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Trading Glossary
151+ essential trading terms — from basics to advanced options and market structure
Showing 151 of 151 terms
A
5
ADX
Average Directional Index. Measures the strength of a trend regardless of direction. Values above 25 indicate a strong trend.
technical
Ask
The lowest price a seller is willing to accept for a security. Also called the offer price.
basic
Assignment
When an option seller is required to fulfill the terms of the contract. Call sellers must sell shares; put sellers must buy shares.
At-the-Money (ATM)
An option whose strike price is equal to or very close to the current price of the underlying asset.
ATR
Average True Range. A volatility indicator that measures the average range of price bars over a period. Used for stop loss placement and position sizing.
technical
B
9
Bear Market
A market condition where prices are falling or expected to fall, typically defined as a 20%+ decline from recent highs.
basic
Beta
A measure of a security's volatility relative to the overall market. A beta of 1.5 means the stock moves 50% more than the market.
risk
Bid
The highest price a buyer is willing to pay for a security. The difference between bid and ask is the spread.
basic
Block Trade
A large privately negotiated securities transaction, typically 10,000+ shares or $200,000+ in value, executed outside the open market.
structure
Bollinger Bands
Volatility bands placed above and below a moving average, typically 2 standard deviations wide. Price near the bands may signal overbought or oversold conditions.
technical
Book Value
The net asset value of a company, calculated as total assets minus total liabilities. Represents the theoretical value if the company were liquidated.
fundamental
Breakout
When price moves above a resistance level or below support with increased volume, signaling a potential new trend.
basic
Bull Market
A market condition where prices are rising or expected to rise, typically defined as a 20%+ gain from recent lows.
basic
Butterfly Spread
A three-strike strategy that profits when the underlying stays near the middle strike at expiration. Limited risk and reward.
C
10
Calendar Spread
Buying and selling options of the same strike but different expiration dates. Profits from time decay differentials.
Call Option
A contract giving the buyer the right, but not the obligation, to buy an asset at a specified strike price before expiration.
Candlestick
A chart element showing open, high, low, and close prices for a time period. The body shows open-to-close range; wicks show extremes.
basic
Consolidation
A period where price moves sideways within a range, often preceding a breakout or breakdown.
basic
Correction
A decline of 10% or more from a recent peak in a stock or index price.
basic
Correlation
A statistical measure of how two securities move in relation to each other. Ranges from -1 (opposite) to +1 (identical). Diversification benefits come from low correlations.
risk
COT Report
Commitments of Traders report. A weekly CFTC publication showing the positioning of commercial hedgers, large speculators, and small traders in futures markets.
macro
Covered Call
Selling a call option against shares you already own. Generates income but caps upside potential.
CPI
Consumer Price Index. Measures the average change in prices paid by consumers for goods and services. A key inflation indicator.
macro
Credit Spread
An options spread where the premium received from the sold option exceeds the premium paid for the bought option, resulting in a net credit.
D
11
Dark Pool
Private exchanges where large institutional orders are executed away from public markets. Trades are reported after execution, hiding real-time flow.
structure
Dealer Hedging
The process by which market makers buy or sell the underlying asset to offset the risk of their options positions. This hedging flow can amplify or dampen price moves.
structure
Debit Spread
An options spread where the premium paid exceeds the premium received, resulting in a net debit. Maximum loss is limited to the debit paid.
Debt-to-Equity
Total debt divided by shareholders' equity. Measures financial leverage. Higher ratios indicate more debt financing relative to equity.
fundamental
Delta
Measures how much an option's price changes per $1 move in the underlying. Also approximates the probability of expiring in-the-money.
