Trading lingo

Plain-English definitions for every term used across the curriculum — search by name or by what it means, or browse by category.

112 terms

Market basics

ADR (Average Daily Range): The average distance a stock or contract travels from high to low over a recent stretch of sessions, usually 14 or 20 days. It gives you a baseline for how far a normal day moves so you can judge whether today's range is unusually wide or unusually quiet.
Ask: The lowest price a seller is currently willing to accept. If you want to buy immediately, this is the price you pay.
Bid: The highest price a buyer is currently willing to pay. If you want to sell immediately, this is the price you receive.
Catalyst: A specific piece of news or data — earnings, guidance, an economic release, a regulatory decision — that shifts how the market prices something. Catalysts explain why a move started, not whether it will continue.
Drawdown: The decline in an account's value from a prior peak, usually shown as a percentage. It measures how deep a losing stretch got, independent of how the account is doing now.
Gap: The difference between where a stock closed and where it opens the next session, leaving a visible hole on the chart between the two candles. Gaps usually reflect news or order-flow imbalance that built up while the market was closed.
Intraday margin: The buying power your broker extends during the trading day, tied to your actual positions and exposure rather than a fixed trade count. Since U.S. regulators retired the old pattern-day-trader framework in 2026, this is how brokers manage day-trading risk — and policies differ from broker to broker.
Last: The price at which the most recent trade actually executed, as distinct from the bid or ask. It tells you what someone just paid, not what the next buyer or seller is offering.
Leveraged ETF: A fund built to deliver a multiple — commonly 2x or 3x — of a benchmark's daily return, using derivatives and debt to do it. The leverage resets daily, so returns over longer periods can drift meaningfully from the simple multiple of the underlying's move.
Liquidity: How easily an instrument can be bought or sold near its current price without moving that price. High liquidity means tight spreads and orders that fill quickly at close to the quoted price; low liquidity means the opposite.
Margin: Money borrowed from a broker to increase buying power beyond your own cash. It amplifies both gains and losses, and the broker can force a sale if the account falls below required levels.
Market regime: The broad character of the market over a stretch of time — trending, range-bound, high-volatility, low-volatility — that tends to favor some approaches and punish others. What worked well in one regime can stop working once conditions change underneath it.
Relative strength: How a stock is performing compared to a benchmark, a sector, or its peers over the same period. A stock holding up while the broader market falls, or leading it higher, is showing relative strength.
Slippage: The gap between the price you expected an order to fill at and the price it actually filled at. It grows with low liquidity, fast-moving prices, and larger order sizes.
Spread: The gap between the bid and the ask at any moment. A tight spread signals an actively traded, liquid instrument; a wide spread signals the opposite and adds cost to entering and exiting.
Volume: The number of shares or contracts traded over a given period. It measures participation — how much conviction, or how little, stands behind a price move.

Orders & execution

Day order: An order that automatically cancels at the end of the trading session if it hasn't filled. You have to re-enter it the next day if you still want it working.
Fill: The completed execution of an order — the price and size at which your buy or sell actually went through. An order can be unfilled, partially filled, or fully filled.
GTC order (Good-Til-Canceled): An order that stays active across multiple sessions until it either fills or you cancel it, instead of expiring at the end of the day. Useful for orders set at a price you don't expect to reach immediately.
Limit order: An order that only fills at a specified price or better. It guarantees the price you get but not that the order fills at all — if the market never reaches your limit, it sits unfilled.
Market order: An order that fills immediately at the best currently available price. It guarantees execution but not the exact price, which can drift from what you last saw quoted, especially in thin or fast markets.
Partial fill: An order that executes for less than its full requested size, leaving the remainder either working or canceled depending on the order type. Common in less liquid instruments or when an order is larger than the size available at the best price.
Stop order: An order that sits inactive until price reaches a trigger level, at which point it becomes a market order. Commonly used to exit a losing position automatically or to enter on a breakout above a level.
Stop-limit order: A stop order that becomes a limit order, rather than a market order, once triggered. It protects against filling at a wildly worse price during a fast move, at the cost of a real chance the order doesn't fill at all.
Time stop: A rule to exit a trade after a set amount of time if it hasn't done what you expected, regardless of whether it has hit a price-based stop or target. It keeps capital from sitting idle in a trade that has stopped behaving the way your thesis required.

