Trader Vocabulary, Glossary, Acronyms and Slang

Welcome to our Trader Terminology glossary of terms, acronyms, and trader speak. We will be adding to this list over time. If we need to add a term, please let us know.

Term Description
ADR ►ADR◄ American Depositary Receipts are stocks that trade in the U.S. but represent foreign shares.  ADRs trade and clear on U.S. markets in USD thereby enabling investors to avoid trading the underlying stock in the foreign market.
Alpha ►Alpha◄  (the Greek letter α) describes a trading strategy’s ability to beat the market. This is the amount over the natural return that comes from the trading strategy’s beta (the Greek letter β).
Alternative Data ►Alternative data◄ Non-market data that can still affect the market, ie Satellite images of Walmart car parks, Twitter sentiments.
Annual Report ►Annual Report◄ A statement produced by a company covering financial and relevant information about its management, direction, products, and accomplishments.
At The Opening ►At The Opening◄ An order type that is executed “at the opening” of the trading day. At Opening orders that are not eligible to be included in the first trades are automatically canceled or rejected.
ATR ►ATR◄  is the Average True Range (aka Average Trading Range) for a given security. The average true range is a technical analysis indicator that measures volatility by decomposing the entire range of a security’s price for a given period.
Average Trade Duration  ►Average Trade Duration◄ Average time spent in a trade (average of all your Trade Durations). For intraday traders, this may be seconds to minutes to hours. For multiday traders, this may be days, weeks, months or even years.
Backtest ►Backtest◄ A process of running a logical idea for trading through historical trading history to see if it bears fruit.
Basis Point ►Basis Point◄ 1/100th of one percent (0.01%). Basis points are used to express the change in a financial security. A 1% change in price equals 100 basis points. Sometimes abbreviated as BPS
Basket Trade ►Basket Trade◄  A trader establishes their own group of symbols and trades them as a block. E.g.: Gold related symbols or big tech companies. The trader monitors these Baskets and move long or short en block as the trading strategy dictates
Bear Market ►Bear Market◄  A market that is going down. Someone who believes the market is going down is called bearish. Think “Bear Down”
Best Execution ►Best Execution◄ a.k.a. Best Ex. SEC rule 19(b)(7)  requires broker/dealers to seek out the best possible price for client orders to ensure fairness to the client purchasing or selling the security.
Beta ►Beta◄  (the Greek letter β) is the measure of a security’s volatility or systematic risk as compared to the entire market or a given index that the security belongs to.
bid-ask spread A ►bid-ask spread◄  is the difference (dollars/cents) between the best ask price (lowest sellers are willing to sell a security) and the best bid price (highest a buyer is willing to pay).
Blue Chip ►Blue Chip◄ A blue-chip stocks are industry-leading, large companies. They represent stable companies that are normally good investments.
Bollinger Bands ►Bollinger bands◄  are drawn x standard deviations away from the moving average. If a price prints outside the Bollinger band it is either Overbought/Oversold or making a Breakout.
Book Value ►Book value◄  is the net asset value of a company. Book Value = total assets – intangible assets (patents, goodwill) – liabilities.
BreakOuts ►Breakouts◄  Symbols will often “trade in a range”. When they suddenly break up or down out of this range, this is a BreakOut. It is a particularly strong indicator if the move is accompanied by a surge in volume.
Broker-Dealer ►Broker-Dealer◄ A brokerage firm that buys and sells securities on its own account as a principal before selling the securities to customers.
Bull Market ►Bull Market◄  A market that is going up. Someone who believes the market is going up is called bearish. Think “Charge!”
Busted Trade ►Busted Trade◄ A trade that is entered into one party in error and that the contra party is willing to walk away from. Requires exchange intervention to bust.
Buying Power ►Buying Power◄ The amount of money that a trader has to trade securities. This is the cash available in a given account plus any approved and available margin.
Buying size ►Buying Size◄ Trading large quantities of a security.
Calmar Ratio ►Calmar Ratio◄ a.k.a. Drawdown Ratio. The Calmar ratio is a comparison of the average annual rate of return and the max drawdown of the trading strategy. Low Calmar Ratio = poor performance. High Calmar ratio = good performance.
