The trading glossary, A to Z
Every term in plain English, with the part that matters for your P&L: what it is, why it changes your decisions, and where it shows up in your own trade record.
105 terms
0DTE options
0DTE options are contracts that expire on the day you trade them. All of their value is time value, and that time runs out by the closing bell.
The 3-5-7 rule
The 3-5-7 rule caps risk three ways. Three percent on one trade, five percent in one market, seven percent across everything open.
The 3-6-9 rule
The 3-6-9 rule is a set of loss caps. At most 3 percent on one trade, 6 percent in a day, 9 percent in a week.
The 90 percent rule
The 90 percent rule is the often repeated claim that about nine in ten new traders lose their money within ninety days. Nobody has published the data behind it.
The 90-90-90 rule
The 90-90-90 rule is a trading saying, not a study: 90 percent of new traders lose 90 percent of their money within 90 days of starting.
Accumulation phase
The accumulation phase is the sideways stretch where large positions get built. Price moves back and forth in a range while buyers take on stock.
Accumulation, manipulation, distribution
Accumulation, manipulation and distribution name three phases a market moves through around a big move. Which phase you are in decides how patient you can afford to be.
At the money (ATM)
At the money means the strike sits at or very near the current stock price. With the stock at 100, a 100 call is at the money.
Average winner and average loser
Your average winner is the mean profit on your winning trades, and your average loser is the mean loss on the losing ones. With win rate, they decide if you make money.
Averaging down
Averaging down means buying more of a position as the price falls, which lowers your average cost. It also makes the trade bigger while it is losing.
Backtesting
Backtesting is testing a set of trading rules against past price data to see how they would have done. It gives you a record of results before you risk money.
Bearish engulfing
A bearish engulfing pattern is an up candle followed by a down candle whose body covers it. It needs an advance in front of it, and marks resistance at the pair's highest high.
Benefits of a trading journal
The benefits of a trading journal come from one thing. It replaces what you remember about your trading with what actually happened.
Breakeven stop
A breakeven stop is moving your stop to your entry price once the trade has moved in your favour. From then on the trade cannot lose money.
Breakout
A breakout is a close beyond a level that had been holding price back, with follow-through. The close is what counts, not the poke through.
Bullish engulfing
A bullish engulfing is a small down candle followed by an up candle whose body covers it. It forms after a fall, and the pair's lowest low marks support.
Candlestick pattern
A candlestick pattern is a shape made by one to three candles that marks a place where price turned. It hands you a level rather than a prediction.
Confirmation candle
A confirmation candle is the strong candle that proves a move is under way. It tells you the direction, but it is a poor place to enter, because it puts you far from your stop.
Consistency rule
A consistency rule is a prop firm limit on how much of your total profit may come from a single day. It stops one lucky day from passing an evaluation.
Consolidation
Consolidation is price moving sideways in a range. Neither side is winning, so there is nothing to be right about until price leaves the range.
Daily loss limit
A daily loss limit is the amount you allow yourself to lose before you stop for the day. You set it before the open, from your account size.
Dark cloud cover
Dark cloud cover is a two candle bearish reversal. The second candle opens above the first candle's close, then closes below the midpoint of the first candle's body.
Day trading
Day trading means opening and closing positions on the same day, so nothing is held overnight. The aim is to make money from moves that last minutes or hours.
Days to expiry (DTE)
Days to expiry, or DTE, is how many days an option has left before it expires. A contract with 30 DTE expires in thirty days, and one with 0 DTE expires today.
Delta
Delta is how much an option's price moves when the stock moves one dollar. A delta of 0.40 means roughly 40 cents of option move per dollar.
Disaster stop
A disaster stop is a hard stop order well beyond your level, there to cap the loss if something goes badly wrong. It is a backstop, not your normal exit.
Distribution phase
The distribution phase is the wide, choppy stretch that follows a strong move, where large positions get unloaded into late buyers. Price goes sideways with big swings and no progress.
Doji
A doji is a candle that opens and closes at almost the same price. Neither side won that period, so it marks a pause rather than a signal to trade.
Drawdown
Drawdown is how far your account has fallen from its highest point. It measures the dip between one equity peak and the low that comes after it.
Emotional trading
Emotional trading is when fear, greed or frustration picks the trade instead of your plan. You chase a move you missed, or buy again straight after a loss.
Entry timeframe
Entry timeframe is the chart you time entries on. Everything else, direction and structure, is read from the slower charts above it.
Evening star
An evening star is a three-candle bearish reversal that needs a rise in front of it. A long up candle, a small indecisive candle, then a down candle closing below the first candle's midpoint.
