MKT
Market Basics
15 termsThe vocabulary every trader needs before anything else: what is traded, where, and the words that describe how a market behaves.
MKT-01
Security
DefinitionA tradable financial instrument that holds value and can be bought or sold.
ExplanationSecurities are the broad class of things that trade on markets: equities (stocks), debt (bonds), and derivatives (options, futures). The word is a catch-all for 'a thing with financial value you can transact in a market.'
Why it mattersAlmost every other term is a property of some security. Knowing the category of what you are trading determines the rules, risks, and mechanics that apply.
MKT-02
Stock
DefinitionA unit of ownership in a company, also called a share or equity.
ExplanationOwning a stock means owning a fractional slice of a company's assets and earnings. Prices move on supply and demand, which are driven by expectations about the company's future profits.
Why it mattersStocks are the most common entry point for retail traders and the reference asset for most examples of risk and analysis.
ExampleBuying 0.74 shares of NVDA at $197.70 costs about $146 and gives you fractional ownership of NVIDIA.
MKT-03
Equity
DefinitionOwnership value; in trading, a synonym for stock, and also the total value of a trading account.
Explanation'Equity' means two related things. In markets it refers to shares. In your brokerage account it means the current total value of your capital including open-position profit and loss.
Why it mattersYour account equity is the base you size every position against, so the word appears constantly in risk management.
MKT-04
Bond
DefinitionA debt instrument in which an investor lends money to an issuer for periodic interest and return of principal.
ExplanationWhen you buy a bond you are the lender. The issuer (a government or company) pays you a fixed or floating coupon and repays the face value at maturity. Bond prices move inversely to interest rates.
Why it mattersBonds anchor the 'risk-free' rate that prices every other asset, and bond-market moves often lead stock-market moves.
MKT-05
Exchange
DefinitionA regulated marketplace where buyers and sellers meet to trade securities.
ExplanationExchanges (NYSE, Nasdaq, LSE) match orders, publish prices, and enforce trading rules. Forex and much of crypto trade over-the-counter or on private exchanges rather than a single central venue.
Why it mattersWhere an asset trades affects its hours, liquidity, transparency, and the protections you have as a trader.
MKT-06
Bull Market
DefinitionA sustained period of rising prices and optimism.
ExplanationA bull market is broadly defined as a rise of 20% or more from recent lows, marked by higher highs and confident buying. The opposite is a bear market.
Why it mattersStrategy should adapt to the regime: trend-following and buying dips tend to work in bull markets and fail in bear markets.
ExampleGlobal equities finished the first half of 2026 at record highs after their best quarter since 2020 — a textbook bull run.
MKT-07
Bear Market
DefinitionA sustained period of falling prices and pessimism.
ExplanationConventionally a decline of 20% or more from recent highs. Bear markets tend to fall faster than bull markets rise, and volatility usually spikes.
Why it mattersLosses compound quickly in bear markets; capital preservation and smaller size matter more than chasing returns.
MKT-08
Liquidity
DefinitionHow easily an asset can be bought or sold without moving its price.
ExplanationHigh liquidity means many buyers and sellers and a tight spread, so you get filled near the quoted price. Low liquidity means wide spreads and slippage, especially in fast markets.
Why it mattersLiquidity determines your true cost of trading and how reliably your stops and targets execute.
ExampleEUR/USD is extremely liquid, so a micro-lot order fills instantly; a tiny-cap stock may gap several percent on a single order.
MKT-09
Volatility
DefinitionThe degree and speed of price movement over time.
ExplanationVolatility measures how much price swings, not its direction. It is often quantified by standard deviation or by indicators such as ATR. Higher volatility means bigger potential gains and bigger potential losses.
Why it mattersVolatility drives position sizing: the same dollar risk requires a smaller position in a volatile instrument and a wider stop.
MKT-10
Bid / Ask / Spread
DefinitionThe bid is the highest price buyers offer; the ask is the lowest price sellers accept; the spread is the gap between them.
ExplanationYou generally buy at the ask and sell at the bid, so the spread is an immediate cost of entering a trade. Tighter spreads mean cheaper, more liquid markets.
Why it mattersThe spread is a cost you pay on every round trip; on a small account it quietly erodes returns.
ExampleIf EUR/USD is quoted 1.1400 / 1.1401, the 1-pip spread is what you pay to cross the market immediately.
MKT-11
Volume
DefinitionThe number of shares, lots, or contracts traded in a period.
ExplanationVolume shows participation and conviction behind a price move. Rising price on rising volume is considered stronger than the same move on thin volume.
Why it mattersVolume confirms or questions a move; breakouts on low volume often fail.
MKT-12
Market Capitalization
DefinitionThe total market value of a company's shares: share price multiplied by shares outstanding.
ExplanationMarket cap sorts companies into large-cap, mid-cap, and small-cap. Larger caps are generally more liquid and less volatile; smaller caps can move faster.
Why it mattersCap size is a quick proxy for an asset's stability, liquidity, and risk profile.
ExampleA stock at $200 with 2 billion shares outstanding has a $400 billion market cap.
MKT-13
Index
DefinitionA basket of securities that tracks the performance of a market or segment.
ExplanationIndices such as the S&P 500 or Nasdaq Composite summarize how a group of stocks is doing. You cannot trade an index directly but can trade funds, futures, or options based on it.
