4.4 Glossary

  1. Algorithm: A set of rules and criteria used in trading strategies.

  2. Algorithmic Trading (Algo Trading): Automated trading strategies using pre-defined algorithms and computer programs.

  3. All or None (AON): An order that must be executed in its entirety or not at all.

  4. Alpha: A measure of a portfolio's performance relative to a market index.

  5. Alpha Decay: A reduction in the alpha of a derivative over time.

  6. Arbitrage: Profiting from price differences of the same asset in different markets.

  7. Arbitrageur: A trader who engages in arbitrage.

  8. Ask Price: The price at which sellers are willing to sell a security.

  9. Ask Size: The number of shares or contracts available at the ask price.

  10. Asset Allocation: Diversifying investments among different asset classes.

  11. Average True Range (ATR): A measure of market volatility.

  12. Backtesting: Testing a trading strategy on historical data to assess its viability.

  13. Bar Chart: A chart displaying price data as vertical bars.

  14. Bear Market: A market characterized by declining prices.

  15. Bear Spread: A strategy involving simultaneous sale and purchase of options.

  16. Bid Price: The price at which buyers are willing to purchase a security.

  17. Bid Size: The number of shares or contracts wanted by buyers at the bid price.

  18. Bollinger Bands: A volatility indicator consisting of a moving average and two standard deviation bands.

  19. Bull Market: A market characterized by rising prices.

  20. Bull Spread: A strategy involving simultaneous purchase and sale of options.

  21. Buy and Hold: A long-term investment strategy without frequent trading.

  22. Buy-In: Forcing the purchase of shares due to a failure to deliver.

  23. Buyer's Market: A market with more supply than demand, favoring buyers.

  24. Call Option: An option to buy an underlying asset at a specified price.

  25. Capital: The amount of money available for trading.

  26. Capital Gain: Profit from the sale of an asset for more than its purchase price.

  27. Capital Loss: Loss from the sale of an asset for less than its purchase price.

  28. Cash Market: A market for the immediate settlement of transactions.

  29. Candlestick Chart: A chart displaying open, high, low, and close prices for a specific time period.

  30. Closing Price: The final price of a security at the end of a trading session.

  31. Collateral: Assets used to secure a loan.

  32. Commission: Fees paid to a broker for executing trades.

  33. Consolidation: A period of price range narrowing, often before a breakout

  34. Correlation: The degree to which two assets move in relation to each other.

  35. Covered Call: A strategy involving holding the underlying asset and selling call options.

  36. Credit Risk: The risk that a debtor will not meet their financial obligations.

  37. Dark Cloud Cover: A bearish candlestick pattern signaling potential reversal.

  38. Day Trader: A trader who opens and closes positions within the same trading day.

  39. Dead Cat Bounce: A brief price increase in a declining market before further decline.

  40. Deadhead: An unexecuted market order.

  41. Derivative: A financial contract derived from an underlying asset.

  42. Divergence: When an indicator disagrees with the price direction.

  43. Dividend: A payment to shareholders from a company's earnings.

  44. Drawdown: The decline in a trading account's value from its peak.

  45. Earnings Per Share (EPS): A company's profit divided by its outstanding shares.

  46. Economic Indicator: A statistic indicating the health of an economy.

  47. Efficiency Ratio: A measure of a trader's success in executing orders.

  48. Elliott Wave Theory: A technical analysis approach based on wave patterns.

  49. Equity: The value of ownership in an asset after liabilities are subtracted.

  50. Execution: The process of completing a trade.

  51. Execution Risk: The risk that an order may not be filled at the desired price.

  52. Exit Strategy: A predetermined plan for closing a trade.

  53. Expiration Date: The date when an option contract ceases to be valid.

  54. Fair Value: The estimated intrinsic value of a security.

  55. Fibonacci Extension: A tool to identify potential price targets in a trend.

  56. Fibonacci Retracement: A tool for identifying potential support and resistance levels.

  57. Fill or Kill (FOK): An order that must be executed immediately or canceled.

  58. Financial Leverage: Using borrowed funds to amplify trading positions.

  59. Fund Manager: A professional who manages an investment fund.

  60. Gamma: A measure of how an option's delta changes with price movement.

  61. Golden Cross: A bullish technical indicator when a short-term moving average crosses above a long-term moving average.

