Trading glossary for people who actually trade.

the method of choosing how many units/contracts to trade so a stop-loss equals a predefined risk amount

the maximum amount you are willing to lose on a single trade, often expressed as a percent of equity

the ratio of potential reward to potential risk based on your target and stop-loss

a trade outcome measured in units of initial risk, where 1R equals your planned loss to the stop

the average expected outcome per trade, usually measured in R, based on win rate and average win/loss size

the percentage of trades that end as winners

the decline in equity from a peak or reference level to a lower level, usually expressed as a percent

the largest peak-to-trough equity decline over a specified period

a predefined exit price that closes the trade when the thesis is invalidated, limiting loss size

a planned exit price where you realize profits instead of letting the market decide for you

a stop-loss that moves in your favor as price moves, designed to lock in profit while allowing trend continuation

the probability of losing a large portion of capital given your edge, risk per trade, and variance

an order to buy or sell at a specific price or better, giving you price control but not fill certainty

an order that executes immediately at the best available prices, prioritizing fill over price

a stop that triggers a market order once the stop price is reached, maximizing exit certainty

a stop that triggers a limit order, giving you price control but risking no fill

the two-tier fee structure on perps exchanges where limit orders that rest on the book (maker) pay less than market orders that fill immediately (taker)

the trading fee charged when your order adds liquidity to the order book by resting as a limit order that is not immediately filled — typically the lower fee tier on perpetual futures exchanges

the trading fee charged when your order removes liquidity from the order book by filling immediately against resting orders — typically the higher fee tier on perpetual futures exchanges, applied to all market orders and aggressive limit orders

the difference between the price you expected to fill at and the price you actually received, measured in basis points — caused by order book depth, market volatility, and position size relative to available liquidity

the difference between the best bid and best ask, representing the immediate cost of crossing the market

how easily you can buy or sell without moving the price significantly

the list of current buy (bid) and sell (ask) orders at different prices for an instrument

an order that must add liquidity; it will cancel if it would immediately execute as a taker

an order flag that ensures the order can only reduce or close an existing position, not increase it

order instructions that control how long an order stays active and how it can fill (e.g., GTC, IOC, FOK)

a leveraged derivative contract with no expiry date, available on exchanges like Binance, Bybit, OKX, and Hyperliquid, that uses periodic funding rate payments every 8 hours to keep its price anchored to the underlying spot market

the periodic payment exchanged between long and short holders on perpetual futures contracts, settled every 8 hours on most exchanges, that keeps the perp price anchored to spot

the price level at which your perpetual futures position is forcibly closed by the exchange because your remaining margin can no longer cover the unrealized loss

a fair-value reference price calculated by the exchange from index price and a decaying funding basis, used to determine unrealized PnL, margin requirements, and liquidation triggers on perpetual futures

a composite reference price derived from spot markets, often used to compute mark price and funding

using borrowed exposure to control a larger position with less margin, increasing both upside and downside sensitivity

a margin mode on perpetual futures exchanges where each position has its own dedicated margin allocation, so the maximum loss on that position is capped at the assigned margin plus fees

a margin mode on perpetual futures exchanges where all open positions share the entire account balance as collateral, giving each position a wider liquidation buffer but coupling risk across the portfolio

the minimum margin balance your perpetual futures position must hold to avoid liquidation — once unrealized losses push your remaining margin below this threshold, the exchange forcibly closes the position

the total number of outstanding perpetual futures and options contracts that have not been closed, representing the sum of all active long or short positions across the market

the price difference between a perpetual futures contract and the underlying spot price, expressed as a percentage — positive basis means the perp trades at a premium to spot, negative means a discount

the market-implied estimate of future volatility embedded in option prices

price zones where buying or selling pressure has repeatedly appeared, often acting as decision points

a move where price breaks above resistance or below support, often signaling a regime shift from range to expansion

a return to a broken level to confirm it as new support or resistance after a breakout

a breakout that quickly reverses back into the prior range, trapping late entrants

a sustained directional move characterized by higher highs/higher lows (uptrend) or lower highs/lower lows (downtrend)

a sideways market condition where price oscillates between defined support and resistance zones

a volatility indicator that measures average price range over a lookback period

a momentum oscillator that compares recent gains to recent losses, commonly used to describe overbought/oversold conditions

an average of past prices over a set period, often used as a trend filter or dynamic support/resistance

volume-weighted average price, often used as an institutional benchmark for average execution price during a session

a histogram showing where volume traded at different prices, often used to identify high- and low-volume nodes

the pattern of swing highs and lows that defines trend, range, and key inflection points

an emotional state where decision quality degrades and you start breaking rules after wins or losses

taking impulsive trades to win back losses quickly, often by increasing size or lowering entry standards

fear of missing out; an impulse to enter because price is moving and you don't want to be left behind

taking too many trades, often outside your edge, usually driven by boredom, anxiety, or the need to feel in control

a bias where losses feel more painful than equivalent gains feel good, leading to distorted trade management

overweighting the most recent outcomes and assuming the future will look like the last few trades

the ability to execute a trading process consistently, especially under stress, without rewriting rules mid-session

gross profit divided by gross loss across a sample of trades

a risk-adjusted return metric: excess return divided by return volatility

a risk-adjusted return metric like Sharpe, but it only penalizes downside volatility