Why it mattersIndices are the benchmark you measure your returns against and a read on overall market direction.
ExampleThe S&P 500 rose 9.6% in the first half of 2026, the benchmark most US traders compare themselves to.
MKT-14
Dividend
DefinitionA share of company profits paid to shareholders, usually quarterly.
ExplanationDividends provide income independent of price movement. Not all companies pay them; many growth companies reinvest profits instead.
Why it mattersDividends contribute to total return and signal financial health, but the stock price typically drops by the dividend amount on the ex-dividend date.
MKT-15
IPO
DefinitionInitial Public Offering — the first sale of a company's shares to the public.
ExplanationAn IPO moves a company from private to publicly traded. Early trading is often highly volatile as the market discovers a price.
Why it mattersIPOs offer opportunity but carry elevated risk from thin history and lock-up-driven supply shocks.
ORD
Order Types & Execution
9 termsThe instructions you send to a broker and the mechanics of how they get filled. Choosing the right order type is the difference between your plan and what actually happens.
ORD-01
Market Order
DefinitionAn order to buy or sell immediately at the best available price.
ExplanationMarket orders prioritize speed over price. In liquid markets the fill is near the quote; in fast or thin markets you may pay more than expected.
Why it mattersThey guarantee execution but not price, which matters most in volatile conditions or illiquid assets.
ORD-02
Limit Order
DefinitionAn order to buy or sell only at a specified price or better.
ExplanationA buy limit fills at your price or lower; a sell limit fills at your price or higher. It guarantees price but not execution — the market may never reach it.
Why it mattersLimit orders control your entry and exit price and avoid slippage, at the cost of possibly missing the trade.
ExamplePlacing a buy limit for NVDA at $195.00 means you only get filled if price trades down to $195 or below.
ORD-03
Stop-Loss
DefinitionAn order that closes a position once price reaches a preset level, capping the loss.
ExplanationA stop-loss becomes a market order when triggered. It is the primary tool for defining risk before entering a trade. In fast markets it may fill worse than the stop price (slippage).
Why it mattersIt converts an open-ended risk into a known, sized loss — the foundation of survival as a trader.
ExampleLong EUR/USD at 1.1400 with a stop at 1.1380 caps the loss at 20 pips regardless of how far price falls.
ORD-04
Take-Profit
DefinitionAn order that closes a position once price reaches a preset profit target.
ExplanationAlso called a limit-to-close. It locks in gains automatically and removes the temptation to hold a winner too long.
Why it mattersPre-setting the exit enforces your planned reward-to-risk ratio instead of letting emotion decide.
ExampleA take-profit at 1.1440 on that EUR/USD long books a 40-pip, 2:1 winner without you watching the screen.
ORD-05
Stop-Limit Order
DefinitionA stop that, once triggered, submits a limit order rather than a market order.
ExplanationIt combines a trigger price with a limit price, giving you price control on the exit. The trade-off is that a fast move can blow past your limit and leave you unfilled.
Why it mattersUseful for controlling slippage, but risky as a protective stop because it can fail to execute in a crash.
ORD-06
Trailing Stop
DefinitionA stop-loss that moves with price in your favor but never against you.
ExplanationSet as a distance (e.g., 30 pips or 2%), it ratchets up as price rises on a long, locking in more profit while leaving room to run.
Why it mattersIt lets winners run while protecting gains, automating the 'cut losses, let profits ride' principle.
ExampleA 3% trailing stop on a stock bought at $100 sits at $97; if price rises to $110 the stop rises to $106.70.
ORD-07
Slippage
DefinitionThe difference between the expected price of a trade and the price at which it actually fills.
ExplanationSlippage happens when the market moves between order and execution, or when liquidity is too thin to fill at the quote. It worsens around news and in volatile or illiquid markets.
Why it mattersSlippage is a hidden cost that can turn a planned 1% risk into something larger, especially around scheduled events.
ExampleHolding through a jobs report, a stop at 1.1380 might fill at 1.1372 as price gaps through the level.
ORD-08
Order Book
DefinitionA real-time list of outstanding buy and sell orders at each price level.
ExplanationAlso shown as 'Level 2' or 'the depth of market,' it reveals where liquidity sits above and below the current price. Large resting orders can act as short-term support or resistance.
Why it mattersReading the book helps gauge liquidity, likely fill quality, and short-term supply and demand.
ORD-09
Market Maker
DefinitionA firm that continuously quotes both bid and ask prices, providing liquidity.
ExplanationMarket makers profit from the spread and stand ready to buy or sell, keeping markets liquid. In return they take on inventory risk.
Why it mattersThey are the counterparty that lets your orders fill instantly, and their behavior shapes spreads and depth.
STY
Trading Styles & Timeframes
5 termsHow long you hold and how often you trade. Style determines everything downstream: which analysis matters, how much screen time you need, and how costs affect you.
STY-01
Scalping
DefinitionA very short-term style capturing tiny price moves, often within seconds to minutes.
ExplanationScalpers make many trades a day for small gains each, relying on tight spreads, speed, and high win rates. Costs and slippage are the biggest enemies.
Why it mattersIt demands intense focus, low fees, and discipline; on a small account, spreads usually make it unprofitable.
