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Glossary124 Terms

Trading Glossary

Every trading term explained clearly — from order flow fundamentals to advanced market structure concepts.

All Terms

Order Flow5 min read

Absorption

An absorption occurs when aggressive market orders are absorbed by passive limit orders without price moving in the direction of the aggression — a sign of institutional counter-activity.

Market Internals4 min read

ADD (Advance-Decline Difference)

The Advance-Decline Difference (ADD) is a real-time market breadth indicator that measures the net difference between the number of advancing and declining stocks on an exchange.

AI & Technology5 min read

AI Trading

AI trading refers to the use of artificial intelligence and machine learning to analyze market data, identify patterns, and automate or support trading decisions.

AI & Technology4 min read

Algorithmic Trading

Algorithmic trading is the automated execution of trade orders according to pre-programmed rules that consider variables such as price, volume, timing, and market conditions.

Volatility5 min read

ATR (Average True Range)

The Average True Range (ATR) is a volatility indicator that measures the average price range of a security over a defined period, quantifying the current intensity of price fluctuations.

Market Structure5 min read

Auction Market Theory

Auction Market Theory describes how markets discover fair value through the continuous interaction of buyers and sellers, balancing supply and demand via an auction process.

Trading Strategies4 min read

Backtesting

Backtesting is the process of testing a trading strategy on historical market data to evaluate its performance, profitability, and robustness before risking real capital.

Order Flow5 min read

Bid-Ask Spread

The bid-ask spread is the difference between the highest buy offer (bid) and the lowest sell offer (ask) in the order book, representing the cost of immediate execution.

Order Flow5 min read

Big Trades

Big trades are individual transactions with above-average volume that indicate institutional activity and frequently occur at turning points or during breakouts.

News & Geopolitics5 min read

Black Swan Event

A Black Swan event is an extremely improbable, unpredictable occurrence with massive consequences that is often incorrectly rationalized as foreseeable in hindsight — a concept coined by Nassim Nicholas Taleb.

Market Structure4 min read

Breakout

A breakout is the price moving through a significant level such as support, resistance, or a range boundary, often triggering an accelerated move in the direction of the break.

Trading Basics4 min read

Candlestick Chart

A candlestick chart is a charting method of Japanese origin that visualizes the open, high, low, and close price for each time period as a candle, revealing price action and market sentiment at a glance.

Trading Taxes4 min read

Capital Gains Tax (Abgeltungssteuer)

The Abgeltungssteuer is a flat withholding tax of 25% on capital gains in Germany, automatically deducted by banks together with the solidarity surcharge and, where applicable, church tax.

Trading Strategies5 min read

Chart Story

The chart story is the systematic interpretation of price and volume action on a chart to read the underlying institutional campaign in four phases: Liquidity, Manipulation, Reaction, and Unwinding.

Futures4 min read

CME (Chicago Mercantile Exchange)

The CME (Chicago Mercantile Exchange) is the world's largest derivatives exchange and part of CME Group, where billions of dollars in futures and options on indices, commodities, currencies, and interest rates are traded daily.

COT Report5 min read

Commercials & Non-Commercials

Commercials and non-commercials are the two main CFTC classifications in the COT Report, where commercials hedge their business risks and non-commercials speculate on price movements.

Psychology4 min read

Confirmation Bias

Confirmation bias is the cognitive tendency to seek out and favor information that confirms one's existing beliefs while ignoring or discounting contradictory evidence.

Futures5 min read

Contango & Backwardation

Contango describes a forward curve where futures prices are above the current spot price, while backwardation is the opposite — futures trade below the spot price.

Futures4 min read

Contract Roll

A contract roll is the process of switching from an expiring futures contract to the next active contract month in order to maintain continuous market exposure.

COT Report5 min read

COT Report

The COT Report (Commitments of Traders) is a weekly report published by the CFTC that discloses the positioning of different trader categories in U.S. futures markets.

Macroeconomics5 min read

CPI (Consumer Price Index)

The Consumer Price Index (CPI) is a monthly price index that measures the average change in prices of a representative basket of goods and services and serves as the primary indicator of consumer price inflation.

Prop Trading4 min read

Daily Loss Limit

The daily loss limit is the maximum allowable loss a trader may incur on a single trading day before the account — particularly at prop trading firms — is suspended or restricted.

Trading Strategies4 min read

Day Trading

Day trading is a trading style where all positions are opened and closed within a single trading day, ensuring no positions are held overnight.

Order Flow1 min read

Delta & CVD

Delta is the difference between volume traded at the ask and at the bid per candle, while the Cumulative Volume Delta (CVD) accumulates these values over time to reveal aggressive buying or selling pressure.

