Trading glossary

An A+ setup is a trader's own label for their highest-quality trades: the ones that tick every item on their checklist, such as trend, level, volume and a clear stop and target.

A trading range after a decline in which large buyers absorb the remaining supply before a rise.

A running total of advancing stocks minus declining stocks, day after day.

One line from 0 to 100 that rises when price moves strongly in either direction and falls when the move fades or price goes sideways.

After-hours trading runs from the 4:00 p.m. ET close until 8:00 p.m. ET on the main electronic venues.

The lowest price a seller will accept right now.

How a portfolio is divided among asset types such as stocks, bonds or sukuk, and cash.

The notice that tells an option seller to fulfil the contract: deliver shares at the strike for a short call, or buy them at the strike for a short put.

An option whose strike equals the stock price, or is the closest listed strike to it.

A smoothed average of the true range over a set number of candles, 14 by default, shown in the price units of the chart.

Buying more of a position that shows a loss, to lower its average cost.

A sustained fall in prices.

A sharp rise inside a bear market that fails before a new high.

The highest price a buyer will pay right now.

The ask minus the bid.

The thick part of a candle, from the open to the close.

A stretch of unusually narrow bands, a sign of low volatility.

A close beyond the last swing in the trend's direction, such as above the last high in an uptrend.

The price at which a position shows neither a profit nor a loss, before costs.

A breakout is a close beyond support, resistance or the edge of a range, ideally on above-normal volume.

A sustained rise in prices.

What you can buy with your cash plus what the broker will lend.

A call gives its buyer the right to buy the underlying at the strike price until expiration.

A candlestick shows four prices for one period: the open, high, low and close.

Cash spent on long-lived assets such as equipment, buildings and software, to keep the business running or to grow it.

A short put backed by cash equal to the strike times 100 per contract, set aside to buy the shares if the put is assigned.

The first close beyond a swing against the trend, such as above the last lower high in a downtrend.

The current close, plotted 26 candles back, so you can compare it with where price traded then.

Growth in which each period’s return is added to the balance, so later returns are earned on a larger base.

The average or median of analysts’ forecasts for a figure such as EPS or revenue, compiled by financial data providers.

A futures curve where later months trade above nearer ones and above spot.

Closing a position in the expiring contract and opening the same size and direction in the next one.

A fall of 10% to 20% from a recent high.

A move against the larger trend, usually in three waves labeled A-B-C.

A measure from +1 to −1 of how closely two investments move together.

A position of at least 100 shares plus one short call per 100 shares on the same stock.

A vertical spread that pays you to open, because the option you sell is worth more than the one you buy.

Day trading means opening and closing every position within the same session, so you hold nothing overnight.

Short interest ÷ average daily trading volume: how many days of average volume it would take to buy back every shorted share.

A shorter average crossing below a longer one, classically the 50-day below the 200-day.

A vertical spread that costs money to open, because the option you buy is worth more than the one you sell.

Total debt ÷ shareholders’ equity.

Delta is the estimated change in an option's price for a $1 move in the underlying.

Trading the underlying so that a position’s total delta stays close to zero, then adjusting as delta changes with price and time.

The yearly return you require for the risk of owning the business.

A trading range after a rise in which large holders sell into public demand before a fall.

Divergence is when price and an oscillator such as RSI disagree: price makes a higher high while RSI makes a lower high (bearish), or price makes a lower low while RSI makes a higher low (bullish).

Spreading money across investments that react differently to events, to reduce the damage any single one can do.

A dividend is a payment a company makes to its shareholders, usually in cash and, for many US companies, every quarter.

Members of the S&P 500 index that have raised their dividend for at least 25 consecutive years, tracked by S&P Dow Jones Indices in an index of the same name.

Dividend yield is the annual dividend per share divided by the share price: a $50 stock paying $2 a year yields 4%.

The full set: ADX, +DI and −DI shown together.

Investing a fixed amount at regular intervals regardless of price, so that more shares are bought when prices are low.

Two lows at about the same price after a downtrend, with a bounce high between them.

Two peaks at about the same price after an uptrend, with a pullback low between them.

The fall from the account's highest value to its lowest point before a new high, usually given in percent.

EPS is a company's net income, minus any preferred dividends, divided by its average number of common shares outstanding.

The weeks after each calendar quarter ends, when most companies publish their quarterly results.

