Trading Glossary
Comprehensive glossary of trading terms and acronyms
Trading Glossary
A comprehensive glossary of trading terms, acronyms, and metrics used in TraderVault.
Performance Metrics
| Term | Acronym | Definition |
|---|---|---|
| Profit and Loss | P&L | The difference between your entry price and exit price, multiplied by position size. Shows how much money you made or lost on a trade. |
| Return on Investment | ROI | Percentage gain or loss relative to your initial investment. Calculated as: (Final Value - Initial Value) / Initial Value × 100 |
| Win Rate | WR | The percentage of your trades that were profitable. Calculated as: Winning Trades / Total Trades × 100 |
| Profit Factor | PF | Ratio of gross profits to gross losses. A profit factor > 1 means you're profitable overall. Calculated as: Total Profit / Total Loss |
| Risk-to-Reward Ratio | R:R | The ratio of potential profit to potential loss on a trade. Example: 3:1 means you aim to make $3 for every $1 risked. |
| Expectancy | - | Average amount you expect to win (or lose) per trade. Calculated as: (Win Rate × Avg Win) - (Loss Rate × Avg Loss) |
| Average Winner | Avg W | The average profit amount on winning trades. |
| Average Loser | Avg L | The average loss amount on losing trades. |
| Largest Winner | - | Your biggest profitable trade in a given period. |
| Largest Loser | - | Your biggest losing trade in a given period. |
| Maximum Adverse Excursion | MAE | The largest unrealized loss experienced during a trade before it was closed. Helps measure how much heat you typically take. |
| Maximum Favorable Excursion | MFE | The largest unrealized profit experienced during a trade before it was closed. Helps identify if you're leaving money on the table. |
| Sharpe Ratio | - | A measure of risk-adjusted return. Higher is better. Calculated as: (Return - Risk-Free Rate) / Standard Deviation of Returns |
| Sortino Ratio | - | Similar to Sharpe but only penalizes downside volatility. Often considered more relevant for traders. |
| Drawdown | DD | The peak-to-trough decline in your account value. Shows how much you've lost from your highest point. |
| Maximum Drawdown | Max DD | The largest percentage drop from a peak to a trough. Critical for understanding worst-case scenarios. |
| Recovery Factor | - | Net profit divided by maximum drawdown. Shows how well you recover from losses. |
Trade Types & Actions
| Term | Definition |
|---|---|
| Long | Buying a security with the expectation that its price will increase. You profit when the price goes up. |
| Short | Selling borrowed shares with the expectation that the price will decrease. You profit when the price goes down. |
| Entry | The price at which you open a position (buy for long, sell for short). |
| Exit | The price at which you close a position (sell for long, buy to cover for short). |
| Stop Loss | A predetermined price level at which you'll exit a losing trade to limit your loss. Also called "stop" or "SL". |
| Take Profit | A predetermined price level at which you'll exit a winning trade to lock in gains. Also called "target" or "TP". |
| Trailing Stop | A stop loss that automatically moves in your favor as the price moves. Locks in profits while giving room to run. |
| Scale In | Adding to your position in increments rather than all at once. Allows averaging into a position. |
| Scale Out | Reducing your position in increments. Allows locking in partial profits while letting the rest run. |
| Dollar Cost Averaging | DCA |
| Averaging Down | Adding to a losing position at lower prices to reduce average cost. Risky if the trend continues against you. |
| Pyramiding | Adding to a winning position as it moves in your favor. Increases exposure to winning trades. |
| Position Sizing | Determining how many shares to buy based on your account size and risk tolerance. |
| Risk per Trade | The percentage of your account you're willing to lose on a single trade. Common rule: 1-2% max. |
Order Types
| Term | Acronym | Definition |
|---|---|---|
| Market Order | MKT | An order to buy or sell immediately at the current best available price. Guarantees execution but not price. |
| Limit Order | LMT | An order to buy or sell at a specific price or better. Guarantees price but not execution. |
| Stop Order | STP | An order that becomes a market order when the price reaches a specified level. Used for stop losses. |
| Stop Limit Order | STP LMT | An order that becomes a limit order (not market) when the trigger price is reached. More control but may not fill. |
| Good Till Canceled | GTC | An order that remains active until it's either filled or you cancel it. |
| Day Order | DAY | An order that expires at the end of the trading day if not filled. |
| Fill or Kill | FOK | An order that must be executed immediately in its entirety or canceled completely. |
| Immediate or Cancel | IOC | An order that attempts to execute immediately; any unfilled portion is canceled. |
| All or None | AON | An order that must be filled completely or not at all, but doesn't have to be immediate. |
| One Cancels Other | OCO | Two orders linked together; when one executes, the other is automatically canceled. Often used for stop loss + take profit. |
| Bracket Order | - | An entry order with attached stop loss and take profit orders. All three are managed together. |
Market Terms
| Term | Definition |
|---|---|
| Bid | The highest price buyers are currently willing to pay for a security. |
| Ask | The lowest price sellers are currently willing to accept. Also called "offer". |
| Spread | The difference between the bid and ask price. Tighter spreads = more liquid. |
