https://tradingdefined.com/ Trading Defined is a free trading dictionary: 560+ market terms explained in plain English, step by step, with worked examples, formulas, quizzes and cited sources. en https://tradingdefined.com/zigzag-indicator https://tradingdefined.com/zigzag-indicator Wed, 04 Nov 2026 08:00:00 GMT Indicators and Tools The ZigZag indicator draws straight lines between significant swing highs and lows, ignoring any move smaller than a set percentage (often 5%). It cleans up noise to show market structure, but it has no predictive power because its last line can change. https://tradingdefined.com/zero-dte-options https://tradingdefined.com/zero-dte-options Wed, 04 Nov 2026 08:00:00 GMT Derivatives 0DTE options are options traded on their expiry day — zero days to expiration. They are cheap and react violently to small price moves, so gains and losses build very quickly, and most expire worthless. https://tradingdefined.com/yield-curve https://tradingdefined.com/yield-curve Wed, 04 Nov 2026 08:00:00 GMT Bonds and Interest Rates The yield curve plots the yields of bonds from the same issuer, usually a government, from short to long maturities. It normally slopes upward; when short-term yields rise above long-term ones the curve is inverted, which has often come before US recessions. https://tradingdefined.com/williams-r https://tradingdefined.com/williams-r Wed, 04 Nov 2026 08:00:00 GMT Indicators and Tools Williams %R is a momentum oscillator that shows where the close sits relative to the highest high of the last 14 periods, on a scale from 0 to −100. Readings from 0 to −20 are overbought and −80 to −100 oversold. https://tradingdefined.com/wash-sale-rule https://tradingdefined.com/wash-sale-rule Wed, 04 Nov 2026 08:00:00 GMT Trading Basics The wash sale rule is a US tax rule that blocks deducting a loss on a security if you buy the same or a substantially identical one within 30 days before or after the sale. The loss is not lost forever: it is added to the cost basis of the new shares. https://tradingdefined.com/vertical-spread https://tradingdefined.com/vertical-spread Wed, 04 Nov 2026 08:00:00 GMT Derivatives A vertical spread buys one option and sells another of the same type and expiry at a different strike. It caps both the maximum gain and the maximum loss; a bull call spread, for example, profits from a moderate rise at a lower cost than a plain call. https://tradingdefined.com/tax-loss-harvesting https://tradingdefined.com/tax-loss-harvesting Wed, 04 Nov 2026 08:00:00 GMT Trading Basics Tax-loss harvesting means selling investments that are below their purchase price to realise a capital loss, then using that loss to reduce the tax on capital gains. In the US, leftover losses can offset up to $3,000 of ordinary income a year and carry forward. https://tradingdefined.com/straddle-and-strangle https://tradingdefined.com/straddle-and-strangle Wed, 04 Nov 2026 08:00:00 GMT Derivatives A long straddle buys a call and a put with the same strike and expiry; a strangle uses an out-of-the-money call and put, which costs less. Both profit from a big move in either direction and lose if price stays still. Selling them is the opposite bet. https://tradingdefined.com/stock-market-index https://tradingdefined.com/stock-market-index Wed, 04 Nov 2026 08:00:00 GMT Trading Basics A stock market index tracks the combined price of a group of shares, such as the S&P 500 (about 500 large US companies), the Dow Jones Industrial Average (30 companies) or the Nasdaq Composite. You cannot buy an index itself, only funds, futures or CFDs that follow it. https://tradingdefined.com/stock https://tradingdefined.com/stock Wed, 04 Nov 2026 08:00:00 GMT Trading Basics A stock, or share, is a unit of ownership in a company. Shareholders own a slice of the business, can profit when its value rises and may receive dividends, and common shares usually come with voting rights. https://tradingdefined.com/safe-haven-assets https://tradingdefined.com/safe-haven-assets Wed, 04 Nov 2026 08:00:00 GMT Commodities, Energy and Carbon Safe-haven assets are ones investors buy when markets are in turmoil because they expect them to hold their value — classically gold, US Treasuries, the Swiss franc and the Japanese yen. They often, but not always, rise when stocks fall. https://tradingdefined.com/risk-free-rate https://tradingdefined.com/risk-free-rate Wed, 04 Nov 2026 08:00:00 GMT Bonds and Interest Rates The risk-free rate is the return on an investment treated as having no default risk, usually proxied by short-term government bills such