RiskPicksTrading Glossary
148 trading terms, from basic concepts to advanced indicators.
A
ABCD Pattern
A four-point chart pattern (A-B-C-D) where the CD leg mirrors the AB leg, giving a predictable entry at point C.
Technical IndicatorsATR
Average True Range: measures volatility by averaging the true range over a set period (typically 14 days).
Trading StrategiesAccumulation
The phase where large players quietly buy shares over time without significantly moving the price. The chart appears range-bound and boring.
Risk ManagementAverage Down
Buying more shares of a stock you already own after the price drops, lowering your average cost per share. Can reduce your break-even price but also increases your exposure to a losing position.
B
Bag Holder
A trader or investor stuck holding shares of a stock that has dropped significantly below their purchase price, often hoping for a recovery that may never come.
Market StructureBear Market
A market condition where prices are falling or expected to fall, generally defined as a 20% or greater decline from recent highs.
Trading StrategiesBear Trap
A false breakdown below support that lures short sellers in before the price reverses sharply upward, trapping the bears in losing positions.
Price & VolumeBid-Ask Spread
The difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask).
Market StructureBlue Chip
A large, well-established, financially stable company with a long track record. Examples include Apple, Microsoft, and Johnson & Johnson.
Technical IndicatorsBollinger Bands
A volatility indicator with a middle SMA band and upper/lower bands set at 2 standard deviations.
Market StructureBond
A debt instrument where you lend money to a government or company in exchange for regular interest payments and the return of your principal at maturity.
Order TypesBracket Order
An order that automatically sets both a stop loss and a profit target when your entry fills. One cancels the other when either is hit.
Chart PatternsBreakout
When price moves above resistance or below support with increased volume, signaling a potential new trend.
Chart PatternsBull Flag / Bear Flag
A continuation pattern where price consolidates in a tight channel (the flag) after a strong move (the pole).
Market StructureBull Market
A market condition where prices are rising or expected to rise, generally defined as a 20% or greater increase from recent lows.
Chart PatternsBull Trap
A false breakout above resistance that lures buyers in, then quickly reverses below the breakout level, trapping longs in a losing position.
Account & RegulationBuying Power
The total dollar amount available to purchase securities in your account. Includes your cash balance plus any margin your broker extends to you.
C
Candlestick
A chart element showing open, high, low, and close prices for a time period. The body shows open-to-close range.
Account & RegulationCapital Gains Tax
Tax owed on profits from selling investments. Short-term gains (held under 1 year) are taxed as ordinary income. Long-term gains (held over 1 year) get lower rates.
Market StructureCatalyst
An event or news that triggers a significant price move: earnings, FDA approvals, analyst upgrades, etc.
Chart PatternsChannel
Two parallel trendlines containing price movement. An ascending channel trends up, a descending channel trends down, and a horizontal channel is a range.
Market StructureChop
Choppy, directionless price action where a stock trades sideways in a tight range with no clear trend, repeatedly triggering stop losses on both sides.
Account & RegulationCircuit Breaker
An automatic trading halt triggered when the S&P 500 drops by 7%, 13%, or 20% in a single day. Designed to prevent panic selling.
Risk ManagementConfirmation Bias
The tendency to seek out information that supports your existing trade idea while ignoring evidence that contradicts it.
Chart PatternsConsolidation
A period where price trades in a tight range, indicating a pause before the next directional move.
Trading StrategiesCovered Call
An options strategy where you own 100 shares of a stock and sell a call option against it, collecting premium income in exchange for capping your upside.
Chart PatternsCup and Handle
A bullish continuation pattern that looks like a tea cup. A rounded bottom (cup) followed by a small pullback (handle) before breaking out to new highs.
D
Dark Pool
A private trading venue where institutional investors execute large block orders without displaying them on the public order book.
Trading StrategiesDead Cat Bounce
A temporary recovery in a stock that's been falling sharply: the bounce is short-lived and selling resumes.
Trading StrategiesDiamond Hands / Paper Hands
Slang from retail trading communities. Diamond hands means holding through volatility. Paper hands means selling at the first sign of a loss.