The difference between the actual figure and the consensus, often shown as a percentage: EPS of $1.30 against $1.20 expected is a surprise of about +8%.

The value of the whole business.

Enterprise value (market value plus debt minus cash) ÷ earnings before interest, taxes, depreciation and amortization.

The ex-dividend date is the first day a stock trades without its next dividend: if you buy on or after it, the payment goes to the seller.

A fund that holds a basket of assets and trades on an exchange under one ticker, at a market price that changes through the day.

Using the right an option gives: buying the shares at the strike with a call, or selling them at the strike with a put.

The average R multiple per trade: W × average win − (1 − W) × average loss.

The fund’s yearly cost as a percentage of the money invested, deducted inside the fund.

The last day the contract exists.

An EMA is a moving average that gives more weight to recent prices, so it reacts faster than a simple moving average.

A three-candle pattern in which a strong middle candle leaves a gap between the wicks of candles 1 and 3.

A fast, steep drop.

Two falling, converging lines, the upper one steeper.

A false breakout is a move beyond a level that quickly falls back inside, trapping traders who bought or sold the break.

The rate banks charge each other for overnight loans of reserves.

A short, shallow pause between two parallel lines that slope against the pole: down in a bull flag, up in a bear flag.

The shares available for public trading: shares outstanding minus those held by insiders, controlling holders or under lock-up.

Buying after a move has already left the level because everyone else seems to be making money.

A standardized, exchange-traded agreement to buy or sell an underlying at a set price, with settlement on a later date.

Gamma is the estimated change in delta for a $1 move in the underlying.

An estimate, built from open interest, gamma and an assumption about dealer positioning, of how much dealers’ hedges would change for a given move in the underlying, often expressed in dollars per 1% move.

A related idea: heavy call option buying leads the dealers who sold those calls to buy shares as a hedge, adding to a rise.

A gap is a jump between one candle's close and the next candle's open, most often between yesterday's close and today's open after news or earnings.

A shorter average crossing above a longer one, classically the 50-day above the 200-day on a daily chart.

A share in a company whose revenue and earnings grow much faster than average.

Management’s own forecast for the next quarter or the full year.

Hawkish means leaning toward tighter policy to fight inflation; dovish means leaning toward easier policy to support jobs and growth.

A peak above the previous peak, and a trough above the previous trough.

The share of trades that close with a profit, W.

Implied volatility is the size of future moves that the market is pricing into an option.

A five-wave move in the direction of the larger trend, labeled 1-2-3-4-5.

A call whose strike is below the stock price, or a put whose strike is above it.

A mutual fund or ETF that holds the stocks of a market index in the index’s proportions, aiming to match its return rather than beat it.

Inflation is the general rise in prices over time, so each dollar buys less.

The range of the first hour: periods A and B in a 30-minute profile.

An IPO is the first time a company sells its shares to the public and lists them on a stock exchange.

Operating income ÷ interest expense: how many times profit covers the interest bill.

An estimate of what a business is worth based on the cash it can produce over its life.

For a call, the stock price minus the strike; for a put, the strike minus the stock price.

An invite-only script is a TradingView indicator whose code is hidden and that only accounts approved by its author can use.

The sharp drop in implied volatility after a known event such as an earnings report.

The same midpoint over the last 26 candles.

The area between Span A and Span B, usually green when Span A is above Span B and red when Span B is above.

Long-Term Equity AnticiPation Securities: listed options with more than a year to expiration.

Leverage means controlling a position larger than the cash you put up, using borrowed money or margin.

A limit order buys or sells only at your price or better: a buy limit at $49.80 fills at $49.80 or lower.

Liquidity is how easily you can buy or sell without moving the price.

A quick move through such a level that triggers the stops resting there, then closes back on the other side.

A lock-up period is a set time after an IPO during which insiders and early investors agree not to sell their shares.

Buying a call and a put on the same underlying with the same strike and expiration, usually at the money.

Buying an out-of-the-money call and an out-of-the-money put with the same expiration.

A lot is the unit of trade size in forex: a standard lot is 100,000 units of the base currency, a mini lot 10,000 and a micro lot 1,000.

A peak below the previous peak, and a trough below the previous trough.

The MACD line minus the signal line, drawn as bars.

The 12-period EMA minus the 26-period EMA of the close.