STY-02
Day Trading
DefinitionOpening and closing positions within the same trading day, holding nothing overnight.
ExplanationDay traders exploit intraday volatility using technical analysis and news. Closing flat each day avoids overnight gap risk but requires active management.
Why it mattersIt removes overnight risk but concentrates pressure and cost into a single session; most beginners underestimate the skill required.
STY-03
Swing Trading
DefinitionHolding positions for several days to weeks to capture a larger price 'swing.'
ExplanationSwing traders combine technical setups with some fundamental context and accept overnight and weekend risk in exchange for less screen time.
Why it mattersIt fits people with day jobs and lets a favorable reward-to-risk ratio play out without constant monitoring.
ExampleBuying a pullback and holding for a two-week move to a resistance target is a classic swing trade.
STY-04
Position Trading
DefinitionHolding for months to years based on major trends and fundamentals.
ExplanationThe longest active style, position trading rides primary trends and largely ignores intraday noise. It overlaps with investing but is still trend- and timing-aware.
Why it mattersIt minimizes trading costs and emotional churn, suiting those who analyze big-picture drivers.
STY-05
Buy and Hold
DefinitionA long-term investing approach of buying assets and holding through volatility.
ExplanationRather than timing entries and exits, buy-and-hold investors accept short-term drawdowns for long-term compounding, often in index funds.
Why it mattersIt is the lowest-effort, historically robust approach for building wealth and a useful benchmark for any active strategy.
TA
Technical Analysis
10 termsStudying price and volume on charts to find probabilities. Technical analysis assumes price reflects all information and that patterns of behavior repeat.
TA-01
Technical Analysis
DefinitionThe study of historical price and volume to forecast future price movement.
ExplanationRather than valuing a company, technical analysis reads the chart: trends, patterns, support and resistance, and indicators. It rests on the idea that price already reflects all known information and that crowd behavior repeats.
Why it mattersIt gives traders a framework for timing entries, exits, and risk regardless of the asset.
TA-02
Candlestick
DefinitionA chart element showing the open, high, low, and close for a period.
ExplanationEach candle's body spans open to close and the wicks show the high and low. Green (or white) means price closed up; red (or black) means it closed down. Patterns of candles hint at momentum and reversals.
Why it mattersCandlesticks pack four data points into one glance and form the vocabulary of most chart patterns.
ExampleA long lower wick with a small body (a hammer) after a downtrend suggests buyers rejected lower prices.
TA-03
Support / Resistance
DefinitionPrice levels where buying (support) or selling (resistance) has repeatedly emerged.
ExplanationSupport is a floor where demand tends to halt declines; resistance is a ceiling where supply tends to cap advances. Broken resistance often becomes new support and vice versa.
Why it mattersThese levels are natural places to set entries, stops, and targets, and to judge risk-reward.
ExampleIf NVDA repeatedly bounces near $195, that level is support and a logical spot to place a stop just below.
TA-04
Trend
DefinitionThe general direction of price: up, down, or sideways.
ExplanationAn uptrend makes higher highs and higher lows; a downtrend makes lower highs and lower lows; a range moves sideways. 'The trend is your friend' captures the edge in trading with it.
Why it mattersMost strategies work far better aligned with the prevailing trend than against it.
TA-05
Trendline
DefinitionA straight line connecting successive highs or lows to visualize a trend.
ExplanationDrawn along the lows in an uptrend or the highs in a downtrend, trendlines highlight direction and potential support or resistance. A decisive break can signal a trend change.
Why it mattersThey turn a subjective sense of direction into a concrete, testable level.
TA-06
Chart Pattern
DefinitionA recognizable formation in price that suggests a likely next move.
ExplanationPatterns fall into continuation (flags, triangles, pennants) and reversal (head and shoulders, double tops and bottoms) types. They reflect recurring crowd psychology.
Why it mattersPatterns offer defined entry, stop, and target levels, making risk measurable.
ExampleA head-and-shoulders top breaking its neckline projects a downside target equal to the pattern's height.
TA-07
Breakout
DefinitionWhen price moves decisively beyond a defined support or resistance level.
ExplanationBreakouts signal that one side has overwhelmed the other. Genuine breakouts usually come with rising volume; low-volume breaks often fail (a 'fakeout').
Why it mattersThey mark the start of potential new trends and offer clear entry triggers with nearby stops.
ExampleNVDA closing above $200.63 on heavy volume after days of resistance there would be a bullish breakout.
TA-08
Pullback
DefinitionA temporary move against the prevailing trend before it resumes.
ExplanationAlso called a retracement, a pullback is a pause or dip within a larger trend, often to a moving average or Fibonacci level, offering a lower-risk entry.
Why it mattersBuying pullbacks in an uptrend improves reward-to-risk versus chasing extended prices.
TA-09
Fibonacci Retracement
DefinitionHorizontal levels (23.6%, 38.2%, 50%, 61.8%) marking likely pullback depths.
ExplanationTraders draw Fibonacci levels between a swing low and high to anticipate where a pullback may find support before the trend resumes. Their power comes partly from being widely watched.
Why it mattersThey provide objective potential entry and stop zones within a trend.
TA-10
Gap
DefinitionA price jump between one period's close and the next period's open with no trading in between.
