Trading Glossary

Plain-English definitions for every term you will meet on Volity. Short, clear, no fluff.

What is an Airdrop in Crypto

An airdrop is a distribution of free tokens to a set of wallet addresses, usually as a launch marketing tactic, a community…
What is Alpha in Investing

Alpha is the excess return of a strategy or asset above what its beta exposure to the market would predict. Positive alpha…
What is Arbitrage

Arbitrage is the simultaneous buying and selling of the same asset on different markets to profit from a price gap. The discrepancy…
What is an Atomic Swap

An atomic swap is a trustless exchange of one cryptocurrency for another across different blockchains, executed by smart contracts so that either…

What is Base and Quote Currency

In any forex pair, the first currency listed is the base and the second is the quote. The pair's price tells you…
What is Basis in Crypto

Basis in crypto markets is the price difference between a derivative contract (perpetual or dated future) and the underlying spot price. Positive…
What is Beta in Investing

Beta is a measure of how much an asset's return moves with the broader market. A beta of 1.0 means the asset…
What are Blue-Chip Stocks

Blue-chip stocks are shares of large, established companies with reliable earnings, strong balance sheets, and long dividend track records. The name comes…

What is a CFD (Contract for Difference)

A contract for difference is a derivative agreement between a trader and a broker to exchange the change in price of an…
What is Circulating Supply

Circulating supply is the number of cryptocurrency tokens that are publicly available and tradeable on the open market right now. Tokens locked…
What is Contract Size

Contract size is the amount of the underlying asset represented by one unit of a derivative contract. It defines the notional exposure…
What is Correlation in Trading

Correlation is a statistical measure of how two assets move relative to each other, ranging from -1.0 to +1.0. A correlation of…
What is Crypto Mining

Crypto mining is the process by which proof-of-work blockchains secure transactions and issue new coins. Miners run specialised hardware to solve cryptographic…
What is a Currency Pair

A currency pair is a forex quote that prices one currency against another. The first currency is the base, the second is…

What is DeFi

DeFi, or decentralised finance, is a set of financial services built on public blockchains using smart contracts. Users keep custody of their…
What is Depth of Market

Depth of market, often shown as Level 2 data, is the view of all outstanding buy and sell orders at each price…
What is a Dividend

A dividend is a cash or stock payment made by a company to its shareholders, typically from earnings. Dividends are declared by…
What is Dividend Adjustment (CFD)

A dividend adjustment is a cash entry the CFD broker posts to the trader's account when the underlying stock pays a dividend.…
What is Dividend Yield

Dividend yield is the annual dividend per share divided by the current share price, expressed as a percentage. It standardises dividend income…
What is Drawdown in Trading

Drawdown is the drop from a portfolio's peak equity to its current value, usually expressed as a percentage. Max drawdown is the…

What is ECN vs Market Maker Execution

An ECN (Electronic Communication Network) routes your order to a pool of liquidity providers competing to fill it. A market maker (MM)…
What is ERC-20

ERC-20 is a standard for creating fungible tokens on Ethereum and other compatible chains. Tokens that follow the standard are interchangeable with…
What is Earnings Per Share (EPS)

Earnings per share is a company's net income (after preferred dividends) divided by the weighted-average shares outstanding. It is the per-share slice…
What is an Exotic Currency Pair

An exotic currency pair pairs a major currency with an emerging-market currency, like USD/TRY, EUR/PLN, or USD/ZAR. Exotics carry wider spreads, lower…
What is an Expert Advisor (EA)

An Expert Advisor (EA) is an automated trading program that runs on MetaTrader 4 or MetaTrader 5. It reads market data, applies…
What is Expiry (Derivative)

Expiry is the date and time at which a derivative contract ceases to exist and settles. For futures, expiry means cash or…

What is a Fiat Ramp

A fiat ramp, or on-ramp, is a service that converts traditional fiat currency (USD, EUR, GBP) into cryptocurrency via bank transfer, card,…
What is a Fill in Trading

A fill is the execution of an order. When the venue matches your buy or sell against a counterparty, the resulting transaction…
What is a Fork in Crypto

A fork is a change to a blockchain's protocol rules that creates a divergence in transaction history. Soft forks remain backward-compatible; hard…
What are Fractional Shares

A fractional share is ownership of less than one whole share of a company. Fractional shares let investors buy specific dollar amounts…
What is a Funding Rate in Crypto

A funding rate is a periodic payment exchanged between long and short holders of a crypto perpetual contract. It exists to keep…

What is Gap Risk

Gap risk is the chance that an asset's next traded price will be substantially different from its prior close, with no intermediate…
What is a Gas Fee

A gas fee is the transaction cost paid to a blockchain's validators to process and confirm a transaction. The fee depends on…
What is Going Long vs Going Short

Going long means buying an asset with the expectation that its price will rise; going short means selling an asset (often borrowed)…

What is Hedging in Trading?