Cancel/Replace ►Cancel Replace◄  orders change some part of an open order. This is typically the price or the order quantity. Most exchanges do not have an order modify feature.
Capital Spending ►Capital Spending◄- The purchase of fixed assets like plants or equipment. Capital expenditures are generally depreciated over their useful life.
Cash Flow ►Cash Flow◄ A company’s cash earnings. Usually the net income + noncash charges (depreciation + amortization)
Closing Period ►Closing Period◄Limited trading period 15 mins before the close, where specialist balances the book adjusting the price until all trades are met.
Clowngrade ►Clowngrade◄ When an institutional analyst upgrades or downgrades a stock for a stupid reason.
Contrarian ►Contrarian◄ Someone who is willing to think and act differently than the crowd.
Corporate Action ►Corporate Action◄ Any material change to a corporation that affects the investors. Must be approved by the board. Think: dividends, stock splits, M&A, bankruptcy, symbol changes.
Curve Fitting ►Curve Fitting◄ Process of repeatedly & artificially improving a backtest model to match the backtest data. When run on new data it inevitably fails.
CUSIP ►CUSIP◄ Committee on Uniform Security Identification Procedure. An inter-industry security coding service that provides each security with a unique identifier called a CUSIP. For example, each stock has a unique CUSIP number.
Daily VWAP ►Daily VWAP◄ The Volume Weighted Average Price for a given day. The VWAP = the number of shares bought times the share price and dividing by total shares.
Dead Cat Bounce ►Dead Cat Bounce◄ A short-lived recovery of a falling security. The bounce occurs when investors close out a short or buy assuming it has bottomed out. A dead cat bounce can only occur if a stock has gone below the previous low.
Delta ►Delta◄ (the Greek letter Δ)  A ratio of the change in a security’s option price to the underlying security price.
Divergence ►When an Indicator suggests strong movement in a particular direction but the price is moving in the opposite direction.◄
Dividend ►Dividend◄ A distribution of the company’s earnings as set by the board of directors. Not all stocks distribute dividends.
Earnings Per Share ►Earnings Per Share (EPS)◄  This is the amount of the earnings from the company allocated to every share of stock in the company. This is a major fundamental data item to gauge the health of a company.
Earnings Report ►Earnings Report◄ A corporate financial statement that reports and nets out all earnings and expenses to a profit and loss. Also called the Profit and Loss (P&L) statement.
EBITDA ►EBITDA◄ Earnings Before Interest, Tax, Depreciation and Amortization. Traders/Investors use this to measure a company’s operating performance while ignoring any decisions about financing, taxes, or accounting decisions.
Edge per Share ►Edge Per Share EPS◄A simple measure of a models efficiency. Average $ & c made per share traded. If you made $20 from 200 shares,  EPS = 10c.
EMA – Exponential Moving Average ►EMA (Exponential Moving Average)◄  Sometimes a moving average can be affected by one value in the range. A significant change on 1 day can change the moving avg. An Exponential Moving Average adds more weight to the more recent values.
ETF ►ETF◄ Exchange Traded Fund.  An ETF is an exchange-traded security that tracks a pre-determined index, commodity, bond, or a basket of assets similar to a mutual fund. Unlike mutual funds the ETFs trade as if they are common stock on a stock exchange
ETP ►Exchange-traded products (ETP)◄  trade on the stock markets as if they are stocks. ETPs derive their value from other investment instruments (commodities, interest rates, currencies) or are benchmarked to stocks, commodities or indices.
Exchange Traded Notes (ETN) ►Exchange Traded Notes (ETN)◄ Traded on market as if they are stocks. ETNs, like ETFs and ETPs, derive their value from other investment instruments.
Ex-Date ►Ex-Date or Ex-Dividend date◄ date on or after which a security is traded less the previously declared dividend or distribution.
Execution Management System (EMS) ►Execution Management System (EMS)◄ An computer program used to send orders into the markets, and to monitor the state of those orders. These often communicate through brokers Order Management Systems.
