Glossary · 146 terms

Trading Glossary

Plain-English definitions. Each entry links to the lessons where the term is used.

146 terms

A

Adherence: The percentage of trades that followed every rule in the plan.
Anchoring: Fixing on a particular number and judging everything relative to it.
Ask price: The lowest price a seller is currently willing to accept.
Auto-deleveraging (ADL): A last-resort mechanism that reduces profitable opposing positions when liquidations cannot be covered.
Automated market maker (AMM): A DEX design that prices trades with a formula over a pool of tokens instead of an order book.
Average True Range (ATR): A measure of how far price typically moves per period, including gaps.

B

Backtest: Applying a rule to historical data to see how it would have performed.
Backwardation: When futures prices are below the spot price.
Base currency: The first asset in a pair — the one you are buying or selling.
Basis: The difference between a contract price and spot.
Bid price: The highest price a buyer is currently willing to pay.
Bollinger Bands: Bands drawn a set number of standard deviations above and below a moving average.
Break of structure: A failure of the current sequence of highs and lows.
Break-even win rate: The win rate at which a given risk-reward ratio neither makes nor loses money, before costs.
Breakout: A move out of a range or through a level that had previously held.
Bridge: A service that moves tokens from one blockchain to another.

C

Candlestick: A chart element encoding open, high, low and close for one interval.
Carry: The ongoing cost of holding a position.
Centralised exchange (CEX): An exchange run by a company that holds users’ funds and matches orders on its own systems.
Compounding: Growth where each period’s result is applied to a balance that already includes previous results.
Concentration risk: The exposure that comes from having too much in one asset, venue or idea.
Confirmation bias: Weighting information that supports a position you already hold.
Consolidation: A pause in which price trades in a narrowing or sideways pattern after a move.
Contango: When futures prices are above the spot price, usually more so for later expiries.
Correlation: How closely two prices tend to move together.
Counterparty risk: The risk that the other side of an arrangement fails to perform.
Cross margin: A margin mode where all positions share the account’s available balance as collateral.
Custody: Who controls the private keys to an asset.

D

Decentralised exchange (DEX): An exchange run by smart contracts, where you trade from your own wallet.
Disposition effect: Selling winners too early and holding losers too long.
Divergence: Price making a new extreme while an indicator does not.
Diversification: Spreading risk across positions that do not all move together.
Drawdown: The decline from an equity peak to a subsequent trough.
Drawdown recovery: The gain needed to return to a previous high after a loss.

E

Edge: A repeatable reason a method should have positive expectancy after costs.
Expectancy: Average profit or loss per trade over a sample, net of costs.
Expiry: The date on which a dated futures or options contract stops trading and settles.
Exponential moving average (EMA): A moving average that gives more weight to recent prices.

F

False breakout: A move beyond a level that quickly reverses back inside it.
Fear of missing out (FOMO): The urge to enter a trade because price is already moving without you.
Fill: The execution of an order, in whole or in part, at a specific price.
Fill-or-kill (FOK): Fill the whole quantity immediately, or cancel all of it.
Funding rate: A periodic payment between longs and shorts on a perpetual contract.
Futures contract: A standardised agreement to transact at a specified price, cleared by a venue.

G

Gap: A jump in price with no trading at the levels in between.
Gas fee: The network fee paid to have a transaction processed on a blockchain.
Good-til-cancelled (GTC): An order that stays open until it fills or you cancel it.

H

Hedge: A position taken to offset the risk of another.
Higher high: A swing high that exceeds the previous swing high.
Higher timeframe: A longer chart period used for context above the one you trade on.
Hindsight bias: The feeling, after the fact, that an outcome was predictable all along.

I

Immediate-or-cancel (IOC): Fill whatever you can right now; cancel the rest.
Impermanent loss: The shortfall of providing liquidity compared with simply holding the same tokens.
Index price: An aggregate price built from several spot venues, used as a reference for derivatives.
Initial margin: The collateral required to open a leveraged position.
Insurance fund: A reserve a derivatives venue uses to cover losses when a liquidation fills worse than the bankruptcy price.
Invalidation: The market condition that would prove your trade idea wrong.
Isolated margin: A margin mode where each position has its own collateral, and only that collateral is at risk.

K

Kelly criterion: A formula for the fraction of capital that maximises long-run growth, given a known edge.

L

Lagging indicator: An indicator whose value depends on data that has already occurred.
Last price: The price of the most recent trade on a particular venue.
Leverage: Controlling a notional larger than your capital, using borrowed exposure.
Limit order: An instruction to fill at a specified price or better, or not at all.
Liquidation: The venue closing a leveraged position because margin has run out.
Liquidity: How much can be transacted without moving the price materially.
Liquidity pool: A smart contract holding two or more tokens that traders swap against.
Long: A position that profits if price rises.
Look-ahead bias: Using information in a test that would not have been available at the time of the decision.
Loss aversion: The tendency to feel a loss more strongly than an equivalent gain.
Lot size: The minimum quantity, or quantity step, that an order can be placed in.
Lower low: A swing low that falls below the previous swing low.