  62. Hanging Man: A bearish candlestick pattern signaling potential reversal.

  63. Hard Stop: A predetermined price at which a trader exits a position.

  64. Hedger: A trader or investor who uses hedging strategies to manage risk.

  65. Historical Volatility: A measure of past price fluctuations.

  66. In-the-Money (ITM): An option with intrinsic value.

  67. Index: A benchmark that represents a market or sector's performance.

  68. Index Fund: A fund designed to track the performance of a specific index.

  69. Indicators: Tools used to analyze market data, e.g., RSI, MACD.

  70. Initial Margin: The initial deposit required to open a leveraged position.

  71. Institutional Investor: Large organizations that invest in financial markets.

  72. Intraday: Within the same trading day.

  73. Intraday High/Low: The highest and lowest prices of a security during a trading day.

  74. Intrinsic Value: The real or true value of an option.

  75. Japanese Candlestick Chart: A charting method displaying price movements using candlestick patterns.

  76. Lagging Indicator: An indicator that reacts to past price movements.

  77. Leverage: Using borrowed funds to increase position size.

  78. Liquidity: The ease of buying or selling an asset without affecting its price.

  79. Limit Order: An order to buy or sell at a specified price or better.

  80. Long Call: An option strategy involving buying call options.

  81. Long Position: Owning an asset with the expectation of its price rising.

  82. Long Put: An option strategy involving buying put options.

  83. Long Squeeze: A rapid price increase due to long positions being liquidated.

  84. MACD (Moving Average Convergence Divergence): A trend-following momentum indicator.

  85. Margin: Borrowed funds from a broker for trading.

  86. Margin Call: A request for additional funds when a trader's account falls below a required level.

  87. Market Capitalization (Market Cap): The total value of a publicly traded company's outstanding shares.

  88. Market Maker: A trader or firm that provides liquidity by buying and selling assets.

  89. Market Order: An order to buy or sell at the current market price.

  90. Market Sentiment: The overall attitude of traders and investors toward a market.

  91. Market Timing: Attempting to predict the future direction of a market.

  92. Market Volatility: The degree of price fluctuation in a market.

  93. Market-Making: A trading strategy where a trader continuously buys and sells to provide liquidity.

  94. Momentum: The strength and persistence of price movements.

  95. Moving Average: An average of security prices over a specific period.

  96. Naked Option: Selling options without owning the underlying asset.

  97. Net Asset Value (NAV): The per-share value of a mutual fund or ETF.

  98. Odd Lot: A number of shares not divisible by the standard trading unit.

  99. Open Interest: The total number of outstanding futures or options contracts.

  100. Option Premium: The price paid for an option contract.

  101. Out-of-the-Money (OTM): An option with no intrinsic value.

  102. Pegging: A strategy to stabilize the market price of a security.

  103. Penny Stock: Low-priced, often speculative stocks.

  104. Pennant: A continuation chart pattern indicating a brief consolidation before a price breakout.

  105. Pip: The smallest price movement in a currency pair.

  106. Pivot Point: A technical analysis tool used to identify potential support and resistance levels.

  107. Portfolio: A collection of assets held by a trader or investor.

  108. Position Trading: A trading style involving longer-term holdings.

  109. Price Action: Analysis of price movements without relying on indicators.

  110. Price Discovery: The process of determining the market price of an asset.

  111. Price-Earnings (P/E) Ratio: A valuation ratio comparing a company's stock price to its earnings per share.

  112. P/S Ratio: The P/S ratio, also known as the Price-to-Sales ratio, is a financial metric used by investors and analysts to assess the valuation of a company's stock

