Table of Contents / Glossary of Terms

Glossary of Terms

9. Glossary of Terms

This document provides a comprehensive reference of trading terminology, abbreviations, and definitions used throughout the knowledge base and in professional trading contexts. Terms are sorted alphabetically for easy lookup.

Term	Definition	Abbreviation	Category
Absorption	When one side absorbs the other's orders without price moving (hidden liquidity)	-	Volume & Order Flow
After-Hours	Trading that occurs after regular market hours	AH	Trading Sessions
Alpha	Returns in excess of what would be expected given beta exposure	-	Statistics & Quant
Analysis Paralysis	Inability to act due to overthinking or excessive analysis	-	Psychology
Asian Session	Primary forex trading hours when Tokyo markets are open	-	Trading Sessions
Ask / Offer	The lowest price a seller is willing to accept	-	Order & Execution
Average Directional Index	Measures trend strength regardless of direction	ADX	Indicators
Average True Range	A volatility measure showing the average range of price movement over a period	ATR	Technical Analysis
Backwardation	When futures prices are lower than expected spot price	-	Futures
Balance	A market state where buying and selling pressure are roughly equal	-	Price Action
Beta	A measure of an asset's volatility relative to a benchmark	-	Statistics & Quant
Bid	The highest price a buyer is willing to pay	-	Order & Execution
Bollinger Bands	Volatility bands placed above and below a moving average	BB	Indicators
Break of Structure	When price breaks beyond the most recent swing point in the trend direction	BOS	Technical Analysis
Breakout	A price move beyond a defined support or resistance level	-	Price Action
Change of Character	When price breaks structure against the prevailing trend; potential reversal signal	CHoCH	Technical Analysis
Commodity Channel Index	Momentum oscillator measuring deviation from average price	CCI	Indicators
Confirmation Bias	Seeking information that confirms existing beliefs while ignoring contradictory data	-	Psychology
Contango	When futures prices are higher than expected spot price	-	Futures
Contract Size	The notional value represented by one futures contract	-	Futures
Correlation	A measure of how two assets move in relation to each other	-	Statistics & Quant
Cumulative Delta	The running total of delta over time	-	Volume & Order Flow
Delta	The net difference between buying and selling volume	-	Volume & Order Flow
Depth of Market	A display showing the quantity of buy and sell orders at different price levels	DOM	Order & Execution
Doji	A candlestick with open and close at nearly the same price; signals indecision	-	Chart Patterns
Drawdown	The peak-to-trough decline in account equity before a new high is reached	-	Risk Management
E-mini	Smaller-sized futures contracts designed for retail traders	ES, NQ	Futures
Engulfing	A candle that completely engulfs the prior candle's body; reversal signal	-	Chart Patterns
Evening Star	Three-candle bearish reversal pattern	-	Chart Patterns
Exhaustion	The depletion of buying or selling pressure, often at extremes	-	Volume & Order Flow
Expectancy	The average expected return per trade, combining win rate with average win/loss size	-	Risk Management
Expected Shortfall	The expected loss given that loss exceeds VaR	ES / CVaR	Statistics & Quant
Exponential Moving Average	A moving average that gives more weight to recent prices	EMA	Technical Analysis
Fade	A counter-trend trade expecting price to reverse	-	Price Action
Fair Value Gap	A price imbalance created by strong momentum; area where price may return to rebalance	FVG	Technical Analysis
FOMO	Fear Of Missing Out; emotional urge to enter trades without proper setup	-	Psychology
Gap	A price discontinuity between one session's close and the next session's open	-	Trading Sessions
Gap Fill	When price moves back to fill the gap from a previous session	-	Trading Sessions
Globex	CME Group's electronic trading platform for futures	-	Futures
Hammer	Small body with long lower wick; bullish reversal signal at support	-	Chart Patterns
High Volume Node	A price level with significant volume accumulation	HVN	Volume & Order Flow
Higher High	A swing high that exceeds the previous swing high (uptrend indicator)	HH	Technical Analysis
Higher Low	A swing low that is higher than the previous swing low (uptrend indicator)	HL	Technical Analysis
Ichimoku Cloud	A comprehensive indicator showing support, resistance, trend, and momentum	-	Indicators
Initial Balance	The price range established in the first hour of trading	IB	Futures
Initial Margin	The minimum deposit required to open a new position	-	Order & Execution
Inside Bar	A bar with range entirely contained within the prior bar; consolidation	-	Chart Patterns
Kelly Criterion	A formula for optimal position sizing to maximize long-term growth	-	Statistics & Quant
Keltner Channels	Volatility-based bands using ATR around an EMA	-	Indicators
Leverage	The use of borrowed capital to increase potential returns (and risk)	-	Order & Execution
Liquidity	The ease with which an asset can be bought or sold without significantly affecting price	-	Order & Execution
London Session	Primary forex trading hours when London markets are open	-	Trading Sessions
Loss Aversion	The tendency to prefer avoiding losses over acquiring equivalent gains	-	Psychology
Low Volume Node	A price level with minimal volume; often acts as price magnet	LVN	Volume & Order Flow
Lower High	A swing high that is below the previous swing high (downtrend indicator)	LH	Technical Analysis
Lower Low	A swing low that is below the previous swing low (downtrend indicator)	LL	Technical Analysis
Maintenance Margin	The minimum equity required to keep a position open	-	Order & Execution
