Trader’s glossary

Trader’s glossary

Every professional environment has its own ‘special words’, which are clear only to those who act in this environment for a long time. Trading is not an exception. That is why we developed this trader’s glossary to help beginners. It contains basic terminology of traders who trade stocks in the stock market. We also added the exchange slang to the glossary.

Although this glossary is far from being complete, it is rather big. In case you haven’t found an interpretation of a word you have been looking for, make a comment and we will add an interpretation of that term.

To find a word in this glossary, you can use the combination of Ctrl+F keys (in the Chrome browser) and type a term you are looking for.

Stock is an exchange instrument, a security. For example, the Apple stock. There could be ordinary and registered stocks. A stock gives its owner the right to receive some benefit from owning it, such as: get dividends, vote at shareholder meetings and claim an interest in the company’s property.

Stockholder is a stock owner.

Accumulation is a market stage when a major player accumulates a long position at low prices.

Algo-trader is a market participant who makes (or tries to make) money using algorithms and automatic (semi-automatic) robots. How to develop a robot in detail.

Uptrend is an ascending trend and consistently growing price.

Up-bar is a bar, the price of closing which is higher than the price of closing the previous bar (or than the price of its opening).

Arbitrage is a trading strategy directed at receiving profit by means of the price difference in similar markets. A classical example: arbitrage traders on the Chicago Exchange immediately start posting buy orders after they learnt that gold has started to move up on the New York Exchange.

Ask is an order for selling an exchange instrument. Asks are market orders (orders for selling) posted by sellers, which could be seen in the order book. About asks in more detail.

Base currency is the currency, which is in the first place in a price quotation. This is a Forex term. Example: the quotation currency in EURJPY is EUR.

Bar chart is a method of displaying the price dynamics for a certain period of time. Besides, every bar is displayed in the form of a vertical line segment with two marks. They mean opening and closing prices and the low and high of an exchange asset for a selected period of time (time-frame). You can see a bar example in the picture below.

Бар. Словарь брокера

Breakeven is the price level, at which the available open position profit will be zero. The breakeven level is used for avoiding the trade to become loss-making. To do it, protective orders are posted there.

Bid is a buying order. About bids in more detail.

Flat is a price movement without a pronounced trend. The chart forms a so-called corridor. Also see ‘consolidation’.

Bond is a debt security, which is traded on the exchange. About bonds in more detail.

Broker or Brokerage Office is an intermediary between the exchange and customer. This intermediary is authorized to execute the orders, received from the customers, on the exchange and take commission for the services rendered.

Paper Profit or Floating Profit is an amount, which would become an actual (registered) profit if a trader closes his position. The paper profit fluctuates (it may either go up or down) while a position is open.

To be in the market (to have a position) means to have an open trade.

To be out of the market (to have no position) means to have no open trade.

Bull is a market participant who sets his mind on price increase.

Bullish market is the market with a pronounced price increase trend.

Quotation currency (counter currency) is the currency, which is in the second place in a price quotation. This is a Forex term. Example: the quotation currency in USDJPY is JPY.

Volatility is a property (ability) of the price to easily change or deviate from its established value. A volatile market is the one where significant expanded price fluctuations are observed. About volatility in more detail.

Enter the market means to open a position or execute a trade.

Intraday trading is such a trading type, at which all operations on the exchange take place within one trading session. Positions could be held from several minutes to several hours and, as a rule, they are never rolled overnight. Traders, who trade within this strategy, are called intraday or day traders.

High Frequency Trading (HFT) is such a trading type, at which a period of time between opening and closing a trade lasts for a fraction of a second. As a rule, this type of trading is carried out with the use of trading robots.

Gap is such a price change, which creates a ‘disruption’ between the bars in the chart. Gaps are very common for opening a session in the stock market. Gaps are less frequent in the Forex and futures markets, since they are open for a longer period of time. There could be a gap up or gap down. The picture below shows two most pronounced gaps up in the AAPL stock market.

