Trading Glossary

Trading Glossary

Trading carries its own dense vocabulary, and a sloppy term in your head becomes a sloppy decision in your account. This reference lesson defines the 90+ terms you will encounter across the Academy, organised by domain rather than alphabet so the definitions reinforce each other instead of arriving as random flashcards.

G.1How to use this glossary

Skim it once front to back — you will not memorise everything, but you will recognise the shape of each section so you know where to look later. Bookmark this page; it is the index your brain will fall back to when a podcast host casually drops “the gamma flip is at 5,720“ and you need to reorient.

Each definition follows the same template: a one-sentence definition, a worked numerical example using a real-feeling ticker, and a watch-out noting the most common misuse. The numerical examples use prices and statistics consistent with conditions in early 2026 for plausibility, not as live quotes.

Across the Academy, terms first introduced here are bolded on first appearance in any lesson. If you see a bolded term you do not recognise, this is the page to bring it back into focus.

Precision in language is not pedantry — it is the cheapest form of risk management. A trader who confuses “limit” with “stop” pays for the lesson in fills.

G.2Order types & mechanics

The order ticket is where intention meets the market. Get the term wrong and the order does the wrong thing.

G.2.1Market order

An instruction to buy or sell immediately at whatever price the order book offers. Example: a market buy of 500 SPY at 10:01 a.m. fills at the prevailing offer, say $723.18. Watch-out: in thin or fast markets, market orders can fill 10–20+ ticks worse than the screen quote. Use only for highly liquid names or true emergency exits.

G.2.2Limit order

An order that fills only at a specified price or better. A limit buy at $118.40 on NVDA fills at $118.40 or below. Watch-out: limits guarantee price, not fills. If price never trades there, you sit out.

G.2.3Stop and stop-limit

A stop order becomes a market order once the trigger price prints. A stop-limit becomes a limit at the trigger. Example: long NVDA at $118.40 with stop at $114.10. Stop triggers at $114.10 and exits at the next available bid. In a gap, you fill at $111.20 instead. Stop-limit at $114.10/$113.50 caps the slippage but risks no fill if the gap goes through both prices.

G.2.4OCO and bracket

One-Cancels-Other: two orders linked so that filling one cancels the other. The bracket order combines an entry, a stop and a target into a single OCO unit — the standard professional ticket structure.

G.2.5Time-in-force flags

• DAY — expires at the closing bell.
• GTC — good-till-cancelled, persists across sessions (broker max often 90 days).
• IOC — immediate-or-cancel; partial fill, balance dies.
• FOK — fill-or-kill; entire order or nothing.

G.3Price & volume terms

The vocabulary of what price is doing and how convincingly.

G.3.1Support and resistance

Support is a price level where buyers historically defended; resistance is its mirror image. SPY $720 acts as support if multiple swing lows have rejected from there. The level is not a wall — it is a probabilistic zone, typically half an ATR wide. See Lesson 1.4 for the full treatment.

G.3.2Trend and consolidation

Trend is a sequence of higher highs and higher lows (uptrend) or the inverse. Consolidation is a sideways range typically 3–7% wide on the daily for large-caps. Most chart pattern names — flag, pennant, base — are subtypes of consolidation.

G.4Risk & portfolio terms

G.4.1R-multiple

R is the dollar amount risked on a single trade. An R-multiple normalises outcomes by R: a +2R winner is twice the planned risk. Example: $375 risked, trade closes at +$825 = +2.2R. Reporting in R-multiples removes position-size noise from your stats.

G.4.2Expectancy

Expected value per trade in R-multiples. E = (Win% × AvgWin) − (Loss% × AvgLoss). A 47% win rate with average win +1.8R and average loss −1.0R gives E = 0.47×1.8 − 0.53×1.0 = +0.31R.

