Glossary
Every term, defined
A
Algorithmic TradingBasicsTrading where entries, exits, and sizing are decided by explicit rules executed by a computer instead of judgment calls made in the moment.ATR (Average True Range)IndicatorsThe average size of a bar's full trading range, gaps included. The standard unit for volatility-scaled stops and position sizes.
B
BacktestingStrategy ValidationSimulating a trading strategy against historical market data to see how it would have performed. The first honest filter between an idea and real money.BasisFutures & BasisThe gap between a futures price and the spot price of the same asset. Positive basis means futures trade rich, and it must shrink to zero by expiry.Bid-Ask SpreadOrders & ExecutionThe gap between the highest price buyers will pay (bid) and the lowest price sellers will accept (ask). The baseline cost of trading immediately.Bollinger BandsIndicatorsA volatility envelope. A moving average with bands two standard deviations above and below, expanding and contracting with the market.Break of Structure (BOS)Market StructurePrice taking out the most recent significant swing extreme in the direction of the prevailing trend. Structural confirmation that the trend continues.
C
Cash-and-CarryFutures & BasisA market-neutral trade. Buy spot, short an equal notional of a dated future, hold to expiry, and collect the basis as the two prices converge.Change of Character (CHoCH)Market StructureThe first structural break against the prevailing trend, such as an uptrend losing its most recent higher low. A signal the trend may be turning.Contango & BackwardationFutures & BasisThe two shapes of a futures curve. Contango means futures above spot (normal in crypto bull markets); backwardation means futures below spot (fear).CVD (Cumulative Volume Delta)IndicatorsThe running total of buy volume minus sell volume. A measure of which side has been hitting the market hardest, independent of price.
D
E
F
FillOrders & ExecutionThe execution of an order. The actual price, quantity, and time at which a trade happened, as opposed to the price at which it was requested.Forward-Walk (Walk-Forward) AnalysisStrategy ValidationRepeatedly optimizing a strategy on one window of history and testing it on the unseen window that follows. The standard defense against curve-fit backtests.Funding RateFutures & BasisThe periodic payment between longs and shorts that keeps a perpetual future's price anchored to spot. Positive when longs pay, negative when shorts pay.Futures ContractFutures & BasisAn agreement to buy or sell an asset at a set price on a future date. Crypto futures trade at a premium or discount to spot, called the basis.
L
LeverageBasicsTrading with borrowed capital so a position's notional value exceeds your account equity. It amplifies gains and losses alike.Limit OrderOrders & ExecutionAn order that executes only at your specified price or better. You control the price and accept that it may never fill.LiquidityOrders & ExecutionHow much can be traded, how fast, without moving the price. It lives in the depth of resting orders willing to take the other side.Long PositionBasicsA position that profits when price goes up. You buy first, aiming to sell later at a higher price.
M
MACDIndicatorsMoving Average Convergence/Divergence. The gap between a fast and a slow EMA, plus a signal line, used to time momentum shifts.Market OrderOrders & ExecutionAn order that executes immediately at the best available price. You get certainty of execution and pay the spread and slippage for it.Market StructureMarket StructureThe trend skeleton of a chart, read from its swing points. Higher highs and higher lows define an uptrend; lower highs and lower lows, a downtrend.Max DrawdownRisk & MetricsThe largest peak-to-trough decline in the equity curve. The worst losing stretch you would have had to sit through.Monte Carlo SimulationStrategy ValidationStress-testing a backtest by randomly reshuffling or resampling its trades thousands of times, turning single numbers into probability ranges.Moving Average (SMA & EMA)IndicatorsThe average price over a rolling window, the basic trend-smoothing tool. SMA weights all bars equally; EMA weights recent bars more.
N
Net Annualized Basis (NAB)Futures & BasisThe futures basis restated as a yearly yield, the percentage premium scaled by 365 over the days to expiry, net of costs. The ranking metric for carry trades.Notional ValueBasicsThe full market value of a position (price times quantity), regardless of how much of your own capital is behind it.
O
OHLCV CandleStrategy ValidationOne bar of market history, the Open, High, Low, Close, and Volume of a fixed time interval. The atomic data unit of charting and backtesting.Order BlockMarket StructureIn smart-money-concepts vocabulary, the last opposite-direction candle before an impulsive move, treated as a zone where large orders were placed and price may react on return.Order Book (L2)Orders & ExecutionThe live ledger of resting buy and sell limit orders at each price level. Level-2 data shows the full depth, not just the best bid and ask.Overfitting (Curve Fitting)Strategy ValidationTuning a strategy until it fits the noise of the historical sample rather than a real market effect. The main reason great backtests fail live.
P
Perpetual FuturesFutures & BasisFutures with no expiry date, kept tethered to spot by periodic funding payments between longs and shorts instead of settlement.PnL (Profit and Loss)BasicsThe money a position or strategy has made or lost. Realized once a trade is closed, unrealized while it is still open.Position SizingBasicsDeciding how much to buy or sell on each trade, usually by fixing the percentage of equity lost if the stop is hit.
Q
R
Risk-Reward RatioRisk & MetricsHow much a trade stands to make relative to what it risks. The distance to take-profit divided by the distance to stop-loss, quoted in "R".RSI (Relative Strength Index)IndicatorsA momentum oscillator from 0 to 100 comparing recent gains to recent losses. The classic gauge of overbought and oversold conditions.
S
Sharpe RatioRisk & MetricsReturn per unit of volatility. The standard score for whether a strategy's returns were worth the bumpiness it took to earn them.Short PositionBasicsA position that profits when price goes down. You sell borrowed (or synthetic) exposure first, aiming to buy it back cheaper.SlippageOrders & ExecutionThe difference between the price you expected and the price you actually got. Execution reality charges it on every market order.Stop-LossOrders & ExecutionA pre-set exit that closes a losing position once price crosses a trigger level. The primary tool for capping loss on a single trade.Support & ResistanceMarket StructurePrice zones where the market has repeatedly turned. Support below (buyers defend), resistance above (sellers cap). Zones, not lines.Swing High / Swing LowMarket StructureA local price extreme, a bar whose high (or low) stands above (below) its neighbors on both sides. The atoms from which market structure is built.
T
Take-ProfitOrders & ExecutionA pre-set exit that closes a winning position at a target price, locking in the gain.TearsheetRisk & MetricsThe one-page performance report of a backtest. Equity curve, returns, Sharpe, drawdown, trade statistics, and costs in one place.TimeframeStrategy ValidationThe interval each candle summarizes (1m, 5m, 1h, 4h, 1d). The choice sets a strategy's trade frequency, cost sensitivity, and noise level.Trailing StopOrders & ExecutionA stop-loss that follows price as the trade moves in your favor, ratcheting the exit level up (for longs) and never back down.