Гэп. Словарь брокера

Blue chips are stocks of famous companies with excellent reputation. Usually, they have a long history and regularly pay dividends. The ‘blue chip’ exchange term came from the poker card game where the blue chip has the highest value.

Head is the ‘head and shoulders’ pattern of technical analysis.

Chart patterns are shapes (for example, ‘triangle’, ‘wedge’, ‘flag’, etc.), which are formed in the price chart. Chart patterns are formed with lines. Such patterns make it easier to understand the market situation and allow building a plan of further actions in different scenarios. You can find more detailed information in our Chart patterns article.

Deutsche Akzien Index (DAX) is one of the most important European stock indices, which reflects the economic state of Germany. DAX includes stocks of 30 largest companies (German blue chips), which form the Frankfurt Stock Exchange top list. It includes Adidas, BMW, Siemens, Deutsche Bank and others.

Downtrend is a stable price decrease.

Down-bar is a bar, the closing of which is lower than the closing of the previous bar (or than its opening).

Delta is the difference between the buying and selling trades.

Demo Account is a training account for beginners with virtual money. When trading on the demo account, a beginner trader can train, master a trading platform and test his strategy without the risk of losing his capital. The demo account service is provided by practically all brokers. As a rule, trading on the demo account practically has no differences from trading on the real account.

Derivative or derivat is a secondary financial instrument. For example, SBER stock is an underlying instrument and Sberbank stock futures contract is a derivative.

Discretionary trading is a type of trading when execution of operations takes place on the basis of a subjective market assessment. You can find more detailed information in our discretionary and system trading article.

Day trading or intraday trading is a type of trading when trades are executed within one session – ‘from dawn till dusk’.

Trader’s log is an electronic or hard copy log, which a trader keeps. He enters in the log exchange operations with prices, reasons why they were executed, important events, ideas and many other things. The log helps a trader to keep discipline, find and correct mistakes, better understand his own psychology and actions in the stock market. Why you need to keep a trader’s log.

Divergence is the difference between the price and oscillator (indicator). If the price forms a new extreme point and the indicator doesn’t show it, a divergence is formed. It means that a trend is ‘exhausted’ and becomes weaker.

Дивергенция

Diversification is a method of risk reducing. Put simply, it means ‘to put eggs in different baskets’. Application of diversification assumes distribution of the capital between different exchange instruments. The idea is that a profit from one asset would compensate for possible losses from another asset.

Dividend (from Latin ‘dividendum’ – something that should be divided) is a part of a company profit, distributed among stockholders in accordance with the number and types of stocks. The amount and order of payment of dividends are identified by a stockholder’s meeting. As a rule, news about dividends of a company is succeeded by a leap in the price of the respective stock.

Dealing center is a legal person, a non-bank office, which provides services on execution of trades in the international currency market (Forex) and Contracts For Difference (CFD) markets. The customers of such offices are, as a rule, beginner speculators with a small trading capital. They work under conditions of margin trading and use leverage. Trades, executed through a dealing center, as a rule, do not reach the official exchange. And customers of such centers trade either against other customers or the center itself.

Distribution is a market stage when a major player closes a long position at market highs, selling out a previously bought asset to the ‘crowd’.

Drawdown is a paper loss, which is formed when the price moves against the existing position.

Eurobond is a bond, which is issued in a foreign currency. In fact, it is a debt liability, which has maturity. Long-term eurobonds are issued for the period of 40 years and more. There are also middle-term eurobonds – more than 10 years, and short-term – from 1 to 5 years. You can find more detailed information in our article about bonds.

Trading register contains detailed statistics of trading operations. A similar term is a trader’s log. It contains information about how much was bought/sold, at what prices and what the result is. It helps to conduct analysis of trading actions, detect and correct mistakes in strategy and psychology. ATAS has trading statistics, which is registered automatically (see the picture below).

Журнал трейдера

Close the position or close the trade or close is an action when the previously bought stocks are sold (long) or previously sold stocks are bought (short). Securities are exchanged into money when the position is closed (‘exit into cash’).

Lock or lock up – see locking.

Register profit (loss) means to close the current position (trade). Besides, the paper profit (loss) becomes actual.

