — paired with average win to assess risk-reward asymmetry.
Mean profit on winning trades — used alongside average loss to compute expectancy.
Annualised return divided by max drawdown — risk-adjusted return using worst-case decline.
The peak-to-trough decline in account equity, expressed as a percentage of the previous peak.
The expected profit or loss per trade, on average, over a large sample.
The single biggest loss — a critical diagnostic for risk management discipline.
The single biggest profit in the trading record — informative about strategy upside and skew.
The largest peak-to-trough drawdown ever experienced by the account or strategy.
Gross profit divided by gross loss — a single number summary of strategy efficiency.
Net profit divided by max drawdown — how efficiently a strategy recovers from worst losses.
The ratio of expected profit to potential loss on a single trade — usually expressed as e.g. "1:2".
Risk-adjusted return — excess return per unit of total volatility.
Risk-adjusted return — like Sharpe, but penalising only downside volatility.
The number of consecutive winning or losing trades — a useful measure of variance and psychological pressure.
The percentage of trades that closed at a profit out of all closed trades.
Orders(12)
An entry order paired with a stop-loss and take-profit, all submitted together.
An order that automatically expires at the end of the current trading session if not filled.
An order that remains active until explicitly cancelled or filled, often with a 90-day broker maximum.
A large order split into smaller visible chunks to hide total size from the market.
An order that fills as much as possible immediately and cancels any unfilled remainder.
An order to buy or sell only at a specified price or better — execution is not guaranteed.
An order to buy or sell immediately at the best available current price.
One-Cancels-the-Other: a paired order where executing one side automatically cancels the other.
An order that becomes a market order when a specified trigger price is reached.
A stop order that converts to a limit order (instead of a market order) when triggered.
A pre-set order to exit a profitable position at a specified favourable price.
A stop order that adjusts in the direction of profit as price moves favourably — never against the position.
Options(14)
A contract giving the holder the right (not obligation) to buy an asset at a specified price by a specified date.
The rate of change in option premium per unit change in the underlying — how option-like vs stock-like the position is.
The date after which the option contract no longer exists — value at expiry is purely intrinsic.
The rate of change in delta per unit change in the underlying — the curvature of option pricing.
The market's expectation of future price volatility, derived from current option prices.
The portion of an option's premium that comes from being in-the-money — the immediate exercise value.
The total number of outstanding option contracts at a given strike — a measure of strike-level commitment.
The market price of an option — what the buyer pays the seller for the contract.
A contract giving the holder the right (not obligation) to sell an asset at a specified price by a specified date.
Ratio of put open interest (or volume) to call open interest — a sentiment indicator.
The pre-agreed price at which the option holder can exercise — buy (call) or sell (put) the underlying.
The rate of premium decay per day — the cost of holding a long option position over time.
The erosion of an option's premium as expiry approaches — measured by theta.
The change in option premium per 1% change in implied volatility — sensitivity to volatility shifts.
Technical Analysis(13)
A volatility measure showing the typical range a price moves per period — useful for stop placement and sizing.
A volatility envelope around a moving average — bands widen during high volatility and contract during calm.
A move where price decisively exits a prior range, support, or resistance level — often with volume confirmation.
A moving average that weights recent prices more heavily, reacting faster to changes than SMA.
A failed breakout — price briefly exits a level then quickly reverses back inside, often trapping breakout buyers.
A tool drawing horizontal levels at 23.6%, 38.2%, 50%, 61.8%, and 78.6% of a prior move — common pullback zones.
Moving Average Convergence Divergence — a trend-following momentum indicator using two moving averages.
A line plotting the average price over a rolling window — smooths noise to reveal trend direction.
Pre-calculated support and resistance levels for the current session, derived from prior session's high/low/close.
A price level at which selling interest historically exceeds buying pressure — a ceiling where price tends to reject.
A 0-100 momentum oscillator — readings above 70 traditionally signal overbought, below 30 oversold.
A moving average computed as a straight arithmetic mean of the last N closing prices.
A price level at which buying interest historically exceeds selling pressure — a floor where price tends to bounce.
Psychology(5)
The mental challenges of experiencing a deep account decline — fear, doubt, and the urge to abandon the plan.
The well-documented tendency to feel losses about twice as strongly as equivalent gains.
The tendency to size by feeling — bigger when confident, smaller when uncertain — rather than by rule.
A behavioural-economics framework explaining how people evaluate gains and losses asymmetrically under uncertainty.
An emotionally compromised state where decisions are driven by frustration, anger, or panic rather than the trade plan.
Risk(6)
The fee charged by the broker for executing a trade — a direct cost that compounds over high-frequency trading.
Borrowed capital used to amplify position size — magnifies both gains and losses.
Collateral deposited with the broker to open and maintain a leveraged position.
The dollar (or rupee) amount allocated to a single trade — the most controllable variable in trading.
The difference between the expected execution price and the actual fill price — a hidden trading cost.
The difference between the best bid (buy) price and the best ask (sell) price — the immediate cost of round-tripping.
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