Trading Dictionary
139+ Trading Terms Explained
Plain-English definitions for active traders - from order types and chart patterns to options Greeks and trader slang.
A four-point harmonic chart pattern where price makes an initial impulse leg (AB), a corrective pullback (BC), and then a continuation leg (
Trading that occurs after the regular market session closes at 4:00 PM ET, typically available from 4:00 PM to 8:00 PM ET. After-hours volum
The inability to pull the trigger on a trade because of excessive analysis, conflicting signals, or fear of being wrong. The trader keeps ad
An ascending triangle is a bullish chart pattern with a flat upper resistance line and a rising lower trendline — buyers are stepping up at
The ask is the lowest price a seller is currently willing to accept. When you buy with a market order, you pay the ask.
Average loser is your mean loss across all losing trades in a given period — it's the number that tells you whether your losers are staying
Average True Range (ATR) measures how much a stock or market typically moves over a set number of periods — it's a pure volatility reading,
Average winner is the mean profit across all your winning trades — the number you compare against average loser to know whether your strateg
The process of running a defined trading strategy against historical price data to evaluate how it would have performed before risking real
A bag holder is a trader stuck in a losing position that has moved so far against them — usually because they refused to cut the loss — that
A bear flag is a continuation pattern where price pauses in a tight, slightly upward channel after a sharp drop — it looks like a brief rest
A bear market is a sustained decline of 20% or more in a major stock index from recent highs — characterized by falling prices, deterioratin
The bid is the highest price a buyer is currently willing to pay. When you sell with a market order, you receive the bid price.
The bid-ask spread is the difference between the highest price buyers will pay and the lowest price sellers will accept — it's an immediate,
Bollinger Bands are three lines plotted around price: a middle moving average and two outer bands set at standard deviations above and below
A bracket order is a single order entry that simultaneously places three orders: your entry, a profit target above it, and a stop-loss below
A break-even stop is moving your stop-loss order to your exact entry price once a trade has moved sufficiently in your favor — it turns a ri
A breakout is when price moves decisively beyond a defined level — a resistance zone, a consolidation boundary, a chart pattern boundary, or
A bull flag is a continuation pattern where a stock pauses in a tight, slightly downward channel after a sharp move higher — it's called a f
A bull market is a sustained period of rising prices in the broader market — traditionally defined as a 20% or greater rise from a recent si
A call option gives the buyer the right — but not the obligation — to purchase 100 shares of a stock at the strike price any time before exp
A candlestick is a single bar on a price chart showing four pieces of data for a specific time period: the opening price, the high, the low,
A catalyst is the specific event or news item that triggers unusual price movement in a stock — earnings reports, FDA decisions, analyst upg
Chop is a market condition where price oscillates back and forth in a tight, directionless range with no follow-through in either direction
Confirmation bias is the tendency to seek out, notice, and remember information that supports a trade idea you've already formed — while sub
Consolidation is a period where price moves sideways within a relatively tight range after a directional move — it reflects a temporary equi
The Consumer Price Index (CPI) is a monthly U.S. government report measuring the average change in prices paid by consumers for goods and se
A dead cat bounce is a brief, temporary recovery in a stock that has been in a steep decline — appearing to reverse but quickly resuming the
A bearish technical signal that occurs when a shorter-term moving average crosses below a longer-term moving average — most commonly when th
Delta is an options Greek that measures how much an option's price is expected to change when the underlying stock moves $1 — a call with a
Diamond hands is internet trading slang for holding a position through severe volatility and losses without selling — originally used to pra
A dip buy is entering a long position after price has pulled back from a recent high — the goal is getting a better entry price in a stock t
Trading discipline is the consistent application of your predefined rules — entries, stops, targets, position sizing, maximum daily loss — r
A doji is a candlestick where the opening and closing prices are nearly identical, creating a very small body with wicks extending above and
A bullish reversal pattern formed by two consecutive troughs at roughly the same price level, creating a "W" shape on the chart. It signals
A double top is a bearish reversal pattern that forms when price advances to a high, pulls back, then rallies again to approximately the sam
Dovish describes a monetary policy stance that favors keeping interest rates low, accommodating economic growth, or signaling tolerance for
A drawdown is the peak-to-trough decline in account equity — it measures how far you've fallen from your high-water mark, either from a sing
An earnings report is the quarterly financial disclosure a public company files with the SEC, revealing revenue, earnings per share (EPS), p
An engulfing candle is a candlestick whose body completely covers — or 'engulfs' — the prior candle's body, signaling a potential shift in c
Expectancy is the average amount your strategy makes or loses per dollar risked — it's the single best number for evaluating whether your tr
The expiration date is the last day an options contract can be exercised or traded — after this date, the option either expires worthless (i
An exponential moving average (EMA) is a moving average that weights recent price data more heavily than older data — making it faster to re
A fakeout is when price briefly breaks through a key level — appearing to confirm a breakout or breakdown — but immediately reverses, trappi
A false breakout occurs when price moves beyond a key level (resistance, support, a chart pattern boundary) but fails to sustain the move an