Candles & patterns

Ascending triangle: A consolidation pattern with a flat resistance line on top and a rising line of higher lows underneath, showing buyers stepping in at progressively higher prices while sellers defend one fixed level. It's generally read as a continuation pattern in an uptrend, resolving higher when the flat top finally gives way.
Bear flag: A brief, mild pullback that slopes gently against a sharp prior decline, forming a small rectangle or channel against the trend. It represents a pause before the prior downward move potentially continues.
Breakout: A move where price pushes decisively through a defined level — resistance, a trendline, or the edge of a range — and keeps going rather than reversing back inside. A breakout is only meaningful in hindsight once it holds; in the moment, it's always a bet on continuation.
Bull flag: A brief, mild pullback that slopes gently against a sharp prior advance, forming a small rectangle or channel against the trend. It represents a pause before the prior upward move potentially continues.
Candle body: The thick rectangular part of a candlestick, spanning the distance between a period's opening and closing price. A wide body signals a strong directional move over that period; a narrow body signals indecision or a small net move.
Consolidation: A stretch where price trades sideways within a defined range instead of trending, as buyers and sellers reach a temporary standoff. Consolidations often precede a breakout once one side gains the upper hand.
Cup and handle: A bullish continuation pattern shaped like a rounded bowl (the cup) followed by a smaller, shallower pullback near the prior high (the handle). The pattern is considered complete when price breaks above the level that formed the top of the cup.
Descending triangle: A consolidation pattern with a flat support line underneath and a falling line of lower highs above it, showing sellers pressing in at progressively lower prices while buyers defend one fixed level. It's generally read as a continuation pattern in a downtrend, resolving lower when the flat bottom finally gives way.
Doji: A candle whose open and close land at nearly the same price, leaving little to no visible body. It signals indecision — neither buyers nor sellers won control over that period.
Double bottom: A reversal pattern where price tests the same support area twice, fails to break lower on the second attempt, and then rallies past the high between the two lows. It suggests sellers ran out of force to push through a level a second time.
Double top: A reversal pattern where price tests the same resistance area twice, fails to break higher on the second attempt, and then falls past the low between the two highs. It suggests buyers ran out of force to push through a level a second time.
Engulfing candle: A two-candle pattern where the second candle's body fully swallows the body of the candle before it, in the opposite direction. A bullish engulfing candle after a decline, or a bearish engulfing candle after an advance, suggests a sudden shift in who is in control.
Expansion bar: A bar that clears a prior range on volume clearly heavier than what built that range, marking the point where a quiet consolidation converts into a real move. It matters most as confirmation layered on top of a structural break, not as a signal on its own.
Fakeout: A move that appears to break out of a level or pattern but quickly reverses back inside, trapping traders who acted on the initial break. Fakeouts are why many traders wait for a level to hold before treating a breakout as real.
Falling wedge: A pattern where price makes lower highs and lower lows, but the two converging trendlines narrow the range as the decline loses downward momentum. It's typically read as bullish, resolving upward once price breaks the upper trendline.
Hammer: A candle with a small body near the top of its range and a long lower wick, formed after a decline. It shows sellers pushed price sharply lower during the period before buyers stepped in and drove it back up.
Head and shoulders: A reversal pattern made of three peaks — a higher middle peak (the head) flanked by two lower, roughly even peaks (the shoulders) — connected by a support line called the neckline. The pattern is considered complete when price breaks below the neckline after the second shoulder.
Higher high and higher low: The structural signature of an uptrend: each swing high sits above the last, and each swing low sits above the last swing low too. As long as that sequence holds, the trend is intact by definition.
Lower high and lower low: The structural signature of a downtrend: each swing high sits below the last, and each swing low sits below the last swing low too. As long as that sequence holds, the downtrend is intact by definition.
Resistance: A price area where selling pressure has previously overwhelmed buying pressure, stalling or reversing an advance. The more times a level rejects price, the more traders tend to watch it — though enough pressure eventually breaks any level.
Retest: A return to a level shortly after price has broken through it, checking whether that level now holds in its new role — resistance becoming support, or vice versa. A retest that holds adds confidence to a breakout; one that fails looks more like a fakeout.
Shooting star: A candle with a small body near the bottom of its range and a long upper wick, formed after an advance. It shows buyers pushed price sharply higher during the period before sellers stepped in and drove it back down.
Support: A price area where buying pressure has previously overwhelmed selling pressure, stalling or reversing a decline. The more times a level holds price up, the more traders tend to watch it — though enough pressure eventually breaks any level.
Wick: The thin line extending above or below a candle's body, marking the high and low reached during that period beyond the open and close. Long wicks show price was rejected at an extreme and pulled back before the period ended.

