Glossary
Trader's glossary
Plain-English definitions of the terms every trader runs into — indicators, risk metrics, market structure, statistics, order types, backtesting, and crypto slang. Formulas where they exist, worked examples where they help.
73 terms across 7 categories
73 terms
A
B
- Backtesting→
Backtest
Simulating a trading rule on historical data to estimate how it would have performed.
- Indicators→
Blackflag FTS
A SuperTrend variant that adds a gap-adjusted true range, a trend-extreme tracker, and Fib pullback levels.
- Indicators→
Bollinger Bands
A moving average flanked by ±k standard deviations of price. k = 2 by default.
- Market structure→
Break of structure (BOS)
Price closing through a prior swing point in the direction of the existing trend.
C
D
E
- Market structure→
Equal highs / equal lows (EQH / EQL)
Two or more swing pivots printing at nearly the same price — a visible liquidity pool.
- Statistics→
Expectancy
Average profit (or loss) per trade — the most honest measure of edge.
- Indicators→
Exponential moving average (EMA)
Weighted moving average that gives recent bars exponentially more weight.
F
H
I
L
- Risk→
Leverage
Position notional divided by posted margin. 10× leverage = 10× the equity exposure.
- Order types→
Limit order
An order to buy at or below / sell at or above a chosen price. May not fill.
- Risk→
Liquidation price
Price at which a leveraged position is force-closed by the exchange.
- Market structure→
Liquidity sweep
Price briefly trades through an EQH or EQL to trigger resting stops, then immediately reverses.
- General→
Long
A position that profits when price rises. To 'go long' = to buy.
- Backtesting→
Look-ahead bias
Using information in a backtest that would not have been available at the time.
- Market structure→
Lower low
A swing low that prints below the prior swing low — the signature of a downtrend.
M
- Indicators→
MACD
Trend-momentum hybrid: difference of two EMAs, plus a signal-line EMA and histogram.
- Order types→
Market order
An order to fill immediately at the best available price. Pays the spread.
- Risk→
Maximum drawdown
The deepest peak-to-trough decline observed across the entire equity curve.
- Statistics→
Mean
Arithmetic average of a series. In trading: average return per period.
- Statistics→
Median
Middle value of a sorted series — robust to outliers, unlike the mean.
- Indicators→
Moving average
A rolling average of price over a fixed window, used to smooth noise.
O
- Market structure→
Order block
The last opposite-direction candle before a break of structure, used as a supply/demand zone.
- Backtesting→
Out-of-sample
Data the strategy was not allowed to see during parameter selection.
- Backtesting→
Overfitting
Fitting a strategy so closely to past data that it captures noise, not signal.
P
- Risk→
Position size
How many units of an asset a trade holds — derived from risk budget and stop distance.
- Market structure→
Premium / discount / equilibrium
The upper, lower, and middle slices of a trailing range — premium = sell zone, discount = buy zone.
- Market structure→
Prior day high / prior day low (PDH / PDL)
Yesterday's extreme prices — common breakout, target, and liquidity reference levels.
- Statistics→
Profit factor
Gross profit divided by gross loss. > 1.0 = profitable, > 1.5 = strong.
R
- Market structure→
Range
Sideways price action bounded by a definable support and resistance.
- Indicators→
Relative strength index (RSI)
Momentum oscillator that ranges 0–100 based on the ratio of gains to losses.
- Market structure→
Resistance
A price level where rising supply outpaces demand, halting or reversing rallies.
- Risk→
Risk per trade
Dollar amount (or % of equity) you lose if the stop on a single trade hits.
- Risk→
Risk-reward ratio
Ratio of potential gain to potential loss on a trade — also written R-multiple.
S
- Statistics→
Sharpe ratio
Excess return over the risk-free rate per unit of total volatility.
- General→
Short
A position that profits when price falls. To 'short' = to sell first, buy later.
- Indicators→
Simple moving average (SMA)
Unweighted arithmetic mean of the last N closes. Every bar counts equally.
- Backtesting→
Slippage
Difference between the price a strategy assumed and the price it actually got.
- Statistics→
Sortino ratio
Sharpe variant that penalizes only downside volatility, not total volatility.
- Statistics→
Standard deviation
Square root of variance — the most common volatility measure in trading.
- Indicators→
Stochastic oscillator
Where today's close sits inside the high-low range of the last N bars, 0–100.
- Risk→
Stop loss
A pre-committed exit level that caps the maximum loss on a trade.
- Order types→
Stop order
An order that converts to a market order once a trigger price is reached.
- Order types→
Stop-limit order
Stop order that converts to a limit order, not a market — avoids bad slippage.
- Indicators→
SuperTrend
An ATR-band trailing stop on hl2 that flips when close breaches the opposite latched band.
- Market structure→
Support
A price level where falling demand outpaces supply, halting or reversing declines.
- Backtesting→
Survivorship bias
Testing only on assets that survived to the present, ignoring those that died.
- Market structure→
Swing high
A local peak: a bar whose high is higher than the N bars on each side.
- Market structure→
Swing low
A local trough: a bar whose low is lower than the N bars on each side.
T
- Risk→
Take profit
A pre-committed exit at a target price that locks in a winning trade.
- Order types→
Take-profit order
A limit order at a target price that closes a winning position automatically.
- Order types→
Time in force (GTC / IOC / FOK)
Instruction that controls how long an order stays live before being cancelled.
- Risk→
Trailing stop
A stop that ratchets in the trade's favor and never moves against it.
- Order types→
Trailing stop order
Exchange-side order whose trigger ratchets as price moves in your favor.
- Market structure→
Trend
A persistent directional drift in price — up, down, or sideways.
- Indicators→
Trend Magic
A wick-anchored ATR band that ratchets one way or the other depending on the sign of CCI.
V
- Statistics→
Variance
Average squared deviation from the mean. Square root is standard deviation.
- Indicators→
Volume Flow Indicator (VFI)
An accumulation/distribution oscillator that sums signed volume only when log-returns exceed a noise floor.
- Indicators→
Volume moving average
A moving average of bar volume, used to detect above-average participation.
- Indicators→
Volume-weighted average price (VWAP)
Average price weighted by volume — the institutional benchmark for intraday fills.
W
- Backtesting→
Walk-forward optimization
Optimize on a rolling in-sample window, validate on the next out-of-sample slice.
- General→
Whale
A holder large enough to move the market when they trade — typically 1,000+ BTC.
- Statistics→
Win rate
Fraction of trades that closed profitable. On its own, says little about edge.
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