Divergence
When an indicator (like RSI or MACD) moves in the opposite direction of price. Bullish divergence signals potential reversal up; bearish divergence signals potential reversal down.
technical
Dividend Yield
The annual dividend payment divided by the stock price, expressed as a percentage. Indicates the income return on investment.
fundamental
Double Bottom
A bullish reversal pattern where price reaches a support level twice and bounces, forming a W shape.
technical
Double Top
A bearish reversal pattern where price reaches a resistance level twice and fails to break through, forming an M shape.
technical
Drawdown Recovery
The return needed to recover from a loss. A 50% drawdown requires a 100% gain to break even, illustrating why capital preservation is paramount.
risk
DXY
The U.S. Dollar Index. Measures the value of the dollar against a basket of six major currencies. A strong dollar can pressure equities and commodities.
macro
E
8
Earnings Surprise
The difference between a company's reported earnings and the consensus analyst estimate. Positive surprises often drive stock prices higher.
fundamental
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization. A measure of operating performance that excludes non-cash charges and capital structure effects.
fundamental
EMA
Exponential Moving Average. A type of moving average that gives more weight to recent prices, making it more responsive to new data.
technical
EPS
Earnings Per Share. A company's net profit divided by the number of outstanding shares. A key measure of profitability.
fundamental
Exercise
When an option buyer activates the right to buy (call) or sell (put) the underlying asset at the strike price.
Expectancy
The average amount you expect to win (or lose) per trade. Calculated as (win rate x avg win) - (loss rate x avg loss). Must be positive for a viable strategy.
risk
Expected Move
The options-implied price range a security is expected to trade within over a given period, typically calculated from at-the-money straddle prices.
bearisfair
Expiration Date
The last date an option contract is valid. After expiration, the option ceases to exist and has no value.
F
5
Fed Funds Rate
The interest rate at which banks lend reserves to each other overnight, set by the Federal Reserve. The most influential interest rate in the economy.
macro
Fibonacci Retracement
Horizontal lines indicating potential support or resistance at key Fibonacci levels (23.6%, 38.2%, 50%, 61.8%) between a high and low.
technical
Fill
The completion of an order. A partial fill means only some of the requested shares or contracts were executed.
basic
FOMC
Federal Open Market Committee. The Fed body that sets monetary policy and interest rates. FOMC meetings and statements significantly impact markets.
macro
Free Cash Flow
The cash a company generates after accounting for capital expenditures. Represents the cash available to shareholders and debt holders.
fundamental
G
7
Gamma
The rate of change of Delta per $1 move in the underlying. Gamma is highest for at-the-money options near expiration.
Gamma Exposure (GEX)
The aggregate gamma of market makers' hedging positions. Positive GEX suppresses volatility; negative GEX amplifies it. A key factor in short-term price dynamics.
structure
Gamma Flip
The price level where aggregate dealer gamma changes from positive to negative (or vice versa). Below the flip, volatility tends to increase.
structure
Gap
A price range where no trading occurred, visible as a space between candles. Gaps often occur at market open.
basic
GDP
Gross Domestic Product. The total monetary value of all finished goods and services produced within a country. A primary indicator of economic health.
macro
GEX Chart
Bear is Fair's Gamma Exposure visualization showing dealer hedging levels, key strikes, and the gamma flip point for major indices.
bearisfair
Guidance
A company's forward-looking estimates for future revenue and earnings, provided during earnings calls. Often matters more than the actual results.
fundamental
H
1
Head and Shoulders
A reversal chart pattern with three peaks: a higher middle peak (head) flanked by two lower peaks (shoulders). Signals a potential trend reversal.
technical
I
10
Ichimoku Cloud
A comprehensive indicator that defines support/resistance, identifies trend direction, gauges momentum, and provides trading signals all in one view.
technical
Implied Volatility (IV)
The market's expectation of future price volatility, derived from option prices. Higher IV means more expensive options.
In-the-Money (ITM)
An option with intrinsic value. A call is ITM when the stock price is above the strike; a put is ITM when below.