Trading StrategiesDistribution
The phase where large players quietly sell shares at high prices into buying demand. The opposite of accumulation.
Technical IndicatorsDivergence
When price and a momentum indicator (like RSI or MACD) move in opposite directions, suggesting the current trend may be weakening.
Market StructureDividend
A payment a company makes to shareholders from its profits, usually quarterly. Not all stocks pay dividends.
Chart PatternsDoji
A candlestick where open and close are nearly equal, signaling indecision between buyers and sellers.
Risk ManagementDollar Cost Averaging (DCA)
Investing a fixed dollar amount at regular intervals regardless of price. Reduces the impact of volatility by buying more shares when prices are low and fewer when prices are high.
Chart PatternsDouble Top / Double Bottom
A reversal pattern where price tests the same level twice and fails both times. Double top signals a bearish reversal, double bottom signals a bullish reversal.
Market StructureDow Jones Industrial Average
An index of 30 large blue-chip US companies. The oldest and most widely quoted market index, though many traders consider the S&P 500 more representative.
E
EMA
Exponential Moving Average: a moving average that weights recent prices more heavily, reacting faster to price changes.
Market StructureETF (Exchange-Traded Fund)
A fund that trades on an exchange like a stock, holding a basket of assets such as stocks, bonds, or commodities. SPY and QQQ are ETFs.
Market StructureEarnings Report
A quarterly financial report that publicly traded companies must file, showing revenue, profit, and guidance. The single biggest catalyst for stock price moves.
Chart PatternsEngulfing Pattern
A two-candle reversal pattern where the second candle's body completely engulfs the first candle's body.
F
FOMO
Fear of missing out. The emotional impulse to chase a stock that is already running because you are afraid of missing the move, often leading to buying at or near the top.
Chart PatternsFair Value Gap (FVG)
A three-candle pattern where the wicks of candles 1 and 3 don't overlap, leaving an imbalance zone price often returns to fill.
Technical IndicatorsFibonacci Retracement
Horizontal levels at key Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%) that identify potential support and resistance.
Order TypesFill
When your order is executed: 'getting filled' means your buy or sell order has been completed.
Price & VolumeFloat
The number of shares available for public trading, excluding restricted and insider-held shares.
Market StructureFree Cash Flow
The cash a company generates after accounting for capital expenditures. The money actually available to pay dividends, buy back stock, or reinvest.
G
Gamma Squeeze
A rapid price increase caused by market makers buying the underlying stock to hedge their exposure from sold call options as the stock price rises.
Chart PatternsGap
When a stock opens significantly higher or lower than its previous close, creating a 'gap' on the chart.
Trading StrategiesGap and Go
A day trading strategy that buys stocks gapping up on news/earnings in pre-market and rides the momentum at the open.
Account & RegulationGood Faith Violation
A violation in a cash account when you buy a stock with unsettled funds and sell it before those funds settle. Three violations in 12 months can restrict your account.
Market StructureGuidance
A company's forward-looking forecast of future revenue and earnings, provided during earnings reports. Often moves the stock more than the actual quarterly numbers.
H
Hammer / Shooting Star
Single-candle reversal patterns: a hammer signals bullish reversal at lows, a shooting star signals bearish reversal at highs.
Chart PatternsHead and Shoulders
A bearish reversal pattern with three peaks: a higher middle peak (head) between two lower peaks (shoulders). Confirmed when price breaks the neckline.
Order TypesHot Keys
Keyboard shortcuts for instant order execution: essential for day traders who need speed.
I
IPO (Initial Public Offering)
The first time a private company sells shares to the public on a stock exchange. Also called "going public."
Technical IndicatorsImplied Volatility (IV)
A measure of how much the market expects a stock to move, derived from options prices. High IV means the market expects a big move. IV crushes after the event.
Market StructureIndex
A measurement of a section of the stock market. The S&P 500, Nasdaq Composite, and Dow Jones are the three most watched indexes.