Protective orders are limit exchange orders, used, as a rule, for protection of an open position against undesirable losses in the event of unfavourable development of the situation. They are better known as stop losses. They are also used for protection of the ‘paper profit’ (see trading stop).

Liquidity seizure is a position building by means of a flow of counter-orders. For example, a major player uses a splash of panic sell orders for accumulating a long position.

Order is an instruction a trader sends to his broker for execution on the exchange. An example of an order is ‘to buy immediately’ or ‘to sell YY contracts when the price is at the level of USD XX’. All exchange orders are standardized. Every order contains all the necessary information such as: period of validity, money amount, price levels, conditions of execution, etc.

Investments, investing is an activity directed at conservation and augmentation of the capital. Usually, investments mean inputs into stock markets (buying of stocks, bonds, etc.). Investment inputs are performed for a long period starting from 1 year and longer.

Insiders are market participants that have real information, which is unaccessible for the majority. This information (inside) is able to influence the prices of exchange instruments. That is why, the inside knowledge (for example, information about unpublished reports) gives a competitive advantage in the market.

Intraday – see intraday trading.

Index is a financial indicator. It is a generalized and averaged (by a special formula) price of all financial instruments, which are included into its calculation base. Index reflects the market (stock market, bond market and so on) dynamics. You can find more details in our article about stock indices.

Indicator is one of the instruments for working with a chart. As a rule, indicators recalculate the data and transform them into a clear visual form. There are classical (MACD, RSI, etc.) and modern developments. The goal of any indicator is to help in the market analysis and to find the entry/exit points.

Channel is a range (or area in the chart), which is limited with two parallel lines, within which the price movement (trend) takes place. They also say ‘a trend channel’. Channels could be ascending (bullish trend) and descending (bearish trend).

Capitalization is the joint-stock company value, calculated by the price of its stock. The company capitalization is the number of stocks multiplied by the current stock value.

Calls are call options. You can find more details in what options are.

Convergence means ‘meeting in one point’. It is the futures contract price movement to the underlying instrument spot price as the expiration date comes nearer. It means that the futures price and underlying asset price will be nearly equal on the date of the futures contract expiration. Two prices should approach each other. In case there is no convergence, a prospect for arbitrage emerges.

Consolidation or sideways motion is a suspension of the trend price motion. The market ‘calms down’ and the price forms fluctuations, which stay within the range, in the chart. Moreover, it is usually accompanied with the decrease of volatility and trading volume.

Correction or rollback is a price movement, directed into the opposite side from the main or prevailing price movement. As a rule, rollbacks are accompanied with the volume (trading activity) reduction. Correction, as a rule, is a counter-trend of a smaller scale within the main trend of a larger scale.

Quotation is the current price of an exchange instrument. The price of the most recent executed trade is taken as the basis. It is a more specialized term. The simpler term “rate” is used more often in everyday language. Also, quotations, sometimes, refer to the historical data of the price change.

Cross rate is a currency quotation, which does not contain USD. For example, AUD/JPY.

Cash is the money in hand. Usually, it means a free capital available for exchange operations.

Time and Sales Tape is an instrument for analysis of just executed trades. It allows monitoring what takes place ‘now and here’. An example is the Smart Tape from the ATAS trading platform (see the picture below).

лента принтов.

Liquidity means, with respect to the market, this market popularity. The more operations in the market are, the more traders there are and the less difference between counter-orders is – the higher the market liquidity is. More detailed information about what liquidity is.

Liquidation is a forced position closing. This unpleasant event takes place when a trader has no money to support his position. Sometimes, it may mean that the trader lost his capital completely, sometimes – partially. It depends on the exchange, broker and trading conditions.

Limit order is an order, which is executed at the price, specified in it. It may be executed at the best price, but not at the worst price. A limit order could be either for buying or selling. It could be set higher or lower than the current rate. You can find more information about limit orders in our article about matching orders on the exchange.

Line chart is the price movement chart built in the form of a curved line.