Expansion phase
The expansion phase is the part of the cycle where price actually moves: higher highs and higher lows, or lower lows and lower highs. There is no sideways version of it.
Expectancy
Expectancy is the average profit or loss you make per trade. It combines how often you win with how big your winners and losers are.
Fakeout
A fakeout is a push through support or resistance that never closes beyond it and snaps back. The traders who entered on the break are left stranded.
Falling window
A falling window is a downward gap with no overlap. The second candle's high sits below the first candle's low, and the space acts as resistance.
Gap down
A gap down is when a stock opens below the low of the previous session, leaving an empty band on the chart where nothing traded. That band acts as resistance while it stays open.
Gap fill
A gap fill is price trading back through a gap left on the chart. The gap is a range where nothing traded, so it often draws price back to it later.
Gap up
A gap up is when a stock opens above the previous session's high, leaving a space on the chart where nothing traded.
Give-back
A give-back is a trade or a day that was up and ends down. The position was green, you held on or kept trading, and the gain went back to the market.
Hammer
A hammer is a single candle that forms after a fall, with a small body and a long lower wick. Its low marks a support level.
Higher timeframe bias
Higher timeframe bias is the direction you read from a chart well above the one you enter on. It is up, down or sideways, and its job is to veto trades against it.
Hold time
Hold time is how long a trade stays open, from the fill that opens it to the fill that closes it. Sorted by hold time, your results usually say something you did not expect.
Implied volatility (IV)
Implied volatility, or IV, is how big a move the market expects, worked backwards out of the option's price. High IV means options are expensive, low IV means they are cheap.
In the money (ITM)
An option is in the money when exercising it would be worth something today. A call is in the money when the stock trades above the strike, a put when it trades below.
IV crush
IV crush is the drop in implied volatility right after a scheduled event. Options get cheaper on the spot, so a call can lose money even though the stock went up.
Latest entry price
The latest entry price is the highest price you can still pay and have the trade pay you at least twice what you risk. Past it, the setup has expired.
Liquidity grab
A liquidity grab is a quick push beyond an obvious high or low that triggers the stop orders resting there. Price then turns back, because those stops were the fill a larger order needed.
Losing streak
A losing streak is a run of losing trades back to back. Streaks are normal at any win rate. They say less about your method than they feel like they do.
Manipulation phase
The manipulation phase is the misleading move around a level that pushes traders out just before the real move begins. It is the stop hunt.
Morning star
A morning star is a three-candle bullish reversal after a decline. A long down candle, then a small quiet one. The third closes above the first body's midpoint.
The most important rule in trading
The most important rule in trading is to protect your money first. Decide what a trade may cost you before you enter, and never let one loss decide your year.
Multi-timeframe analysis
Multi-timeframe analysis means reading the same stock on three charts. A high one for direction, a middle one for structure, and your entry chart for timing.
Option premium
Option premium is the price of an option contract. It is quoted per share, so a premium of 2.50 costs 250 dollars for one contract covering 100 shares.
Out of the money (OTM)
Out of the money means an option has no built-in value yet. A call is out of the money below its strike. A put is out of the money above its strike.
Overtrading
Overtrading is taking more trades than your plan asks for. It usually comes from boredom, from wanting the money back, or from mistaking activity for work.
Paper trading
Paper trading is practice trading with fake money. You place the same trades in a simulator at live prices and watch what they would have done.
Pattern day trader (PDT) rule
The pattern day trader rule is a US rule for margin accounts. Four or more day trades in five business days, and the account must keep a broker-set minimum size.
Piercing line
A piercing line is a down candle followed by an up candle that closes past the midpoint of the first candle's body. It marks support at the pair's lowest low.
Position sizing
Position sizing is deciding how many shares or contracts to buy so that a losing trade costs you an amount you chose in advance.
Profit factor
Profit factor is your total winnings divided by your total losses. Above 1.0 you made money, below 1.0 you lost it, and 2.0 means you won two dollars for every one lost.
Profit target
A profit target is the price where you plan to take the trade off. You set it before you enter, from the next level on the chart.
Prop firm
A prop firm is a company that lets you trade its money instead of your own. You pay a fee, pass an evaluation with rules attached, and then split the profits with them.
Pullback
A pullback is a short move against the trend that then holds. In an uptrend, price dips and stops above the last low before carrying on.
R-multiple
R-multiple measures a trade's result in units of what you risked. Risk 100 dollars and make 200 and the trade is 2R. It lets you compare trades of any size.
Range box
A range box is a rectangle drawn around a sideways market, using two touch points along the top and two along the bottom. You trade the break out of it, never the inside.
Resistance
Resistance is a price where sellers stepped in before and stopped a rise. It is drawn at the high of the candle pattern that turned price back, not at a body or a close.
