🎯 In 30 seconds: This page defines 189 words you will meet in this course and in any broker app, in one or two plain sentences each. Terms are grouped by first letter. Each one links to the chapter where it is explained with examples. Use it as a lookup, not something to memorize: when a word stops you, find it here, then read the linked chapter.
How to use this glossary
Definitions here are short on purpose. Many words, like margin or settlement, mean different things in different markets, and the linked chapter explains the full picture.
Rules and numbers change. Where a definition includes a figure, such as the SIPC protection limit or the futures tick size, it reflects official sources as of October 2026. Check the linked chapter and its sources before you rely on it.
Learn words in families
Terms make more sense in groups: bid, ask, spread and slippage; call, put, strike, premium and expiration; margin, maintenance and margin call. When you look one up, read the others in its family too.
Same word, different meaning
"Margin" means a loan in a stock account but a deposit in a futures account. "Spread" can mean the bid-ask gap or an options strategy. "Yield" can mean a dividend yield or a bond yield. When a word is used, check which market you are in before you act on it.
A
| Term | Meaning and where to learn more |
|---|---|
| Account equity | What your account would be worth if you closed every position and repaid any margin loan. Margin |
| After-hours trading | Trading after the regular session closes at 4:00 p.m. Eastern. Quotes are thinner and spreads wider than during the day. Market hours and settlement |
| Algorithmic trading | Trading where a computer program applies written rules and may place orders automatically. Algorithmic trading |
| American-style option | An option that can be exercised on any business day up to expiration. Most US stock options are American style. Exercise and assignment |
| Annual report (10-K) | The yearly report a US public company files with the SEC. It includes audited financial statements and a list of risk factors. Market data sources |
| Ask | The lowest price a seller is currently willing to accept. If you buy with a market order, you usually pay the ask. Bid, ask and liquidity |
| Assignment | Notice to an option seller that a buyer has exercised, so the seller must now buy or sell the shares at the strike. Exercise and assignment |
| At the money (ATM) | An option whose strike price is equal to, or very close to, the current stock price. Option value |
| Average down | Buying more of a falling position to lower your average cost. It increases risk in a trade that is already going wrong. Beginner mistakes |
| Average True Range (ATR) | The average size of a stock's daily range, including gaps, over a set number of days. Often used to set stops and position sizes. Volatility tools |
B
| Term | Meaning and where to learn more |
|---|---|
| Backtest | Running a set of trading rules over past prices to see how they would have performed. Easy to fool yourself with. Algorithmic trading |
| Balance sheet | A snapshot of what a company owns (assets), owes (liabilities) and what is left for shareholders (equity) on one date. Financial statements |
| Basis | The difference between a futures price and the price of the underlying, such as the S&P 500 index. Futures basics |
| Basis point | One hundredth of one percent, or 0.01%. A rate rising from 4.00% to 4.25% is a 25 basis point increase. The economy and stocks |
| Bear market | A broad decline of 20% or more from a recent high. Bull and bear markets |
| Beta | How much a stock has tended to move compared with the overall market. A beta of 1.5 means about 1.5 times the market's moves, on average. Reading a quote |
| Bid | The highest price a buyer is currently willing to pay. If you sell with a market order, you usually get the bid. Bid, ask and liquidity |
| Black-Scholes model | A formula for pricing European options from the stock price, strike, time, interest rate and volatility. Options pricing |
| Bollinger Bands | Lines drawn a set number of standard deviations above and below a moving average, widening when prices get more volatile. Volatility tools |
| Breakeven | The price at which a trade neither makes nor loses money, after the premium or costs paid. Calls |
| Breakout | A move through a support or resistance level, often watched with volume for confirmation. Breakouts and gaps |
| Broker-dealer | A firm registered to buy and sell securities for customers and for itself. Must be a FINRA member to deal with the public. Choosing a broker |