CAGR divided by maximum drawdown (a drawdown-based risk-adjusted return metric)

return evaluated relative to a risk measure such as volatility, drawdown, or downside deviation

the amount of capital or notional value currently at risk, often expressed as a percent of equity

a measure of how two return series move together (positive, negative, or not at all)

sensitivity of an asset or strategy to a benchmark (how much it tends to move when the benchmark moves)

returns beyond what would be expected from exposure to a benchmark (the part not explained by beta)

the worst unrealized loss a trade experienced before you exited

a per-trade fee charged by a broker or exchange for executing your order

the actual executed price of your order (which can differ from your intended price)

when only part of your order is executed and the rest remains unfilled or is canceled

the price movement your own order causes when you trade enough size to move the book

a large order that is split into smaller visible pieces to reduce signaling and market impact

time-weighted average price execution, where an order is split and executed over time

delay between your decision and the market receiving and filling your order

the path your order takes to reach liquidity (venues, pools, makers), affecting fill quality and costs

getting a better execution price than the quoted best bid/ask at the time of the order

a limit that defines the worst acceptable execution price (often used in swaps) before an order is rejected

a futures curve state where futures prices trade above spot (or above nearer expiries)

a futures curve state where futures prices trade below spot (or below nearer expiries)

an option Greek that approximates how much the option price changes for a 1-unit move in the underlying

an option Greek that measures how much delta changes as the underlying price moves

an option Greek that approximates how much value an option loses per unit of time, all else equal

an option Greek that measures sensitivity to changes in implied volatility

a sharp drop in implied volatility after a catalyst, which reduces option premiums

the price at which an option can be exercised (the reference level for calls and puts)

the date/time when an option or future contract expires or settles

a pattern where implied volatility differs by strike price, often higher for deep OTM puts and calls

moving average convergence divergence; an indicator based on the relationship between two moving averages

volatility bands plotted around a moving average, typically using standard deviation

a momentum indicator comparing a closing price to its price range over a lookback period

average directional index; an indicator designed to estimate trend strength (not direction)

a method of marking potential pullback levels using ratios (commonly 38.2%, 50%, 61.8%) of a prior move

precomputed price levels (pivot, support, resistance) derived from prior session high/low/close

a zone some traders use to describe where aggressive buying or selling previously entered the market (often tied to a sharp move)

a price zone some traders define when a fast move leaves an imbalance (little trading) between levels

a price move that breaks a prior swing high/low, often used to suggest a change in trend or momentum

a move that runs above/below obvious levels (highs/lows) to trigger stops, then reverses

a bias where you seek information that supports your position and ignore information that contradicts it

a bias where you fixate on a reference point (entry price, previous high) and base decisions around it

continuing a behavior because you've already invested time or money, even when the original reasons no longer apply

believing a win is 'due' after a losing streak (or a loss is due after a winning streak)

overestimating your skill or certainty, often after a streak, leading to oversized risk and sloppy execution

reduced decision quality after making too many decisions, leading to impulsive or avoidant trading

increasing activity or risk after losses to try to get back to even quickly

overweighting information that is recent, vivid, or emotionally intense, even if it is statistically rare

treating money differently depending on where it came from (house money effect) instead of treating it as the same risk unit

trading under pressure to perform (prove yourself, hit a goal), which distorts decision-making and execution

an options position opened for a net credit by selling one option and buying another at a different strike

an options position opened for a net debit by buying one option and selling another at a different strike

a defined-risk options strategy combining a call credit spread and put credit spread to profit from range-bound price action

owning shares while selling call options against that stock to collect premium

selling a put option while holding enough cash to buy the underlying if assigned

the risk that a short option is exercised, forcing you to buy or sell the underlying position

a position setup where net delta is near zero so small price moves have limited directional impact

a percentile-style measure of where current implied volatility sits relative to its historical range

the standard unit of price movement in forex pairs, often 0.0001 for most majors

a standardized forex position size unit (standard, mini, micro) used to calculate exposure and pip value

the difference between bid and ask prices, representing an immediate transaction cost

a strategy that seeks return from interest-rate differentials between currencies, often with leveraged exposure

the overnight financing charge or credit applied to leveraged forex positions held past rollover time

price divided by earnings per share, used to compare how richly or cheaply a stock is valued

earnings per share divided by price (the inverse of P/E), expressed as a percentage

a company's net asset value (assets minus liabilities), often used for valuation context in asset-heavy sectors

annual dividends per share divided by share price, expressed as a percentage

market price per share divided by book value per share

the percentage of earnings paid out as dividends

the total market value of a company's equity, calculated as share price multiplied by shares outstanding

free cash flow per share divided by share price, or free cash flow divided by market capitalization

net income divided by shareholder equity, measuring how efficiently capital is converted into profits