Market StructureInstitutional Trader
A professional trader employed by a firm to trade large positions on behalf of clients or the firm itself.
L
Level 2 / Order Book
A real-time display of all pending buy and sell orders at every price level, showing market depth.
Order TypesLimit Order
An order to buy or sell at a specific price or better. Only executes at the limit price or more favorable.
Market StructureLiquidity
How easily a stock can be bought or sold without significantly affecting its price.
Market StructureLiquidity Sweep
A quick price move that takes out resting orders at a key level before reversing. Functionally the same as a stop hunt, viewed from the perspective of the liquidity being taken.
Trading StrategiesLong Position
Buying a stock with the expectation that its price will rise. "Going long" means you profit when the stock goes up.
M
MACD
Moving Average Convergence Divergence: a trend-following momentum indicator showing the relationship between two EMAs.
Account & RegulationMargin
Borrowed money from your broker to trade larger positions. Amplifies both gains and losses.
Account & RegulationMargin Call
A demand from your broker to deposit more money or sell positions because your account value has dropped below the required maintenance level.
Market StructureMarket Hours
The US stock market is open 9:30 AM to 4:00 PM Eastern Time, Monday through Friday. Pre-market starts at 4:00 AM, after-hours ends at 8:00 PM.
Market StructureMarket Maker
A firm or individual that continuously quotes both a buy and sell price for a security, providing liquidity so other traders can execute orders quickly.
Order TypesMarket Order
An order to buy or sell immediately at the best available price. Guarantees execution but not price. Large market orders can push the stock price up or down as they fill.
Chart PatternsMarket Structure
The pattern of higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend) on a chart.
Risk ManagementMax Drawdown
The largest peak-to-trough decline in account value. Measures the worst-case loss experienced.
Trading StrategiesMean Reversion
The theory that price tends to return to its average over time: trading extreme moves back toward the mean.
Market StructureMeme Stock
A stock that gains massive attention and trading volume driven by social media hype rather than traditional fundamentals. GameStop and AMC are the most famous examples.
Market StructureMidday Lull
The low-volume, low-volatility period between roughly 11:00 AM and 2:00 PM ET when trading activity drops off and stocks tend to drift sideways.
Trading StrategiesMomentum Trading
A strategy that buys stocks making strong moves on high volume, riding the trend until momentum fades.
Technical IndicatorsMoving Average
A smoothed line that averages price over a set number of periods, used to identify trend direction.
Market StructureMutual Fund
A pooled investment fund managed by a professional that buys a portfolio of stocks, bonds, or other assets. Investors buy shares of the fund, not the individual holdings.
N
NASDAQ
The second largest stock exchange in the world, fully electronic with no physical trading floor. Known as the home of technology stocks.
Market StructureNYSE (New York Stock Exchange)
The largest stock exchange in the world by market capitalization, home to many blue-chip companies like Apple, JPMorgan, and Walmart.
O
OTC Markets
A decentralized network where stocks trade directly between buyers and sellers through broker-dealers, outside of major exchanges like NYSE and NASDAQ.
Market StructureOpening Drive
The first 30-60 minutes after the market opens (9:30-10:00 or 10:00 AM ET), characterized by the highest volume and volatility of the day as overnight orders, gap reactions, and early momentum trades execute.
Trading StrategiesOpening Range Breakout (ORB)
A day trading strategy that marks the high and low of the first 15 or 30 minutes after market open, then trades the breakout in whichever direction price moves outside that range.
Market StructureOptions
Contracts that give the buyer the right, but not the obligation, to buy or sell a stock at a specific price before a specific date.
Chart PatternsOrder Block
The last opposing candle before a strong move: an area where institutional orders were placed.
Risk ManagementOvertrading
Taking too many trades, often driven by boredom, frustration, or the urge to make back losses. The number one account killer for new traders.
P
PDT Rule
FINRA's former Pattern Day Trader rule required a $25,000 minimum for active day trading. Overhauled April 2026: the $25K floor is gone, replaced by a $2,000 margin minimum and real-time intraday margin.