Trend line is a line segment, half line or continuous line, built through the price extreme points in the chart. The trend line is an important level of resistance or support. It helps to find the position opening/closing moments and judge about the market strength/weakness and mood change. It is one of the keystone concepts of technical analysis.

Locking is an opening of a position, which is opposite to the already existing one and has the same volume. It is allowed in the Forex, if a trader has an open buy and he opens a sell. It is a kind of hedging. Locking (lock up) is usually applied for registering a floating loss. Locking is not allowed for regular traders in the stock market. If you bought an asset on the official exchange, you can only sell it and register the operation result.

Long or long position is availability of previously bought securities with the purpose of their further broking at a higher price.

Loss is a trade’s negative return.

Lot is a unit of measurement of a trade.

Majority stakeholders are influential owners of the company stock, who, as a rule, are members of its Board of Directors. They can participate in making important decisions, they have access to inside information and their votes have special weight at the stockholder meetings.

Money management is a system of capital management. It includes a correct calculation of the working volume, a number of simultaneously opened positions, acceptable risks (drawdowns), guides for goals, etc.

Market maker – we have a special article about market makers.

Margin lending is a method of buying more on the exchange than you can afford and also a possibility of selling the securities you do not have. Due to the margin lending service, which a broker (or exchange) provides you with, you can trade for the amount of USD 1,000 while having on the account only USD 200-300. This allows increasing the yield but also bears the risk of loss.

Margin call takes place when the value of the margin account of an investor (the account to which the securities, bought for the borrowed money, are deposited) falls below the required broker’s amount. The margin call is a broker’s requirement to an investor for immediate depositing of funds for supporting the investor’s position.

Market order (trading market orders) is an order for immediate buy/sell of an exchange instrument at the best current market price. This is an aggressive type of trading, which is characteristic for the more decisive and dominating market side.

Bear is a market participant (in the wide sense – any seller) who sets his mind on the price decrease. He either has a short position (already sold) or intends to open it, planning to make a profit on a possible price decrease.

Bearish market is a market where sellers dominate. The down tendency, when the supply exceeds demand, is characteristic to it.

Automated trading system (ATS) is an algorithm for trading on the exchange without applying subjective decisions. Usually, it is a clear cut automated trading strategy, which is developed for robots.

Minority stakeholders are stakeholders who own small packages of the company stock. As a rule, they are not included into the company’s Board of Directors and own stock for investing or speculative purposes.

Moving average is an indicator. It is an average price value for a selected period of time. There are several types of the moving average calculation: simple, exponential and others.

Spike is a price quotation, which stands out of the current general context, It may form a significant break in  the price with further return to the previous level. As a rule, spikes are the consequence of a technical malfunction.

Bond (from Latin ‘obligatio’) is a debt security. Its owner has the right to get its face value from the issuer in cash or in the form of another asset. Bonds have maturity and interest.

Volume is a trading activity indicator. It could be calculated in contracts, money and ticks. It could be calculated for a unit of time (for example, a volume for 1 hour) and used for non-standard chart types. Increase of the volume in the direction of price movement, as a rule, shows the strength of this movement. Volume analysis is an important part of knowledge for traders.

Oscillator is a modification of the technical analysis indicators, which show the overbought/oversold areas. As a rule, they are displayed in the form of a bar chart or curve and placed under the price chart.

Option (from Latin ‘optio’ – choice, wish or discretion) is a contract, by which a potential buyer or potential seller of an asset (commodity, security, etc.) obtains the right, but not obligation, to buy or sell at a previously specified price. You can read in more detail what options are.

Pullback or rollback is insignificant in time and duration price decrease after its increase and a small transitional growth after a lengthy fall.

Bounce is the price growth, as a rule, after touching the support level.

Pending order is an order for execution of a trade under certain conditions. For example, after posting a pending (limit) buy order when reaching the price level of XX, a trader may switch off from the monitor since the trade will be executed automatically.

Take a position means to enter the market and buy or sell stock, futures or any other exchange asset.

Open interest – you can read about it in this article.

Offer is the same as Ask. For example, the ‘to buy offers’ phrase means that an aggressive buyer acts in the market.