A margin call is a demand from your broker to add cash or securities when the equity in a margin account falls below the maintenance requirement.

The discount between a conservative estimate of value and the price paid, as a percentage of the value.

How many stocks take part in a market move, measured by counts such as advancers vs decliners or the share of stocks above a moving average.

Share price × shares outstanding: the market value of all of a company’s shares.

A firm that keeps posting both a bid and an ask in a stock and earns the spread when both sides fill.

A market order buys or sells right away at the best price available.

The sequence of swing highs and lows: higher highs and higher lows in an uptrend, lower highs and lower lows in a downtrend.

A target convention: take the height of the pattern, or the length of the flagpole, and project it from the breakout point.

A futures contract worth $5 times the S&P 500 index, one-tenth of ES.

A futures contract worth $2 times the Nasdaq-100 index, one-tenth of NQ.

Momentum is the tendency of stocks that have risen strongly to keep rising for a while, and of weak ones to keep falling.

Graham’s imaginary partner who offers every day to buy your share or sell you his, at a price set by his mood: high when euphoric, low when gloomy.

An open-end fund that sells and redeems its own shares at the next NAV calculated after your order, usually once each business day.

The line that confirms a head and shoulders or a double top or bottom.

The value of everything the fund holds, minus its liabilities, divided by its shares.

The number of option contracts in a series that are still open at the end of a trading day: opened earlier and not yet closed, exercised, assigned or expired.

The high and low of the first 5, 15 or 30 minutes after the 9:30 a.m. ET open, on regular-session data.

Cash generated by the business itself over the period: net income adjusted for non-cash items, such as depreciation, and for changes in working capital.

An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a set price on or before a set date.

The table that lists every strike and expiration for one underlying, with calls on one side and puts on the other, and a bid and ask for each.

The last opposite candle before a strong move that breaks structure.

A call with a strike above the stock price, or a put with a strike below it.

Recent closes landed near the top of the range: a description of strength, not a forecast of a drop.

Recent closes landed near the bottom of the range.

Share price ÷ book value per share (assets minus liabilities, divided by shares).

Market capitalization ÷ revenue over the last 12 months.

Paper trading means placing simulated trades with virtual money to practice without risking capital.

The PDT rule was a FINRA margin rule: four or more day trades within five business days in a margin account required at least $25,000 in account equity.

The payout ratio is the share of a company's earnings paid out as dividends: dividends per share divided by earnings per share.

P/E ÷ the expected annual EPS growth rate, written as a whole number: a P/E of 30 with 15% growth gives 30 ÷ 15 = 2.0.

The same pause shaped like a tiny symmetrical triangle, with lines that converge instead of running parallel.

Pine Script is TradingView's own programming language for writing indicators and strategies that run on its charts.

A pip is the standard unit of price change in a currency pair: the fourth decimal place (0.0001) for most pairs and the second (0.01) for pairs quoted in Japanese yen.

The average of the prior period’s high, low and close.

The price row with the most traded volume in the period: a reference that is often revisited and often broken.

Choosing the number of shares or contracts so that a full stop-out costs your planned risk per trade, and no more.

Pre-market is trading before the 9:30 a.m. ET open, starting as early as 4:00 a.m. ET on the main electronic venues, though many brokers offer a shorter window.

The price of the option, quoted per share.

Future cash expressed in today’s money: cash ÷ (1 + discount rate)^years.

The P/E ratio divides a stock's price by its earnings per share: a $50 stock earning $2.50 a share has a P/E of 20, meaning investors pay $20 for each dollar of annual earnings.

Gross = (revenue − cost of goods sold) ÷ revenue; operating = operating income ÷ revenue; net = net income ÷ revenue.

Long shares plus one long put per 100 shares on the same stock.

The price band around D where several measurements cluster: a place to watch for a reversal, not a price to buy blindly.

A pullback is a short move against the trend before it continues, such as an uptrend dipping back toward VWAP or a moving average.

A put gives its buyer the right to sell the underlying at the strike price until expiration.

Put volume divided by call volume, or put open interest divided by call open interest, for a market, an index or a single stock over a set period.

Adding to a winning position in steps, usually each smaller than the last, with the stop raised before each add.

A trade’s result divided by its 1R.

Selling part of what has grown and buying what has lagged to bring a portfolio back to its target mix.

