Accumulation Phase
A market cycle in which institutional investors gradually buy assets at low prices before a potential upward price trend.
A
Algorithmic Trading
An automated decision-making and trade execution that uses a computer in the financial market to buy and sell orders when predefined market conditions are met.
Alpha
The investment strategy’s ability to beat the market.
Ask
The lowest price a seller is willing to accept for an asset.
Asset
Anything that has value or can generate future economic benefit, such as cash, stocks, or property.
Asset Allocation Drift
A portfolio’s asset allocation changes when the proportions of stocks, bonds, or other investments shift away from the original target because of differences in market performance.
At the Money (ATM)
An option whose strike price is equal to or close to the market price of the underlying asset.
B
Backwardation
A market scenario in which the current (spot) price of an asset exceeds its future prices, or near-term futures are valued higher than those with longer maturities.
Balance Sheet
A financial statement showing a company’s assets, liabilities, and equity at a specific point in time.
Basic Trade
A voluntary exchange of goods and services between two or more parties, such as buyers and sellers. The trade is done without any force or coercion.
Basis Point (bps)
A unit representing one-hundredth of a percent (0.01%).
Bear/Bear Market/Bearish
A bear expects prices to fall. A bear market is a prolonged decline in prices. Bearish means having a negative outlook.
Beta Slippage
A multi-day tracking inefficiency is found in leveraged and inverse ETFs.
Bid
The highest price a buyer is willing to pay for an asset.
Block Trade
A large transaction of securities that is privately negotiated outside of open markets to avoid disrupting stock prices.
Blue-Chip Stock
Shares of large, reputable companies with a history of stable earnings.
Bond
A fixed-income investment representing a loan made by an investor to a borrower.
Broker
A person or firm that executes trades on behalf of clients, often charging a fee or commission.
Bull/Bull Market/Bullish
A bull expects prices to rise. A bull market is a prolonged increase in prices. Bullish means having a positive outlook.
C
Capital
Wealth in the form of money or assets available for investment or business use
Capitulation
A market scenario in which investors engage in mass panic selling during a market downturn.
Cash-and-Carry Arbitrage
A market-neutral trading strategy that involves buying long positions in assets such as stocks or commodities, while at the same time shorting futures contracts on the same asset.
CFD (Contract for Difference)
A derivative contract that allows traders to speculate on price movements without owning the underlying asset
Closing/Close
Ending a trading position or the final price of a market at the end of a trading day
Commission
A broker’s fee for executing a trade
Confirmation Bias
The habit of seeking, interpreting, and remembering information that supports existing views by overlooking or disregarding the contradictory facts.
Contango
A futures market condition where futures prices are higher than the current spot price
Correction
A short-term decline (typically 10% or more) in a market or stock after a rally
Cryptocurrency
A digital currency secured by cryptography, operating independently of central banks
D
Dark Pool
A private trading venue where institutional investors can execute large trades anonymously without revealing their orders to the public market.
Day Trading
Buying and selling assets on the same trading day
Delta Hedging
An option trading strategy to offset or minimize the risk caused by price movements in the underlying asset.
Derivative
A financial instrument whose value depends on an underlying asset or index
Distribution Phase
A phase in trading where institutional investors systematically sell assets to retail traders after a price increase to signal a potential market downtrend or reversal.
Diversification
Spreading investments across different assets to reduce risk
Dividend
A portion of a company’s profits that is paid to shareholders
Drawdown
The decline in portfolio value from its peak to its lowest point
E
Earnings
A company’s profits after expenses
Equity
Ownership interest in a company or asset
ETC (Exchange-Traded Commodity)
A product that tracks the price of a commodity. Like ETFs, ETCs trade like stocks on an exchange. Collectively, they are known as ETP or Exchange-Traded Products.
ETF (Exchange-Traded Fund)
A fund that tracks an index or sector, and trades like a stock on an exchange
Execution
The process of completing a trade order
Expected Shortfall
Known as conditional value at risk, it measures the average potential loss expected in the worst-case portion of investment returns.
F
Factor Investing
An investment strategy that selects securities based on specific characteristics and factors such as value, size, momentum, quality, or volatility.
Fair Value
An estimated price that reflects an asset’s true worth based on supply, demand, and fundamentals
Forex (Foreign Exchange)
The global marketplace for exchanging national currencies
Funding Rate
A periodic payment exchange between long and short traders in a perpetual futures contract to keep the contract price close to the asset spot price.
Futures Contract
An agreement to buy or sell an asset at a set price on a specific future date
G
Gamma Exposure
To measure how the option market makers’ hedging needs change with asset price movement.
Greeks
A risk management metric used for options to measure the sensitivity to different factors such as price changes (delta), volatility (vega), and time decay (theta).
Gross Domestic Product (GDP)
The total monetary value of goods and services produced within a country during a specific period
H
Hedging
A strategy used to offset or reduce risk from another position
Herd Behaviour
An investor follows the action of a larger group rather than making an independent investment decision based on analysis.
High Frequency Trading (HFT)
An algorithmic trading that uses powerful computers and sophisticated algorithms to execute thousands of trades within milliseconds.
High-Frequency Trading (HFT)
Automated trading that uses algorithms to execute large numbers of orders quickly
I
Implied Volatility
Represent the market’s forecast of futures price fluctuations in an asset derived from option prices.