Execution Report ►Execution Report◄ A FIX Protocol transaction that represents a change in order state. This originally contained fill information but now contains all order state changes (pending new, fill, cancelled, rejecected, …)
Fast Market ►Fast Market◄  A fast market is a market that trades at a heavy volume and becomes chaotic with rapid-changing prices. We also use this term to also indicate that we have a lot of work on our plate and are rather busy.
Fed ►FED◄ The Federal Reserve system (The Fed). This is the central banking system in the USA. It was officially created as a public-private institution in 1913 to stabilize banks. The origins of central banking began with Alexander Hamilton.
Fill AND Kill – FAK ►Fill AND Kill – FAK◄ A FAK order type instructs the market or broker to fill or partially fill the order at the specified limit price and then cancel any remaining quantity.
Fill OR Kill – FOK ►Fill OR Kill FOK◄ A FOK order type instructs the market or broker to cancel the order if and only if it is not immediately filled for the total order quantity at the specified limit price.
Fill Price ►Fill Price◄  or Fill PX: The price at which your order was executed in the market.
Fiscal Year ►Fiscal Year◄ The year period that a company uses for accounting purposes and preparing financial statements and corporate taxes. This is not the same as the calendar year.
Float Shares ►Float Shares◄ The portion of shares in a symbol that are in the market and not held by insiders.
FOK ►FOK◄ Fill or Kill. An order qualifying instruction that tells the broker to execute the entire quantity immediately. If it isn’t filled, then the order is canceled (killed).
Fundamental Data ►Fundamental Data◄ aka the Fundamentals. Quantitative information about a security. This information comes from the reports to the governing body. This is easily thought of as quarterly balance sheet and profit/loss reporting.
Hedge ►Hedge◄ An investment to reduce the risk of a position. i.e. Taking an offsetting position in a related security or trading in an option contract to prevent excessive loss.
High Turnover ►High Turnover◄  Repeatedly trading increases trading costs, requires “more correct trading decisions” and often fails to outperform “Buy and Hold”.
HTB (Hard To Borrow) ►Hard to Borrow◄To short (sell) a stock you don’t own, you must 1st borrow those shares. If a stock is heavily shorted these can be Hard to Borrow.
Index ►Index◄ Derived value of a Market. Can be a Whole/Part/Industry/Country etc. Can be traded via ETFs which replicate the Index. ie SPY QQQ
Industry / Sector ►Industry/Sector◄  Symbols are grouped with similar companies (generally 11-13 sectors and 100+ Industries) E.g. Google would be in the Technology Sector and Goog is in the Internet Content & Information Industry.
Insiders ►Insider◄ A director, senior officer, or any person or entity that owns more than 10% of a company’s stock. These are people who have inside or privileged knowledge that other investors do not and are able to benefit from insider trading.
Institutional Investors ►Institutional Investor◄ Any person or organization trading securities in quantities large enough to qualify for preferential treatment that isn’t already a bank.
Lagging Indicator ►Lagging Indicator◄Attempts to predict future price from recent price action. Indicates trend & direction. +more reliable, -later signal.
Leading Indicator ►Leading Indicator◄Attempts to predict future price from “new” events ie News, RSI, TicVol. +early signal, -less reliable, -many false positives.
Level 1 Market Data ►Level 1 Market Data◄ The best bid and best offer (including quantities) for a given security at the given point in time. This is also called the top of book.
Level 2 Market Data ►Level 2 Market Data◄ The summary of each price level of the order book. This shows the best bid/ask prices and quantities for each price level of the order book. The price levels show the total quantity (not each order.)
Leverage ►Leverage◄ Using borrowed capital to trade in order to increase the (potential) return of an investment.
Leveraged Buyout ►Leveraged Buyout◄ The purchase of a controlling share in a company by its management, using outside capital. This increases demand for the stock and usually causes the price to rise.
LIBOR ►LIBOR◄ London Inter-Bank Offered Rate. Basic rate of interest for Inter Bank loans on the London Market. Used as a base for most interest rates.
Limit Order ►Limit Order◄  or Limit Price: The maximum or minimum price you are willing to pay or accept on your order.
Liquidity ►Liquidity◄ How easy it is to buy/sell a stock in the market without affecting the stock price. Think of this of how many and how frequent there are bids & offers in the market.
