Trading Glossary: 50 Key Terms Explained
A beginner-friendly trading glossary with 50 essential terms explained in plain English-risk, leverage, liquidation, funding, and more.
Use this glossary to quickly understand common trading and investing terms. Each term includes a short definition and a next-step link to a relevant TradeOrbit tool or guide.
A
Ask (Ask Price)
The lowest price someone is willing to sell for right now (part of the bid-ask spread). Next: Bid-Ask Spread
ATR (Average True Range)
A volatility indicator that estimates typical price movement over a period. Often used for stop placement. Next: Stop-Loss Strategies
B
Backtest
Testing a trading strategy on historical data to estimate performance. Backtests can be misleading if slippage and costs are ignored. Next: Trading Slippage
Bid (Bid Price)
The highest price someone is willing to pay right now (part of the bid-ask spread). Next: Bid-Ask Spread
Break-Even Price
The price where your trade or investment is net zero after fees and costs. Next: PnL Calculator
C
CAGR (Compound Annual Growth Rate)
Annualized growth rate of an investment over time (compounded). Best for comparing different timeframes. Next: CAGR Calculator
Correlation
A measure of how similarly two assets move. High correlation means stacked risk. Next: Risk Limits & Rules
Cost Basis (Average Buy Price)
Your weighted average entry price across multiple buys. Next: Average Buy Price Calculator
D
DCA (Dollar-Cost Averaging)
Investing a fixed amount at regular intervals regardless of price to reduce timing risk. Next: DCA Strategy Explained
Drawdown
The peak-to-trough decline in your account equity. Large drawdowns require disproportionate gains to recover. Next: Trading Drawdown Recovery
E
Edge
A repeatable advantage that produces positive expectancy over many trades. Next: Risk Management in Trading
Expectancy (EV)
Expected profit per trade: (WinRate x AvgWin) - (LossRate x AvgLoss). Next: Risk/Reward Calculator
F
Fees (Maker/Taker)
Exchange costs charged when you enter/exit. Maker adds liquidity, taker removes it. Next: Trading Fees Explained
Funding Rate
Perpetual futures payment between longs and shorts, paid periodically while holding. Next: Funding Rates Explained
G
Gap
A jump in price between two levels with little or no trading in between. Can increase slippage on stops. Next: Trading Slippage
H
HODL
Crypto slang for long-term holding. DCA is often used for HODL strategies (still requires allocation rules). Next: DCA Checklist
I
Initial Margin
Collateral required to open a leveraged position (futures or margin trading). Next: Margin & Leverage Calculator
Invalidation
The price level where your trade idea is proven wrong. Often used to place a stop-loss. Next: Position Size Calculator
J
Journaling
Recording your trades, risk, and outcomes to improve discipline and decision-making. Next: Trading Journal Template
L
Liquidity
How easily an asset can be bought or sold without moving the price. Low liquidity increases spread and slippage. Next: Bid-Ask Spread
Leverage
Borrowed exposure that increases notional position size relative to margin used. Next: Leverage Explained
Liquidation
Forced close by the exchange when margin is insufficient. Not the same as a stop-loss. Next: Liquidation vs Stop-Loss
Limit Order
An order to buy or sell at a specified price or better. Often used to be a maker. Next: Maker vs Taker
M
Maker
Adds liquidity to the order book (usually lower fees). Next: Trading Fees Explained
Market Depth
How much volume is available at different price levels in the order book. Thin depth increases slippage. Next: Trading Slippage
Market Order
Executes immediately at best available price. Often pays taker fees and can slip. Next: Trading Slippage
Maintenance Margin
Minimum margin required to keep a position open. Falling below can trigger liquidation. Next: Margin & Leverage Calculator
N
Notional Value
True position exposure: units x price. Notional drives PnL and risk. Next: Futures Margin vs Notional
O
OHLC (Open, High, Low, Close)
The four key prices of a candle. Often used to read structure and volatility. Next: Stop-Loss Strategies
Order Book
The list of current buy and sell orders at each price level. Next: Maker vs Taker
Overtrading
Trading too often or without a clear edge, often leading to avoidable losses. Next: Risk Limits & Rules
P
PnL (Profit and Loss)
Profit or loss from a position, ideally including fees and funding. Next: PnL Calculator
Position Size
How many units or contracts you trade. Should be derived from risk and stop distance. Next: Position Size Calculator
Q
Quote Currency
The currency used to price a pair (e.g., BTC/USDT -> USDT is the quote). Next: ROI Explained
R
R-Multiple (R)
A performance metric where 1R equals your planned risk per trade. Next: R-Multiple Explained
Risk/Reward (R:R)
Ratio of potential reward to risk based on target and stop distance. Next: Risk/Reward Calculator
ROI (Return on Investment)
Total return over a period. Doesn't account for time-use CAGR for time-normalized comparison. Next: ROI / PnL Calculator
S
Scale In
Entering a position in multiple parts instead of all at once. Next: DCA Strategy Explained
Scale Out
Taking profit in parts to reduce risk and lock gains. Next: Risk/Reward Ratio
Slippage
When your fill price is worse than expected, common on stops during volatility. Next: Trading Slippage
Spread (Bid-Ask Spread)
The difference between bid and ask. A hidden cost you pay every trade. Next: Bid-Ask Spread
Stop-Loss
An order or level where you exit if price invalidates your trade idea. Next: Stop-Loss Strategies
Support/Resistance
Price zones where buying or selling pressure often appears. Next: Stop-Loss Strategies
T
Taker
Removes liquidity and usually pays higher fees. Next: Maker vs Taker
Take Profit (TP)
A planned exit level to lock gains. Should be aligned with R:R and structure. Next: Risk/Reward Calculator
Trailing Stop
A moving stop that follows price to lock gains while keeping downside defined. Next: Stop-Loss Strategies
U
Unrealized PnL
Profit or loss on open positions that has not been realized by selling. Next: DCA Realized vs Unrealized PnL
V
Volatility
The degree of price movement. Higher volatility usually increases spread and slippage. Next: Trading Fees Explained
W
Win Rate
Percentage of winning trades. Win rate alone doesn’t determine profitabilityâ€"expectancy does. Next: Risk/Reward Ratio
Y
Yield
Return generated by an investment or asset over time, often expressed as a percentage. Next: Compound Interest Explained