Trading & Investing Glossary

A

Accumulation

A phase where buyers quietly build positions, often after a downtrend, before a move higher. The opposite of distribution.

All-Time High (ATH)

The highest price an asset has ever traded at. Common shorthand in stocks and crypto.

Ask

The lowest price a seller is currently willing to accept. You buy at the ask.

Asset Allocation

How you split your money across different asset types, such as stocks, gold and cash, to balance risk and reward. Risk and diversification →

ATR (Average True Range)

A measure of how much an asset typically moves over a period. Used to set stop distances that respect volatility.

B

Backtesting

Testing a trading strategy against historical price data to estimate how it would have performed before risking real money.

Bear Market

A prolonged period of falling prices, often defined as a drop of 20% or more from recent highs.

Bid

The highest price a buyer is currently willing to pay. You sell at the bid.

Blockchain

The shared, tamper-resistant digital ledger that records cryptocurrency transactions across a network of computers.

Blue Chip

A large, well-established, financially sound company with a long track record.

Bond

A loan you make to a government or company that pays interest and returns your money at a set date. Generally lower risk than stocks.

Break of Structure (BOS)

When price breaks a prior swing high or low, signalling a potential shift in trend direction.

Breakout

When price moves decisively beyond a level it had been stuck under or above. Real breakouts expand; many are traps. How to trade breakouts →

Bull Market

A prolonged period of rising prices and optimism.

Bull Trap

A false breakout above resistance that lures buyers in, then reverses. A bear trap is the same below support.

Buy the Dip

Buying an asset after a short-term fall, on the view that the longer-term trend remains up. Powerful in a real uptrend, dangerous in a downtrend.

C

Candlestick

A chart symbol showing the open, high, low and close for a period. The core unit of price reading. How to read a candlestick chart →

Capital Gain

The profit made when you sell an asset for more than you paid. Often subject to tax depending on where you live.

Compounding

Earning returns on your past returns, so growth accelerates over time. The most powerful force in long-term investing. Compounding →

Consolidation

A period where price trades sideways in a tight range, often before a larger move.

Cryptocurrency

A digital asset secured by cryptography and recorded on a blockchain, such as Bitcoin or Ethereum. Crypto for beginners →

D

Day Trading

Opening and closing trades within the same day, holding no positions overnight.

DeFi (Decentralised Finance)

Financial services such as lending and trading built on blockchains, run by code rather than traditional institutions. Higher risk and largely unregulated.

Displacement

A sharp, forceful move that leaves an imbalance behind. Used to grade the quality of order blocks.

Distribution

A phase where large holders quietly sell into strength, often near a top, before a move lower. The opposite of accumulation.

Divergence

When price and a momentum indicator disagree, a warning that the current move may be tiring. Reading momentum →

Diversification

Spreading money across many assets so no single loss can sink you.

Dividend

A share of a company's profits paid to shareholders, usually as cash.

Dollar-Cost Averaging (DCA)

Investing a fixed amount on a regular schedule regardless of price, which removes timing and emotion. Dollar-cost averaging →

Drawdown

The drop from a peak to a trough in an account or asset, usually shown as a percentage.

E

Earnings

A company's profit. Quarterly earnings reports often move stock prices sharply.

Earnings Per Share (EPS)

A company's profit divided by its number of shares. The headline profitability figure analysts watch most. Reading an earnings report →

Equity

Ownership in an asset. In stocks it means shares; in an account it means your balance after debts.

ETF (Exchange-Traded Fund)

A basket of assets you can buy as a single ticker, giving instant diversification at low cost. Stocks, ETFs and funds →

Expense Ratio

The annual fee a fund or ETF charges, as a percentage of your investment. Lower is better, because fees compound against you. What is an ETF →

F

Fair Value Gap (FVG)

A price imbalance left by a fast move that the market often returns to fill. Also called an imbalance. FVG indicator →

Fibonacci Retracement

A tool that marks potential support and resistance at ratios (38.2%, 61.8%) of a prior move.

Fundamental Analysis

Judging an asset by its underlying value, such as a company's earnings and growth, rather than its chart. Fundamental analysis basics →

Futures

A contract to buy or sell an asset at a set price on a future date. Often leveraged.

G

Gap

A jump in price between one candle's close and the next candle's open, leaving empty space on the chart. Common after news or at the open.

Going Long

Buying an asset expecting its price to rise.

Going Short

Selling a borrowed asset expecting to buy it back cheaper. Profits from a falling price.

Gold

A precious metal used as a store of value and a hedge against inflation and uncertainty. Investing in gold →

H

Hedge

A position taken to offset risk in another, like holding gold to cushion a stock portfolio. It trades some upside for protection.

Higher High / Higher Low

The pattern of an uptrend: each peak and each dip is higher than the last.

HODL

Crypto slang for holding an asset through volatility rather than selling. From a misspelling of 'hold'.

I

Index

A measure of a group of assets, such as the S&P 500 tracking 500 large US companies.

Index Fund

A fund that simply tracks an index, offering broad, low-cost exposure to a whole market.

Inflation

The gradual rise in prices that erodes the buying power of cash over time.

