Trading Glossary – Terms Explained Simply | Trading Academy

59 terms from trading, crypto, derivatives and macro explained in two to three sentences: from funding rate to stop-loss.

Short explanations of the key terms. The content is for information only and is not investment advice.

Altcoin

An altcoin is any cryptocurrency other than Bitcoin. The term covers large networks such as Ethereum as well as very small projects with thin liquidity. Altcoins are often more volatile than Bitcoin and vary widely in technology, adoption and risk. Guide: altcoins explained

Basis

The basis is the difference between the price of a futures contract and the spot price of the same underlying asset. When futures trade above spot the market is in contango, when they trade below it is in backwardation. An unusually wide or negative basis is often read as a sign of how the derivatives market is positioned.

Bitcoin dominance

Bitcoin dominance is Bitcoin's share of the total market capitalisation of all cryptocurrencies. When it rises, Bitcoin is growing faster than the rest of the market; when it falls, altcoins are gaining share. The figure depends on which coins a data provider includes, for example whether stablecoins are counted.

Bitcoin halving

The Bitcoin halving is the protocol rule that cuts the block reward paid to miners in half every 210,000 blocks, roughly every four years. It slows the rate at which new bitcoin is created until the 21 million cap is reached. Many market participants frame Bitcoin cycles around halvings, but there is no guaranteed link to price. Bitcoin cycle overview

Bollinger Bands

Bollinger Bands are a volatility indicator made of a moving average with two bands placed a set number of standard deviations above and below it. The common setting is 20 periods and two standard deviations. Narrow bands mark quiet phases and wide bands mark large swings; they do not predict direction. Guide: Bollinger Bands

Candlestick

A candlestick is a chart element that shows the open, high, low and close of one period in a single symbol. The body spans from open to close, while the wicks mark the high and low. Its colour usually shows whether price rose or fell during the period. Guide: reading candlestick charts

Correlation

Correlation measures how closely two prices or data series move together, on a scale from minus 1 to plus 1. A value near plus 1 means they move largely in step, near minus 1 in opposite directions, and near zero barely related. Correlations between markets change over time and do not prove cause and effect. Guide: market correlations

DeFi (decentralised finance)

DeFi refers to financial applications that run on blockchains through smart contracts instead of traditional intermediaries such as banks. Typical examples are decentralised exchanges, lending protocols and liquidity pools. Risks include smart contract bugs, exploits and the absence of deposit protection. DeFi data overview

Divergence

A divergence occurs when price and an indicator such as the RSI or MACD move in different directions. If price makes a higher high while the indicator makes a lower high, it is called a bearish divergence. Divergences are read as a sign of fading strength, but they can persist for a long time without the trend turning.

Drawdown

Drawdown is the decline of an account, portfolio or price from a peak to the subsequent low, usually expressed as a percentage. Maximum drawdown is the largest such decline within a period. The deeper the drawdown, the larger the gain needed to recover: a 50 percent loss requires a 100 percent gain.

Economic calendar

An economic calendar is a schedule of upcoming economic data releases and central bank events with dates, times and consensus forecasts. Typical entries include inflation figures, jobs reports and rate decisions. Around major events prices often swing more and spreads can widen. Economic calendar

ETF flows (net inflows)

ETF flows are the money moving into or out of an exchange-traded fund on a given day. For Bitcoin spot ETFs, net inflows mean new shares were created and net outflows mean shares were redeemed. The data is usually published after the market close and describes past behaviour. Bitcoin ETF flows today

Exponential moving average (EMA)

The exponential moving average (EMA) is an average price that gives more weight to recent prices than to older ones. As a result it reacts faster to price changes than a simple moving average. The trade-off is more false signals in sideways markets. Guide: SMA and EMA

Fear & Greed Index

The Fear & Greed Index is a score from 0 to 100 that summarises market sentiment between extreme fear and extreme greed. For crypto it typically combines inputs such as volatility, volume, social media and Bitcoin dominance, depending on the provider. It describes current sentiment and is not a timing signal for buying or selling. Fear & Greed Index today

Fibonacci retracement

Fibonacci retracement is a drawing tool that places horizontal lines between a high and a low at set percentages such as 38.2, 50 and 61.8 percent. These levels are treated as possible zones for pullbacks within a trend. Their usefulness is debated and depends heavily on which highs and lows are chosen. Guide: Fibonacci retracement

Funding rate

The funding rate is a recurring payment between long and short positions in perpetual futures that keeps the contract price close to the spot price. When it is positive, longs pay shorts; when it is negative, shorts pay longs. It is usually settled every 8 hours, though some exchanges settle more often. Current funding rates

Inflation (consumer price index) (CPI)

Inflation is the general rise in the price level that reduces the purchasing power of money. It is usually measured with the consumer price index (CPI), which tracks the prices of a typical basket of goods. Monthly CPI releases shape expectations for interest rate policy and can trigger sharp short-term market moves. Economic calendar

