Investing & Trading Terms, Explained
Chart patterns and options jargon get thrown around as though everyone already knows them. This section covers the indicators, the option mechanics and the market phrases that fill trading commentary, each at three depths plus a slang version. These are explanations of the vocabulary, not advice about what to buy.
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What are Call and Put Options?
The right to buy or sell at a locked price, and why buyers risk only the premium.
How do Candlestick Charts Work?
Four prices, one shape — how a candle shows who controlled the session at a glance.
What is a Short Squeeze?
When short sellers are forced to buy — and their own buying drives the price they're fleeing.
All 32 terms
What are Bollinger Bands?
A 20-day average with self-sizing boundaries — a live map of how volatile a stock has been.
What is a Breakout (and a Fakeout)?
Price finally passing a level it kept failing at — and the three checks that separate real from fake.
What are Call and Put Options?
The right to buy or sell at a locked price, and why buyers risk only the premium.
How do Candlestick Charts Work?
Four prices, one shape — how a candle shows who controlled the session at a glance.
What is Delta in Options?
How much of each $1 stock move your option captures, and its three readings.
What is Gamma in Options?
Why option sensitivity accelerates, and how that snowballing fuels gamma squeezes.
Golden Cross vs. Death Cross: What do they Signal?
The 50-day average crossing the 200-day — what it means, why it's late, and why millions watch.
What is Implied Volatility?
The move the market expects, priced into options, and why IV crush burns earnings bets.
What is the MACD Indicator?
Two price averages, one gap — how traders read whether a trend is speeding up or fading.
What is the RSI (Relative Strength Index)?
A 0–100 gauge of how hard price has been sprinting — and why 70 isn't a sell button.
What is a Short Squeeze?
When short sellers are forced to buy — and their own buying drives the price they're fleeing.
SMA vs. EMA: What's the Difference?
Equal votes vs. recent-days-count-extra — the steadiness-versus-speed choice behind trend lines.
What is Standard Deviation?
How far the numbers wander from their average — the spread two identical averages can hide.
What are Support and Resistance Levels?
The price floors and ceilings where buyers and sellers keep showing up — and what a break means.
What is Theta Decay?
Why options lose value every day the clock runs, and who collects that daily drip.
What does Volume tell you in Trading?
Shares traded = participation — how much agreement stood behind a price move.
What is the bid-ask spread?
Every market has two prices, and the gap between them is what "trade right now" costs. The invisible fee nobody bills you for.
What is a margin call?
The demand for cash that arrives when investments bought with borrowed money fall. Pay up fast, or the broker sells for you.
What is slippage?
You clicked at one price and got filled at another. Where the gap comes from, when it's worst, and the one honest way to cap it.
What is the Sharpe ratio?
How much return per unit of risk. The number that separates skill from a lucky gamble when two investments both "did well".
What are stop-loss and take-profit orders?
Two standing orders that exit a trade for you: one caps the damage below, one banks the gain above. Set while calm, executed without you.
What is liquidity?
How fast something turns into cash without the sale dragging the price down. Why it matters most exactly when it disappears.
What is an order book?
The live list of everyone waiting to buy or sell, sorted by price. Where prices actually come from, and what "depth" means.
Limit order vs market order: what's the difference?
One guarantees the trade happens, the other guarantees the price. You cannot have both, and knowing which you gave up is the whole skill.
What is a Market Maker?
The firm that stands ready to buy or sell at every moment, quoting both prices at once and trading from its own inventory. It sells immediacy and earns the spread for it.
What is Payment for Order Flow?
The money a trading firm pays your broker for the right to fill your trades. It is why trading apps charge no commission, and why your order never reaches an exchange.
What is a Dark Pool?
The private venue where funds trade big blocks of shares without listing those orders publicly. An order names a size but no price, waits unseen, and settles at whatever the open market says. It hides the order, not the trade.
What is Short Interest?
The number of shares in a company that have been sold short and not yet bought back, published as a percentage of the float, the shares actually available to trade. It measures buying that still has to happen, and it reaches you a week or more after the fact.
What is the Wash-Sale Rule?
The US tax rule that refuses a loss on shares to an investor who buys the same shares back within 30 days either side of the sale. It asks whether you actually left the position, and the refused loss moves onto the cost of the new shares.
What is an Iron Condor?
Four option contracts on one stock, sold and bought in pairs, that pay you a fee up front if the price stays inside a range you pick. The two you buy set a firm limit on what leaving that range can cost you.
What's the Difference Between an ETF and a Mutual Fund?
Both are baskets of investments you buy whole. One prices itself once a day by arithmetic, the other gets priced all day by the people trading it, and that difference drives everything else.
What is a Stock Split?
A company divides each share into several, the price falls to match, and your stake is worth exactly what it was. Why companies bother anyway, and what a reverse split says.
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