Trading StrategiesPaper Trading
Simulated trading with fake money to practice strategies without financial risk.
Market StructurePayment for Order Flow (PFOF)
The practice where brokers send customer orders to market makers in exchange for payment. This is how zero-commission brokers make money.
Market StructurePenny Stock
A stock trading below $5 per share, typically from a small company with limited financial history. High risk, high volatility, and often subject to manipulation.
Market StructurePink Sheets
The broadest tier of OTC Markets with minimal disclosure requirements, named after the pink paper quotes were originally printed on.
Market StructurePortfolio
The collection of all investments (stocks, ETFs, options, cash) held in your trading or brokerage account.
Risk ManagementPosition Sizing
Determining how many shares to buy based on your account size, risk tolerance, and stop loss distance.
Market StructurePower Hour
The last hour of the regular trading session (3:00-4:00 PM ET), known for increased volume, volatility, and decisive price moves as institutional traders and algorithms execute end-of-day orders.
Market StructurePre-Market / After-Hours
Extended trading sessions before (4-9:30 AM ET) and after (4-8 PM ET) regular market hours.
Risk ManagementProfit Factor
Total gross profits divided by total gross losses. Above 1.0 is profitable, above 2.0 is excellent.
Chart PatternsPullback
A temporary price decline within an ongoing uptrend. The stock dips but the overall trend remains intact. The opposite of a bounce in a downtrend.
Q
R
R-Multiple
A trade's profit or loss expressed as a multiple of the initial risk (R). A 3R trade made 3x what was risked.
Technical IndicatorsRSI
Relative Strength Index: a momentum oscillator (0-100) measuring speed and magnitude of price changes.
Price & VolumeRelative Volume (RVOL)
A ratio comparing the current trading volume to the average volume over a lookback period, typically 10 or 20 days. An RVOL of 2.0 means twice the normal volume.
Technical IndicatorsRelative Volume (RVOL)
Current volume compared to the average volume for the same time of day. RVOL > 2 signals unusual activity.
Market StructureRetail Trader
An individual trading their own money through a personal brokerage account, typically with smaller position sizes than institutions.
Risk ManagementRevenge Trading
Emotionally-driven trading to recover losses, typically with larger size and less discipline: almost always makes things worse.
Market StructureRevenue
The total money a company brings in from sales before subtracting any costs. Also called the "top line" because it is the first line on the income statement.
Chart PatternsReversal
A change in the overall direction of a stock price. An uptrend reversing into a downtrend, or a downtrend reversing into an uptrend.
Risk ManagementRisk/Reward Ratio
The ratio of potential loss to potential gain on a trade. A 1:3 ratio means risking $1 to potentially make $3.
Trading StrategiesRound Trip
A complete trade cycle: opening a position and then closing it. Counted as one round trip regardless of share count.
S
S&P 500
An index of the 500 largest publicly traded US companies, weighted by market cap. The most widely used benchmark for overall US stock market performance.
Account & RegulationSEC Form 4
An SEC filing required when a corporate insider (officer, director, or 10%+ shareholder) buys or sells company stock, due within 2 business days of the transaction.
Market StructureSPY
The SPDR S&P 500 ETF. The most traded security in the world, tracking the 500 largest US companies. When traders say "the market," they usually mean SPY.
Account & RegulationSSR (Short Sale Restriction)
A rule that prevents short sellers from shorting on a downtick after a stock drops 10% or more from the prior close. Stays in effect for the rest of the day and the following day.
Account & RegulationSTOCK Act
The Stop Trading on Congressional Knowledge Act of 2012, which requires members of Congress to disclose stock trades within 45 days and prohibits them from trading on non-public information.
Trading StrategiesScalping
A strategy of making many small trades for tiny profits, holding positions for seconds to minutes.
Market StructureSector Rotation
When money flows from one market sector to another as economic conditions change or investors shift risk appetite.
Market StructureSecurity
A tradable financial instrument such as a stock, bond, option, or ETF. When traders say "securities," they usually mean stocks.