Isolated and cross margin

Isolated and cross margin are two ways of posting collateral for leveraged positions. With isolated margin only the margin assigned to one position is at risk, while cross margin uses the entire available account balance as collateral. Cross margin can delay a liquidation but puts more capital at stake if things go wrong. Guide: isolated vs. cross margin

Leverage

Leverage is the ratio between the size of a position and the trader's own capital committed to it. At 10x leverage, a 1 percent price move changes the committed capital by about 10 percent, in either direction. Higher leverage moves the liquidation price closer to the entry and raises the risk of losing the entire margin. Guide: understanding leverage

Limit order

A limit order is an order that is only filled at the specified price or better. It rests in the order book and executes only once the market reaches the limit price. This controls the price but does not guarantee a fill. Guide: order types

Liquidation

A liquidation is the forced closing of a leveraged position by the exchange when the posted margin no longer covers the losses. The margin is lost in full or in large part, and extra fees often apply. Clusters of liquidations can amplify price moves in the short term. Guide: understanding liquidation

Liquidation price

The liquidation price is the price at which a leveraged position is forcibly closed. It depends on the entry price, the leverage, the margin mode and the maintenance requirements of the exchange. The higher the leverage, the closer it sits to the entry. Calculate liquidation price

Liquidity

Liquidity describes how easily an asset can be bought or sold in size without moving its price much. High liquidity shows up as tight spreads and a deep order book. In illiquid markets, slippage and price jumps are usually much larger.

Long

A long is a position that gains when prices rise. In spot trading it means buying the asset, in derivatives it means buying a contract. If the price falls, the position loses money.

Long/short ratio

The long/short ratio compares long and short positions on a derivatives exchange, measured by accounts or by position size. A value above 1 means more accounts or more volume are positioned for rising prices. The figure varies by exchange and method and shows only part of the market. Futures data

M2 money supply

M2 money supply covers cash, demand deposits and short-term savings and time deposits in an economy. It is often used as a gauge of the liquidity available in the financial system. A link between a growing money supply and rising prices of risk assets is often observed, but it does not hold at all times. Global liquidity

MACD

The MACD (moving average convergence divergence) is a trend-following indicator that plots the difference between two exponential moving averages, typically 12 and 26 periods. It adds a signal line, usually a 9-period EMA, and a histogram. Crossovers and divergences are read as hints of shifts in direction or pace, but they produce many false signals in ranging markets. Guide: MACD explained

Maker and taker

Maker and taker describe the two sides of an exchange fill: makers add liquidity to the order book with limit orders, takers remove it with orders that execute immediately. Many exchanges charge different fees for each, with maker fees usually lower. Over many trades these differences can add up noticeably. Guide: trading fees

Margin

Margin is the capital posted as collateral for a leveraged position. There is initial margin to open a position and maintenance margin, the minimum that must remain for it to stay open. If the balance falls below the maintenance margin, the position faces liquidation. Guide: margin trading

Market capitalisation (Market Cap)

Market capitalisation is the current price of an asset multiplied by the number of units in circulation. In crypto it is the standard way to compare project size. It does not show how much money was actually invested and can be misleading when only a small share of the supply is freely traded. Guide: tokenomics

Market order

A market order is an order that executes immediately at the best available price. A fill is almost certain, but the exact price is not. In thin or fast markets the fill price can differ noticeably from the last quoted price. Guide: order types

Momentum

In market analysis, momentum is the strength and speed of a price move over a given period. Indicators such as the RSI, MACD or rate of change try to measure that pace. Strong momentum describes the move so far but does not guarantee that it will continue.

On-chain data

On-chain data is publicly visible information recorded directly on a blockchain, such as transactions, wallet balances and fees. Metrics like active addresses or exchange inflows and outflows are derived from it. Linking addresses to people or exchanges often relies on estimates. Guide: on-chain data

Open interest (OI)

Open interest is the total number or value of outstanding derivatives contracts that have not yet been closed or settled. Rising open interest means new money is entering positions, falling open interest means positions are being closed. It shows participation, not whether longs or shorts dominate. Guide: funding and open interest

Order book

The order book is the list of all open buy and sell orders for a market, sorted by price. Bids sit on one side and asks on the other. Its depth shows how much volume can be traded close to the current price.

Perpetual futures

Perpetual futures are futures contracts with no expiry date that let traders take positions on rising or falling prices of an underlying asset. The funding rate keeps their price close to spot. They are usually traded with leverage, which multiplies gains and losses alike and can lead to liquidation. Guide: futures and perpetuals

Policy rate

The policy rate is the interest rate set by a central bank at which commercial banks can borrow from or deposit with it. In the United States this is the federal funds rate, in the euro area mainly the ECB deposit rate. Rate decisions and expectations about them affect bonds, equities, currencies and cryptocurrencies. Central bank dates

Position size

Position size is the amount traded, measured in units or in money. In risk management it is often set so that a loss at the stop-loss costs only a fixed small share of the account. It links account size, risk per trade and the distance to the stop. Calculate position size