Inflation
The rate at which the general level of prices for goods and services is rising, eroding purchasing power. Central banks target around 2% annually.
macro
Insider Trading (Legal)
When company executives, directors, or large shareholders buy or sell their own company's stock and report it to the SEC. Can signal confidence or concern.
fundamental
Institutional Flow
Large trades executed by hedge funds, mutual funds, and other institutional investors. Tracking this flow can reveal smart money positioning.
structure
Iron Condor
A four-leg strategy selling an OTM call spread and an OTM put spread. Profits when price stays within a defined range.
IV Crush
A sharp decline in implied volatility, typically after an anticipated event like earnings. Causes option prices to drop even if the stock moves.
IV Rank
Where current IV falls relative to its range over the past year, expressed as a percentile. High IV Rank means options are relatively expensive.
IV Surface
A 3D visualization of implied volatility across different strike prices and expiration dates. Reveals the term structure and skew of options pricing.
bearisfair
K
1
Kelly Criterion
A formula for determining optimal position size based on win rate and payoff ratio. Maximizes long-term growth but can be aggressive in practice.
risk
L
5
Leverage
Using borrowed capital to increase the potential return of an investment. Amplifies both gains and losses.
basic
Limit Order
An order to buy or sell at a specific price or better. Guarantees price but not execution.
basic
Liquidity
How easily an asset can be bought or sold without significantly affecting its price. High liquidity means tight spreads and fast execution.
basic
Liquidity Zone
A price area with high trading activity and large resting orders. Price often pauses, reverses, or accelerates at these levels.
structure
Long
Buying a security with the expectation that its price will rise. Going long means you profit when prices increase.
basic
M
9
MACD
Moving Average Convergence Divergence. A trend-following momentum indicator showing the relationship between two moving averages of price.
technical
Margin
The collateral required by a broker to open and maintain leveraged positions. Margin calls occur when equity falls below requirements.
basic
Market Cap
Market Capitalization. The total market value of a company's outstanding shares, calculated as share price multiplied by shares outstanding.
fundamental
Market Maker
A firm that provides liquidity by continuously quoting bid and ask prices. They profit from the spread and must hedge their risk dynamically.
structure
Market Order
An order to buy or sell immediately at the best available price. Guarantees execution but not price.
basic
Max Drawdown
The largest peak-to-trough decline in portfolio value, expressed as a percentage. Measures the worst-case loss an investor experienced.
risk
Max Pain
The strike price at which the most options contracts (both calls and puts) would expire worthless. Theory suggests price gravitates toward max pain at expiration.
structure
Mean Reversion
The theory that prices tend to return to their average over time. Bear is Fair signals often identify mean-reversion opportunities when price deviates significantly.
bearisfair
Moving Average
A smoothed average of past prices over a set period (e.g., 20-day, 50-day, 200-day). Used to identify trend direction.
technical
N
2
NFP
Non-Farm Payrolls. A monthly U.S. jobs report showing the number of jobs added or lost, excluding farming. One of the most market-moving economic releases.
macro
NQ Futures
E-mini Nasdaq 100 futures (NQ). A highly liquid futures contract tracking the Nasdaq 100 index. The primary instrument analyzed by Bear is Fair.
bearisfair
O
6
OI Heatmap
Bear is Fair's Open Interest Heatmap that visualizes options positioning across strikes and expirations to identify key support and resistance levels.
bearisfair
Open Interest
The total number of outstanding option contracts that have not been settled. Rising OI with price moves confirms trends.
OPEX
Options Expiration day. The date when options contracts expire. Monthly OPEX (third Friday) and quarterly OPEX can cause significant price volatility.
structure
Options Chain
A table displaying all available option contracts for a security, organized by strike price and expiration date.
Order Flow
The analysis of buy and sell orders hitting the market in real time. Reveals the aggressiveness and intent of market participants.
structure
Out-of-the-Money (OTM)
An option with no intrinsic value. A call is OTM when the stock price is below the strike; a put is OTM when above.