Risk Management4 min read

Drawdown

Drawdown is the percentage decline in account equity from the highest peak to the lowest trough before a new high is reached — a key performance metric for evaluating trading strategy risk.

Futures4 min read

E-mini

E-mini futures are electronically traded, downsized futures contracts that represent a fraction of the full-size contract and rank among the most heavily traded derivatives in the world.

Macroeconomics1 min read

Economic Calendar

An economic calendar is a schedule that chronologically lists all major economic data releases, interest rate decisions, and central banker speeches, serving as an essential tool for traders.

Trading Strategies4 min read

Edge (Trading Edge)

An edge is a statistically measurable advantage a trader holds over the market that produces positive expectancy over a sufficiently large number of trades.

Macroeconomics5 min read

European Central Bank (ECB)

The European Central Bank (ECB) is the central bank of the eurozone, responsible for maintaining price stability across the euro area through monetary policy and interest rate management.

Order Flow5 min read

Exhaustion

An exhaustion is an order flow signal where a strong price movement occurs with declining aggressive volume, indicating the driving force is fading and a reversal may be imminent.

Trading Strategies5 min read

Failed Structure

A failed structure occurs when the market forms a new high or low but cannot sustain the level and reverses instead — a strong signal that trend continuation has failed.

Macroeconomics5 min read

Fed Funds Rate

The Federal Funds Rate is the benchmark interest rate set by the Federal Reserve at which US commercial banks lend overnight reserves to each other, serving as the primary tool for steering monetary policy.

Macroeconomics5 min read

Federal Reserve (Fed)

The Federal Reserve is the central bank of the United States, responsible for ensuring price stability and maximum employment through monetary policy, interest rate management, and financial system regulation.

Macroeconomics6 min read

FOMC

The Federal Open Market Committee (FOMC) is the monetary policy decision-making body of the US Federal Reserve that meets eight times per year to set the federal funds rate and determine the direction of monetary policy.

Psychology4 min read

FOMO (Fear of Missing Out)

FOMO in trading is the emotional impulse to enter a trade out of fear of missing a market move, often leading to undisciplined entries without a valid setup.

Order Flow1 min read

Footprint Chart

A footprint chart displays the number of contracts traded at each price level, split into buys (trades at the ask) and sells (trades at the bid), making aggressive market activity visible.

Prop Trading4 min read

Funded Account

A funded account is a trading account backed by a prop trading firm's capital that allows the trader to trade with external funds and withdraw a share of the profits.

Futures5 min read

Futures

Futures are standardized contracts traded on regulated exchanges that obligate the buyer to purchase, or the seller to sell, an underlying asset at a predetermined price and date.

Futures4 min read

Futures vs CFDs

Futures are traded on regulated exchanges with central clearing, while CFDs are over-the-counter derivatives where the broker acts as direct counterparty.

Macroeconomics1 min read

GDP Nowcast

A GDP Nowcast is a real-time estimate of current gross domestic product calculated from incoming economic data before the official GDP statistics are released.

News & Geopolitics5 min read

Geopolitical Risk

Geopolitical risk refers to the potential for negative impacts on financial markets arising from political conflicts, military confrontations, sanctions, trade wars, or diplomatic tensions between states.

COT Report5 min read

Hedger

Hedgers are market participants who use derivatives such as futures and options to offset existing or anticipated price risks from their operational business rather than speculating on price direction.

Volatility1 min read

High Volatility Trading

High volatility trading encompasses specialized strategies and risk management techniques designed to profit from market phases with above-average price swings.

Market Structure4 min read

Higher Highs & Higher Lows

Higher highs and higher lows describe a price structure where each new high exceeds the previous one and each new low is above the last low — the classic hallmark of an intact uptrend.

Order Flow4 min read

HVN & LVN

High Volume Nodes (HVN) are price levels in the volume profile with above-average traded volume that act as equilibrium zones, while Low Volume Nodes (LVN) are areas with little volume that price traverses quickly.

Order Flow4 min read

Iceberg Order

An iceberg order is a large limit order split into small visible portions so that only a fraction of the actual order size is displayed in the order book while the rest remains hidden.

Order Flow4 min read

Imbalance

An imbalance is a significant disparity between buying and selling volume at a price level in the footprint chart, typically when one side exceeds the other by at least 300%.

Macroeconomics5 min read

Inflation

Inflation is the sustained increase in the general price level of an economy that reduces the purchasing power of money and is managed by central banks through monetary policy tools.