  113. Profit and Loss (P&L): The financial result of trading activities.

  114. Pyramiding: Increasing the size of a position as it becomes more profitable.

  115. Quantitative Analysis: Analyzing data and statistics for trading decisions.

  116. Range: The difference between a security's high and low prices during a specific period.

  117. Rate of Return: The percentage gain or loss on an investment relative to its initial value.

  118. Regression Analysis: A statistical method for analyzing relationships between variables.

  119. Relative Strength: Comparing the performance of one asset to another.

  120. Resistance: A price level where selling pressure may outweigh buying pressure.

  121. Reversal: A change in the direction of an asset's price trend.

  122. Risk Management: Strategies to limit potential losses.

  123. RSI (Relative Strength Index): A momentum oscillator to measure overbought or oversold conditions.

  124. Scalping: A strategy aiming to make small profits from quick trade.

  125. Securities and Exchange Commission (SEC): U.S. regulatory body overseeing securities markets.

  126. Settlement Date: The date when a securities transaction is finalized.

  127. Short Covering: Buying to close a previously short position.

  128. Short Interest: The total number of shares sold short by investors.

  129. Short Position: Selling an asset with the expectation of its price falling.

  130. Short Selling: Selling borrowed shares with the expectation of buying them back at a lower price.

  131. Signal: A trigger to buy or sell based on technical or fundamental analysis.

  132. Single Stock Futures (SSF): Futures contracts on individual stocks.

  133. Skewness: A measure of the asymmetry of a probability distribution.

  134. Slippage: The difference between expected and actual trade execution prices.

  135. Speculator: A trader seeking profit from price fluctuations.

  136. Spread: The difference between the bid and ask prices.

  137. Spread Betting: A type of betting on financial markets without owning the underlying asset.

  138. Squeeze: A situation where traders are forced to buy or sell due to adverse price movements.

  139. Standard Deviation: A measure of price volatility or dispersion.

  140. Statistical Arbitrage: Trading based on statistical relationships between assets.

  141. Stock Exchange: A marketplace for buying and selling securities.

  142. Stop Limit Order: An order to buy or sell once a specified price is reached.

  143. Stop Loss Order: An order to sell at a predetermined price to limit losses.

  144. Support: A price level where buying pressure may outweigh selling pressure.

  145. Support and Resistance: Price levels where buying and selling pressure tend to occur.

  146. Swing High/Low: The highest and lowest points in an asset's price movement.

  147. Swing Trading: Holding positions for several days or weeks.

  148. Technical Analysis: Analyzing price charts and patterns to predict future movements.

  149. Technical Indicator: Mathematical calculations applied to price and volume data.

  150. Theta: A measure of the time decay of an option's value.

  151. Time and Sales: A real-time record of security trades.

  152. Time Decay: The erosion of an option's value as it approaches expiration.

  153. Trader Psychology: Managing emotions and maintaining discipline in trading.

  154. Trading Desk: A workspace where traders execute orders.

  155. Trading Plan: A predefined strategy outlining entry and exit rules.

  156. Trend: The general direction in which an asset's price is moving.

  157. Trend Line: A line on a chart connecting successive highs or lows.

  158. Trailing Stop: A stop-loss order that adjusts with the price movement.

  159. Underlying Asset: The asset on which a derivative contract is based.

  160. Vega: A measure of an option's sensitivity to changes in implied volatility.

  161. VIX (Volatility Index): A measure of market volatility.

  162. Volume: The number of shares or contracts traded in a given period.

  163. Volume Profile: A graphical representation of trading volume at different price levels.

  164. Volatility: The degree of price fluctuation in a market.

  165. VWAP (Volume-Weighted Average Price): An average price weighted by trading volume.

  166. Wash Trading: Illegitimate trading to create the illusion of activity.

  167. Wedge: A chart pattern resembling a triangle signaling a potential price breakout.

  168. Whipsaw: Rapid price movement in both directions.

  169. Yield: The income generated by an investment, often expressed as a percentage.

  170. Yield Curve: A graphical representation of interest rates on debt for various maturities.

  171. Zigzag: A technical analysis tool used to identify price trends and reversals.

  172. Zone of Resistance: A price range where selling pressure is expected.

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