Decoding the Trader's Lexicon: A (Slightly) Sarcastic Guide to Trading Jargon

Decoding the Trader’s Lexicon: A (Slightly) Sarcastic Guide to Trading Jargon

The world of trading has its own language, a swirling vortex of acronyms, slang, and oddly-specific terms that can leave newcomers feeling like they’ve stumbled into a secret society meeting held in a poorly-lit basement. Fear not, aspiring market wizards! This guide will help you navigate the treacherous waters of trading jargon, from the commonly used, to the commonly made up. We’ll translate the grunts, the groans, and the occasional “WTF” into plain English, with a healthy dose of sarcasm (because, let’s face it, some of this stuff is ridiculous).

The Basics (Essential Terms)

Let’s start with the fundamentals, the bread and butter of trading chat:

• Long/Short: “Going long” on a pair means you’re betting the first currency will strengthen against the second. “Going short” is the opposite.

  • Example: “Going long on GBP/USD” means you’re betting the British Pound will strengthen against the US Dollar.
  • Commentary: Seems simple enough, until you add ‘with leverage’ into it.

• Bid/Ask/Spread: The bid is the price at which you can sell, and the ask is the price at which you can buy. The spread is the difference, and it’s how your broker makes their money.

  • Example: If the bid for EUR/USD is 1.1000 and the ask is 1.1002, the spread is 2 pips.
  • Commentary: The spread is the first of many ways you’ll find out why it’s so hard to trade, especially on smaller sums.

• Pip/Point: A pip is usually the fourth decimal place in a currency pair (except for JPY pairs, where it’s the second). A point is typically used for indices, and refers to a whole number movement.

  • Example: If GBP/USD moves from 1.2500 to 1.2550, that’s a 50 pip move. If the FTSE 100 moves from 7500 to 7550, that’s a 50 point move.
  • Commentary: “I made 100 pips today!” sounds way cooler than “I made a small percentage of a small percentage of movement in a currency pair!”

• Lot Size: This determines the size of your trade.

  • Example: Standard lot, mini lot, micro lot.
  • Commentary: “Don’t go full lot, you maniac!”

• Leverage: This allows you to control a larger amount of currency than you have in your account.

  • Example: 1:100 leverage means you can control £100,000 worth of currency with only £1,000 of your own capital.
  • Commentary: Leverage: the express elevator to either riches or ruin.

• Stop Loss (SL) / Take Profit (TP): Essential risk management tools. A stop loss automatically closes your trade at a predetermined price to limit losses. A take profit does the same, but for profits.

  • Example: “I set my SL at 1.2450 and my TP at 1.2550.”
  • Commentary: Use them, or be prepared to explain to your significant other why you’re now living in a cardboard box.

• Margin/Margin Call: Your broker needs collateral, margin, to permit you to use borrowed funds (leverage). If a trade moves against your position, you need more funds to back it up.

  • Example: “Margin requirements vary, better check before you trade!”
  • Commentary: Don’t get margin called, it’s the worst!

The Technical Analysis Tribe

This lot love their charts and indicators. Here’s a taster:

• Support/Resistance: Key levels where price tends to bounce or stall.

  • Example: “Support is like the floor, resistance is like the ceiling.”
  • Commentary: Except when they’re not, which is always.

• Trendline: A line drawn on a chart to (supposedly) identify the direction of the trend.

  • Example: “The trend is your friend… until it bends.”
  • Commentary: Use at your own peril, but good for seeing where trend might be changing.

• Breakout/Retracement: A breakout is when price moves decisively beyond a key level. A retracement is a temporary move against the trend.

  • Example: “I’m looking for a breakout above resistance.”
  • Commentary: “Buy the breakout, sell the retest” is a common mantra, often followed by “Why didn’t that work?!”

• Candlestick Patterns: These are formations on candlestick charts that some traders believe predict future price movements.