Macroeconomics1 min read

Interest Rates & Bonds

Interest rates and bonds form the foundation of global financial markets, with bond prices and yields reflecting expectations for monetary policy, inflation, and economic growth.

Trading Basics4 min read

Leverage

Leverage allows traders to control a larger market position with a fraction of the actual position value by depositing only a security deposit (margin).

Order Flow4 min read

Limit Order

A limit order is an order that executes only at the specified price or better, guaranteeing price but not execution — it is the passive order type that provides liquidity to the market.

Order Flow4 min read

Liquidity

Liquidity describes the ability to buy or sell a financial instrument in large quantities without significantly impacting price, determined by the depth and density of limit orders in the order book.

Trading Basics4 min read

Long & Short

Long and short describe the two fundamental trading directions: long means buying in anticipation of rising prices, short means selling in anticipation of falling prices.

Psychology4 min read

Loss Aversion

Loss aversion is the psychological tendency to feel losses approximately twice as strongly as equivalent gains, leading traders to irrationally hold losing positions and cut winners too early.

Trading Taxes5 min read

Loss Offset Rules

Loss offset rules govern how trading losses can be deducted against gains for tax purposes in Germany, reducing the overall tax burden for traders.

Macroeconomics1 min read

Macroeconomics for Traders

Macroeconomics for traders is the targeted application of economic concepts such as inflation, interest rates, and monetary policy to make informed trading decisions in financial markets.

Futures4 min read

Margin (Initial & Maintenance)

Margin is the security deposit a trader must post with their broker to open a futures position (initial margin) and to keep it open (maintenance margin).

Market Internals1 min read

Market Breadth

Market breadth measures how many individual stocks in a market are participating in a price move, revealing whether a trend is supported by a broad base or driven by only a few names.

Market Internals1 min read

Market Internals

Market internals are real-time breadth indicators that measure the internal strength of the stock market by aggregating the number of advancing and declining stocks, their volume, and tick data.

Order Flow4 min read

Market Order

A market order is an order that executes immediately at the best available price, guaranteeing execution but not price — it is the aggressive order type that moves price.

Market Structure6 min read

Market Phases

Market phases describe the three fundamental states a market can be in — Trend, Range, and Momentum/Anomaly — which determine which trading strategy is most effective at any given time.

Futures5 min read

Micro Futures

Micro Futures are downsized futures contracts at one-tenth the size of an E-mini, giving traders with smaller accounts access to major futures markets.

Trading Basics4 min read

Moving Average (EMA/SMA)

A moving average is a technical indicator that calculates the average price over a defined number of periods, smoothing price data to reveal trends and dynamic support/resistance zones.

Trading Strategies5 min read

Multi-Timeframe Analysis

Multi-timeframe analysis is a method where traders examine multiple timeframes simultaneously to identify the dominant trend, the current market phase, and precise entries across different levels.

Nasdaq Trading5 min read

Nasdaq Futures (NQ)

Nasdaq Futures (NQ) are standardized futures contracts on the Nasdaq-100 Index traded at the CME, representing the core instrument for professional index trading.

News & Geopolitics1 min read

News Trading

News trading is a strategy where traders actively trade around the release of economic data, central bank decisions, or geopolitical events to profit from the resulting volatility.

Macroeconomics5 min read

Non-Farm Payrolls (NFP)

Non-Farm Payrolls (NFP) is a monthly employment report published by the US Bureau of Labor Statistics that measures the number of jobs added outside the agricultural sector and ranks among the most market-moving economic data releases globally.

Market Structure1 min read

One-Way & Two-Way Markets

One-way markets move directionally with clear order flow in a single direction, while two-way markets feature active participation from both buyers and sellers, typically producing rotations.

Futures4 min read

Open Interest

Open interest is the total number of outstanding futures contracts that have not yet been closed by an offsetting trade or settled by delivery.

Trading Strategies5 min read

OpEx (Options Expiration)

OpEx (Options Expiration) is the date on which options contracts expire, requiring open positions to be settled or exercised, regularly causing heightened volatility and unusual price behavior across markets.

Order Flow1 min read

Order Book (DOM)

The order book (Depth of Market / DOM) displays all currently resting limit buy and limit sell orders at each price level, making available liquidity and its distribution visible in real time.

Order Flow1 min read

Order Flow

Order flow is the real-time analysis of buy and sell orders at an exchange, revealing the actual supply and demand behavior of institutional and retail market participants.

Psychology5 min read

Overtrading

Overtrading refers to excessive trading where a trader opens too many positions or trades too frequently, typically driven by emotions rather than a clear strategy.