Hedging is opening a position that offsets the risk of another. In forex it often means taking a long and short on…

What is an IPO

An initial public offering is the first sale of a company's shares to the public. It transforms a private company into a…

What is KYC in Crypto

KYC, or Know Your Customer, is the identity-verification process that regulated financial services must complete before serving a customer. In crypto, KYC…

What is Layer 1 vs Layer 2

Layer 1 is a base blockchain that settles transactions on its own consensus, like Bitcoin or Ethereum. Layer 2 is a secondary…
What is Leverage in Forex

Leverage in forex is borrowed capital that lets you control a larger position with a smaller deposit. Expressed as a ratio like…
What is a Limit Order

A limit order is an instruction to buy at no more than a specified price or sell at no less than a…
What is a Liquidity Provider

A liquidity provider (LP) is a bank, non-bank market maker, or institution that quotes continuous buy and sell prices on an instrument,…
What is Lot Size in Forex

Lot size is the quantity of currency units traded in a single forex position. A standard lot is 100,000 units, a mini…

What is a Major Currency Pair

A major currency pair is a forex pair that quotes the US dollar against one of the seven other most-traded currencies: EUR,…
What is a Margin Call

A margin call is a broker notification that account equity has fallen below the maintenance-margin level and requires additional deposit or position…
What is Margin in Trading

Margin in trading is the deposit a trader puts down to open a leveraged position, expressed as a percentage of total position…
What is Market Cap in Crypto

Market capitalisation in crypto is the total US dollar value of all coins in circulation. It is computed as circulating supply multiplied…
What is a Market Order

A market order is an instruction to buy or sell an instrument immediately at the best available price. It prioritises certainty of…
What is Max Supply in Crypto

Max supply is the absolute hard cap on the number of tokens a cryptocurrency will ever exist. Once that ceiling is reached,…

What is an OCO Order

An OCO (one-cancels-the-other) order is a pair of orders linked so that execution of one automatically cancels the other. It is used…
What is On-Chain Analysis

On-chain analysis is the practice of reading public blockchain data to estimate market dynamics, holder behaviour, and network health. The signals come…
What is an Order Book

An order book is the real-time list of all outstanding buy and sell orders for an instrument on a venue, organised by…
What is Overnight Financing

Overnight financing is the interest charge or credit applied to a leveraged position held past the daily cutoff (typically 22:00 GMT). It…

What is a Partial Close

A partial close is the action of closing a fraction of an open position rather than the entire size. It reduces exposure…
What is a Perpetual Contract

A perpetual contract is a crypto derivative that tracks the spot price of an underlying asset without an expiry date. Funding payments…
What is a Pip in Forex

A pip is the smallest standard price move in a forex pair, almost always the fourth decimal place (0.0001). On JPY pairs…
What is Position Sizing

Position sizing is the process of determining how much capital to allocate to a single trade based on the risk budget per…
What is Position Trading

Position trading is the longest-horizon active style. Positions are held for weeks, months, or sometimes years, targeting structural moves driven by macro…
What is Proof of Stake

Proof of stake is a blockchain consensus mechanism that selects block producers in proportion to the amount of cryptocurrency they have locked…
What is Proof of Work

Proof of work is a blockchain consensus mechanism in which miners spend computational energy solving cryptographic puzzles to add blocks. The cost…

What is an R-Multiple

An R-multiple expresses the result of a trade as a multiple of the initial risk taken. A 1R trade gained one unit…
What is a Requote in Trading

A requote is when your broker refuses to fill your market order at the price you clicked and instead offers a new…
What is Rollover (CFD)

Rollover is the process by which a CFD position based on an underlying futures contract is transferred from an expiring contract to…

What is Scalping in Trading

Scalping is a high-frequency trading style that profits from very small price moves, typically 3 to 15 pips per trade, held for…
What is a Seed Phrase

A seed phrase is a sequence of 12 or 24 words generated by a wallet that encodes the master private key for…
What is Self-Custody vs Custodial

Self-custody means you hold your own private keys and control your wallet directly. Custodial means a third party (exchange, broker, institutional custodian)…
What is Short Selling