Long Term Hold ►Long Term Hold◄  What happens when a short term trade doesn’t turn out the way you wanted it to but you are still convinced that you like the position.
Long vs Short ►Long vs Short◄  Most people outside trading understand “buying” a stock. Few comprehend the idea of selling a stock you do not own, or “Shorting” a stock. There are different risks associated with Shorting vs going Long.
MACD ►MACD◄ Moving Average Convergence Divergence signals the strength, direction, momentum & duration price trends. Cross Up=Bullish, Down=Bearish.
Margin ►Margin◄ The use of securities in a client account to borrow money against. This is the difference between the total value of the securities held and the amount on loan from the broker that is used to hold a position.
Mark to Market (MTM) ►Mark to Market◄ a.k.a. MTM.  The current market value of the account.
MTM = ∑ (#shares for each security * the current market price of the security)
Market Capitalization Market Capitalization◄  Also called “market cap.” The value of a public traded company. Market Cap = total number of shares * share price.
Market Capitalization ►Market Capitalization (Cap)◄ Market Cap is the current market value of a company’s outstanding shares.
Market Cap = Total shares outstanding * current market price of one share.
Market Maker ►Market Maker◄ A person or company that provides liquidity on an exchange. MMs provide quotes both to buy and sell a security (hoping to make a profit on the bid-offer spread) to ensure that there is always bids and offers.
Market Research ►Market Research◄ You are either doing research into trading ideas, algorithms, or are just surfing the internet hoping to find something entertaining to do.
Market Trend ►Market Trend◄ Indicates a stock is moving consistently up or down. Higher Highs and Higher Lows (UpTrend) or Lower Lows and Lower Highs (DownTrend). The time period is at the trader’s discretion.
Max Drawdown ►Max Drawdown◄Maximum loss from Peak to Trough of a backtest (or portfolio). It gives an idea of the maximum potential downside risk of a model.
Moving Average ►A moving average◄  is simply an Average of the most recent a set period of time (market data bars.) It can be an average of the Price, the Volume,… The “moving” is simply recalculating the value with each new data point.
Naked Short ►Naked Short◄  In order to short a stock one first has to borrow the stock from a 3rd party at a small cost. Selling a stock without borrowing it first is called a Naked Short and is illegal.
Net Profit ►Net Profit◄ The actual profit after all expenses have been removed. Net profit = Gross Profit – Expenses. For traders, the Expenses are usually calculated as commissions + other market fees.
News Sentiment ►News Sentiment◄ A numerical value assigned to measure the positive or negative nature of a news story. Many alternative data providers use Natural Language Processing to measure sentiment. See @RavenPack, @SMA_alpha and others.
OHLC ►OHLC◄  Open High Low Close. The typical set of recorded market data in a period of time (time bar) used to display a symbols performance over time.
Options Trade ►Options Trade◄ Contract that gives a buyer an option not obligation to buy/sell an underlying stock on/before a specific date at a specific price.
Perfect Algo ►Perfect Algo◄ An unobtainable goal sought by every trader, demanded by every risk manager, and required of every algorithmic programmer.
Preferred Stock ►Preferred Stock◄ stock that entitles the holder to a fixed dividend, whose payment takes priority over that of common-stock dividends.
Price Earnings Ratio (P/E) ►P/E Ratio◄ The price-to-earnings ratio is the ratio of the stock price per share to earnings per share (EPS). P/E Ratio is widely used as a method for determining if the stock is valued properly compared to peer industry or sector stocks.
Pro Forma Financial Statement ►Pro Forma Financial Statement◄ A financial statement based upon assumptions and projections.
Pump and Dump ►Pump and Dump◄Fraud : Artificially inflating a stock price using misleading positive statements. Offender buys low, pumps and dumps high.◄
REG NMS ►REG NMS◄  Regulation National Market System is a set of SEC rules to improve fairness in price execution, quote display speed/quality as well as increase access to market data.
Reg SHO ►Regulation SHO◄ Reg SHO governs short sale practices. Traders are required to locate and borrow stock prior to short selling.  Reg SHO set standards to prevent the naked short selling practices and maintain fair markets for all.