ExplanationGaps form from overnight news, earnings, or economic data. Some gaps 'fill' as price returns to the pre-gap level; others mark powerful new moves.
Why it mattersGaps can leap over stop-loss levels, a key reason to respect scheduled events and overnight risk.
ExampleA stock closing at $198 and opening at $180 after bad earnings has gapped down $18, past any stop between those prices.
IND
Indicators
8 termsMathematical transformations of price and volume that summarize momentum, trend, and volatility. Indicators are tools, not crystal balls — they lag price and work best in confluence.
IND-01
Moving Average
DefinitionThe average price over a set number of periods, plotted as a smoothing line.
ExplanationA simple moving average (SMA) weights all periods equally; an exponential moving average (EMA) weights recent prices more. Crossovers and the slope signal trend and momentum.
Why it mattersMoving averages define trend direction and act as dynamic support or resistance.
ExampleWhen a 50-period average crosses above a 200-period average (a 'golden cross'), many read it as a bullish signal.
IND-02
Relative Strength Index (RSI)
DefinitionA momentum oscillator from 0 to 100 measuring the speed of price changes.
ExplanationReadings above 70 are often called overbought and below 30 oversold, though in strong trends these can persist. Divergence between RSI and price can hint at exhaustion.
Why it mattersRSI helps gauge momentum extremes and potential turning points.
ExampleIf price makes a new high but RSI makes a lower high (bearish divergence), momentum may be fading.
IND-03
MACD
DefinitionMoving Average Convergence Divergence — a trend-momentum indicator built from two EMAs and a signal line.
ExplanationThe MACD line is the difference between a fast and slow EMA; crossovers of its signal line and moves above or below zero indicate shifts in momentum.
Why it mattersMACD combines trend and momentum in one view and is popular for confirming entries.
IND-04
Bollinger Bands
DefinitionA moving average with upper and lower bands set a number of standard deviations away.
ExplanationThe bands widen when volatility rises and contract ('the squeeze') when it falls. Price tends to revert from the bands but can 'ride' them in strong trends.
Why it mattersThey visualize volatility and relative high/low prices, useful for mean-reversion and breakout setups.
IND-05
Stochastic Oscillator
DefinitionA momentum indicator comparing the close to the recent high-low range, scaled 0–100.
ExplanationLike RSI it flags overbought (above 80) and oversold (below 20) conditions and uses %K/%D line crossovers for signals.
Why it mattersIt is well suited to range-bound markets for timing reversals.
IND-06
Average True Range (ATR)
DefinitionAn indicator measuring average price range over a period to quantify volatility.
ExplanationATR captures how far an asset typically moves, including gaps. It is not directional — it only measures magnitude of movement.
Why it mattersATR is the professional's tool for setting volatility-based stops and sizing positions.
ExampleIf EUR/USD's ATR is 40 pips, a 5-pip stop is inside the noise and likely to be hit at random.
IND-07
VWAP
DefinitionVolume-Weighted Average Price — the average price weighted by volume over a session.
ExplanationVWAP shows the 'fair' average price large players reference. Trading above VWAP is broadly bullish for the session; below is bearish.
Why it mattersInstitutions benchmark fills against VWAP, so it acts as a magnet and intraday support/resistance.
IND-08
On-Balance Volume (OBV)
DefinitionA cumulative volume line that adds volume on up days and subtracts it on down days.
ExplanationOBV tracks whether volume is flowing into or out of an asset. Rising OBV alongside rising price confirms a move; divergence warns of weakness.
Why it mattersIt helps confirm trends and spot accumulation or distribution before price reacts.
FA
Fundamental Analysis
7 termsValuing an asset by its underlying economics rather than its chart. Fundamentals drive long-term value and the scheduled events that move markets in the short term.
FA-01
Fundamental Analysis
DefinitionEvaluating an asset's intrinsic value using financial and economic data.
ExplanationFor stocks this means earnings, revenue, debt, and growth; for currencies it means interest rates, inflation, and growth. The goal is to judge whether an asset is cheap or expensive versus its true worth.
Why it mattersIt explains the 'why' behind long-term moves and the catalysts (earnings, data) that create volatility.
FA-02
Earnings Per Share (EPS)
DefinitionA company's profit divided by its number of outstanding shares.
ExplanationEPS measures profitability on a per-share basis. Growth in EPS, and whether it beats analyst estimates, is a primary driver of stock prices around earnings.
Why it mattersEPS surprises move stocks sharply, making earnings dates key risk events.
FA-03
Price-to-Earnings (P/E) Ratio
DefinitionShare price divided by earnings per share, showing how much investors pay per dollar of earnings.
ExplanationA high P/E implies high growth expectations (or overvaluation); a low P/E implies modest expectations (or undervaluation). It is most useful compared across similar companies.
Why it mattersP/E is the most common quick valuation gauge and a shorthand for market sentiment on a stock.
ExampleA stock at $200 with $8 EPS has a P/E of 25, meaning investors pay $25 for each $1 of annual earnings.
FA-04
Earnings Report
DefinitionA company's quarterly disclosure of financial results.
ExplanationReports include revenue, EPS, and forward guidance. Prices often move violently as results are compared to expectations, frequently gapping at the next open.
Why it mattersEarnings are scheduled volatility bombs; holding through them is a distinct risk decision.