| BrokerCheck | FINRA's free website for checking the registration and disciplinary history of brokers and firms. Who protects you |
| Bull market | A long period of generally rising prices. Many people date one from a 20% rise off a bear market low. Bull and bear markets |
| Buying power | How much you can buy right now in your account, given your cash, margin and the rules your broker applies. Margin |
C
| Term | Meaning and where to learn more |
|---|---|
| Call option | The right, but not the obligation, to buy 100 shares at the strike price until expiration. Calls |
| Candlestick | A chart bar that shows the open, high, low and close for a period, with a filled or colored body between open and close. Candlesticks |
| Capital gain | Profit from selling something for more than you paid. Short-term (held one year or less) and long-term gains are taxed differently. Taxes for traders |
| Cash account | A brokerage account where you pay in full for everything you buy. No borrowing. Account types |
| Cash-secured put | Selling a put while holding enough cash to buy the shares if assigned. Cash-secured puts |
| CFTC | The Commodity Futures Trading Commission, the federal regulator of futures, options on futures and retail forex. Futures basics |
| Circuit breaker | A market-wide trading halt triggered when the S&P 500 falls 7%, 13% or 20% from the prior day's close. Trading rules |
| Clearinghouse | The organization that stands between buyers and sellers and guarantees trades settle. How the market works |
| Collar | Owning a stock, buying a protective put and selling a call to help pay for it. Limits both loss and gain. Protective puts and collars |
| Commission | A fee a broker charges per trade. Many US brokers now charge zero commission on online stock trades, but other costs remain. Trading costs |
| Compounding | Earning returns on past returns, so growth speeds up over time. A plan for a young person |
| Confirmation bias | Looking for information that agrees with what you already believe and ignoring what does not. Trading psychology |
| Correction | A decline of 10% to 20% from a recent high. Bull and bear markets |
| Correlation | How closely two prices move together, from -1 (opposite) through 0 (unrelated) to +1 (in step). Diversification |
| Cost basis | What you paid for an investment, including costs, used to work out your gain or loss for taxes. Taxes for traders |
| Covered call | Owning 100 shares and selling a call against them for income, which caps your upside at the strike. Covered calls |
D
| Term | Meaning and where to learn more |
|---|---|
| Day order | An order that is canceled automatically if it is not filled by the end of the trading day. Order types |
| Day trading | Opening and closing positions within the same trading day. Day trading |
| Delta | How much an option's price is expected to change for a $1 move in the stock. The Greeks |
| Dilution | When a company issues new shares, so each existing share owns a smaller slice. Why companies sell shares |
| Disposition effect | The habit of selling winners too soon and holding losers too long. Trading psychology |
| Diversification | Spreading money across many investments so that no single one can do serious damage. Diversification |
| Dividend | Cash a company pays its shareholders out of profits, often every quarter. Dividends, splits and buybacks |
| Dividend yield | Yearly dividends per share divided by the share price. Dividends, splits and buybacks |
| Doji | A candlestick where the open and close are almost equal, showing indecision. Candlesticks |
| Dollar-cost averaging | Investing a fixed dollar amount on a regular schedule regardless of price. A plan for a young person |
| Drawdown | The fall from an account's or price's peak to a later low, usually stated as a percentage. Drawdowns |
E
| Term | Meaning and where to learn more |
|---|---|
| E-mini S&P 500 | A CME futures contract worth $50 times the S&P 500 index. Futures basics |
| Earnings per share (EPS) | A company's net profit divided by its number of shares. Earnings season |
| EDGAR | The SEC's free online database of company filings, such as 10-Ks and 10-Qs. Market data sources |
| Emergency fund | Cash set aside for unexpected costs, kept separate from investing and trading money. A plan for a young person |
| ETF (exchange-traded fund) | A fund that holds a basket of investments and trades on an exchange like a stock. ETFs and index funds |