P
15
P/B Ratio
Price-to-Book ratio. Compares a stock's market value to its book value. A P/B below 1 may indicate undervaluation.
fundamental
P/E Ratio
Price-to-Earnings ratio. A stock's current price divided by its earnings per share. Measures how much investors pay per dollar of earnings.
fundamental
PCE
Personal Consumption Expenditures price index. The Fed's preferred measure of inflation, tracking price changes in consumer goods and services.
macro
PEG Ratio
Price/Earnings-to-Growth ratio. The P/E ratio divided by the earnings growth rate. A PEG of 1 suggests fair valuation relative to growth.
fundamental
Pivot Points
Calculated price levels based on the prior period's high, low, and close. Used to identify potential support, resistance, and turning points.
technical
PMI
Purchasing Managers' Index. A survey-based indicator of economic health in manufacturing and services. Above 50 signals expansion; below 50 signals contraction.
macro
POC
Point of Control. The price level with the highest traded volume in a Volume Profile. Price tends to gravitate toward the POC.
technical
Portfolio
A collection of financial investments like stocks, bonds, commodities, and cash equivalents held by an individual or institution.
basic
Position Sizing
Determining how many shares or contracts to trade based on account size, risk tolerance, and stop loss distance. Critical for capital preservation.
risk
Premium
The price paid by the buyer to the seller for an option contract. Comprised of intrinsic value and time value.
Probability Cone
A visual representation of the expected price range at various confidence levels (e.g., 1 standard deviation = 68% probability). Used on Bear is Fair charts.
bearisfair
Protective Put
Buying a put option on shares you own to limit downside risk. Acts as an insurance policy for your stock position.
Pullback
A temporary reversal in the direction of a prevailing trend. Traders often look to enter positions during pullbacks.
basic
Pulse Dashboard
Bear is Fair's macro market overview showing real-time data on VIX, options flow, COT positioning, and economic indicators.
bearisfair
Put Option
A contract giving the buyer the right, but not the obligation, to sell an asset at a specified strike price before expiration.
Q
2
Quantitative Easing (QE)
A monetary policy where a central bank purchases government bonds or other assets to inject liquidity into the economy and lower interest rates.
macro
Quantitative Tightening (QT)
The reverse of QE. The central bank reduces its balance sheet by letting bonds mature or selling them, removing liquidity from the financial system.
macro
R
10
R-Multiple
A trade's profit or loss expressed as a multiple of the initial risk (R). A 3R trade earned three times the amount risked.
risk
Rally
A sustained increase in prices, often following a decline or period of consolidation.
basic
Recession
A significant decline in economic activity, typically defined as two consecutive quarters of negative GDP growth.
macro
Research Terminal
Bear is Fair's comprehensive stock and market research platform with 50+ tools including charts, fundamentals, options data, and more.
bearisfair
Resistance
A price level where selling pressure historically prevents further advance. Acts as a ceiling for price.
technical
Revenue
The total income generated by a company from its business operations before any expenses are deducted. Also called the top line.
fundamental
Rho
Measures an option's sensitivity to changes in interest rates. Generally less impactful than other Greeks for short-dated options.
Risk-Reward Ratio
The potential profit of a trade divided by the potential loss. A 3:1 ratio means you expect to gain $3 for every $1 risked.
risk
ROE
Return on Equity. Net income divided by shareholders' equity. Measures how effectively a company uses shareholder capital to generate profits.
fundamental
RSI
Relative Strength Index. A momentum oscillator (0-100) that measures the speed and magnitude of price changes. Above 70 is overbought; below 30 is oversold.
technical
S
14
Sharpe Ratio
Risk-adjusted return metric. Calculated as (return - risk-free rate) / standard deviation. Higher values indicate better risk-adjusted performance.
risk
Short
Selling a borrowed security with the expectation that its price will fall, allowing you to buy it back cheaper.
basic
Signal Dashboard
The Bear is Fair real-time view showing active algorithmic trading signals with entry, stop, and target levels.