ExampleNVIDIA's next earnings report is Aug 26, 2026 — a date a position trader would mark as event risk.
FA-05
Guidance
DefinitionManagement's forecast of future performance issued with earnings.
ExplanationGuidance shapes expectations more than past results. Strong results with weak guidance often send a stock down, and vice versa.
Why it mattersThe market prices the future, so guidance frequently matters more than the reported quarter.
FA-06
Economic Indicators
DefinitionScheduled data releases that reveal the health of an economy.
ExplanationKey releases include GDP, inflation (CPI), employment (Nonfarm Payrolls), and central-bank interest-rate decisions. They move currencies, bonds, and stocks broadly and simultaneously.
Why it mattersThese events cause sharp, market-wide volatility; trading into them without a plan is gambling.
ExampleA US jobs report can swing EUR/USD 50–150 pips within minutes and widen spreads dramatically.
FA-07
Dividend Yield
DefinitionAnnual dividends per share divided by share price, expressed as a percentage.
ExplanationYield shows the income return of holding a stock. It rises when price falls and falls when price rises, all else equal.
Why it mattersIncome-focused investors use yield to compare stocks and against bond rates.
RSK
Risk Management
11 termsThe discipline that separates traders who survive from those who don't. Every concept here exists to keep losses small and controlled so your edge has time to work.
RSK-01
Risk Management
DefinitionThe process of identifying, measuring, and controlling the potential loss on every trade.
ExplanationIt covers how much you risk per trade, where your stop goes, how big your position is, and how you diversify. Good risk management prioritizes surviving losing streaks over maximizing any single win.
Why it mattersYou cannot control whether a trade wins, only how much you lose when it doesn't — which is why risk control, not prediction, is the real edge.
RSK-02
Position Sizing
DefinitionDeciding how large a position to take based on account size, risk tolerance, and stop distance.
ExplanationThe core formula is: position size = (account × risk %) ÷ distance to stop. Risking a fixed small percentage per trade keeps any single loss survivable.
Why it mattersSizing, not entries, is what most determines whether a small account survives long enough to grow.
ExampleRisking 1% of a $200 account ($2) with a 20-pip stop on EUR/USD gives a position of 1,000 units (one micro lot).
RSK-03
Risk-Reward Ratio
DefinitionThe ratio of potential loss to potential gain on a trade.
ExplanationWritten as 1:2 or 2R, it compares the distance to your stop against the distance to your target. A favorable ratio lets you be profitable even with a sub-50% win rate.
Why it mattersIt shifts focus from being right to being paid: with 2:1, you can lose more often than you win and still make money.
ExampleRisking 20 pips to make 40 pips is a 2:1 ratio; winning just 40% of such trades is still net profitable.
RSK-04
Drawdown
DefinitionThe peak-to-trough decline in account equity, usually as a percentage.
ExplanationDrawdown measures how far you have fallen from your highest equity. Recovering from deep drawdowns is hard: a 50% loss requires a 100% gain to break even.
Why it mattersManaging maximum drawdown protects both capital and the psychology needed to keep trading the plan.
RSK-05
Leverage
DefinitionUsing borrowed capital to control a position larger than your own funds.
ExplanationExpressed as a ratio (30:1) or margin percentage, leverage multiplies both gains and losses. Forex and futures are inherently leveraged; cash stock accounts are not.
Why it mattersLeverage is the fastest way to blow up a small account; the risk lives in position size, not in the margin you post.
ExampleAt 30:1, $200 controls $6,000 of currency — but a 3.3% adverse move wipes out the account.
RSK-06
Margin
DefinitionThe capital a broker requires you to deposit to open and hold a leveraged position.
ExplanationInitial margin opens the trade; maintenance margin keeps it open. Falling below maintenance triggers a margin call or automatic liquidation.
Why it mattersMisunderstanding margin leads to over-leveraging and forced closes at the worst possible time.
ExampleOne micro lot of EUR/USD (~$1,140 notional) needs about $38 margin at 30:1 leverage.
RSK-07
Diversification
DefinitionSpreading capital across uncorrelated assets to reduce overall risk.
ExplanationBecause different assets react differently to events, a diversified portfolio smooths returns. Correlation matters: ten tech stocks are not truly diversified.
Why it mattersIt reduces the chance that a single event devastates your account.
RSK-08
R-Multiple
DefinitionA trade's profit or loss expressed in units of the amount risked (R).
ExplanationIf you risk $2 and make $4, that is +2R; if you lose the full risk it is −1R. Thinking in R makes results comparable across account sizes and instruments.
Why it mattersR-multiples let you judge performance by edge rather than dollars, which is essential for a small account.
ExampleTen trades averaging +0.4R with 1% risk grow the account regardless of the dollar figures.
RSK-09
Expectancy
DefinitionThe average amount you can expect to win or lose per trade over many trades.
ExplanationExpectancy = (win rate × average win) − (loss rate × average loss). Positive expectancy means the system makes money over a large sample.
Why it mattersIt is the single number that tells you whether a strategy is worth trading at all.
ExampleA 40% win rate at 2:1 reward-to-risk has positive expectancy despite losing most trades.
RSK-10
Win Rate
DefinitionThe percentage of trades that are profitable.