Margin	The deposit required to open and maintain a leveraged position	-	Order & Execution
Marubozu	A full-body candle with no wicks; strong directional conviction	-	Chart Patterns
Maximum Drawdown	The largest peak-to-trough decline in account value	Max DD	Statistics & Quant
Mean Reversion	The expectation that price will return to an average or fair value level	-	Price Action
Micro	Even smaller contracts (1/10th of E-mini size)	MES, MNQ	Futures
Money Flow Index	Volume-weighted RSI; measures buying and selling pressure	MFI	Indicators
Morning Star	Three-candle bullish reversal pattern	-	Chart Patterns
Moving Average Convergence Divergence	Trend-following momentum indicator showing relationship between two EMAs	MACD	Indicators
New York Session	Primary forex trading hours when US markets are open	-	Trading Sessions
On-Balance Volume	A cumulative volume indicator based on whether price closes up or down	OBV	Volume & Order Flow
Opening Range	The high and low established during the first minutes of trading (typically 5-30 min)	OR	Market Structure
Outside Bar	A bar with range exceeding the prior bar in both directions	-	Chart Patterns
Overnight High / Low	The highest and lowest prices reached during the overnight (Globex) trading session	ONH / ONL	Market Structure
Overnight Session	Futures trading session outside regular market hours	Globex	Market Structure
Paper Trading	Simulated trading without real money to practice and develop skills	-	Psychology
Parabolic SAR	Stop and reverse indicator used for trailing stops	PSAR	Indicators
Pin Bar	A bar with long wick showing price rejection; reversal signal	-	Chart Patterns
Point	A standard unit of price movement (varies by instrument)	-	Order & Execution
Point of Control	The price level with the highest traded volume in a session; represents fair value	POC	Market Structure
Position Sizing	The process of determining how many shares/contracts to trade based on risk parameters	-	Risk Management
Pre-Market	Trading that occurs before regular market hours	PM	Trading Sessions
Profit and Loss	The realized or unrealized gains or losses on positions	PnL	Risk Management
Pullback	A temporary retracement against the prevailing trend	-	Price Action
Recency Bias	Overweighting recent events in decision-making	-	Psychology
Regular Trading Hours	The main US trading session (typically 9:30 AM - 4:00 PM ET for equities)	RTH	Market Structure
Relative Strength Index	Momentum oscillator measuring speed and magnitude of price changes	RSI	Indicators
Resistance	A price level where selling pressure is expected to overcome buying pressure	-	Price Action
Retest	When price returns to a previously broken level to confirm the break	-	Price Action
Revenge Trading	Attempting to recover losses through impulsive, often oversized trades	-	Psychology
Reward-to-Risk Ratio	The ratio of potential profit to potential loss on a trade	R:R	Risk Management
Risk of Ruin	The probability of losing a specified percentage of capital (often 50% or total loss)	-	Risk Management
Rollover	Moving positions from an expiring contract to the next active contract	-	Futures
Rotation	Range-bound price movement oscillating around a central price	-	Price Action
Session High / Low	The highest and lowest prices during a specific trading session	-	Trading Sessions
Settlement	The official daily closing price used for margin calculations	-	Futures
Sharpe Ratio	Risk-adjusted return measure: (Return - Risk Free Rate) / Volatility	-	Statistics & Quant
Shooting Star	Small body with long upper wick; bearish reversal signal at resistance	-	Chart Patterns
Simple Moving Average	The arithmetic mean of prices over a specified period	SMA	Technical Analysis
Slippage	The difference between expected execution price and actual fill price	-	Order & Execution
Sortino Ratio	Like Sharpe but only penalizes downside volatility	-	Statistics & Quant
Spread	The difference between the bid and ask prices	-	Order & Execution
Standard Deviation	A measure of volatility showing dispersion from the mean	Std Dev / Sigma	Statistics & Quant
Stochastic Oscillator	Momentum indicator comparing closing price to price range over time	Stoch	Indicators
Stop Loss	A predetermined price level at which a losing position is automatically closed	SL	Risk Management
Support	A price level where buying pressure is expected to overcome selling pressure	-	Price Action
Take Profit	A predetermined price level at which a winning position is automatically closed	TP	Risk Management
Tick Size	The minimum allowable price movement for an instrument	-	Order & Execution
Tilt	Emotional state where rational decision-making is compromised	-	Psychology
Time and Sales	A real-time record of executed trades showing time, price, and size	T&S / L2	Order & Execution
Trend Day	A session dominated by directional movement with minimal pullbacks	-	Price Action
True Open	The opening price of the regular trading session	-	Trading Sessions
Value Area	The price range containing approximately 70% of session volume	VA	Volume & Order Flow
Value Area High / Low	Upper and lower boundaries of the price range containing 70% of session volume	VAH / VAL	Market Structure
Value at Risk	The maximum expected loss at a given confidence level	VaR	Statistics & Quant
Volume Profile	A display showing volume traded at each price level	-	Volume & Order Flow
Volume-Weighted Average Price	The average price weighted by volume; used as a benchmark for execution quality	VWAP	Technical Analysis
Win Rate	The percentage of trades that are profitable	-	Risk Management
Z-Score	The number of standard deviations a value is from the mean	-	Statistics & Quant

9. Glossary of Terms

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