Volume & structure

Accumulation: A stretch where a position is being built quietly, often inside a range, without pushing price sharply higher. It's typically inferred from volume and range behavior rather than observed directly, since no single trade announces it.
Demand zone: A price area where buying previously stepped in forcefully enough to reverse or sharply accelerate price higher, marking a zone worth watching if price returns to it. It's a looser, range-based cousin of a single support line.
Distribution: A stretch where a position is being unwound quietly, often inside a range, without pushing price sharply lower. It's typically inferred from volume and range behavior rather than observed directly, since no single trade announces it.
EMA: Exponential moving average — a trend line that averages recent closing prices while weighting the most recent ones more heavily than older ones. That weighting makes it react to new price action faster than a simple moving average of the same length.
EMA stack: The top-to-bottom order of price relative to a set of EMAs of different lengths at a given moment. Reading the stack — whether price and the EMAs agree on direction or are tangled together — is a quick way to judge whether a trend exists and which way it points.
Relative volume: Current volume compared to what's typical for that instrument at the same point in the session, usually expressed as a multiple. A stock trading at several times its relative volume is drawing unusual attention.
Supply zone: A price area where selling previously stepped in forcefully enough to reverse or sharply accelerate price lower, marking a zone worth watching if price returns to it. It's a looser, range-based cousin of a single resistance line.
Volume profile: A chart showing how much volume traded at each price level over a chosen period, displayed as a horizontal histogram alongside the price axis. It reveals which prices attracted heavy participation and which were passed through quickly.
Volume shelf: A price level on a volume profile where trading activity noticeably piled up, standing out against a comparatively empty stretch around it. Shelves often mark prices the market previously agreed were fair, which can act as support or resistance later.

Risk & sizing

1-2% rule: A guideline capping the amount of capital risked on any single trade at roughly 1 to 2 percent of total account value. It's meant to keep any one losing trade — or several in a row — from doing lasting damage to the account.
Breakeven win rate: The minimum percentage of trades that must win, given a strategy's average win and loss sizes, just to avoid losing money over time. Comparing your actual win rate to this number shows whether a strategy has room to be profitable or is structurally underwater.
Expectancy: The average amount a strategy makes or loses per trade over time, calculated from its win rate and the average size of wins versus losses. It's the single number that determines whether a strategy is worth trading, regardless of how any individual trade turned out.
FOMO: Fear of missing out — the urge to enter a trade late, chasing a move that has already run, because it feels like it will keep going without you. Trades entered on FOMO typically skip the planning and sizing discipline applied to trades entered on a normal signal.
Invalidation: The specific price or condition that, if reached, proves the original trade thesis wrong. Defining invalidation before entering is what turns a stop-loss placement into a decision instead of a guess.
Maximum loss: The largest amount a position or strategy can lose given its structure — defined precisely for options by the combination of legs, and defined by a stop-loss for a straightforward stock or futures position. Knowing this number before entering is what makes a position's risk a known quantity rather than an open-ended one.
Position sizing: The process of deciding how many shares or contracts to trade, based on your account risk limit and the distance to your stop, rather than picking a round dollar amount. Correct position sizing makes the dollar risk on every trade consistent even though share counts vary.
R: Shorthand for the initial dollar risk on a trade — what you stood to lose if the stop was hit. Measuring results in R lets you compare trades of very different sizes on the same scale.
R multiple: A trade's profit or loss expressed as a multiple of its initial risk (R). A trade that made twice what it risked is +2R; a trade that hit its stop exactly is -1R.
Revenge trading: Entering a trade — often oversized or poorly planned — specifically to recover a recent loss quickly, rather than because the setup itself earned it. It replaces process with emotion, and tends to compound the original loss rather than fix it.
Risk-to-reward: The ratio between what a trade stands to lose if it fails and what it stands to gain if it works, measured from entry to stop and entry to target. A favorable risk-to-reward ratio means the potential gain is meaningfully larger than the potential loss on the same trade.
Stop-loss: A predetermined price at which a losing position will be closed to cap further loss. Setting it before entering a trade, rather than deciding in the moment, keeps the exit decision from being made under pressure.

