Trading Terms & Definitions
Understanding key trading vocabulary is essential for clear communication and effective execution. Here are terms used daily in JR28 alerts and community calls.
Call Option
Right to buy an asset at a specific price before expiration.
Put Option
Right to sell an asset at a specific price before expiration.
Breakout
Price moves beyond a key support or resistance level, often signaling a new trend.
Support & Resistance
Price levels where buying (support) or selling (resistance) historically steps in.
Fibonacci Retracement (Fibs)
Horizontal lines indicating potential support/resistance based on the Fibonacci sequence (23.6%, 38.2%, 61.8%).
Moving Averages (SMA vs EMA)
SMA calculates the average price over a period; EMA gives more weight to recent prices for quicker signals.
VWAP
Volume-Weighted Average Price: average price weighted by volume, often used as intraday support/resistance.
Relative Strength Index (RSI)
Momentum oscillator measuring speed and change of price movements; values above 70 = overbought, below 30 = oversold.
Circuit Breakers
Market-wide trading halts triggered by large index moves (e.g., S&P 500 dips of 7%, 13%, 20%).
Spreads
Options strategy involving buying and selling options simultaneously (e.g., vertical spreads, debit/credit spreads) to limit risk.
Option Delta
Rate of change of option price relative to a $1 move in the underlying; delta ranges from 0 to 1 for calls, 0 to -1 for puts.
Option Gamma
Rate of change of delta relative to a $1 move in the underlying; indicates potential delta swings.
Option Theta
Time decay of an option’s price; how much value an option loses each day as expiration approaches.
Option Vega
Sensitivity of an option’s price to a 1% change in implied volatility.
Futures (ES, NQ)
Standardized contracts on indexes (ES = S&P 500, NQ = Nasdaq-100), leveraged for intraday and swing trading.
Trailing Stop
Stop-loss order that adjusts with price to lock in gains while allowing momentum to run.