| European-style option | An option that can be exercised only at expiration. Most broad index options, like SPX, are European style. Index options |
| Ex-dividend date | The first day a stock trades without the right to the next dividend. The price usually drops by about the dividend that morning. Dividends, splits and buybacks |
| Exercise | Using an option's right to buy (call) or sell (put) the shares at the strike price. Exercise and assignment |
| Expectancy | The average amount you expect to make or lose per trade: (win rate x average win) minus (loss rate x average loss). Risk/reward and expectancy |
| Expense ratio | A fund's yearly cost as a percentage of the money invested. ETFs and index funds |
| Expiration | The date an option or futures contract stops trading and is settled. Exercise and assignment |
| Extrinsic value | The part of an option's price above its intrinsic value, made up of time value and volatility. Also called time value. Option value |
F
| Term | Meaning and where to learn more |
|---|---|
| Fill | The completed execution of an order, at a specific price and quantity. Your first trade |
| FINRA | The Financial Industry Regulatory Authority, the self-regulatory organization that oversees US broker-dealers. Who protects you |
| Float | Shares available for the public to trade, excluding those held by insiders and other locked-up holders. Reading a quote |
| Forex | The foreign exchange market, where currencies are traded in pairs such as euro and US dollar. Leverage everywhere |
| Forward P/E | Share price divided by analysts' estimate of next year's earnings per share. Valuation ratios |
| Fractional share | Less than one whole share, offered by many brokers so you can invest by dollar amount. Your first trade |
| Free cash flow | Cash from operations minus capital spending. The cash a business produces that could be paid to owners. Business quality |
| Fundamental analysis | Judging a stock by the business behind it: revenue, profit, debt, competition and valuation. Financial statements |
| Futures contract | A standardized exchange-traded agreement to buy or sell something at a set price on a future date. Futures basics |
G
| Term | Meaning and where to learn more |
|---|---|
| Gamma | How fast an option's delta changes as the stock moves. The Greeks |
| Gap | A jump in price between one bar's close and the next bar's open, with no trading in between. Breakouts and gaps |
| Good 'til canceled (GTC) | An order that stays open across days until filled or canceled. Brokers often set a time limit. Order types |
| Good faith violation | In a cash account, selling a security bought with unsettled funds before those funds settle. Trading rules |
| Guidance | A company's own forecast of future revenue or earnings, often given with quarterly results. Earnings season |
H
| Term | Meaning and where to learn more |
|---|---|
| Halt | A temporary stop in trading of a stock, for example pending news or after a sharp move. Trading rules |
| Hard-to-borrow | A stock with few shares available to borrow for short selling, which usually means high borrow fees. Short selling |
| Hedge | A position taken to reduce the risk of another position, such as buying a put on a stock you own. Protective puts and collars |
I
| Term | Meaning and where to learn more |
|---|---|
| Implied volatility (IV) | The future volatility the market is pricing into an option, worked out backward from its price. Implied volatility |
| In the money (ITM) | A call with a strike below the stock price, or a put with a strike above it. Option value |
| Income statement | A report of a company's revenue, costs and profit over a period. Financial statements |
| Index | A number that tracks a basket of stocks, such as the S&P 500, used to measure a market. Market indexes |
| Index fund | A fund that aims to match an index's return by holding its stocks. ETFs and index funds |
| Initial margin | The deposit required to open a margin or futures position. Margin |
| Intraday | Within a single trading day. Day trading |
| Intrinsic value | For an option, the amount it is in the money. For a business, an estimate of its true worth. Option value |
| Inverse ETF | An ETF designed to move opposite to an index for one day, such as -1x. Leverage everywhere |
| IPO | Initial public offering: a company's first sale of shares to the public. Why companies sell shares |
| Iron condor | A neutral options strategy that sells a put spread and a call spread, profiting if the stock stays in a range. Iron condors and butterflies |