Futures

Front month: The futures contract closest to expiration that still carries the bulk of trading volume. Most day traders stay in the front month because it has the tightest spreads and deepest liquidity, then move to the next contract as expiration nears.
Futures contract: A standardized agreement to buy or sell something — a stock index, a commodity, a currency — at a set price on a future date. Traders rarely hold to delivery; they trade the price itself and exit before expiration, with leverage built in through margin.
Futures margin: The good-faith deposit required to hold a futures contract — a performance bond, not borrowed money. Exchanges set minimums, brokers often discount them intraday, and holding past the session close requires the larger overnight amount.
Micro contract: A smaller version of a standard futures contract — typically one-tenth the size — with a proportionally smaller tick value and margin requirement. Micros let smaller accounts trade the same markets with dollar risk that fits their size.
Rollover: Closing a position in an expiring futures contract and reopening it in the next contract month. Volume migrates to the new contract in the days before expiration, so traders roll early to keep trading a liquid market.
Tick size: The smallest price increment a futures contract can move — a quarter point on the major index contracts, other fixed steps elsewhere. Charts, stops, and targets all move in these units rather than pennies.
Tick value: The dollar amount one tick of movement is worth per contract. The same price move can be worth ten times more on a full-size contract than on its micro, so tick value — not the chart — determines what a stop actually costs.