as US Treasury bills. It is the baseline every riskier investment must beat and a key input in CAPM, the Sharpe ratio and valuation. https://tradingdefined.com/put-call-ratio https://tradingdefined.com/put-call-ratio Wed, 04 Nov 2026 08:00:00 GMT Derivatives The put-call ratio divides the volume (or open interest) of puts by that of calls. A high ratio shows heavy demand for protection; traders often read extremes as contrarian sentiment signals. https://tradingdefined.com/pump-and-dump https://tradingdefined.com/pump-and-dump Wed, 04 Nov 2026 08:00:00 GMT Market Structure A pump and dump is a fraud where promoters buy a cheap, thinly traded asset, hype it with false or misleading claims to push the price up, then sell their holdings to the buyers they attracted. The price usually collapses afterwards. https://tradingdefined.com/preferred-stock https://tradingdefined.com/preferred-stock Wed, 04 Nov 2026 08:00:00 GMT Trading Basics Preferred stock is a class of shares that usually pays a fixed dividend and ranks ahead of common stock for dividends and in bankruptcy, but behind bonds. Holders usually have no voting rights, and the price moves less than common stock. https://tradingdefined.com/penny-stocks https://tradingdefined.com/penny-stocks Wed, 04 Nov 2026 08:00:00 GMT Trading Basics Penny stocks are shares of very small companies that trade at low prices, often on over-the-counter markets. They are cheap per share but thinly traded, poorly researched and a frequent target for manipulation, so they carry very high risk. https://tradingdefined.com/options-chain https://tradingdefined.com/options-chain Wed, 04 Nov 2026 08:00:00 GMT Derivatives An options chain is the table of every listed call and put for an underlying asset, grouped by expiry date and strike price. Each row shows prices such as bid, ask and last, plus volume, open interest and often implied volatility and the Greeks. https://tradingdefined.com/mutual-fund https://tradingdefined.com/mutual-fund Wed, 04 Nov 2026 08:00:00 GMT Trading Basics A mutual fund pools money from many investors and invests it in a portfolio of stocks, bonds or other assets run by a professional manager. Shares are bought from and sold back to the fund at its net asset value, calculated once a day. https://tradingdefined.com/money-flow-index https://tradingdefined.com/money-flow-index Wed, 04 Nov 2026 08:00:00 GMT Indicators and Tools The Money Flow Index is a 0–100 oscillator that combines price and volume to measure buying and selling pressure, often called a volume-weighted RSI. Readings above 80 are overbought and below 20 oversold; the default period is 14. https://tradingdefined.com/leaps https://tradingdefined.com/leaps Wed, 04 Nov 2026 08:00:00 GMT Derivatives LEAPS are long-dated options with expirations up to about three years away. A LEAPS call gives exposure to a stock's rise for less capital than buying the shares, while the long time frame gives the trade more time to work. https://tradingdefined.com/keltner-channels https://tradingdefined.com/keltner-channels Wed, 04 Nov 2026 08:00:00 GMT Indicators and Tools Keltner Channels are volatility bands drawn above and below an exponential moving average, usually a 20-period EMA plus and minus two times the Average True Range. The EMA shows direction and the ATR sets the width. https://tradingdefined.com/iron-condor https://tradingdefined.com/iron-condor Wed, 04 Nov 2026 08:00:00 GMT Derivatives An iron condor sells an out-of-the-money put spread and an out-of-the-money call spread on the same expiry. It earns the premium if price stays between the short strikes, and the bought options cap the maximum loss. https://tradingdefined.com/index-fund https://tradingdefined.com/index-fund Wed, 04 Nov 2026 08:00:00 GMT Trading Basics An index fund is a mutual fund or ETF that tries to match the return of a market index, such as the S&P 500, by holding the same securities. It trades less and usually charges far lower fees than actively managed funds. https://tradingdefined.com/hedge-fund https://tradingdefined.com/hedge-fund Wed, 04 Nov 2026 08:00:00 GMT Trading Basics A hedge fund is a private investment fund for wealthy and institutional investors that can use leverage, short selling and other flexible strategies. It faces fewer rules than mutual funds and usually charges a management fee plus a share of profits. https://tradingdefined.com/forex-market https://tradingdefined.com/forex-market Wed, 04 Nov 2026 08:00:00 GMT Trading Basics The forex market is the global market for exchanging currencies, and the largest financial