Relative Volume ►Relative Volume◄  compares a stock’s current volume traded to the normal traded volume. It is displayed as a ratio e.g. a 2.75 Relative Volume means that the stock is trading at  3 3/4 times its normal volume.
Resistance ►Resistance◄Upper price level where stock resists breaking through as no more buyers. Typically at round human prices 10c, 25c, $1. “Get out at $20”
Risk ►Risk◄ The possibility of monetary loss associated with investments.
Risk Arbitrage ►Risk Arbitrage◄ also known as merger arbitrage is an investment strategy that speculates on the successful completion of mergers and acquisitions.
Risk Tolerance ►Risk Tolerance◄ The amount of variability in an investment that one is willing to withstand. One should have a frank discussion with your spouse about your risk tolerance.
ROR ►ROR◄ Rate of Return. The net gain or loss of an investment as a percentage of the investment cost. ROR = 100 * ( (Ending value of position – Start value of investment) / Start value of investment)
RSI – Relative Strength Indicator ►RSI – Relative Strength Indicator◄  A momentum indicator used to indicate Overbought (>75%) or Oversold (<25%) securities. It is calculated by taking the avg gain of up periods and dividing by the average loss of down periods.
Settlement Date ►Settlement Date◄ The day when the transaction is (or will be) completed. This is the day that the buyer is to pay the seller and deliver the security.
Sharpe Ratio ►Sharpe Ratio◄  is the performance of an investment by adjusting for risk.
S (x) = (rx – Rf) / StdDev (x)
X is the investment
rx is the avg return rate of X
Rf is the best rate of return of a risk-free security (T-bills)
Short Sale ►Short Sale◄ The selling of a stock that one doesn’t own in the hopes that the price will drop. One must borrow the stock prior to selling it through a stock loan process. Borrowing stock does have additional fees.
Short Squeeze ►Short Squeeze ◄Trader shorts stock anticipating a drop. Instead, it rises. Exceed their Margin and are forced to buy back at the high price to cover.
Simulation ►Simulation◄An approximation of likely fill prices for an order placed on any historic date based on the trades that happened at the time.
Slippage ►Slippage◄  The difference between the price you thought you would trade at, and the price you actually received from the market.
Social Sentiment ►Social Sentiment◄ is the score/grade of how well people think of a stock. It comes from natural language processing (NLP) of social media to analyze companies, products or, brands. Used to predict changes in stock prices.
SOR – Smart Order Routing ►SOR – Smart Order Routing◄ is the automated process of placing orders algorithmically to achieve the best possible price using a range of venues and execution methods.
Specialist ►Specialist◄ A member of SEC-regulated exchanges who must make a market in specific securities. Sometimes called two-dollar brokers.
Spike ►Spike◄  When a price suddenly moves away from its normal trend. Can be caused by news, rumors, competition, mergers and acquisitions. Identifying the cause allows you to take advantage of the move. A spike is often followed by a reversal
Spread Pt1 ►Spread Pt1◄ Bid-Ask. For liquid stocks often <=0.01. For stocks Rising/Falling/Illiquid it can be HUGE and can wipe out your profit.
Spread Pt2 ►Spread Pt2◄ Airport Currency Kiosk: $1.00 / €1.10. They sell €110 for $101. They buy €110 for $99. The SPREAD is their PROFIT for MAKING THE MARKET.
Standard Deviation ►Standard Deviation◄  Calculation of the typical (standard) distance of the swing (deviation) from the norm (Moving Average). On a normal bell curve, 68% of the values are within 1 StdDev from the average, 95% are within 2 StdDev.
Statistical Arbitrage ►Statistical Arbitrage◄ Short-term trading strategies that trade a set of securities on the basis of historical correlations and the general economic variables. A good strategy to apply Machine learning or apply linear regression and Support Vector Machine to the historical prices.
Stock Split ►Stock Split◄  This is a decision by the board to boost the number of shares available in the market by converting every share into a multiple. For example, a 2 for 1 split would result in everyone who owns 1 share would then own 2!
Stop Limit Order – STL ►Stop Limit Order – STL◄ An instruction to buy or sell if and only if a trigger price is encountered. The order becomes a resting limit order at the limit price when the market trades at the trigger (stop) price.