Pattern is a repeated model in the price dynamics.

Unit Investment Fund (UIF) is an investment method. The money funds of the fund participants are accumulated and invested in valuable exchange assets.

Reverse means to change a position to an opposite one. Buys became sells and vice versa.

Overbought means that the market is overheated and is in the state when the prices are too high, which means that the probability of their reduction increases.

Oversold means that the market is in panic and is in the state when the prices are too low, which means that a probability of their growth increases.

Floating profit (floating loss) is the same as paper profit or loss. These are not yet registered results of the trading activity.

Absorption – read the article about absorptions.

Breakout is the price overriding of significant levels (support/resistance lines, trend lines, etc.). There could be false and true breakouts. True breakouts result in pronounced trends.

Market profile is an important instrument for volume analysis. You can find more details in this article.

Saw is a sideways movement within a range; inactive market without a pronounced trend with periodical up and down thrusts of the price (traps) and subsequent return to the range.

Pip or point is a minimum step of the exchange asset price change.

Leverage is a loan provided by a broker within margin lending. For example, the 1:5 leverage means that a trader can buy 5 times more stocks in the stock market than his deposit allows. Brokers use the leverage service to attract customers.

Position is an open trade.

Position trader is a trader who holds his positions during a long period of time. It is the investment style. The trade duration is one year and more.

Catch the loss means to close a stop loss position.

Portfolio is a set of exchange assets. For example, open positions in various markets and free funds on the account.

Support or support level is a significant level, at which the price usually slows down its fall and starts to grow. You can read more about support and resistance.

Slippage is the difference between the price at the moment of order posting and the price, at which this order will be executed. Slippage is most common for vigorous markets, when sharp price increases and an order flow from traders take place on the exchange. Usually, orders are executed longer and not so much as wished.

Professional market participants are organizations, which task is to provide the securities market functioning. You can find more detailed information in the article about professional participants.

Risk management is a set of measures directed at limitation of losses, keeping them under control and preservation of the capital. Mathematical models are used for achieving this goal. A more general term – capital management – is also used.

Re-Quote is a situation when a broker offers another quotation at the moment of the order execution. Re-quotes often occur during the periods of accelerated motion in the vigorous market. Sometimes, re-quotes bring even a higher profit.

Market order is an order, which will be executed on the exchange in full at the best prices available. If you need to buy/sell as soon as possible, do post market orders.

Size is the volume of an order, position or market in general.

Swap is a value, which influences open trader positions, which are rolled overnight. If a trader leaves a trade open the next day, a swap is charged for rolling over and holding the position. This payment is justified by a high risk the broker takes, holding the trader’s position. It is used both on the stock exchange and in the Forex market.

Trade is an action, which a trader undertakes on the exchange. For example, buying/selling stock or closing a position. A trade is the realization of a trading plan.

Expert adviser (EA) or trading robot is a software for automatic trading, which works independently in accordance with the previously set algorithm. Other names: expert, bot and automatic trading system.

Trading signal or trading alert is a direction for execution of a trade on the exchange. There could be paid for and free signals. They are designed for beginner traders or those who have no time to monitor and analyze the market. A signal example: to buy EURUSD now with YY stop and ZZ goal.

System trading is trading by a strategy with strict observation of a trading plan.

Scalper is a trader who does scalping.

Scalping is a trading type directed at receiving profit from short-term buy/sell operations in popular markets. Standard scalping trades last from several seconds to several minutes.

Trailing stop loss is used for protecting the capital against indirect losses connected with profit ‘evaporation’; in other words, the trailing stop allows the profit to grow and limits its ‘evaporation’ at a certain level. It is applied for managing profits. It is a sort of a stop loss, an order for a consequent automatic registration of the growing profit of an open position in the event of a favourable price movement. A desirable limit level is set and the program automatically moves it. The trailing stop is set for an open position and works only when the terminal is on.

Resistance (resistance level) is a significant level, at which the price usually slows down its growth and starts falling. More detailed information about support and resistance.