Options

0DTE: Shorthand for an option expiring the same day it's traded — zero days to expiration. These contracts carry almost pure extrinsic value that decays to nothing by the closing bell, making their pricing extremely sensitive to small moves in the underlying.
Assignment: The process by which an option seller is required to fulfill the contract — delivering or buying the underlying shares — after the buyer exercises it. Assignment can happen any time for American-style options, though it's most common near expiration or around dividends.
ATM: At-the-money — an option whose strike price is at or very close to the current price of the underlying. ATM options have the highest extrinsic value of any strike at a given expiration because their outcome is the most uncertain.
Breakeven: The underlying price at which an option position neither makes nor loses money at expiration, after accounting for the premium paid or received. For a simple long call, it's the strike plus the premium paid; for a long put, the strike minus the premium paid.
Call: A contract giving its buyer the right, but not the obligation, to buy the underlying at a set strike price before expiration. Buyers of calls profit when the underlying rises; sellers take on the opposite side of that bet in exchange for the premium.
Contract: One options agreement, which by convention represents the right to buy or sell 100 shares of the underlying. Prices are quoted per share, so a $2.00 option premium costs $200 per contract.
Delta: A measure of how much an option's price is expected to move for a $1 move in the underlying. It also serves as a rough estimate of the probability the option finishes in the money.
DTE: Days to expiration — the number of calendar days remaining before an option contract expires. It's one of the main inputs into how much time value an option carries, alongside the underlying's volatility.
Expected move: The range the options market is currently pricing a stock to trade within by a given date, derived from implied volatility. It's a probability-based estimate, not a prediction — the underlying can and does move outside it.
Expiration: The date an option contract stops existing, after which it either gets exercised, assigned, or expires worthless. All of an option's remaining time value collapses to zero at expiration.
Gamma: A measure of how fast an option's delta changes as the underlying price moves. High gamma means an option's directional exposure can shift quickly, which is most pronounced for near-the-money options close to expiration.
Implied volatility: The level of future price movement the options market is currently pricing into a contract, derived by working backward from its premium. Higher implied volatility means richer option premiums, since a bigger expected range makes any given strike more likely to be reached.
Intrinsic value: The portion of an option's premium that comes from being in the money — the real, immediate value if it were exercised right now. An option that is at or out of the money has zero intrinsic value; its entire premium is extrinsic.
ITM: In-the-money — a call with a strike below the current underlying price, or a put with a strike above it. ITM options carry intrinsic value in addition to any extrinsic value.
IV crush: A sharp drop in implied volatility, and therefore option premiums, right after an anticipated event like earnings resolves. Even a stock moving in the direction an option holder expected can still lose money if IV crush outweighs the directional gain.
LEAPS: Long-term option contracts with expirations more than a year out. They carry a large amount of time value but decay far more slowly day to day than short-dated options, since so much time remains until expiration.
Moneyness: Where an option's strike sits relative to the underlying's current price — in, at, or out of the money. It's the main driver of how much of an option's premium is intrinsic value versus extrinsic value.
Open interest: The total number of option contracts at a given strike and expiration that remain open — bought or sold but not yet closed, exercised, or expired. Rising open interest alongside rising volume suggests new positions are being built rather than existing ones being traded back and forth.
Option: A contract that gives its buyer the right, but not the obligation, to buy or sell an underlying asset at a set price before a set date. The seller collects a premium in exchange for taking on the obligation if the buyer chooses to exercise.
Option chain: The full listing of available calls and puts for an underlying, organized by strike price and expiration date. It typically shows each contract's premium, volume, open interest, and Greeks side by side.
OTM: Out-of-the-money — a call with a strike above the current underlying price, or a put with a strike below it. OTM options have no intrinsic value; their entire premium is extrinsic, time-based value.
Premium: The price paid by the buyer, and received by the seller, for an option contract. It's made up of intrinsic value (if any) plus extrinsic value, and it's quoted per share before multiplying by the 100-share contract size.
Put: A contract giving its buyer the right, but not the obligation, to sell the underlying at a set strike price before expiration. Buyers of puts profit when the underlying falls; sellers take on the opposite side of that bet in exchange for the premium.
Straddle: An options position combining a call and a put at the same strike and expiration, typically bought together to profit from a large move in either direction. It profits from volatility itself, regardless of which way the underlying eventually goes, as long as the move is big enough to cover the combined premium.
Strike: The fixed price at which an option's buyer can exercise the right to buy (for a call) or sell (for a put) the underlying. Every option chain lists a range of strikes above and below the current underlying price.
Theta: A measure of how much an option's price is expected to decline per day purely from the passage of time, holding everything else constant. Theta accelerates as expiration approaches, which is why short-dated options lose extrinsic value faster than long-dated ones.
Vega: A measure of how much an option's price is expected to change for a one-point change in implied volatility. Options with more time until expiration generally carry higher vega, since there's more time for volatility to matter.
Weeklies: Options contracts that expire every week rather than only on the standard monthly cycle. They give traders more granular control over expiration timing but decay faster day to day because so little time remains until they expire.

Screening & process

Backtesting: Testing a trading strategy against historical price data to see how it would have performed, before risking real capital on it. It's useful for sanity-checking an idea, though past results never guarantee how a strategy performs going forward.
CANSLIM: A stock-screening framework built around seven characteristics — including current and annual earnings growth, new factors like products or leadership, and institutional sponsorship — used to identify fundamentally and technically strong candidates. It's one structured way to narrow a large universe of stocks down to a shorter watchlist.
Earnings gap: A gap in price that opens after a company reports earnings, reflecting the market digesting results and guidance overnight or over a weekend. Earnings gaps tend to be larger and more volatile than ordinary gaps because they're driven by genuinely new information.
Screener: A tool that filters the full universe of tradable instruments down to a shorter list matching specific criteria — price, volume, sector, technical setup, or fundamentals. Screeners turn "what looks interesting today" from a manual scan into a repeatable, defined process.
Trading journal: A running record of trades taken, including the reasoning behind each one, the outcome, and any lessons drawn from it. Reviewing it over time is how patterns in your own decision-making — good and bad — become visible instead of staying anecdotal.
Trading playbook: A personal reference of the specific setups a trader has defined for themselves, including what qualifies a candidate, where to enter, and where the idea is invalidated. Trading only from setups in the playbook, rather than improvising, is what makes results comparable from one trade to the next.
Watchlist: A curated list of instruments being actively monitored for a potential trade, typically narrowed down from a screener or ongoing research. Keeping it short enough to actually watch closely is generally more useful than keeping it comprehensive.