K
| Term | Meaning and where to learn more |
|---|---|
| Kelly criterion | A formula for the bet size that maximizes long-run growth, given your edge. Traders often use a fraction of it. Position sizing |
L
| Term | Meaning and where to learn more |
|---|---|
| Leverage | Controlling a position larger than your own money in it. Magnifies gains and losses. Leverage everywhere |
| Leveraged ETF | An ETF that aims for a multiple, such as 2x or 3x, of an index's return for one day. Leverage everywhere |
| Limit order | An order to buy at or below, or sell at or above, a price you set. Order types |
| Limit up-limit down | Rules that pause trading in a single stock when it moves outside a set band in a short time. Trading rules |
| Liquidity | How easily you can buy or sell without moving the price much. Bid, ask and liquidity |
| Long | Owning a position, so you gain if the price rises. What a stock is |
| Look-ahead bias | Using information in a backtest that would not have been available at the time. Algorithmic trading |
| Loss aversion | Feeling a loss more strongly than a gain of the same size. Trading psychology |
M
| Term | Meaning and where to learn more |
|---|---|
| MACD | Moving average convergence divergence: a momentum indicator built from the gap between two exponential moving averages. Momentum indicators |
| Maintenance margin | The minimum equity you must keep in a margin or futures account to hold positions. Margin |
| Margin | For stocks, borrowing from your broker to buy securities. For futures, a good-faith deposit. Margin |
| Margin call | A demand to deposit more money or securities because your equity fell below the required level. Margin |
| Mark to market | Revaluing positions at current prices, which for futures happens every day with cash moving in or out. Futures basics |
| Market cap | Share price times shares outstanding: what the market values the whole company at. Reading a quote |
| Market maker | A firm that continuously quotes prices to buy and sell, earning the spread. How the market works |
| Market order | An order to buy or sell immediately at the best available price, with no price limit. Order types |
| Mean reversion | The tendency of a price that moved far from its average to move back toward it. Mean reversion |
| Micro E-mini | A CME futures contract one tenth the size of the E-mini. The S&P 500 version is $5 times the index. Futures basics |
| Momentum | The tendency of assets that have risen recently to keep rising for a while, and fallers to keep falling. Momentum trading |
| Moving average | The average price over the last set number of periods, recalculated each period. Moving averages |
N
| Term | Meaning and where to learn more |
|---|---|
| Naked option | An option sold without owning the shares or holding an offsetting position. Can have very large losses. Options risk |
| NBBO | National best bid and offer: the highest bid and lowest ask across all US exchanges. How the market works |
| NFA | The National Futures Association, the self-regulatory organization for the US futures industry. Futures basics |
| Notional value | The full dollar size of a position's exposure, such as index level times multiplier for a future. Futures basics |
O
| Term | Meaning and where to learn more |
|---|---|
| Open interest | The number of option or futures contracts that are open and not yet closed or exercised. Options chain |
| Options chain | The table of all available strikes and expirations for an underlying, with prices. Options chain |
| Out of the money (OTM) | A call with a strike above the stock price, or a put with a strike below it. Has no intrinsic value. Option value |
| Overbought | A reading on an indicator such as RSI that suggests a strong recent rise. It does not by itself mean the price will fall. Momentum indicators |
| Overfitting | Tuning rules so closely to past data that they capture noise instead of a real pattern. Algorithmic trading |
P
| Term | Meaning and where to learn more |
|---|---|
| P/E ratio | Price-to-earnings: share price divided by earnings per share. Valuation ratios |
| Paper trading | Practising trades with fake money in a simulated account. Paper trading |
| Pattern day trader (PDT) | A former FINRA designation with a $25,000 minimum for frequent day traders, replaced by intraday margin requirements effective June 4, 2026, with a firm transition period through October 20, 2027. Trading rules |
| Payment for order flow | Payments a broker receives from market makers for sending them customer orders. Trading costs |