ExplanationWin rate alone is meaningless without reward-to-risk: a 90% win rate can still lose money if the occasional loss is huge. It must be paired with average win and loss size.
Why it mattersUnderstanding win rate prevents the common trap of chasing 'accuracy' at the expense of expectancy.
RSK-11
Hedging
DefinitionTaking an offsetting position to reduce the risk of an existing one.
ExplanationA hedge limits downside from an adverse move, often using derivatives such as options or futures. It reduces risk but usually caps profit or costs a premium.
Why it mattersHedging lets traders hold positions through uncertainty without closing them outright.
ExampleOwning a stock and buying a put option limits the loss if the stock falls, like insurance.
OPT
Options
11 termsContracts giving the right, but not the obligation, to buy or sell an asset at a set price. Options offer defined-risk leverage and flexible strategies, at the cost of real complexity.
OPT-01
Option
DefinitionA contract granting the right, not the obligation, to buy or sell an underlying at a set price before or at expiration.
ExplanationThe buyer pays a premium for this right; the seller (writer) collects it and takes on the obligation. Options come in two types: calls and puts.
Why it mattersOptions allow leverage with defined risk for buyers and income strategies for sellers, plus precise hedging.
OPT-02
Call Option
DefinitionAn option giving the right to buy the underlying at the strike price.
ExplanationCall buyers profit when the underlying rises above the strike plus premium. Losses for buyers are limited to the premium paid.
Why it mattersCalls offer leveraged upside exposure with a known, capped cost.
ExampleA $200 call on a stock trading at $198 becomes profitable if the stock rises above $200 plus the premium paid.
OPT-03
Put Option
DefinitionAn option giving the right to sell the underlying at the strike price.
ExplanationPut buyers profit when the underlying falls below the strike minus premium, making puts useful for downside speculation or hedging a long position.
Why it mattersPuts are the primary tool for protecting a portfolio against declines.
ExampleBuying a put on a stock you own acts as insurance: if the stock crashes, the put gains value.
OPT-04
Strike Price
DefinitionThe fixed price at which an option can be exercised.
ExplanationThe relationship between strike and market price determines whether an option is in, at, or out of the money, and how much intrinsic value it holds.
Why it mattersStrike selection defines an option's cost, probability of profit, and leverage.
OPT-05
Premium
DefinitionThe price paid to buy an option.
ExplanationPremium is made of intrinsic value (how far in the money) and extrinsic value (time and implied volatility). It decays as expiration approaches.
Why it mattersPremium is the option buyer's maximum risk and the seller's maximum initial reward.
OPT-06
In the Money
DefinitionAn option that would have value if exercised now.
ExplanationA call is in the money when price is above the strike; a put when price is below the strike. Out-of-the-money options have only extrinsic (time) value; at-the-money sit at the strike.
Why it mattersMoneyness determines an option's intrinsic value, risk, and how it behaves as price moves.
OPT-07
The Greeks
DefinitionA set of risk measures describing how an option's price reacts to different factors.
ExplanationDelta measures sensitivity to the underlying's price; gamma the rate of change of delta; theta time decay; vega sensitivity to implied volatility; rho to interest rates.
Why it mattersThe Greeks let option traders quantify and manage exposure precisely rather than guessing.
OPT-08
Delta
DefinitionThe change in an option's price for a $1 change in the underlying.
ExplanationDelta ranges from 0 to 1 for calls and 0 to −1 for puts, and doubles as a rough probability of finishing in the money.
Why it mattersDelta tells you how much directional exposure an option gives you, key for sizing and hedging.
OPT-09
Theta (Time Decay)
DefinitionThe amount an option's value erodes each day as expiration nears.
ExplanationOptions are wasting assets: all else equal, they lose extrinsic value daily, and the decay accelerates near expiration. Sellers benefit from theta; buyers fight it.
Why it mattersTime decay means option buyers must be right about direction and timing, not just direction.
OPT-10
Implied Volatility
DefinitionThe market's forecast of future volatility priced into an option.
ExplanationHigher implied volatility (IV) means richer premiums. IV tends to spike before known events like earnings and collapse afterward ('IV crush').
Why it mattersBuying options into high IV and holding through the event can lose money even if you call direction correctly.
ExampleAn option bought before earnings can fall in value after the report as IV collapses, despite a favorable move.
OPT-11
Covered Call
DefinitionSelling a call option against stock you already own.
ExplanationYou collect premium as income and agree to sell your shares if they rise above the strike. It caps upside in exchange for immediate cash and a small downside buffer.
Why it mattersIt is a popular income strategy in flat-to-mildly-bullish markets.
FUT
Futures
4 termsStandardized contracts to buy or sell an asset at a set price on a future date. Futures are the leveraged backbone of commodity, index, and rate speculation and hedging.
FUT-01
Futures Contract
DefinitionA standardized agreement to buy or sell an asset at a set price on a specified future date.
ExplanationUnlike options, futures carry an obligation for both parties. They trade on exchanges with standardized sizes and are marked to market daily. Most are closed before delivery.
Why it mattersFutures give efficient, highly leveraged exposure to commodities, indices, and rates for hedging and speculation.
ExampleA crude-oil future locks in a price for a barrel to be delivered months out, letting producers hedge and traders speculate.
FUT-02
Tick
DefinitionThe minimum price increment a futures contract can move.