Fair (justified) stock price is the estimated stock value, directed at understanding of its real internal value.

Spread is the difference between the best buying price and best selling price. In other words, the distance between the nearest Ask and Bid. Small spreads are characteristic for popular liquid markets. You can find more details in this article.

Spot (spot market) is the market, which trades physical commodities with their further delivery.

Forward market is the market of derivative financial instruments. It trades futures, options and swaps.

Depth Of Market (DOM) or order book is a queue of orders in the exchange terminal, which shows existing posted orders from the exchange trade participants. You can find more detailed information about DOM in this article.

Биржевой стакан

Stop loss is a protective order designed to stop losses. It is applied for strict limitation of possible losses in the event the market moved against you.

Target is the price movement goal and a reference point for a take profit.

Technical analysis is an exchange science, which is a set of methods and ways of price analysis. The goal of the technical analysis is to identify the price movement, which would take place with high probability.

Technical analyst is a specialist who studies and applies technical analysis.

Take profit or profit target is the price value, at which the planned profit registration takes place. It is applied for capital management.

Trading idea is a design of a market operation (strategy) directed at making profit.

Trading plan – you can read about it in this article.

Trading session is a period, during which trading is going on on the exchanges. For example, the MICEX trading session starts at 10:00 and ends at 18:45.

Trading system or system trading is a trading type, which envisages execution of operations on the basis of formulated rules. You can find more information in the article on discretionary and system trading.

Trade range is the distance between the lowest (low) and highest (high) prices for a certain period of time (day) or it is a limited range within which the price fluctuates.

Trading terminal or trading platform is a software for analyzing the market and executing trades. An advanced platform (for example, ATAS – see the picture below) gives a competitive advantage in the exchange trading.

Торговый терминал

Trend is a stable price movement, which has a focused character. There could be an up (bullish) trend and down (bearish) trend. How to identify a trend day.

Trader is a specialist who trades financial instruments on the exchange. He can buy and sell securities both on behalf of his customers or on his own behalf. As a rule, a trader acts on the basis of a developed strategy.

Trading is a commercial activity on the exchange. Trading as such is analysis of the current market situation, execution of trades and observation of the risk management rules.

Crowd is a term, which generalizes a multitude of beginner and minor traders. They are inclined to act emotionally.

Fibonacci is a technical analisys instrument – an indicator based on Leonardo Fibonacci numbers. You can find more details in the article about Fibonacci numbers.

Flat is an inactive and quiet market. The price moves in a narrow price range for a long period of time. Trend systems make losses in such a market.

Stock market is an exchange market, which trades such securities as stocks, bonds and shares. For example, the Stock Department of the Moscow Exchange.

Forex is the market of over-the-counter transactions where trading operations with currencies take place.

Fundamental analysis is an approach for assessing the market, industry or economy. It includes a set of methods of analytical studies of the macro- and micro-economic data, their comparison between themselves and financial analysis. More information about fundamental analysis.

Fundamental analyst is a specialist who deals with analysis of fundamental factors, data and statistics.

Footprint is a cluster chart. Footprint is the most advanced type of the exchange chart.

Futures contract (futures) is a derivative financial instrument. More information about what futures is.

Hedging is a way to protect yourself against an unfavourable scenario. Read more about what hedging is.

Security (financial instrument) is what they trade on the exchange. It could be a stock, bond or futures contract.

Short position is a sell operation. If you see that the price is ready to go down, you even can sell assets, which do not belong to you (borrowed from the broker). You short the market with the goal to buy out the stock later at a lower price and make a profit on this difference. It is called ‘selling short’.

Short squeeze is a closure of short positions in the bullish market at any price. This process strengthens the ascending impulse even more.

Issuer is an organization which issued securities. For example, the AAPL company issued stock for the amount of USD XX. A state can also be an issuer.

Expiration is the contract maturity date. As a rule, it concerns a futures contract. The necessity to execute obligations, settlement payments and/or asset delivery comes on that date.

Candlestick chart (Japanese candles) is a chart type, which is very popular among traders. You can find more information in the article about candlestick analysis.

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