Stop Order ►Stop Order◄  Also called Stop Loss Orders. This order type is an instruction to close out of a position if a trigger price is reached. Stops are used for protecting oneself from losing any more than you already have.
Support ►Support◄Lower price level where stock resists breaking through as no more sellers. Typically at round human prices 10c, 25c, $1.
Swing Trading ►Swing Trading◄ Trading over a period of days (overnight to a few weeks) to gain profits from changing prices.
Technical Analysis ►Technical Analysis◄  is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume.
Tender Offer ►Tender Offer◄ A public offer to buy the stock of a corporation for a given price. This offer typically has a time frame. Tender offers are normally an effort to win control of the company.
The Office ►The Office◄ A movie and or TV sitcom that represents real life in the back office to many traders. 🙂
The Open ►The Open◄1st trade on a stocks “primary” exchange after 9:30EST. It is preceded by an “Opening Auction” similar to the “Closing Period”.
The Specialist ►The Specialist◄Traditionally a human at the Exchange managing one or more stocks. Held a “book” with list of traders looking to buy/sell/prices.
Thick Market – Liquid Stocks ►Thick Market – Liquid Stocks◄ Stock with many buyers/sellers (hi trading vol > 100k avol). Lower price volatility, risk, profit. Small spread.
Thin Market – Illiquid Stocks ►Thin Market – Illiquid Stocks◄Stock with few buyers/sellers (low trading vol < 100k avol). Hi price volatility, risk & potential profit. Big Spread.
Trade / Quote ►Trade/Quote◄ Think ticker tape parades! The exchanges updates to the bid/ask/last traded price for each Stock symbols. All the price data you view (ie minute bars, moving averages, ATRs, RSIs) is derived from these simple market events.
Trade Kelly Edge ►Trade Kelly Edge◄ An indication of what percentage of a given account is the maximum amount one should risk on any given trade.
Kelly % = Win_Probability – [(1 – Win_Probability) / Win_Loss_Ratio]
Trade Win % ►Trade Win % – Win/Loss Ratio◄ Is the total number of winning trades to the total number of losing trades (does represent actual $’s won/lost)
Trailing Stop ►Trailing Stop◄ An order to close a position if it moves in an unfavorable direction. It can be set a percentage away or a dollar cent value away from the current market price.
Turnover ►Turnover◄  For a fund, the goal is to maximise profitability while limiting the number of trades. Turnover is the number of shares traded during a period (expressed as a percentage).
TWAP  ►TWAP◄  is the Time-Weighted Average Price of a security over a specified time. Trading a strategies attempt to accumulate or liquidate positions at better than the TWAP. Some brokers provide TWAP algos.
Uptick ►Uptick◄ An uptick event happens when a security’s price has increased in price from the last traded price on the market data feed.
UpTrend/DownTrend ►UpTrend/DownTrend◄  Indicates a stock is moving consistently up or down. Higher Highs and Higher Lows (UpTrend) or Lower Lows and Lower Highs (DownTrend). The time period is at the trader’s discretion.
VIX ►VIX Volatility Index◄Measure of current/future volatility of the US Equities market based off Options Traded. Can be traded via an ETN (VXX/VXXB).
Volatility and the VIX ►Volatility and the VIX◄  is a measurement of the S&P500 volatility for the next 30 days derived from the Options market, hence it is known as the “Fear Gauge” of the market. VXX is an ETF that tracks VIX. Follow the VIX trends.
Volume ►Volume◄ Total number of shares traded in a specific security over a specific period of time. IE, the volume for AAPL during market hours on 1/24/2019 was around 44m shares.
Win Probability ►Win Probability◄ The likelihood that any given trade you make will result in a profit.
Win/Loss Ratio ►Win/Loss Ratio◄ The total positive trade amounts divided by the total negative trade amounts.
Witching Hour ►Witching Hour◄  The last hour of trading on the 3rd Friday of the month when options and stock futures expire. Heavy volume resulting from traders closing out positions before expiry.
Yield ►Yield◄ Earnings from an investment over a period of time expressed as a percentage on the investment amount. Yield =  Net Realized Return / Principal Amount