market by trading volume. It has no central exchange, trades around the clock from Monday to Friday, and quotes currencies in pairs such as EUR/USD. https://tradingdefined.com/exercise-and-assignment https://tradingdefined.com/exercise-and-assignment Wed, 04 Nov 2026 08:00:00 GMT Derivatives Exercise is when an option holder uses the right to buy (call) or sell (put) the underlying at the strike price. Assignment is the other side: the option seller is chosen to fulfil that obligation and must sell or buy the shares at the strike. https://tradingdefined.com/elliott-wave https://tradingdefined.com/elliott-wave Wed, 04 Nov 2026 08:00:00 GMT Technical Analysis Elliott Wave theory, developed by Ralph Nelson Elliott in the 1930s, holds that markets move in repeating patterns: five waves in the direction of the trend, then three corrective waves against it. Wave counts are subjective, and two analysts often disagree. https://tradingdefined.com/dow-theory https://tradingdefined.com/dow-theory Wed, 04 Nov 2026 08:00:00 GMT Technical Analysis Dow Theory is a classic framework for reading market trends, built from Charles Dow's work. It says the market moves in primary, secondary and minor trends, that prices reflect all known information, and that a trend is confirmed when the industrial and transport averages agree. https://tradingdefined.com/donchian-channels https://tradingdefined.com/donchian-channels Wed, 04 Nov 2026 08:00:00 GMT Indicators and Tools Donchian Channels plot the highest high and lowest low over a set number of periods, usually 20, with a midline between them. A close above the upper band signals a breakout; the Turtle traders famously used them for trend-following entries. https://tradingdefined.com/discounted-cash-flow https://tradingdefined.com/discounted-cash-flow Wed, 04 Nov 2026 08:00:00 GMT Fundamentals and Macroeconomics Discounted cash flow values a company or project as the sum of its expected future cash flows, each discounted back to today at a rate that reflects risk. The result depends heavily on the growth and discount-rate assumptions, so small changes move it a lot. https://tradingdefined.com/covered-call https://tradingdefined.com/covered-call Wed, 04 Nov 2026 08:00:00 GMT Derivatives A covered call means owning shares (usually 100 per contract) and selling a call option on them. The premium gives extra income, but if the price rises above the strike, the shares can be called away and the upside is capped. https://tradingdefined.com/compound-interest https://tradingdefined.com/compound-interest Wed, 04 Nov 2026 08:00:00 GMT Trading Basics Compound interest means earning returns on your earlier returns as well as on the original amount. At 10% a year, $1,000 grows to $1,100 after one year and $1,210 after two, because the second year's interest is also paid on the first year's $100. https://tradingdefined.com/commodities https://tradingdefined.com/commodities Wed, 04 Nov 2026 08:00:00 GMT Commodities, Energy and Carbon Commodities are raw materials traded in bulk: energy such as oil and gas, metals such as gold and copper, and farm products such as wheat and coffee. Traders mostly reach them through futures contracts, ETFs or CFDs rather than physical delivery. https://tradingdefined.com/chaikin-money-flow https://tradingdefined.com/chaikin-money-flow Wed, 04 Nov 2026 08:00:00 GMT Indicators and Tools Chaikin Money Flow measures buying and selling pressure by summing money flow volume over a set period, usually 20 or 21 days, and dividing by total volume. It swings above and below zero: positive suggests accumulation, negative suggests distribution. https://tradingdefined.com/cagr https://tradingdefined.com/cagr Wed, 04 Nov 2026 08:00:00 GMT Risk Management The compound annual growth rate is the steady yearly rate that would turn a starting value into an ending value: (end ÷ start) raised to 1/years, minus 1. Doubling $10,000 to $20,000 over 5 years is a CAGR of about 14.9%. https://tradingdefined.com/butterfly-spread https://tradingdefined.com/butterfly-spread Wed, 04 Nov 2026 08:00:00 GMT Derivatives A butterfly spread combines three strikes: buy one lower-strike option, sell two middle-strike options, and buy one higher-strike option, all with the same expiry. It costs little, risks only the premium and pays most if price ends exactly at the middle strike. https://tradingdefined.com/bond https://tradingdefined.com/bond Wed, 04 Nov 2026 08:00:00 GMT Bonds and Interest Rates A bond is a loan to a government or company. The issuer usually pays regular interest (the coupon) and repays