Resistance

Resistance is a price area where selling has previously picked up and slowed rising prices. It often forms at prior highs or round numbers. Once resistance breaks clearly, it can later act as support. Guide: support and resistance

Risk-reward ratio (CRV)

The risk-reward ratio compares the potential profit of a trade with the potential loss up to the stop-loss. A ratio of 2 means the target is twice as far from the entry as the stop. It says nothing about how likely the target is to be reached. Guide: risk-reward ratio

RSI (relative strength index)

The relative strength index (RSI) is an oscillator that maps the ratio of price gains to losses over a period onto a scale from 0 to 100. The usual setting is 14 periods; readings above 70 are often called overbought and below 30 oversold. In strong trends the RSI can stay in these zones for a long time without price reversing. Guide: RSI explained

Short

A short is a position that gains when prices fall. In derivatives it means selling a contract, in classic short selling it means selling a borrowed asset. If the price rises, the position loses money, and in theory that loss has no upper limit.

Simple moving average (SMA)

The simple moving average (SMA) is the mean of closing prices over a fixed number of periods, recalculated with each new candle. It smooths out price noise and makes the direction of a trend easier to see. Because it is based on past prices, it lags. Guide: SMA and EMA

Slippage

Slippage is the difference between the expected price of an order and the price at which it is actually filled. It mostly affects market and stop orders in fast or illiquid markets. Orders that are large relative to order book depth increase slippage.

Spot ETF

A spot ETF is an exchange-traded fund that holds the underlying asset directly, so a Bitcoin spot ETF holds actual bitcoin. It gives investors price exposure through a regular brokerage account without holding coins themselves. Unlike a futures ETF it tracks the price without futures contracts, but ongoing management fees apply. Bitcoin ETF flows

Spot trading

Spot trading is the direct purchase or sale of an asset at the current market price with immediate settlement. Buying Bitcoin on the spot market means actually owning bitcoin afterwards. Without leverage, the possible loss is limited to the capital invested. Exchange comparison

Spread

The spread is the difference between the highest bid and the lowest ask in the order book. A tight spread points to high liquidity, a wide spread to low liquidity. Anyone who buys and immediately sells pays the spread as a hidden cost. Guide: fees and spread

Stablecoin

A stablecoin is a cryptocurrency designed to hold its value against a reference asset such as the US dollar. Depending on the model, the peg is backed by reserves, by other crypto collateral or by algorithms. Stablecoins can lose their peg, and their safety depends on the issuer and the quality of the reserves. Guide: stablecoins compared

Staking

Staking is locking up cryptocurrency in a proof-of-stake network to help secure it in exchange for rewards. The coins are often tied up for a period of time. Risks include price declines, lock-up periods and penalties if the validator misbehaves. Guide: staking

Stop order

A stop order is an order that only becomes active once the price reaches a set trigger price. It is then sent as a market order or, for a stop-limit order, as a limit order. Stop orders are used both to limit losses and to open positions on breakouts. Guide: order types

Stop-loss

A stop-loss is a predefined price at which a position is closed automatically to limit the loss. It is usually placed as a stop-market or stop-limit order. In gaps or very fast markets the fill can be worse than planned. Guide: stop-loss strategies

Support

Support is a price area where demand has previously stepped in and slowed falling prices. The more often an area has held, the more significant it is usually considered. Once support breaks clearly, it can later act as resistance. Guide: support and resistance

Take-profit

A take-profit is a predefined price at which a position is closed automatically to lock in a gain. It is usually placed as a limit order. Together with the stop-loss it sets the risk-reward ratio of a trade.

Timeframe

The timeframe is the period that a single candle on a chart represents, for example one hour, four hours or one day. Shorter timeframes show more detail and more noise, longer ones the broader direction. The same signal can mean different things on different timeframes.

Trend

A trend is the overall direction in which a price moves over a period. An uptrend shows higher highs and higher lows, a downtrend lower highs and lower lows. Whether a trend exists depends heavily on the timeframe being viewed. Guide: reading charts

Volatility

Volatility measures how strongly and how quickly the price of an asset fluctuates. It is often expressed as the standard deviation of returns or through indicators such as the average true range. High volatility means larger potential gains and losses and usually calls for smaller positions for the same risk.

Volume

Volume is the amount of an asset traded during a given period. It shows how much participation stands behind a price move. In crypto, volume is spread across many exchanges, and figures reported by individual venues are not always reliable. Guide: volume analysis

Wallet

A wallet is software or a device that manages the private keys for cryptocurrencies and thus provides access to funds. Hot wallets are connected to the internet, while cold wallets, such as hardware devices, stay offline. Anyone who loses or reveals the recovery phrase usually loses access to the coins as well. Guide: crypto wallets

Whale

A whale is a market participant holding so much of a cryptocurrency that their transactions can noticeably move its price. Movements of large wallets can be tracked on-chain. A transfer to an exchange does not necessarily mean a sale, and an address may belong to an exchange or custodian. Whale tracker