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Every trading term explained clearly — from order flow fundamentals to advanced market structure concepts.
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.
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 trading refers to the use of artificial intelligence and machine learning to analyze market data, identify patterns, and automate or support trading decisions.
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.
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.
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.
Backtesting is the process of testing a trading strategy on historical market data to evaluate its performance, profitability, and robustness before risking real capital.
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.
Big trades are individual transactions with above-average volume that indicate institutional activity and frequently occur at turning points or during breakouts.
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.
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.
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.
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.
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.
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.
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.
Confirmation bias is the cognitive tendency to seek out and favor information that confirms one's existing beliefs while ignoring or discounting contradictory evidence.
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.
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.
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.
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.
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.
Day trading is a trading style where all positions are opened and closed within a single trading day, ensuring no positions are held overnight.
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.
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.
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.
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.
An edge is a statistically measurable advantage a trader holds over the market that produces positive expectancy over a sufficiently large number of trades.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Futures are traded on regulated exchanges with central clearing, while CFDs are over-the-counter derivatives where the broker acts as direct counterparty.
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.
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.
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.
High volatility trading encompasses specialized strategies and risk management techniques designed to profit from market phases with above-average price swings.
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.
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.
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.
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%.
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.
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.
Leverage allows traders to control a larger market position with a fraction of the actual position value by depositing only a security deposit (margin).
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.
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.
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.
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.
Loss offset rules govern how trading losses can be deducted against gains for tax purposes in Germany, reducing the overall tax burden 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.
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 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 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.
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 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.
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.
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.
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 Futures (NQ) are standardized futures contracts on the Nasdaq-100 Index traded at the CME, representing the core instrument for professional index 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.
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.
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.
Open interest is the total number of outstanding futures contracts that have not yet been closed by an offsetting trade or settled by delivery.
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.
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 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.
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.
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.
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 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.
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.
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.
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.
A pullback is a temporary counter-move within an existing trend, where price briefly moves against the trend direction before resuming the trend.
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.
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.
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.
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).
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.
Risk management in trading encompasses all measures and rules designed to limit potential losses and protect trading capital over the long term.
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.
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.
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.
Scalping is a trading strategy where positions are opened and closed within seconds to a few minutes to profit from the smallest price movements.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 burnout is a state of emotional, mental, and physical exhaustion caused by sustained stress, overtrading, and insufficient recovery periods in trading.
A Trading GmbH is a German limited liability company established specifically for securities and derivatives trading to leverage tax advantages over private trading.
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.
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.
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.
A trading routine is a structured, recurring workflow encompassing market analysis, preparation, trade execution, and review that ensures consistency and discipline in trading.
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.
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.
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.
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).
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).
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.
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.
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.
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.
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.
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.
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.