Order Flow4 min read

POC (Point of Control)

The Point of Control (POC) is the price level with the highest traded volume within a defined time period, marking the area of greatest market acceptance.

Risk Management4 min read

Position Sizing

Position sizing is the systematic determination of how many contracts, lots, or shares to trade per position, based on defined risk tolerance and account size.

Prop Trading1 min read

Prop Trading

Prop trading (proprietary trading) is a model where traders trade with capital provided by a firm — a prop trading company — and receive a share of the profits generated in return.

Prop Trading1 min read

Prop Trading Challenge

A prop trading challenge is an evaluation phase where traders must prove they can reach a profit target without exceeding risk limits in order to receive a funded account.

Trading Taxes1 min read

Prop Trading Taxes

Prop trading taxes concern the tax classification of profits earned through prop trading firms, which in Germany may be treated as capital gains or other income depending on the contract structure.

Prop Trading1 min read

Prop Trading vs Own Capital

The comparison between prop trading and trading with own capital describes the different advantages and disadvantages of both approaches regarding capital access, risk, profit sharing, and flexibility.

Market Structure4 min read

Pullback

A pullback is a temporary counter-move within an existing trend, where price briefly moves against the trend direction before resuming the trend.

Market Internals5 min read

Put/Call Ratio

The put/call ratio is a sentiment indicator that measures the ratio of put option volume to call option volume and serves as a contrarian gauge of market sentiment.

Macroeconomics5 min read

Quantitative Easing (QE)

Quantitative Easing is an unconventional monetary policy tool in which a central bank purchases government and corporate bonds on a large scale to lower long-term interest rates and stimulate the economy.

Macroeconomics5 min read

Quantitative Tightening (QT)

Quantitative Tightening is the process by which a central bank reduces its balance sheet by not reinvesting maturing bonds or actively selling holdings to withdraw liquidity from the financial system.

Market Structure4 min read

Range (Consolidation)

A range is a market phase in which price moves sideways without a clear direction, oscillating between an upper boundary (resistance) and a lower boundary (support).

Psychology5 min read

Revenge Trading

Revenge trading is the impulsive act of entering trades after a loss in an attempt to quickly recover the lost money, which typically leads to even greater losses.

Psychology5 min read

Risk Management

Risk management in trading encompasses all measures and rules designed to limit potential losses and protect trading capital over the long term.

Risk Management6 min read

Risk of Ruin

Risk of ruin is the statistical probability of a trader losing their entire trading capital, calculated from win rate, risk-reward ratio, and the amount of capital risked per trade.

Risk Management5 min read

Risk-Reward Ratio

The risk-reward ratio is the relationship between the potential loss and the potential gain on a trade, serving as a core metric for evaluating trading decisions.

Nasdaq Trading5 min read

S&P 500 vs Nasdaq

The comparison between S&P 500 and Nasdaq refers to the different composition, volatility, and trading characteristics of the two most important US equity indices and their futures contracts.

Trading Strategies5 min read

Scalping

Scalping is a trading strategy where positions are opened and closed within seconds to a few minutes to profit from the smallest price movements.

Trading Strategies5 min read

Session High & Low

Session high and low are the highest and lowest prices reached during a specific trading session, serving as key reference points for liquidity, stops, and potential reversal zones.

Futures5 min read

Settlement Price

The settlement price is the official closing price of a futures contract, determined daily by the exchange and used as the basis for mark-to-market valuation.

Trading Basics5 min read

Slippage

Slippage is the difference between the expected execution price of an order and the actual price at which the order is filled in the market.

Order Flow5 min read

Spoofing

Spoofing is the illegal practice of placing large limit orders in the order book to create a false impression of supply or demand, then canceling those orders before execution.

Order Flow5 min read

Stacked Imbalance

A stacked imbalance occurs when multiple consecutive price levels in the footprint chart show a significant disparity between bid and ask volume, indicating strong aggressive pressure in one direction.

Risk Management5 min read

Stop Loss

A stop loss is a predefined order that automatically closes a position when the price reaches a specified loss level, limiting the risk on each trade.

Trading Strategies5 min read

Stop Run

A stop run is a deliberate price move beyond an obvious price level that triggers stop-loss orders and releases liquidity before the market reverses in the opposite direction.

Market Structure5 min read

Supply & Demand Zones

Supply and demand zones are price areas where institutional participants previously placed aggressive buy or sell orders and where price is likely to react again on a revisit.

Market Structure4 min read

Support & Resistance

Support and resistance are price zones where the market has reacted due to institutional activity in the past — support as a zone where buyers step in, and resistance as a zone where sellers dominate.