The regular session is the main trading day on the NYSE and Nasdaq: 9:30 a.m. to 4:00 p.m. Eastern Time (ET), Monday to Friday, outside market holidays.

A stock’s price divided by a benchmark’s price, plotted as a line.

RSI is a momentum oscillator from 0 to 100 that compares the size of recent gains with recent losses, over 14 periods by default.

Current volume divided by average volume for the same period.

Repainting is when an indicator's past signals or values change after the fact, so its history on the chart looks better than what you would have seen live.

Resistance is a price area where selling has capped rallies before, such as a prior swing high or yesterday's high.

A return to the broken neckline from the other side: old support acting as resistance, or old resistance as support.

Net income ÷ shareholders’ equity, usually shown as a percentage: profit relative to the book value of the owners’ stake.

After-tax operating profit ÷ the debt plus equity used in the business.

Trading to win back a loss right away, usually with bigger size, a weaker setup or no stop.

(Revenue this period − revenue in the same period a year earlier) ÷ the earlier revenue.

A split that merges shares, reducing their number and raising the price per share, such as 1-for-10.

Rho is the estimated change in an option's price for a one-point change in interest rates.

Two rising, converging lines, the lower one steeper.

The dollars you lose if the stop is hit, set before you enter.

The risk-reward ratio compares what you stand to lose with what you aim to gain.

Scalping is the shortest trading style: positions last from seconds to a few minutes and aim for small moves, sometimes a few cents a share.

Assets minus liabilities, also called book value: what would be left for the owners if every asset were sold at its balance sheet value and every debt repaid.

All the shares a company has issued and not repurchased, including those held by insiders.

Checking a company’s business and financial ratios against a Sharia standard to classify its shares as compliant or not.

The total number of a stock’s shares that have been sold short and not yet bought back, as reported on a set settlement date.

A 9-period EMA of the MACD line.

An SMA is the plain average of the last set number of closes: a 20-period SMA adds up the last 20 closes and divides by 20.

The difference between the price you expected and your actual fill, caused by fast moves, thin liquidity or gaps.

A split that increases the number of shares and lowers the price per share, such as 2-for-1 or 3-for-1.

A stop loss is the price at which you exit a losing trade, decided before you enter.

A stop order waits until price trades at a level you set, then becomes a market order.

A stop-limit order has two prices: the stop price triggers it, and the limit price sets the worst fill you will accept.

The fixed price at which the holder can buy the underlying (with a call) or sell it (with a put).

Support is a price area where buying has stopped declines before, such as a prior swing low, yesterday's low or a round number.

A peak or trough on the chart with lower highs (or higher lows) on both sides.

Swing trading means holding a position for several days to a few weeks to catch one larger move, usually planned on daily and 4-hour charts.

A take profit is the price at which you plan to exit a winning trade, usually at the next support or resistance level.

The midpoint of the highest high and lowest low of the last 9 candles.

The value, at the end of the forecast, of all the cash flows after it, usually estimated with a perpetual growth formula or an exit multiple.

Theta is the estimated change in an option's price for one day passing, with nothing else changing.

Everything in the premium above intrinsic value.

The timeframe is the period each candle covers, such as 1 minute, 5 minutes, 1 hour or 1 day.

A period when price swings between a horizontal support and resistance instead of making higher highs or lower lows.

A TradingView alert is a notification that fires when a condition you set is met, such as price crossing a level or an indicator printing a signal, and reaches you in the app, as a pop-up or by email.

A trend is a sustained move in one direction.

Trend following is a strategy that buys markets in uptrends and sells or shorts them in downtrends without trying to predict tops or bottoms, then exits with a trailing stop when the trend ends.

The largest of the three distances above for one candle.

The range around the POC that holds a chosen share of the volume, usually 70%.

Vega is the estimated change in an option's price for a one-point change in implied volatility.

The Cboe Volatility Index: the 30-day implied volatility of the S&P 500, calculated from SPX option prices and quoted as an annualized percentage.

Volume is the number of shares or contracts traded in a period, usually drawn as bars under the chart.

VWAP is the average price a stock has traded at during the session, weighted by the volume at each price, and it resets every day.

A cross that reverses soon after it fires, so a buy is followed by a sell at a worse price.

A wick, or shadow, is the thin line above or below a candle's body that marks the highest and lowest prices of the period.

0DTE means zero days to expiration: options traded on the day they expire.