Fibonacci retracement levels are horizontal lines drawn at key ratios (23.6%, 38.2%, 50%, 61.8%, 78.6%) between a significant swing high and
A fill is the execution of an order — when your buy or sell order is matched with a counterparty and the transaction is completed, you've re
Float is the number of shares of a company that are actually available for public trading — it excludes shares held by insiders, major insti
The Federal Open Market Committee (FOMC) is the Federal Reserve committee that sets U.S. monetary policy — most importantly, the target fede
FOMO — Fear of Missing Out — is the emotional pressure that drives traders to chase moves they've already missed, entering at suboptimal pri
A futures contract is a standardized agreement to buy or sell a specific asset at a predetermined price on a specified future date — widely
Gamma is the options Greek that measures the rate of change in delta for every $1 move in the underlying stock — high gamma means delta shif
A gap is a price discontinuity on a chart where a stock opens significantly higher or lower than the previous session's close, leaving a vis
A momentum strategy where a trader enters a stock that gapped up (or down) at the open and continues moving in the direction of the gap — ra
A gap fill occurs when price retraces to close the open space left by a gap — returning to the level where the gap originated — and is one o
A golden cross is a bullish technical signal that occurs when a shorter-term moving average (typically the 50-day SMA) crosses above a longe
Guidance is forward-looking financial projections that a company's management provides for upcoming periods — typically covering expected re
A temporary suspension of trading in a specific stock, ordered by an exchange or regulator. Halts pause all buying and selling activity and
A single-candle reversal pattern with a small body near the top of the candle and a long lower wick — at least twice the body length. It sig
Hawkish describes a monetary policy stance favoring higher interest rates, reduced money supply, or tighter financial conditions to control
A head and shoulders pattern is a classic reversal formation with three peaks — a higher middle peak (the head) flanked by two lower peaks (
A higher high occurs when price makes a swing peak that is above the previous swing peak — it's one of the two defining features of an uptre
A higher low is a swing low that is above the previous swing low — paired with higher highs, it's the second component that confirms an uptr
HOD stands for High of Day — the highest price a stock has reached in the current regular trading session, often used as a key breakout leve
Implied volatility (IV) is the market's forward-looking estimate of how much a stock will move, derived from current option prices — high IV
An option is in the money (ITM) when exercising it immediately would be profitable — a call option is ITM when the stock price is above the
IV crush is the rapid collapse in implied volatility immediately after a major binary event — such as earnings, an FDA decision, or a Fed an
Level 2 data shows the full order book — all the bids and asks queued at multiple price levels beyond the inside bid and ask — giving trader
A limit order is an instruction to buy or sell a security at a specified price or better — a buy limit will only execute at your price or lo
Liquidity in trading refers to how easily you can enter and exit a position at a fair price — a liquid stock has high volume and a tight bid
LOD stands for Low of Day — the lowest price a stock has traded at during the current regular session, and a critical reference point for su
Loss aversion is the psychological tendency to feel the pain of a loss approximately twice as intensely as the pleasure of an equivalent gai
A lower high is a swing high that is below the previous swing high — paired with lower lows, it's the second component that confirms a downt
A lower low is when price makes a swing low that is below the previous swing low, confirming a downtrend in market structure — the mirror im
MACD (Moving Average Convergence Divergence) is a momentum and trend-following indicator that measures the relationship between two exponent
Margin is borrowed capital from your broker that lets you control a larger position than your cash balance would otherwise allow — a $25,000
A market order is an instruction to buy or sell immediately at the best available price — it guarantees execution but not the price, meaning
Maximum daily loss (max daily loss) is a self-imposed rule — or a broker/prop firm imposed rule — that automatically stops your trading for
Mean reversion is the trading concept that after an extreme price move away from an average (VWAP, a moving average, a prior range), price h
Momentum trading is an approach that identifies stocks moving strongly in one direction — usually driven by a catalyst, high relative volume
A moving average smooths out price data by calculating the average closing price over a set number of periods — it filters out noise and ide
Open interest is the total number of outstanding (open) options contracts that have not been exercised, expired, or closed — it measures how
An Opening Range Breakout (ORB) is a trading strategy that defines the high and low of the first N minutes of the session (commonly 5, 15, o
Option premium is the total price you pay to buy an options contract, composed of two parts: intrinsic value (the amount the option is alrea
An option is out of the money (OTM) when exercising it immediately would not be profitable — a call is OTM when the stock price is below the
A technical condition where an asset has risen so far, so fast that momentum indicators suggest the move may be extended and due for a pullb
The cognitive bias where a trader overestimates the accuracy of their predictions, the quality of their edge, or their ability to handle ris
A technical condition where an asset has declined so far, so fast that momentum indicators suggest the selling may be exhausted and a bounce
Overtrading is taking too many trades — whether from boredom, greed, frustration, or an inability to sit on your hands — leading to degraded
Paper hands is trading slang for exiting a position at the first sign of weakness or minor adverse movement — the opposite of diamond hands
A near-vertical price acceleration where a stock or asset moves sharply higher (or lower) in a short period, its trajectory curving steeply