  • Example: “A ‘doji’ looks like a cross and indicates indecision.”
  • Commentary: “Reading candlestick patterns is like reading tea leaves, but with more maths.”

• Moving Average (MA): An indicator that smooths out price data by averaging prices over a specific period.

  • Example: “The 200-day moving average is a popular indicator.”
  • Commentary: “Some people swear by them, others swear at them.”

• Fibonacci Retracement/Extension: Tools based on the Fibonacci sequence, used to identify potential support and resistance levels.

  • Example: “Price retraced to the 61.8% Fibonacci level.”
  • Commentary: “If you believe in magic, these might work. Otherwise, they’re just pretty lines.”

• RSI/MACD/Stochastics: These are momentum oscillators, indicators that attempt to gauge the strength or weakness of a price trend.

  • Example: “RSI over 70 means overbought, RSI under 30 means oversold.”
  • Commentary: “Great for generating signals, most of which are false.”

The Lingo of Loss (and Occasional Wins)

Here’s where the emotional rollercoaster of trading gets its own vocabulary:

• FOMO (Fear Of Missing Out): The anxiety that you’re not in on a profitable trade.

  • Example: “I saw Bitcoin going up and FOMO’d in at the top.”
  • Commentary: The most common reason for buying high and selling low.

• HODL (Hold On for Dear Life): Originally a misspelling of “hold,” now a mantra for crypto investors.

  • Example: “HODL your Bitcoin, it’s going to the moon!”
  • Commentary: Often followed by “I’ve lost everything.”

• FUD (Fear, Uncertainty, Doubt): Negative news or sentiment that can cause panic selling.

  • Example: “The FUD around this coin is intense.”
  • Commentary: The market’s favourite weapon.

• Rekt: A misspelling of “wrecked,” used to describe a devastating loss.

  • Example: “I got rekt on that trade.”
  • Commentary: A rite of passage for every trader.

• BTFD (Buy The F*ing Dip):** The rallying cry of those who believe every dip is a buying opportunity.

  • Example: “BTFD! This is just a healthy correction.”
  • Commentary: Can be profitable, can also be financial suicide.

• To the Moon!: The optimistic (and often delusional) belief that an asset will skyrocket in price.

  • Example: “This altcoin is going to the moon!”
  • Commentary: Usually followed by a crash back to Earth.

• DD (Due Dilligence): Research

  • Example: “Make sure you do your own DD”
  • Commentary: Often misused and applied, usually just means they saw another person say it!

The Prop Firm Patois

Prop firms (proprietary trading firms) have their own special lingo:

• Challenge: The initial evaluation period where traders must prove their skills (or luck) to get funded.

  • Example: “I’m taking the FTMO challenge.”
  • Commentary: “I’m paying a fee to gamble with virtual money.”

• Funded: The state of having passed the challenge and received a (usually simulated) trading account.

  • Example: “I’m finally funded!”
  • Commentary: “I’m finally allowed to trade with someone else’s fake money!”

• Payout: The (hopefully) real money you receive from a prop firm, usually a percentage of your profits.

  • Example: “Waiting on my payout.”
  • Commentary: “Hoping they don’t find a reason to deny my withdrawal.”

• Max DD (Maximum Drawdown): The largest drop in equity of the account

  • Example: “I got caught out by a news spike and took a massive DD.”
  • Commentary: Often the reason for getting kicked out of a challenge.

• BE (Break Even): The neutral point where the account has neither made profit, nor lost any money.

  • Example: “I’m just going to move my SL (Stop Loss) to BE to protect my capital now.”
  • Commentary: Can get you stopped out needlessly.