Inflation
The rate at which the general price level of goods and services rises over time
Interest Rate
The cost of borrowing money, expressed as a percentage
IPO (Initial Public Offering)
When a company offers its shares to the public for the first time
ITM (In the Money)
An option that currently has intrinsic value
L
Latent Arbitrage
A trading strategy that profits from delays in market data transmission between different exchanges or trading platforms.
Leverage
Borrowed capital used to increase the potential return of an investment
Limit Order
An order to buy or sell at a specified price or better
Liquidity
How easily an asset can be bought or sold without affecting its price
Liquidity Sweep
Occurs when the price briefly moves to trigger clusters of stop-loss orders or pending orders before reversing directions.
Long Position
Buying an asset expecting its price to rise
M
Margin
The collateral required to open and maintain leveraged trades
Margin Call
A broker’s demand for an investor to deposit additional funds when account equity falls below required levels
Market Maker
A firm that provides liquidity by quoting both buy and sell prices for an asset
Market Microstructure
A study of how specific trading mechanisms, rules, and participants interact to influence price formation and liquidity.
Market Neutral Strategy
A trading approach that is designed to generate returns regardless of whether the broader market direction is balanced by long and short positions.
Market Order
An instruction to buy or sell an asset immediately at the best available price
Market Sentiment
Refers to the attitude, mood, or psychology of investors toward a specific asset, sector, or financial market.
Maturity
The date when a debt instrument or contract ends, and repayment is due
Mean Reversion
A trading theory suggesting that asset prices and returns will revert to their long-term average or mean.
Momentum Trading
A technical strategy of traders buying assets when the prices are rising strongly and selling when the prices are reversing.
Moving Average (MA)
A technical indicator that smooths price data to identify trends
O
Open Position
An active trade that has not yet been closed or settled
Option
Contracts giving the right, but not the obligation, to buy or sell an asset at a set price before expiry
Order Flow
A real-time analysis of buy and sell orders, providing insight into the market liquidity.
OTC (Over-the-Counter)
Trading directly between parties without using a centralized exchange
Overtrading
Occurs when investors trade excessively within a short period, often resulting in increased transaction costs and reduced profitability.
P
P&L (Profit and Loss)
The difference between revenue and expenses or gains and losses from trading
Pairs Trading
A market-neutral strategy that involves buying an underperforming asset and selling (shorting) an outperforming asset within one sector to profit from divergence.
Pip
The smallest price move in a currency pair, typically 0.0001
Portfolio
A collection of financial investments held by an individual or institution
Position
The exposure held in a market, either long or short
Position Trading
A long-term strategy where traders hold assets for months or years to profit from major market trends.
Price Action
The movement of a security’s price plotted over time, often used in technical analysis
Price Discovery
A process in which the buyer and seller determine the fair market price of an asset through supply and demand.
Price Impact
It refers to the effect that a specific trade has on the market price of an asset.
R
Realized Volatility
Measures the actual historical price fluctuations of an asset over a specific period of time.
Rebalancing
A process of adjusting asset allocations back to the target percentage to align with the investor’s risk tolerance and goals.
Resistance
A price level where selling pressure typically prevents further price increases
Return on Investment (ROI)
The percentage gain or loss relative to the original investment
Risk
The possibility of losing part or all of your investment
Risk Parity
An investment strategy that allocates capital based on risk contribution rather than the amount of money invested in each asset.
Risk-Reward Ratio
A measure comparing potential profit to possible loss in a trade
S
Scalping
A trading strategy that targets small, frequent profits by making numerous quick trades
Scalping
An investment strategy that allocates capital based on risk contribution rather than the amount of money invested in each asset.
Security
A tradable financial asset, such as a stock, bond, or derivative
Sharpe Ratio
Measures an investment’s risk-adjusted return by comparing the investment’s excess return to its volatility.
Short Selling
Selling borrowed assets in anticipation of buying them back later at a lower price
Slippage
The difference between the expected price and the actual price at which a trade is executed
Slippage Model
It estimates the difference between the expected trade price and the actual execution price due to market conditions.
Smart Order Routing
An automated trading platform that uses technology to find the best available price across multiple exchanges.
Sortino Ratio
A risk-adjusted performance metric that measures an investment’s return relative that is similar to the Sharpe Ratio but only focuses on the downside risk.
Spread
The difference between the bid and ask price of an asset
Statistical Arbitrage
A quantitative trading strategy that uses mathematical models to identify and exploit short-term price inefficiencies.
Stop-Loss Order
An order to automatically close a trade at a specified loss level to limit further downside
Swing Trading
A medium-term trading strategy focused on capturing price swings over several days or weeks
Swing Trading
A market swing is when traders and investors act and react to upward and downward trends.
T
Technical Analysis
The study of past price movements and patterns to forecast future trends
Tick
The minimum price movement of an asset
Tracking Error
It measures the performance of funds or portfolios that follow the benchmark index.
Trend
The general direction in which a market or asset price is moving
Turnover
The total volume or value of shares traded during a period
V
Value at Risk (VaR)
A statistical technique used to estimate the maximum potential loss of an investment during a specific period of time at a given confidence level.
Volatility
The degree of variation in an asset’s price over time
Volatility Trading
A strategy that focuses on trading the price movements rather than the direction of the asset (up and down).
Volume
The total number of shares, contracts, or units traded in a given period
W
Warrant
A warrant is a security that gives the holder the right to buy shares at a fixed price before a set expiry date
Y
Yield
The income return on an investment, usually expressed as an annual percentage