bearisfair
Slippage
The difference between the expected price of a trade and the actual execution price, common in fast-moving markets.
basic
SMA
Simple Moving Average. The arithmetic mean of prices over a set number of periods, giving equal weight to each data point.
technical
Sortino Ratio
Similar to the Sharpe Ratio but only penalizes downside volatility. A better measure for strategies with asymmetric return profiles.
risk
Spread
The difference between the bid and ask price. Tighter spreads indicate higher liquidity.
basic
Stochastic Oscillator
A momentum indicator comparing a closing price to its price range over a period. Values above 80 suggest overbought; below 20 suggest oversold.
technical
Stop Loss
An order that automatically sells a position when it reaches a specified price, limiting potential losses.
basic
Straddle
Buying both a call and put at the same strike and expiration. Profits from large moves in either direction.
Strangle
Buying a call and put at different strikes but the same expiration. Cheaper than a straddle but requires a larger move to profit.
Strike Price
The predetermined price at which an option can be exercised. Also called the exercise price.
Support
A price level where buying pressure historically prevents further decline. Acts as a floor for price.
technical
Sweep
A large options order that routes across multiple exchanges simultaneously to get filled quickly. Often signals urgency and institutional conviction.
structure
T
8
Take Profit
An order that automatically closes a position when it reaches a target profit level.
basic
Tape Reading
Analyzing the time and sales data (the tape) to gauge real-time supply and demand, identifying large buyers or sellers.
structure
Theta
The rate at which an option loses value each day due to time decay. Theta accelerates as expiration approaches.
Ticker Symbol
A unique abbreviation used to identify a publicly traded security (e.g., AAPL for Apple, NQ for Nasdaq futures).
basic
Timeframe
The duration each candlestick or bar represents on a chart (e.g., 1-minute, 5-minute, daily, weekly).
basic
Track Record
Bear is Fair's historical log of all signals with outcomes, showing win rate, average R-multiple, and equity curve.
bearisfair
Treasury Yield
The return on U.S. government bonds. Rising yields often pressure growth stocks; falling yields support them. The 10-year yield is the key benchmark.
macro
Trend Line
A straight line connecting two or more price points, used to identify the direction and strength of a trend.
technical
U
1
Unusual Activity
Options trades that significantly deviate from normal volume patterns, potentially indicating informed or institutional positioning ahead of a move.
bearisfair
V
9
Value Area
The price range where approximately 70% of trading volume occurred. Defined by the Value Area High (VAH) and Value Area Low (VAL).
technical
VaR
Value at Risk. Estimates the maximum expected loss over a given time period at a given confidence level (e.g., 95% VaR = the loss not exceeded 95% of the time).
risk
Vega
Measures how much an option's price changes per 1% change in implied volatility. Long options have positive Vega.
Vertical Spread
Buying and selling options of the same type and expiration but different strikes. Limits both risk and reward.
VIX
The CBOE Volatility Index, often called the fear gauge. Measures the market's expectation of 30-day volatility based on S&P 500 options.
macro
Volatility
A measure of how much a security's price fluctuates over time. Higher volatility means larger price swings.
basic
Volume
The total number of shares or contracts traded during a given period. High volume confirms price moves.
basic
Volume Profile
A chart study that shows the amount of volume traded at each price level over a specified period. Highlights high-volume nodes (HVN) and low-volume nodes (LVN).
technical
VWAP
Volume Weighted Average Price. The average price weighted by volume, used as a benchmark. Institutional traders often use VWAP for execution.
technical
W
1
Win Rate
The percentage of trades that are profitable. Must be considered alongside average win size vs. average loss size (reward-to-risk ratio).
risk
Y
1
Yield Curve
A graph plotting interest rates of bonds with different maturities. An inverted yield curve (short-term rates above long-term) often precedes recessions.
macro
Z
1
Zero DTE
Zero Days To Expiration. Options contracts expiring on the same day they are traded. Increasingly popular and can create significant intraday volatility.
structure