Patience in trading is the discipline to wait for your exact setup criteria to be met before entering — resisting the urge to force trades i
The former Pattern Day Trader rule — an SEC/FINRA regulation that required retail traders to maintain at least $25,000 in a margin account t
A pin bar (also called a hammer, shooting star, or rejection candle depending on direction) is a single candlestick with a long wick and sma
Position size is the number of shares, contracts, or dollar value you deploy in a single trade — determined by the relationship between your
Pre-market trading is the session that occurs between 4:00 AM and 9:30 AM Eastern, before the regular market opens — it allows traders to re
Profit factor is the ratio of total gross profit to total gross loss across a set of trades — a profit factor above 1.0 means you're profita
A profit target is a predetermined exit price where you plan to close a winning trade and lock in gains — defined before you enter the posit
A pullback is a temporary counter-trend price movement within an established trend — in an uptrend, a pullback is a short-term decline that
A put option gives the buyer the right — but not the obligation — to sell 100 shares of the underlying stock at the strike price before the
R-multiple is a way to measure trade outcomes in units of initial risk — a 2R trade means you made twice your initial risk as profit, a -1R
A range (or trading range) is a price zone where a stock oscillates between a defined support floor and resistance ceiling without making me
A rate cut is when the Federal Reserve lowers its benchmark federal funds rate target, which reduces borrowing costs throughout the economy
A rate hike is when the Federal Reserve raises its benchmark federal funds rate target, increasing borrowing costs across the economy to slo
The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of recent price changes on a 0–100 scale —
Relative volume (RVOL) compares a stock's current trading volume to its average volume for the same time of day, expressed as a multiple — a
Resistance is a price level where selling pressure has historically overcome buying pressure, causing price to stall, reverse, or consolidat
Revenge trading is the impulsive act of placing new trades immediately after a loss — or multiple losses — in an attempt to quickly recover
Risk per trade is the maximum dollar amount you're willing to lose on a single position if your stop is hit — typically expressed as a perce
The risk-reward ratio compares the potential profit of a trade to the maximum loss if the stop is hit — a 3:1 risk-reward means you stand to
A rug pull is when insiders, promoters, or large holders of a low-float stock or cryptocurrency suddenly sell all of their holdings into ret
Scalping is a trading style that targets very small price moves — often just cents or a few ticks — entering and exiting positions within se
A broad grouping of companies that operate in the same segment of the economy — such as Technology, Healthcare, Energy, or Financials. Stock
Short interest is the total number of a stock's shares currently sold short, expressed as a percentage of the float — it measures the collec
Short selling is borrowing shares from a broker and selling them at the current price with the intention of buying them back later at a lowe
Slippage is the difference between the price you expected to receive when placing a trade and the actual fill price you got — it occurs beca
A squeeze (short squeeze) occurs when a stock that is heavily shorted rises sharply, forcing short sellers to buy back shares to cover their
A stop order (also called a stop-market order) becomes a market order and executes immediately at the best available price once the stock to
A stop-limit order combines a stop price (trigger) and a limit price (maximum/minimum acceptable fill) — once the stock hits the stop price,
A stop-loss order is a predetermined exit point placed below a long position (or above a short) that automatically closes the trade if price
The strike price (or exercise price) is the fixed price at which an options contract can be exercised — for a call option, it's the price at
Support is a price level where buying pressure has historically overcome selling pressure, causing price to stop declining and reverse — it'
Swing trading is a style that holds positions for days to weeks, aiming to capture one directional swing within a larger trend — it requires
The skill of interpreting real-time order flow — watching the time & sales (the "tape"), Level 2 quotes, and print sizes — to gauge the bala
Theta is the options Greek that measures time decay — the rate at which an option's extrinsic (time) value decreases each day as expiration
Tilt is a trading state of emotional dysregulation — usually triggered by a string of losses, a missed trade, or a violation of your plan —
Time-in-force (TIF) is an order instruction that tells the broker how long your order should remain active before automatically cancelling —
A written or digital record of every trade you take, capturing entry, exit, setup rationale, position size, emotions, and outcome. A consist
A trading plan is a written document that defines your strategy, the specific setups you trade, entry and exit rules, risk management parame
A trailing stop is a dynamic stop-loss order that automatically moves in your favor as the trade profits — locking in gains incrementally —
A trend is a sustained directional movement in price over time — an uptrend is characterized by a sequence of higher highs and higher lows,
Trend following is a systematic trading approach that identifies an established price trend and enters in that direction, holding the positi
A trendline is a straight line drawn connecting two or more swing highs (in a downtrend) or swing lows (in an uptrend) that defines the slop
Vega measures how much an option's price changes for every 1 percentage point change in implied volatility — a vega of 0.10 means the option
The CBOE Volatility Index — a real-time measure of the market's expectation for 30-day volatility in the S&P 500, derived from the prices of
Volume is the total number of shares (or contracts) traded during a given time period — it's the primary confirmation tool for all price act
VWAP (Volume Weighted Average Price) is the average price a security has traded at throughout the session, weighted by volume — it's the mos