M

MACD: Moving Average Convergence Divergence: the gap between two exponential moving averages, plotted with a signal line.
Maintenance margin: The minimum equity that must remain before liquidation is triggered.
Maker: An order that rests in the book and adds liquidity until someone trades against it.
Margin call: A warning that your collateral is approaching the level needed to keep a position open.
Mark price: A reference price a derivatives venue uses to value open positions and trigger liquidations.
Market depth: How much size rests at each price level in the order book.
Market order: An instruction to fill immediately at the best available price.
Maximum adverse excursion (MAE): How far a trade moved against you before it closed.
Mean reversion: A strategy family that bets price will return towards an average after moving away from it.
Momentum: The rate of change of price over a lookback window.
Moving average: The mean of the last N closing prices, recalculated each period.

N

Notional value: Position size multiplied by price — the face value you control.

O

OHLC: Open, high, low and close — the four values a candle records.
Open interest: The number of derivative contracts currently open and not yet closed or settled.
Order book: The list of resting buy and sell orders at each price level.
Oscillator: An indicator expressing where price sits within a recent range, usually on a bounded scale.
Out-of-sample: Data held back from development and used once, to validate a rule.
Overconfidence: Believing your judgement is more accurate than it actually is.
Overfitting: Tuning a rule until it fits the sample rather than the underlying behaviour.

P

Partial fill: An order that has executed for only part of its quantity.
Perpetual futures: A futures contract with no expiry, tethered to spot by periodic funding.
Phishing: An attempt to trick you into giving away access by imitating someone you trust.
Position size: The number of units held, derived from risk limit and stop distance.
Post-only order: A limit order that is cancelled rather than allowed to fill as a taker.
Private key: The secret that authorises transfers from a crypto address.
Proof of reserves: An attestation that a venue controlled certain assets at a point in time.
Pullback: A temporary move against the prevailing trend.

Q

Quote currency: The second asset in a pair — the one the price is expressed in.

R

R-multiple: A trade’s result expressed as a multiple of the amount you risked on it.
Range: A period in which price moves sideways between a recognisable high and low.
Recency bias: Giving recent events more weight than they deserve.
Relative Strength Index (RSI): A momentum oscillator from 0 to 100 comparing the size of recent gains with recent losses.
Retracement: A pullback measured as a proportion of the preceding move.
Revenge trading: Trading to win back a recent loss rather than because a setup exists.
Risk of ruin: The probability that a normal run of losses ends the account.
Risk per trade: The amount of your account you stand to lose if a trade hits its stop.
Risk-reward ratio: The planned gain on a trade relative to its planned loss.
Rug pull: A scheme where a token’s creators withdraw the liquidity or funds, leaving holders unable to sell.

S

Sample size: The number of observations behind a metric.
Seed phrase: A list of words that can recreate a wallet and every key in it.
Self-custody: Holding crypto in a wallet where only you control the keys.
Settlement: How a contract is resolved at expiry — in cash or by delivery.
Short: A position that profits if price falls.
Slippage: The difference between the price you expected and the price you got.
Slippage tolerance: The maximum price movement you accept before a DEX swap is cancelled.
Smart contract: A program deployed on a blockchain that runs exactly as written.
Spot market: A market for immediate ownership of the asset itself.
Spread: The gap between the bid and the ask.
Stablecoin: A token designed to hold a steady value, usually against a currency such as the US dollar.
Stop distance: The gap between your entry price and your stop.
Stop order: An order that becomes a market order once a trigger price is reached.
Stop-limit order: A stop that, once triggered, places a limit order rather than a market order.
Stop-loss: An order placed at the level where the trade idea is invalidated.
Sunk cost fallacy: Continuing with something because of what has already been spent on it.
Support and resistance: Price zones where transactions previously clustered heavily.
Survivorship bias: Drawing conclusions only from the cases that survived, ignoring the ones that did not.
Swing high: A candle whose high exceeds the highs of the N candles either side.
Swing low: A candle whose low is beneath the lows of the N candles either side.

T

Tail risk: The risk of rare, extreme moves larger than normal conditions suggest.
Take-profit order: A resting order that closes a position once price reaches a chosen target.
Taker: An order that fills immediately against an order already in the book, removing liquidity.
Tick size: The smallest price increment an instrument can trade in.
Tilt: A state in which the goal shifts from executing the process to recovering losses.
Time in force: How long an order stays active before it is cancelled.
Timeframe: The interval each candle on a chart represents.
Trading journal: A written record of each trade: the plan, the execution, the result and what you were thinking.
Trading pair: Two assets quoted against each other, such as BTC/USDT.
Trading plan: A written document specific enough that two people would take the same trades.
Trailing stop: A stop that moves with price in your favour by a set distance, but never back.
Trend: A sequence of higher highs and higher lows, or lower highs and lower lows.
Trend following: A strategy family that enters in the direction of an established move.

V

Volatility: The magnitude of price variation over a period.
Volume: How much traded during an interval.

W

Wick: The thin line on a candlestick showing the high or low reached beyond the open and close.
Win rate: The proportion of trades that finish profitable.