Market Structure5 min read

Swing High & Swing Low

A swing high is a local price peak that is higher than the adjacent highs, and a swing low is a local price trough that is lower than the adjacent lows — together they form the foundational structure of all price movement.

Trading Strategies4 min read

Swing Trading

Swing trading is a trading style where positions are held for several days to weeks to capture medium-term price movements — known as swings — within a broader trend.

Risk Management5 min read

Take Profit

A take profit is a predefined order that automatically closes a position when the price reaches a specified profit level, ensuring gains are systematically realized.

Order Flow1 min read

Tape Reading

Tape reading is the analysis of Time & Sales data (the tape), where every individual executed transaction is observed in real time to draw conclusions about institutional market participant behavior.

Market Internals5 min read

TICK Index

The TICK Index measures in real time the difference between the number of NYSE stocks whose last trade was on an uptick and those whose last trade was on a downtick.

Futures5 min read

Tick Size & Tick Value

Tick size is the smallest possible price movement of a futures contract, and tick value is the dollar amount that this minimum movement represents per contract.

Psychology4 min read

Tilt

Tilt is an emotional state in which a trader loses the ability to think rationally and instead acts impulsively and without control, often triggered by a series of losses.

Trading Lifestyle5 min read

Trading Burnout

Trading burnout is a state of emotional, mental, and physical exhaustion caused by sustained stress, overtrading, and insufficient recovery periods in trading.

Trading Taxes5 min read

Trading Company (GmbH)

A Trading GmbH is a German limited liability company established specifically for securities and derivatives trading to leverage tax advantages over private trading.

Psychology5 min read

Trading Discipline

Trading discipline comes through passion for the process — those who love trading do not need to force discipline but execute their plan out of intrinsic motivation.

Psychology5 min read

Trading Journal

A trading journal is a systematic record of all trades that documents entries, exits, rationale, and emotions to identify patterns and improve overall trading performance.

Psychology1 min read

Trading Psychology

Trading psychology encompasses the mental and emotional factors that influence a trader's decision-making and ultimately determine long-term success or failure in the markets.

Trading Lifestyle5 min read

Trading Routine

A trading routine is a structured, recurring workflow encompassing market analysis, preparation, trade execution, and review that ensures consistency and discipline in trading.

Trading Taxes6 min read

Trading Taxes

Trading taxes encompass all tax regulations and obligations that apply to the trading of financial instruments such as stocks, futures, CFDs, and options in Germany.

Risk Management4 min read

Trailing Stop

A trailing stop is a dynamic stop loss that automatically moves in the direction of the price to protect accumulated profits while keeping the trade open for further gains.

Macroeconomics1 min read

Treasury Futures

Treasury Futures are standardized futures contracts on US government bonds traded at the CME that allow traders to speculate on interest rate changes and bond price movements or to hedge interest rate risk.

Market Structure5 min read

Trend

A trend is a sustained price movement in one direction, characterized by a sequence of higher highs and higher lows (uptrend) or lower highs and lower lows (downtrend).

Order Flow5 min read

Value Area

The value area is the price range containing approximately 70% of total traded volume for a defined period, bounded by the Value Area High (VAH) and Value Area Low (VAL).

Volatility1 min read

VIX

The VIX (CBOE Volatility Index) measures the expected volatility of the S&P 500 over the next 30 days as implied by options prices and serves as the market's primary fear gauge.

Volatility1 min read

Volatility Regimes

Volatility regimes are distinct market phases characterized by a consistent level of price fluctuation, ranging from low through normal to extreme volatility, each requiring different trading strategies.

Market Internals5 min read

VOLD

VOLD is a real-time market breadth indicator that measures the ratio of cumulative trading volume in advancing stocks to the cumulative volume in declining stocks on the NYSE.

Order Flow1 min read

Volume Profile

The volume profile is an analysis tool that displays the distribution of traded volume across different price levels within a defined time period as a horizontal histogram.

Order Flow5 min read

VWAP

The VWAP (Volume Weighted Average Price) is the volume-weighted average price of an instrument over a defined period and serves institutional traders as a benchmark for evaluating their execution quality.

Trading Strategies4 min read

Win Rate & Expectancy

Win rate is the percentage of winning trades, while expectancy describes the average expected value per trade — together they determine whether a strategy is profitable long-term.

Macroeconomics5 min read

Yield Curve

The yield curve is a graphical representation of bond yields of the same credit quality across different maturities, whose shape provides insight into growth and recession expectations.