ExplanationEach tick has a fixed dollar value defined by the exchange, so profit and loss are counted in ticks. Tick size and value vary by contract.
Why it mattersKnowing tick value is how you translate price moves into dollars for sizing and risk.
FUT-03
Contango / Backwardation
DefinitionContango is when futures trade above the spot price; backwardation is when they trade below it.
ExplanationThese describe the shape of the futures curve across delivery dates, driven by storage costs, interest, and supply-demand expectations. They cause 'roll' costs or gains when holding across expirations.
Why it mattersFor anyone holding futures or futures-based ETFs, the curve shape quietly affects returns over time.
FUT-04
Settlement
DefinitionThe process of closing a futures contract at expiration, by delivery or in cash.
ExplanationPhysical settlement delivers the underlying; cash settlement pays the difference. Index futures settle in cash; some commodities settle physically.
Why it mattersTraders must exit or roll before settlement to avoid unwanted delivery obligations.
FX
Forex
7 termsThe global market for trading currencies — the largest and most liquid market in the world, open 24 hours on weekdays and inherently leveraged.
FX-01
Forex
DefinitionThe foreign-exchange market where currencies are traded in pairs.
ExplanationForex (FX) is decentralized and open 24 hours on weekdays. Traders speculate on one currency strengthening or weakening against another, almost always using leverage.
Why it mattersIts liquidity, low capital requirements, and leverage make it popular — and the leverage makes it dangerous for beginners.
FX-02
Currency Pair
DefinitionA quotation of two currencies, showing how much of the quote currency buys one unit of the base currency.
ExplanationIn EUR/USD, EUR is the base and USD the quote. A price of 1.1400 means one euro costs 1.14 US dollars. Buying the pair bets the base will strengthen against the quote.
Why it mattersEvery forex trade is a simultaneous bet on two economies, so pairs behave differently from single assets.
ExampleGoing long EUR/USD profits if the euro rises relative to the dollar.
FX-03
Base / Quote Currency
DefinitionThe base is the first currency in a pair; the quote (or counter) is the second.
ExplanationPrices express how many units of the quote currency equal one unit of the base. Profit and loss accrue in the quote currency.
Why it mattersKnowing which is which is essential for reading prices and calculating value per pip.
FX-04
Pip
DefinitionThe smallest standard price move in a currency pair, usually the fourth decimal place.
ExplanationFor most pairs one pip is 0.0001; for yen pairs it is 0.01. Pip value depends on position size — for a USD-quoted pair, one pip on a micro lot is about $0.10.
Why it mattersPips are how forex risk, stops, and targets are measured and sized.
ExampleA move from 1.1400 to 1.1440 in EUR/USD is 40 pips; on one micro lot that is about $4.
FX-05
Lot
DefinitionA standardized unit of trade size in forex.
ExplanationA standard lot is 100,000 units of the base currency, a mini lot 10,000, and a micro lot 1,000. Larger lots mean more dollars per pip.
Why it mattersLot size directly sets your risk per pip, so it is the lever you pull to control position size on a small account.
ExampleOne micro lot (1,000 units) of EUR/USD is worth about $0.10 per pip.
FX-06
Carry Trade
DefinitionBorrowing a low-interest currency to buy a higher-interest one, earning the rate difference.
ExplanationTraders collect the interest-rate differential (the 'swap' or 'rollover') for holding the position overnight, on top of any price move. It can unwind violently in risk-off periods.
Why it mattersCarry is a major driver of long-term currency flows and overnight financing costs.
FX-07
Rollover / Swap
DefinitionThe interest paid or earned for holding a forex position overnight.
ExplanationBecause each currency carries an interest rate, holding a pair overnight credits or debits the rate differential. It can add up on longer-term positions.
Why it mattersSwap costs or gains affect the true return of any position held beyond a day.
CRY
Cryptocurrency
9 termsDigital assets secured by cryptography and recorded on decentralized ledgers. Crypto trades 24/7, is highly volatile, and blends its own vocabulary with traditional market terms.
CRY-01
Cryptocurrency
DefinitionA digital asset that uses cryptography and a decentralized ledger to record ownership and transfers.
ExplanationCryptocurrencies like Bitcoin operate without a central authority, trade 24/7, and are known for extreme volatility. They can be traded on exchanges much like other assets.
Why it mattersCrypto's volatility offers large opportunity and large risk, demanding even tighter risk management.
CRY-02
Blockchain
DefinitionA distributed, tamper-resistant ledger that records transactions across many computers.
ExplanationEach block of transactions links cryptographically to the previous one, making history hard to alter. It is the technology underpinning most cryptocurrencies.
Why it mattersUnderstanding the ledger explains why crypto settles without banks and why network activity affects value.
CRY-03
Bitcoin
DefinitionThe first and largest cryptocurrency, created in 2009.
ExplanationBitcoin (BTC) is often treated as digital gold — a scarce, decentralized store of value. Its price frequently sets the tone for the broader crypto market.
Why it mattersAs the market's benchmark, Bitcoin's moves heavily influence other coins ('altcoins').
CRY-04
Altcoin
DefinitionAny cryptocurrency other than Bitcoin.
ExplanationAltcoins range from large, established networks to tiny speculative tokens. They tend to be more volatile than Bitcoin and often move with it.