G.4.3Drawdown

Peak-to-trough equity decline. Reported as max DD (worst observed) and current DD. A 15% max DD on a $50,000 account means equity briefly hit $42,500 before recovering. Recovery from −20% requires +25%; from −50%, +100%.

G.4.4Sharpe and Sortino

Sharpe = (return − risk-free) / total volatility. Sortino = (return − risk-free) / downside volatility only. A Sharpe of 1.0 is decent, 1.5 is good, 2.0+ is rare and usually overfit when seen in retail backtests.

G.4.5Beta and correlation

Beta is sensitivity to a benchmark. NVDA’s 1-year beta to SPY around 1.65 means a 1% SPY move expects a 1.65% NVDA move. Correlation is the standardised version, bounded [-1, +1].

G.4.6Kelly fraction

The bet size that maximises long-run log growth: f* = W − (1−W)/R, where W is win rate and R is average-win-to-loss ratio. Most traders use fractional Kelly (0.25×) because variance under full Kelly is brutal.

G.5Options & derivatives

G.5.1Call and put basics

A call gives the right to buy at the strike; a put gives the right to sell. Each contract typically covers 100 shares. SPY 725-strike call expiring 21 days out at $8.20 costs $820 per contract.

G.5.2The Greeks

G.5.3IV, IV rank and the VIX

Implied volatility (IV) is the market’s forward annualised standard deviation priced into options. IV rank is today’s IV percentile across the last 252 days. VIX is the 30-day IV of S&P options, rebased. A VIX print of 17.32 implies a ~1.0% daily expected SPY range.

G.5.4Spreads and structures

A vertical spread buys one strike and sells another in the same expiry; defined risk, defined reward. An iron condor sells an out-of-the-money put spread and call spread; profits in range, loses on expansion. A calendar sells a near-dated option and buys a longer-dated one at the same strike; profits if IV rises and price stays put.

G.6Market structure & participants

G.6.1Exchanges, ATSs and dark pools

Lit exchanges (NYSE, Nasdaq) display quotes publicly. ATSs (alternative trading systems) and dark pools match orders without pre-trade transparency. A typical large-cap US name routes 35–45% of volume to dark venues.

G.6.2Market makers and HFTs

A market maker quotes both sides continuously; their P&L is the spread minus inventory risk. High-frequency traders are a strategy class, not a venue, and execute many of those quotes. Citadel Securities and Virtu together intermediate the majority of US retail flow.

G.6.3Sessions and circuit breakers

Pre-market runs roughly 04:00–09:30 ET; regular hours 09:30–16:00; after-hours 16:00–20:00. Limit-up / limit-down (LULD) bands halt single names that move beyond a percentage band. Market-wide circuit breakers trigger pauses at −7%, −13%, and −20% SPX moves intraday.

G.6.4Indices and breadth tools

SPX is the cash S&P 500 index; SPY is the ETF, traded in dollars roughly 1/10th of SPX. NDX tracks Nasdaq-100; QQQ is its ETF. RUT is the Russell 2000 (small caps), tracked by IWM. Breadth indicators count participation: advance-decline line, McClellan Oscillator, MPI (Market Participation Index, custom), percent of S&P above the 50-day. An MPI of 78 indicates broad participation; below 35 suggests a narrow tape vulnerable to reversal.

G.7Common mistakes in vocabulary

Three patterns of misuse cause real money to vanish.

G.7.1Calling a stop a target

A trader says, “my stop is $114.” Pressed, they admit it’s where they hope price will turn around — not a hard exit. That is not a stop, that is a target dressed up as protection. A real stop has an order working at the broker.

G.7.2Confusing volume with liquidity

High volume in 1-second windows is not liquidity if the depth disappears the moment a real order arrives. Liquidity is depth at quote, not flickering size on the screen.

G.7.3Treating beta as constant

NVDA’s beta to SPY can swing from 1.4 to 2.1 across a year depending on regime. Hedge ratios computed from a one-year average can leave portfolios under-hedged in the regime that actually matters.