Short selling is the practice of selling borrowed shares with the intention of repurchasing them later at a lower price. The trader…
What is a Short Squeeze

A short squeeze is a sharp upward price spike in a heavily-shorted stock, driven by short sellers being forced to buy back…
What is Slippage in Trading

Slippage is the gap between the price you request and the price your order actually fills at. It happens when liquidity is…
What is a Smart Contract

A smart contract is a self-executing program deployed on a blockchain that runs exactly as written when its trigger conditions are met.…
What is Spot Trading in Crypto

Spot trading is the direct exchange of one cryptocurrency for another, or for fiat, at the current market price. The asset settles…
What is Spread in Forex

The spread is the difference between a forex pair's bid (sell) and ask (buy) prices, quoted in pips. It is the immediate…
What is a Stablecoin

A stablecoin is a cryptocurrency designed to hold a 1-to-1 peg to an external reference asset, almost always the US dollar. The…
What is Staking in Crypto

Staking is locking up cryptocurrency to support the operation of a proof-of-stake blockchain in exchange for rewards. Stakers earn a yield denominated…
What is a Stock Split

A stock split increases the number of shares outstanding by issuing additional shares to existing holders, while proportionally reducing the share price.…
What is a Stop Order

A stop order is an instruction that becomes a market order once the price reaches a specified trigger level. It is used…
What is a Stop Out

A stop out is the broker's automatic closing of trades when a trader's account equity falls below a defined threshold of the…
What is a Stop-Limit Order

A stop-limit order is a combined order that activates a limit order once a trigger price is touched. Unlike a plain stop,…
What is a Stop-Sell Limit

A stop-sell limit is a combined order type. A stop trigger price activates a limit sell order at a specified price or…
What is Swap or Rollover in Forex

A swap, also called rollover, is the overnight interest you pay or receive for holding a forex position past the daily cutoff.…
What is Swing Trading

Swing trading is a style that holds positions for several days to a few weeks, aiming to capture the next directional move…

What is TWAP

TWAP, or Time-Weighted Average Price, is the average price of an instrument over a period, sampled at equal time intervals. Unlike VWAP,…
What is a Take-Profit Order

A take-profit order is an instruction to automatically close a position when price reaches a specified favourable target. It is the upside…
What is Tokenomics

Tokenomics is the design of a crypto token's supply, distribution, and incentive structure. It defines how tokens are issued, who receives them,…
What is Total Return

Total return is the full profit or loss from an investment over a period, combining capital gains plus dividends and other distributions…
What is a Trailing Stop

A trailing stop is a dynamic stop-loss order that follows the price at a fixed distance as the position moves favourably. If…
What is the Bid-Ask Spread

The bid-ask spread is the gap between the highest price a buyer will pay (bid) and the lowest price a seller will…
What is the Bitcoin Halving

The Bitcoin halving is an event coded into the Bitcoin protocol that cuts the block reward paid to miners by 50 percent.…
What is the Ex-Dividend Date

The ex-dividend date is the cutoff day on or after which a stock trades without the right to the upcoming declared dividend.…
What is the Kelly Criterion

The Kelly criterion is a formula for sizing bets to maximise long-term geometric growth of capital. It takes win probability and payoff…
What is the P/E Ratio

The price-to-earnings ratio is a stock's share price divided by its earnings per share. It tells investors how many dollars they pay…
What is the Risk-Reward Ratio

The risk-reward ratio compares the potential loss on a trade to the potential gain, expressed as a single number. A 1:3 ratio…
What is the Sharpe Ratio

The Sharpe ratio is a measure of risk-adjusted return, calculated as excess return over the risk-free rate divided by the standard deviation…

What is USDC (USD Coin)

USDC, or USD Coin, is a US dollar-pegged stablecoin issued by Circle. Each token is backed 1-to-1 by cash and short-duration US…
What is USDT (Tether)

USDT, or Tether, is the largest US dollar-pegged stablecoin by market capitalisation. Each token aims to be redeemable for one US dollar,…

What is VWAP

VWAP, or Volume-Weighted Average Price, is the average price of an instrument over a period, weighted by the volume traded at each…
What is Volatility in Trading

Volatility is the statistical measure of how much a price moves over a period, usually expressed as an annualised standard deviation of…
What is Volume in Stocks

Volume in stocks is the total number of shares traded in a security during a given period. High volume signals strong market…

What is a Wallet Address in Crypto

A wallet address is a public string of characters derived from a cryptographic public key that identifies a destination on a blockchain.…