Invalidation

The price or condition that proves a trade idea wrong. Defining it before entering is essential.

L

Leverage

Borrowed money used to increase position size. It magnifies both gains and losses.

Limit Order

An order to buy or sell only at a specified price or better.

Liquidity

How easily an asset can be bought or sold without moving its price. Also refers to clusters of orders price is drawn to.

Liquidity Sweep

A quick move that triggers a cluster of stop orders beyond a level before reversing.

M

MACD

Moving Average Convergence Divergence, a popular momentum indicator built from moving averages.

Margin

Money borrowed from a broker to trade a larger position than your cash alone allows.

Market Capitalisation

The total value of a company's shares: share price multiplied by the number of shares.

Market Maker

A firm that continuously quotes buy and sell prices, providing liquidity so others can trade. It profits from the spread.

Market Order

An order to buy or sell immediately at the best available price.

Market Structure

The pattern of highs and lows that defines whether a market is trending or ranging. Support and resistance →

Momentum

The rate of change of price. Strong momentum means a move is accelerating. Reading momentum →

Moving Average (MA)

The average price over a set number of periods, used to smooth noise and define trend.

O

Order Block (OB)

A price zone where large orders were placed, often acting as future support or resistance. Order block indicator →

Overbought / Oversold

Conditions where an indicator suggests price has risen or fallen too far, too fast. Not an automatic signal.

P

P/E Ratio (Price-to-Earnings)

A stock's price divided by its earnings per share, a rough gauge of how expensive it is relative to its profits. Fundamental analysis →

Paper Trading

Practising trades with fake money in a simulator, so you can learn the mechanics and test ideas without real risk. Trading for beginners →

Portfolio

The full collection of assets you own. Build your first portfolio →

Position Sizing

Deciding how much to risk on a trade so a single loss never sinks the account. Position sizing →

Price Action

Reading raw price movement and structure on a chart, rather than relying on indicators.

Pullback

A temporary move against the trend before it resumes. Often a lower-risk entry.

Pump and Dump

A scam where promoters hype an asset to inflate the price, then sell into the buying, leaving latecomers with losses. Common in low-cap crypto and penny stocks.

R

Rally

A sustained upward move in price.

Range

A market moving sideways between a clear floor and ceiling rather than trending.

Recession

A significant, broad decline in economic activity lasting months, often defined as two consecutive quarters of shrinking output.

Resistance

A price level where selling has tended to halt advances. Support and resistance →

Retest

When price returns to a broken level to confirm it now acts as support or resistance.

Risk Management

The discipline of controlling how much you can lose. The foundation of lasting trading. Risk management →

Risk-Reward Ratio

How much you stand to make versus lose on a trade. A 1:3 risk-reward risks 1 to make 3.

RSI (Relative Strength Index)

A momentum oscillator from 0 to 100 used to gauge the speed and size of price moves.

S

Scalping

Very short-term trading that aims for small, frequent gains over seconds or minutes.

Sentiment

The overall mood of the market, from fear to greed. Extreme sentiment in either direction often precedes a turn.

Short Selling

Borrowing and selling an asset to profit from a falling price. Higher risk, as losses are open-ended.

Short Squeeze

A sharp rally that forces short sellers to buy back to cut losses, which pushes price even higher in a feedback loop.

Slippage

The difference between the price you expected and the price you actually got on a trade.

Spot Price

The current price to buy or sell an asset for immediate delivery, as opposed to a futures or contract price.

Spread

The gap between the bid and the ask. A cost you pay on every trade.

Stablecoin

A cryptocurrency pegged to a stable asset such as the US dollar, used to park value in crypto markets.

Staking

Locking up certain cryptocurrencies to help run the network in exchange for rewards, a little like earning interest. It carries its own risks.

Stock

A share of ownership in a company. How the stock market works →

Stop Loss

An order that closes a trade at a set price to cap your loss.

Support

A price level where buying has tended to halt declines. Support and resistance →

Swing Trading

Holding trades for days to weeks to capture larger moves than day trading.

T

Take Profit

An order that closes a trade at a set price to lock in a gain.

Technical Analysis

Studying charts and price patterns to anticipate future moves.

Ticker

The short symbol that identifies an asset, such as AAPL for Apple or BTC for Bitcoin.

Timeframe

The period each candle represents, from one minute to one month. Higher timeframes carry more weight.

Trailing Stop

A stop loss that follows price as it moves in your favour, locking in gains while giving the trade room to run.

Trend

The general direction of price: up, down or sideways. The trend is the context for every trade. Trends and ranges →

V

Volatility

How much and how quickly a price moves. Higher volatility means bigger swings and more risk.

Volume

The number of shares or contracts traded in a period. Confirms the strength behind a move.

VWAP

Volume-Weighted Average Price, the average price weighted by volume. A key intraday reference level.

W

Wallet

Software or hardware that stores the keys to your cryptocurrency.

Watchlist

A curated list of assets you are monitoring for setups. Building a watchlist →

Whale

A holder large enough to move a market with their trades, a term used most often in crypto.

Wick

The thin line above or below a candle body, showing the high and low that price rejected.

Y

Yield

The income an investment produces, such as a dividend or interest, as a percentage of its price.