the face value at maturity. Bond prices move opposite to interest rates: when yields rise, existing bonds lose value. https://tradingdefined.com/bitcoin-halving https://tradingdefined.com/bitcoin-halving Wed, 04 Nov 2026 08:00:00 GMT Cryptocurrency and Blockchain The Bitcoin halving is the scheduled cut in half of the new bitcoin paid to miners per block, every 210,000 blocks — roughly every four years. It slows the creation of new coins toward the fixed 21 million cap. https://tradingdefined.com/aroon-indicator https://tradingdefined.com/aroon-indicator Wed, 04 Nov 2026 08:00:00 GMT Indicators and Tools The Aroon indicator measures how many periods have passed since the latest high (Aroon-Up) and low (Aroon-Down) within a look-back window, usually 25. Readings near 100 mean a fresh extreme; Aroon-Up above Aroon-Down suggests an uptrend. https://tradingdefined.com/alpha https://tradingdefined.com/alpha Wed, 04 Nov 2026 08:00:00 GMT Risk Management Alpha is the part of a return that beats what the market or a benchmark delivered for the same risk. Positive alpha suggests skill or an edge; Jensen's alpha measures it against the return the CAPM would predict from the portfolio's beta. https://tradingdefined.com/zero-coupon-bond https://tradingdefined.com/zero-coupon-bond Mon, 02 Nov 2026 08:00:00 GMT Bonds and Interest Rates A zero-coupon bond pays no regular interest. It is sold below face value and repaid at full face value at maturity; the difference is the investor’s return. Its price is very sensitive to interest-rate changes. https://tradingdefined.com/z-spread-and-oas https://tradingdefined.com/z-spread-and-oas Mon, 02 Nov 2026 08:00:00 GMT Bonds and Interest Rates The Z-spread is the constant spread that, added to the government spot-rate curve, makes a bond’s discounted cash flows equal its price. The option-adjusted spread goes further and uses a model to remove the effect of embedded options such as call rights. https://tradingdefined.com/yield-to-worst https://tradingdefined.com/yield-to-worst Mon, 02 Nov 2026 08:00:00 GMT Bonds and Interest Rates Yield to worst is the lowest yield a bond can deliver if the issuer exercises its right to redeem early on the least favourable date for the investor. For callable bonds it is a more cautious figure than yield to maturity. https://tradingdefined.com/yield-to-maturity https://tradingdefined.com/yield-to-maturity Mon, 02 Nov 2026 08:00:00 GMT Bonds and Interest Rates Yield to maturity is the annual return you would earn by buying a bond at today’s price and holding it to maturity, assuming every payment is made and coupons are reinvested at the same rate. It is the standard way to compare bonds. https://tradingdefined.com/yield-curve-control https://tradingdefined.com/yield-curve-control Mon, 02 Nov 2026 08:00:00 GMT Fundamentals and Macroeconomics Yield curve control is a policy in which a central bank targets the yield on bonds of a chosen maturity and buys or sells as much as needed to hold it there. The Bank of Japan used it from 2016 to 2024. https://tradingdefined.com/winning-and-losing-trades https://tradingdefined.com/winning-and-losing-trades Mon, 02 Nov 2026 08:00:00 GMT Trading Basics A winning trade closes with a profit and a losing trade with a loss; whether a small result counts as a win depends on whether costs are included, so define it consistently. https://tradingdefined.com/wedge https://tradingdefined.com/wedge Mon, 02 Nov 2026 08:00:00 GMT Price Action A wedge is a pattern where both boundary lines slope in the same direction while converging — a rising wedge or a falling wedge. https://tradingdefined.com/watchlist https://tradingdefined.com/watchlist Mon, 02 Nov 2026 08:00:00 GMT Trading Basics A watchlist is a list of assets you follow closely so you can spot opportunities without scanning the whole market. https://tradingdefined.com/walk-forward-analysis https://tradingdefined.com/walk-forward-analysis Mon, 02 Nov 2026 08:00:00 GMT Trading Psychology and Performance Walk-forward analysis tests a strategy by repeatedly optimising it on one period and then testing it on the following, unseen period, rolling forward through the data. It gives a more honest estimate than a single optimisation over all the data. https://tradingdefined.com/wacc https://tradingdefined.com/wacc Mon, 02 Nov 2026 08:00:00 GMT Fundamentals and Macroeconomics The weighted average cost of capital is the average return a company must pay its lenders and shareholders, weighted by how much of each it uses. It is the usual discount rate in a discounted cash flow valuation.