| Penny stock | A very low-priced stock, often thinly traded and a common target for scams. Growth vs value |
| Portfolio heat | The total amount you would lose if every open position hit its stop at once. Diversification |
| Position sizing | Deciding how many shares or contracts to trade, usually based on how much you are willing to lose. Position sizing |
| Pre-market | Trading before the regular session opens at 9:30 a.m. Eastern. Market hours and settlement |
| Premium | The price paid for an option. What an option is |
| Protective put | Buying a put on a stock you own, to limit how much you can lose. Protective puts and collars |
| Pump and dump | A scheme where promoters hype a stock to push its price up, then sell to the buyers they attracted. Scams and red flags |
| Put option | The right, but not the obligation, to sell 100 shares at the strike price until expiration. Puts |
Q
| Term | Meaning and where to learn more |
|---|---|
| Quant | Short for quantitative analyst: someone who builds math and statistical models for investing or trading. Careers |
| Quote | The current bid, ask and last trade price for a security. Reading a quote |
R
| Term | Meaning and where to learn more |
|---|---|
| R-multiple | A trade's profit or loss divided by the amount you risked on it. A trade that makes twice the risk is +2R. Position sizing |
| Relative strength | How a stock has performed compared with the market or other stocks. Not the same as RSI. Momentum trading |
| Resistance | A price area where selling has tended to stop rises. Support and resistance |
| Revenue | The total money a company takes in from sales before costs. Also called sales or the top line. Financial statements |
| Risk of ruin | The chance that a series of losses shrinks an account to a level where you cannot continue. Risk comes first |
| Rolling | Closing an option or futures position and opening a similar one with a later expiration or a different strike. Options risk |
| Roth IRA | A retirement account funded with after-tax money, where qualified withdrawals are tax-free. Requires earned income. A plan for a young person |
| RSI | Relative Strength Index: a momentum indicator from 0 to 100 based on the size of recent gains and losses. Momentum indicators |
| Russell 2000 | An index of about 2,000 smaller US companies. Market indexes |
S
| Term | Meaning and where to learn more |
|---|---|
| S&P 500 | An index of 500 large US companies, weighted by market value. Market indexes |
| SEC | The Securities and Exchange Commission, the federal regulator of US securities markets. Who protects you |
| Section 1256 contract | Futures and some index options taxed 60% at long-term and 40% at short-term rates, whatever the holding period. Taxes for traders |
| Sector | A group of companies in a similar line of business, such as energy or health care. Sectors and cycles |
| Settlement | The final exchange of cash and securities after a trade. US stock trades settle one business day after the trade (T+1). Market hours and settlement |
| Sharpe ratio | Return above a risk-free rate divided by the volatility of returns. Algorithmic trading |
| Short selling | Borrowing shares and selling them, hoping to buy them back cheaper later. Losses have no fixed limit. Short selling |
| Short squeeze | A fast rise in a heavily shorted stock as short sellers rush to buy shares back. Short selling |
| SIE | The Securities Industry Essentials exam from FINRA, open to anyone 18 or older. Careers |
| SIPC | The Securities Investor Protection Corporation. If a member broker fails, it protects customer assets up to $500,000, including up to $250,000 in cash. It does not cover market losses. Who protects you |
| Slippage | The difference between the price you expected and the price you actually got. Bid, ask and liquidity |
| Spread (bid-ask) | The gap between the bid and the ask. A cost you pay when you trade. Bid, ask and liquidity |
| Standard deviation | A measure of how widely values spread around their average. Used as a measure of volatility. Volatility tools |
| Stock split | Dividing each share into more shares at a lower price. The company's total value does not change. Dividends, splits and buybacks |
| Stop-limit order | A stop order that becomes a limit order when the stop price is reached. May not fill in a fast move. Order types |
| Stop-loss order | An order that becomes a market order to sell (or buy) if the price reaches a set level. Stop losses |