Retest
A retest is price coming back to a level it just broke through, to see whether the level now holds from the other side. It is usually the safer place to enter.
Revenge trading
Revenge trading is trading to get money back after a loss. The trade comes from the loss rather than from a setup. The size is usually bigger than normal.
Reversal
A reversal is a trend changing direction rather than pausing. Price closes beyond the last swing point and comes back to test it. Then it keeps going the new way.
Rising window
A rising window is an upward gap with no overlap between two candles: the second candle's low sits above the first candle's high. The level is the whole gap, drawn as a box.
Risk per trade
Risk per trade is the money you lose if your stop is hit. Traders fix it as a small slice of the account so no single trade matters much.
Risk to reward ratio
Risk to reward ratio compares what a trade can lose with what it can make. Risk 50 cents to make 150 and the ratio is one to three.
Runner
A runner is the piece of a position you keep after taking partials. It stays on for the next level, or until the trend stops making new highs.
Scaling in (layering in)
Scaling in means entering a position in pieces. You start small, then add only when the chart proves the idea. Full size never goes on at once.
Scaling out (partials)
Scaling out means selling part of a position at a target and holding the rest. Traders call the pieces partials, and the leftover a runner.
Scalping
Scalping is taking many small trades that last seconds or minutes. You aim for a few cents a share and get out fast, whether it works or not.
Shooting star
A shooting star is a single candle with a small body and a long upper wick. It forms after a rise, and its high marks resistance.
Sizing down
Sizing down means deliberately trading smaller: fewer shares or contracts than usual. It cuts what a bad stretch can cost while you work out whether the problem is you or the market.
Sizing up
Sizing up means trading more shares or contracts than usual. It should be earned by the setup in front of you, not by how the last trade went.
Starter position
A starter position is a small first entry, often a quarter to a third of what you meant to put into the trade. You add only when the chart agrees.
Stop hunt
A stop hunt is a short move just past an obvious level that triggers the stop orders parked there. Price usually comes straight back inside the level afterwards.
Stop loss order
A stop loss order tells your broker to sell if the price reaches a level you set. It caps what a single trade can cost you.
Strike price
The strike price is the price an option lets you buy or sell the stock at. A 105 call lets you buy at 105, whatever the stock does.
Support
Support is a price where buyers stepped in before and stopped a fall. You draw it at the low of the candle that turned price around, and your stop goes beyond it.
Support turned resistance (role flip)
Support turned resistance is a level that swaps roles. Once price closes below a support and comes back to it, the same price caps the move.
Swing trading
Swing trading means holding a position for days or weeks to catch one move, rather than closing it the same day. You check the chart once or twice a day instead of watching it.
Theta (time decay)
Theta is the amount an option loses each day from time passing alone. For a buyer it is rent. For a seller it is income.
Tilt
Tilt is the state where a loss makes you angry or desperate and you stop following your own rules. Size grows, stops get moved, and trades stop looking like your usual setup.
Time stop
A time stop is an exit triggered by elapsed time rather than by price. You close the trade because the move never started, while your price stop is still untouched.
Timeframe alignment
Timeframe alignment is when the charts you use agree on direction. The higher chart says up, the middle one shows the same, and you enter on the small one.
Tradervue free features
Tradervue free features are the parts of the Tradervue trading journal you can use without paying. It is a starter tier, with limits that the paid plans lift.
Trading (what it is)
Trading is buying and selling something, like a stock, hoping to sell it for more than you paid. Traders work over minutes to weeks rather than years.
Trading edge
A trading edge is the reason your trades make money over a long run of them. It is a small, repeatable advantage, not a way to be right every time.
Trading journal
A trading journal is a record of the trades you took and why. It turns a vague memory of the month into numbers you can check.
Trading journal features
Trading journal features are the parts of a journal you actually use: an automatic record of every fill, a calendar of daily results, and stats that show what is working.
Trading plan
A trading plan is your rules written down before the money is on the line: what you trade, where you get in, where you get out, and how much you risk.
Trailing stop
A trailing stop is an exit that follows price at a distance. As the trade goes your way the stop moves with it, so a winner cannot turn all the way back into a loser.
Trend
A trend is the direction price is generally moving. An uptrend makes higher highs and higher lows. A downtrend makes lower highs and lower lows.
Wash sale
A wash sale is when you sell something at a loss and buy it back within 30 days. The tax rules stop you claiming that loss straight away.
Wick (shadow)
A wick is the thin line above or below a candle's body. It shows where price went during that period before it was pushed back.
Win rate
Win rate is the share of your trades that made money. Thirty winners out of fifty trades is a 60 percent win rate. On its own it says nothing about whether you are profitable.