The basics
- Long
- A position that bets on a price rise: you buy now to sell higher later. It gains if the price goes up and loses if it goes down.
- Short (short selling)
- A position that bets on a price fall: you sell first and buy back later. It gains if the price goes down and loses if it goes up; in theory its loss has no ceiling.
- Position
- An open trade: one asset, one direction (long or short), a quantity and an entry price. It stays open until you close it.
- Paper trading
- Simulated trading: you place fictitious orders on real prices without committing any money. Results are virtual and leave out some real-world frictions.
- Bid / Ask
- The bid is the best price buyers offer, the ask the best price sellers want. You buy at the ask and sell at the bid.
- Spread
- The gap between the ask and the bid. It is a hidden cost: a position bought and sold straight away loses the spread.
- Liquidity
- How easily you can buy or sell without moving the price. An illiquid market often has a wide spread and more slippage.
Orders
- Market order
- An order filled immediately at the best available price. Execution is almost certain; the exact price is not.
- Limit order
- An order filled only at the chosen price or better. The price is controlled, but the order may never be filled.
- Stop-loss
- An exit order meant to limit a loss when the price reaches a level chosen in advance. The fill price can differ from that level: it is not a guaranteed maximum loss.
- Take-profit
- An order that locks in the gain at a price set in advance. Reaching it is never guaranteed.
- Trailing stop
- A stop that follows the price at a fixed distance when it moves in your favour, and never moves back. It protects part of the gain.
- Slippage
- The gap between the expected price and the price you actually get. Common during sharp moves and in illiquid markets.
- Fees
- A commission charged when buying and when selling. In BULLSAGE Paper Trading: 0.10% of the amount, at opening and again at closing.
Risk
- Risk
- The loss you plan to accept if the scenario fails — not the same as the amount invested. Fees and slippage can make the actual loss bigger.
- Invalidation
- The price or condition that proves your scenario wrong. You place the stop there, then calculate the quantity.
- Position size
- The quantity to buy or sell so that the loss at the stop equals the risk you chose: risk ÷ distance between entry and stop.
- Risk/reward ratio (R/R)
- For €1 risked down to the stop, how much you aim to gain up to the target. “1:2” means aiming for €2 per €1 risked. It is not a probability.
- Leverage
- Borrowing to take a position bigger than your capital. It multiplies gains and losses alike. Turned off in BULLSAGE Paper Trading.
- Drawdown
- The largest fall of capital from its previous high, as a percentage. It tells you how much you could have lost at the worst moment.
- Volatility
- How much prices move. The higher it is, the bigger the moves and the possible losses.
Reading a chart
- Candlestick
- A summary of price over one period: open, high, low and close. The body joins open and close; the wicks show the extremes.
- Timeframe
- The period each candle represents. On a 4h chart one candle sums up four hours; that does not mean holding the position for four hours.
- Trend
- The dominant direction of price: up (rising highs and lows), down, or none.
- Support / Resistance
- Price zones where the market has often bounced (support) or stalled (resistance). They are landmarks, not walls.
- Breakout
- The price crosses an important level and a candle closes beyond it. A wick that comes straight back is not a breakout.
- Gap
- A price jump between two sessions with no trading in between. A stop can be filled well beyond its level.
- ATR
- Average True Range: the average size of a candle over the last 14. A stop closer than one ATR is likely to be hit by normal market noise.
- RSI
- Relative Strength Index: how strong recent moves were, from 0 to 100. A high value does not guarantee a fall, nor a low value a rise.
- Moving average (SMA, EMA)
- The average price over several periods. The SMA weighs every period equally, the EMA gives more weight to recent ones. They describe the past without predicting.
Measuring results
- P&L
- Profit and loss. Unrealised: the position is still open. Realised: the position is closed, fees included.
- Equity
- What the account is worth if you closed everything now: available balance + capital committed + unrealised P&L.
- R multiple
- A result expressed in multiples of the planned risk. If you planned to lose €100 at the stop, winning €200 is +2R and losing €100 is −1R.
- Win rate
- The share of trades closed with a gain. A low rate can be enough if gains are much larger than losses.
- Profit factor
- Total gains divided by total losses. Above 1, gains outweigh losses; it takes many trades for this figure to be reliable.
- Expectancy
- The average result of one trade, in R multiples. Positive: the method wins on average; negative: it loses.
Markets and products
- Index
- A basket of shares that sums up a market, such as the Nasdaq-100 (100 large non-financial companies listed on the Nasdaq).
- ETF
- Exchange-traded fund: a listed fund that tracks an index. You buy it like a share; it has ongoing charges and follows the index up and down.
- Perpetual contract
- A crypto contract with no expiry date that tracks an asset’s price, often with leverage. A periodic payment (funding) keeps it close to the real price.
- Funding
- A periodic payment between buyers and sellers of perpetual contracts. It can add a cost to the position; it is not a sufficient signal on its own.
- Trading session
- The exchange’s opening hours. Nasdaq: 9:30 am – 4 pm New York time (3:30 pm – 10 pm Paris time most of the year).
To go further, follow the learn trading from scratch path or practise with paper trading. This glossary is educational and is not personalised financial advice.