| Straddle | Buying (or selling) a call and a put at the same strike and expiration. Straddles and strangles |
| Strike price | The price at which an option holder can buy or sell the underlying. What an option is |
| Support | A price area where buying has tended to stop declines. Support and resistance |
| Survivorship bias | Testing only on companies that still exist, which leaves out the failures and flatters the results. Algorithmic trading |
| Swing trading | Holding positions for a few days to a few weeks to capture a price swing. Swing trading |
T
| Term | Meaning and where to learn more |
|---|---|
| Technical analysis | Studying price and volume charts to judge likely future moves. Trends |
| Theta | How much an option's value is expected to fall with one day's passage of time. The Greeks |
| Tick | The smallest price change allowed. For the E-mini and Micro E-mini S&P 500 it is 0.25 index points. Futures basics |
| Ticker symbol | The short code used to identify a security on an exchange. Your first trade |
| Time decay | The loss of an option's extrinsic value as expiration approaches. Option value |
| Trailing stop | A stop order that moves with the price by a set amount or percent, locking in some gains. Order types |
| Trend | The general direction of price over time: up, down or sideways. Trends |
U
| Term | Meaning and where to learn more |
|---|---|
| Underlying | The asset an option or futures contract is based on. What an option is |
| Uptick rule (alternative) | Under SEC Regulation SHO, after a stock falls 10% in a day, short sales are generally allowed only above the best bid for the rest of that day and the next. Short selling |
V
| Term | Meaning and where to learn more |
|---|---|
| Valuation | Estimating what a business or share is worth, and comparing that with its price. Valuation ratios |
| Vega | How much an option's price is expected to change for a one point change in implied volatility. The Greeks |
| Vertical spread | Buying one option and selling another of the same type and expiration at a different strike. Vertical spreads |
| VIX | Cboe's volatility index, a measure of expected 30-day S&P 500 volatility from option prices. Implied volatility |
| Volatility | How much and how quickly a price moves up and down. Volatility tools |
| Volume | The number of shares or contracts traded in a period. Volume |
| VWAP | Volume-weighted average price: the average price of the day's trades, weighted by size. Volume |
W
| Term | Meaning and where to learn more |
|---|---|
| Walk-forward test | Repeatedly tuning rules on one period and testing on the next unseen period. Algorithmic trading |
| Wash sale | Selling at a loss and buying a substantially identical security within 30 days before or after, which delays the tax deduction. Taxes for traders |
| Watchlist | A saved list of securities you follow. What a stock is |
| Win rate | The percentage of trades that make money. Says little without the average win and loss. Risk/reward and expectancy |
Y
| Term | Meaning and where to learn more |
|---|---|
| Yield | Income from an investment as a percentage of its price, such as a dividend yield or bond yield. Dividends, splits and buybacks |
| Yield curve | A line showing interest rates on bonds of different maturities. An inverted curve has short rates above long rates. The economy and stocks |
Z
| Term | Meaning and where to learn more |
|---|---|
| Zero-day option (0DTE) | An option on its expiration day. Prices can swing very fast and many expire worthless. Options risk |
Try it
Open a stock quote in the market dashboard or your broker app. Write down every word on the screen you cannot define in one sentence. Look each one up here, then read the linked chapter. Repeat with an options chain once you reach Reading an options chain. When you can explain every word on both screens to a friend, you are ready for paper trading.
Check yourself
- A rate rises from 4.00% to 4.25%. How many basis points is that? Answer: 25 basis points (one basis point is 0.01%).
- What does "margin" mean in a stock account, and in a futures account? Answer: In a stock account it means borrowing from your broker. In a futures account it is a good-faith deposit.
- Is relative strength the same thing as RSI? Answer: No. Relative strength is how a stock has performed compared with the market or other stocks. RSI is a 0 to 100 momentum indicator based on recent gains and losses.
- You risked $150 on a trade and made $300. What is the R-multiple? Answer: +2R (profit divided by the amount risked).