| Volume | The number of shares traded during a specific time period. High volume = more interest/activity. |
| Liquidity | How easily a security can be bought or sold without significantly affecting its price. |
| Volatility | A measure of how much a price fluctuates. High volatility = bigger price swings. |
| All-Time High | ATH |
| All-Time Low | ATL |
| 52-Week High | 52W H |
| 52-Week Low | 52W L |
| Market Cap | - |
| Float | - |
| Short Interest | SI |
| Days to Cover | DTC |
| Gap | - |
| Slippage | - |
Technical Analysis
| Term | Acronym | Definition |
|---|---|---|
| Support | - | A price level where buying interest is strong enough to prevent further decline. Price tends to bounce here. |
| Resistance | - | A price level where selling pressure is strong enough to prevent further advance. Price tends to stall here. |
| Breakout | - | When price moves above a resistance level or below a support level with conviction. |
| Breakdown | - | When price falls below a support level, often with increased volume. |
| Consolidation | - | When price trades in a tight range, neither trending up nor down. Often precedes a breakout. |
| Trend | - | The general direction of price movement (uptrend, downtrend, or sideways). |
| Simple Moving Average | SMA | Average price over a specific number of periods. All periods weighted equally. |
| Exponential Moving Average | EMA | Moving average that gives more weight to recent prices. More responsive to new information. |
| Relative Strength Index | RSI | Momentum oscillator (0-100). Above 70 = overbought, below 30 = oversold. |
| Moving Average Convergence Divergence | MACD | Trend-following momentum indicator showing relationship between two EMAs. |
| Volume Weighted Average Price | VWAP | Average price weighted by volume. Institutional benchmark for trade execution quality. |
| Bollinger Bands | BB | Volatility bands placed above and below a moving average. Widen during volatile periods. |
| Average True Range | ATR | Measure of volatility based on price range. Used for setting stop losses. |
| Fibonacci Retracement | Fib | Horizontal lines indicating potential support/resistance at key Fibonacci levels (23.6%, 38.2%, 50%, 61.8%). |
Candlestick Patterns
| Term | Definition |
|---|---|
| Doji | Candle with nearly equal open and close, showing indecision. |
| Hammer | Bullish reversal pattern with small body and long lower wick. |
| Shooting Star | Bearish reversal pattern with small body and long upper wick. |
| Engulfing | When one candle's body completely covers the previous candle's body. Bullish or bearish depending on direction. |
| Morning Star | Three-candle bullish reversal pattern at bottom of downtrend. |
| Evening Star | Three-candle bearish reversal pattern at top of uptrend. |
Account & Platform Terms
| Term | Acronym | Definition |
|---|---|---|
| Multi-Factor Authentication | MFA | Security feature requiring two or more verification methods to log in. |
| Two-Factor Authentication | 2FA | Same as MFA, specifically with two factors (usually password + phone/app code). |
| Application Programming Interface | API | A way for different software systems to communicate. TraderVault uses APIs to connect to brokers. |
| Webhook | - | An automated message sent from one app to another when a specific event occurs. |
| Comma-Separated Values | CSV | A file format for spreadsheet data. Used for importing/exporting trades. |
| Open Authorization | OAuth | A secure way to grant apps access to your broker account without sharing your password. |
| Paper Trading | - | Simulated trading with fake money to practice without risk. |
| Backtesting | - | Testing a trading strategy on historical data to see how it would have performed. |
Trading Styles
| Term | Definition |
|---|---|
| Day Trading | Opening and closing positions within the same trading day. No overnight holds. |
| Swing Trading | Holding positions for several days to weeks, capturing medium-term moves. |
| Position Trading | Holding positions for weeks to months, following longer-term trends. |
| Scalping | Making many small trades to capture tiny price movements. High frequency, small gains. |
| Momentum Trading | Trading stocks showing strong price movement in one direction with high volume. |
| Breakout Trading | Entering trades when price breaks through support/resistance levels. |
| Mean Reversion | Trading based on the idea that prices will return to their average over time. |
| Trend Following | Trading in the direction of the prevailing trend. "The trend is your friend." |
Risk Management
| Term | Definition |
|---|---|
| Risk/Reward | The ratio comparing potential profit to potential loss. Aim for at least 2:1 or 3:1. |
| Position Sizing | Calculating how many shares to trade based on account size and risk tolerance. |
| Diversification | Spreading investments across different assets to reduce risk. |
| Correlation | How closely two assets move together. Negative correlation = good for diversification. |
| Beta | Measure of a stock's volatility relative to the overall market. Beta > 1 = more volatile than market. |
| Hedging | Taking offsetting positions to reduce risk. |
| Risk Management | The process of identifying, assessing, and controlling threats to your trading capital. |
Quick Reference: Formulas
Win Rate = Winning Trades / Total Trades × 100
Profit Factor = Gross Profit / Gross Loss
Risk per Trade = Account Size × Risk Percentage
Position Size = Risk Amount / (Entry Price - Stop Loss)
R-Multiple = Actual Profit / Initial Risk
Expectancy = (Win Rate × Avg Win) - (Loss Rate × Avg Loss)
Sharpe Ratio = (Return - Risk-Free Rate) / Standard Deviation