Why it mattersAltcoins offer higher potential returns and higher risk, including low liquidity and failure risk.
CRY-05
Stablecoin
DefinitionA cryptocurrency designed to hold a steady value, usually pegged to a fiat currency.
ExplanationStablecoins like those pegged to the US dollar are used to park funds and move between trades without converting to cash. Their stability depends on the quality of their backing.
Why it mattersThey are the settlement layer of crypto trading and a refuge during volatility.
CRY-06
Exchange (Crypto)
DefinitionA platform for buying, selling, and trading cryptocurrencies.
ExplanationCentralized exchanges (CEX) hold your funds and match orders; decentralized exchanges (DEX) let you trade peer-to-peer from your own wallet. Custody and security differ greatly.
Why it mattersWhere and how you hold crypto affects security, counterparty risk, and control.
CRY-07
Wallet
DefinitionSoftware or hardware that stores the keys controlling your cryptocurrency.
ExplanationA wallet holds the private keys that prove ownership. 'Hot' wallets are online and convenient; 'cold' wallets are offline and more secure. 'Not your keys, not your coins' captures the custody risk.
Why it mattersLosing keys or trusting the wrong custodian can mean permanent, irreversible loss.
CRY-08
Gas Fees
DefinitionThe transaction fees paid to process operations on a blockchain.
ExplanationFees compensate the network for computation and rise when the network is congested. On some chains they can exceed the value of a small trade.
Why it mattersFees are a real cost that can make small crypto trades uneconomical.
CRY-09
Staking
DefinitionLocking up crypto to help secure a network in return for rewards.
ExplanationOn proof-of-stake blockchains, holders stake coins to validate transactions and earn yield, similar in spirit to interest. Staked funds may be locked for a period.
Why it mattersStaking offers income but adds lock-up and network risk to price risk.
PSY
Trading Psychology
9 termsThe mental discipline behind consistent trading. Most trading failures are not analytical — they are emotional, and this is where a plan and a journal earn their keep.
PSY-01
Trading Psychology
DefinitionThe emotional and mental factors that influence trading decisions.
ExplanationFear, greed, hope, and regret push traders to break their rules — cutting winners short, letting losers run, or oversizing after a loss. Managing yourself is as important as managing the trade.
Why it mattersA sound strategy fails without the discipline to execute it consistently under pressure.
PSY-02
Discipline
DefinitionThe ability to follow your trading plan regardless of emotion.
ExplanationDiscipline means taking every valid signal, respecting stops, and skipping trades that don't fit — even when it is boring or uncomfortable. It is built through routine and journaling.
Why it mattersDiscipline is the trait most correlated with long-term survival and profitability.
PSY-03
FOMO
DefinitionFear Of Missing Out — the urge to chase a move already underway.
ExplanationFOMO drives traders to enter late, at poor prices, without a plan, usually right before a pullback. It is amplified by social media and fast-moving markets.
Why it mattersChasing on FOMO produces bad entries and blown risk-reward, a leading cause of losses.
ExampleBuying a stock after it has already surged 80%, with no stop in mind, is a classic FOMO trade.
PSY-04
Fear & Greed
DefinitionThe two dominant emotions that drive market cycles and individual decisions.
ExplanationGreed inflates bubbles and makes traders oversize and overstay; fear drives panic selling and hesitation. Markets swing between these extremes.
Why it mattersRecognizing these emotions in yourself and the crowd is central to buying value and avoiding manias.
PSY-05
Overtrading
DefinitionTrading too frequently or with too much size relative to your plan.
ExplanationOvertrading stems from boredom, revenge, or overconfidence and inflates costs while degrading decision quality. Fewer, higher-quality trades usually outperform.
Why it mattersIt bleeds accounts through fees, spreads, and forced low-probability trades.
PSY-06
Revenge Trading
DefinitionTrying to immediately win back a loss by taking impulsive trades.
ExplanationAfter a painful loss, the urge to 'get it back' leads to oversized, unplanned trades that often deepen the hole. It is emotion overriding process.
Why it mattersRevenge trading turns a single manageable loss into a catastrophic drawdown.
PSY-07
Loss Aversion
DefinitionThe tendency to feel losses more strongly than equivalent gains.
ExplanationBehavioral research suggests losses hurt about twice as much as gains feel good. This bias makes traders hold losers hoping to break even and sell winners too early.
Why it mattersRecognizing loss aversion helps you honor stops and let winners run against your instincts.
PSY-08
Trading Plan
DefinitionA written set of rules defining what, when, how much, and why you trade.
ExplanationA plan specifies your strategy, entry and exit criteria, risk per trade, and the conditions under which you will not trade. It converts trading from improvisation into a repeatable process.
Why it mattersA plan removes in-the-moment emotion and makes performance reviewable and improvable.
PSY-09
Trading Journal
DefinitionA record of every trade with its rationale, execution, and outcome.
ExplanationA journal logs entry and exit, size, risk, reward-to-risk, result in R, and notes on what you did well or poorly. Reviewing it reveals your real edge and recurring mistakes.
Why it mattersYou cannot improve what you don't measure; the journal turns experience into learning.
ExampleLogging each trade's R-multiple and setup lets you see which strategies actually make money over time.
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