Advanced Trading Terms

• Liquidity: The ability of an asset to be bought or sold quickly without significantly affecting its price.
  • Example: “A liquidity pool on a decentralised exchange…”
  • Commentary: Often used to describe a previous price point.
• Bias: A preconceived idea of where the market is likely to be headed.
  • Example: “I’m shorting from here, my bias is it’s going to go lower.”
  • Commentary: Often misused to defend a position that is going the wrong way.
• Risk-on, Risk-off: Describing the mood of markets and whether they are likely to trade in assets that could gain, but also lose money.
  • Example: “Risk-off markets currently as USD is gaining and traders feel safer parking money there.”
  • Commentary: Often used to explain why a market is moving, in ways that are untradeable.
• Market Makers: The group of people who are setting prices in the market.
  • Example: “Market makers are hunting your stops.”
  • Commentary: A commonly used term to describe price action, when it can’t be explained by the technical analysis being used.
• VWAP (Volume Weighted Average Price): The average price of an asset, weighted by the volume traded at each price.
  • Example: “Price bounced off VWAP.”
  • Commentary: A popular indicator, often used by institutional traders.
• Liquidity Zone: An area with significant interest.
• S/R or SNR: Support and Resistance. Key price levels where the market has previously found support (buying interest) or resistance (selling interest).
  • Example: “The price is approaching a key S/R level.”
  • Commentary: The most basic, and perhaps most useful, concept in technical analysis.
• STB, BTS (Sell to Buy, Buy to Sell): Used to mark a last move down before a move up, or last move up before a move down.
  • Example: “A failed STB is going to make a run for the exit.”
  • Commentary: Can be a useful addition for marking up charts.
• BOS/CHoCH: Break of Structure, Change of Character.
  • Example: “The previous high was broken, so that’s a BOS, and the market is now bullish.”
  • Commentary: Originally coined by the Smart Money Concepts (SMC)/Inner Circle Trader (ICT) group.
• FVG (Fair Value Gap): A range of price action where only one side of the market was in play.
  • Example: “The price surged and left a huge gap, now we wait for it to come back and fill the FVG.”
  • Commentary: Often used to indicate where price is likely to move, or retrace to.
• DP (Decision Point): a local extreme point in PA, not necessarily a full reversal.
• FTR (Fail to Return): When price fails to return to its origin.
• PA (Price Action): The movement of a security’s price.
  • Example: “PA is looking bearish.”
  • Commentary: Used to describe the behaviour of the price in a specific way.
• LQ: Can refer to “Liquidity”, or “Low Quality”.
• LTF / HTF: Lower/Higher Time Frame.
  • Example: “On the H4 chart, the trend is up, but on the M15, it’s down.”
  • Commentary: Used to describe different time perspectives (e.g., 4-hour chart, 15-minute chart).

The Memes and the Madness

• Apes: Retail traders who are overly enthusiastic about a particular asset, often to the point of irrationality.

  • Example: “The apes are piling into this meme stock.”
  • Commentary: Often used derisively.

• Diamond Hands: Holding an asset through thick and thin, refusing to sell even in the face of massive losses.

  • Example: “Diamond hands, baby! Never selling!”
  • Commentary: Often used ironically, as “diamond hands” can lead to ruin.

• Paper Hands: Selling an asset at the first sign of trouble.

  • Example: “Don’t be a paper hands, this is just a dip.”
  • Commentary: The opposite of “diamond hands.”

• Pump and Dump: A scheme where an asset’s price is artificially inflated (pumped) and then sold off at a profit (dumped), leaving later investors holding the bag.

  • Example: “Watch out for the pump and dump, this coin will go down 99%.”
  • Commentary: Very illegal, very common.

Conclusion (Wrap-up & Call to Action):

So, there you have it, a (mostly) comprehensive guide to the weird and wonderful world of trading lingo. Now you can confidently throw around terms like “FOMO,” “HODL,” and “Rekt” with the best of them. Just remember, knowing the lingo doesn’t make you a profitable trader. But it might help you understand what the hell everyone else is talking about. Now go forth, and may your trades be ever in your favour (but seriously, use a stop loss).

Published by Collected 5 Mar, 2024 and tagged glossary and jargon using 1928 words.

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