Trading StrategiesShakeout
A sharp price drop designed to scare weak holders into selling before the stock reverses and moves higher. Also called a spring in Wyckoff terminology.
Trading StrategiesShort Selling
Selling borrowed shares to profit from a price decline. Buy them back cheaper to close the trade.
Market StructureShort Squeeze
A rapid price spike caused by short sellers being forced to buy back shares, creating a feedback loop of buying pressure.
Order TypesSlippage
The difference between the expected price and the actual fill price, usually caused by fast-moving markets or low liquidity.
Market StructureSmall Cap / Mid Cap / Large Cap
Size classifications for companies based on total market value. Small cap is under $2 billion, mid cap is $2-10 billion, large cap is over $10 billion.
Market StructureStop Hunt
A price move that briefly pushes through a key level to trigger clustered stop loss orders, then reverses. Also called a liquidity sweep.
Order TypesStop Limit Order
A two-part order that triggers a limit order when a specified stop price is reached. Gives you price control but does not guarantee execution.
Order TypesStop Loss
An order to sell a position when it reaches a specified price, limiting potential losses.
Chart PatternsSupply and Demand Zones
Price areas where imbalances between buyers and sellers caused sharp moves: stronger than traditional support/resistance.
Chart PatternsSupport and Resistance
Price levels where buying (support) or selling (resistance) pressure historically prevents further movement.
Trading StrategiesSwing Trading
A strategy of holding positions for days to weeks, capturing medium-term price swings.
T
T+1 Settlement
The rule that stock trades settle one business day after execution. You sold shares today, the cash is officially yours tomorrow.
Market StructureTXSE (Texas Stock Exchange)
A new national securities exchange headquartered in Dallas, Texas, backed by BlackRock and Citadel Securities, positioning itself as an alternative to NYSE and NASDAQ.
Account & RegulationTax Bracket
The range of income taxed at a particular rate. The US uses progressive brackets where higher portions of income are taxed at higher rates.
Technical IndicatorsThe Greeks (Options)
A set of risk metrics for options: Delta (direction), Gamma (acceleration), Theta (time decay), and Vega (volatility sensitivity).
Risk ManagementTilt
An emotional state where frustration or anger from recent losses leads to impulsive, irrational trading decisions. Borrowed from poker terminology.
Price & VolumeTime and Sales (Tape)
A real-time feed of every executed trade showing price, size, and time: the 'tape' that tape readers watch.
Risk ManagementTrading Plan
A written set of rules that define when you enter, exit, and manage a trade. Removes emotion from decision-making by pre-defining your actions.
Order TypesTrailing Stop
A stop that automatically adjusts upward as price rises, locking in profits while allowing the trade to run.
Market StructureTreasury
A debt security issued by the US federal government. Treasuries are considered the safest investment and their yields heavily influence the stock market.
Technical IndicatorsTrend
The general direction a stock price is moving over time. An uptrend makes higher highs and higher lows. A downtrend makes lower highs and lower lows.
U
V
VWAP
Volume Weighted Average Price: the average price weighted by volume throughout the trading day.
Price & VolumeVolume
The total number of shares traded during a given period. High volume confirms price moves.
Technical IndicatorsVolume Profile
A chart study showing volume traded at each price level, revealing where the most activity occurred.
W
Wash Sale Rule
IRS rule that disallows a tax loss deduction if you buy a substantially identical security within 30 days.
Trading StrategiesWatchlist
A curated list of stocks you are monitoring for potential trades. Built from scans, news, and research, typically updated daily.
Chart PatternsWedge
A chart pattern where price converges between two sloping trendlines. Rising wedges are bearish, falling wedges are bullish.
Market StructureWhale
A trader or institution with enough capital to move the market with a single order. Their buying or selling creates visible price and volume spikes.
Risk ManagementWin Rate
The percentage of trades that are profitable. A 45% win rate means 45 out of 100 trades are winners.
Trading StrategiesWyckoff Method
A framework for understanding how large players accumulate and distribute shares through predictable market cycles. Developed by Richard Wyckoff in the 1930s.