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Designed for professional traders, quants, and specialists. The Advanced Glossary tackles the most complex, specialized nomenclature of High-Frequency Trading (HFT) and institutional Prop Firm ecosystems. It includes terms related to Quantitative Models, Critical Slippage, and Derivative Regulations. If you aim to dominate every aspect of complex market investment and scale a large funded trading account, this comprehensive glossary gives you the competitive edge.
The use of computer programs and algorithms to execute trades based on pre-set conditions, often at high speed.
Prop Firm Impact: Often allowed only under specific conditions; used by advanced traders to achieve precision and speed beyond manual capability.
The excess return a trading strategy generates compared to the market or benchmark performance. It represents the trader’s skill in producing profit beyond general market movements.
A measure of an asset’s volatility compared to the overall market. A beta greater than 1 means more volatility than the market.
A rare and unpredictable event with severe consequences on financial markets, such as the 2008 crisis.
The central bank of the United Kingdom, one of the oldest and most influential financial institutions.
Japan’s central bank, known for its aggressive monetary easing and influence in forex markets.
A financial contract giving the holder the right to buy an asset at a set price before expiration.
A strategy where traders borrow funds in a low-interest-rate currency to invest in a high-interest-rate currency, earning the interest rate differential.
The primary financial authority of a country (e.g., Federal Reserve, ECB), responsible for monetary policy and financial stability.
Describes the shape of the futures curve. Contango is when futures prices are higher than the spot price; Backwardation is the opposite.
A weekly report by the CFTC showing the open positions held by commercial, non-commercial, and retail traders in futures markets. It helps identify market sentiment and institutional positioning.
A key indicator of inflation that measures the average price change of a basket of consumer goods and services.
Private financial exchanges where large institutional investors trade without revealing their intentions to the broader market.
The opposite of inflation, where prices decline across the economy, often linked with weak demand and recessions.
An option Greek showing how much the price of an option is expected to move for every $1 change in the underlying asset.
A financial contract whose value is based on the performance of an underlying asset, such as options, futures, or swaps.
Statistical data (e.g., GDP, inflation, employment) that provide insights into the health of an economy. Traders use them to anticipate market trends and central bank policy changes.
The central bank of the Eurozone, managing monetary policy for member states using the euro.
A financial theory suggesting that asset prices fully reflect all available information, making it impossible to consistently beat the market through analysis.
A technical analysis theory suggesting that market prices move in repetitive wave patterns influenced by investor psychology.
A strategy that exploits market volatility following economic events such as earnings reports, rate decisions, or geopolitical developments.
The central bank of the United States, influencing global markets through interest rate policy and economic decisions.
A technical analysis tool using horizontal lines at key Fibonacci levels to identify potential support and resistance zones.
Government decisions on taxation and spending to influence the economy.
A sudden, deep, and rapid drop in security prices within minutes, often followed by a quick recovery.
A standardized agreement to buy or sell an asset at a predetermined price at a future date.
Risk measures used in options trading (Delta, Gamma, Theta, Vega, Rho) that describe how option prices react to market factors.
Price patterns based on Fibonacci ratios, such as the Gartley or Bat, used to predict potential market reversals.
A risk management technique where traders open positions to offset potential losses in another trade. For example, going long on EUR/USD while shorting GBP/USD to reduce exposure.
Prop Firm Impact: Prop traders use hedging cautiously since some firms restrict or disallow it to maintain risk transparency and prevent correlated exposure.
The use of powerful algorithms and high-speed data connections to execute large volumes of trades within milliseconds.
Prop Firm Impact: Almost universally banned; the speed and execution style violates the common sense trading rules of most firms.
A measure of expected future volatility in the market, derived from option prices.
The rate at which the general price level of goods and services rises, reducing purchasing power.
The cost of borrowing money, set by central banks, which heavily impacts currency values and asset prices.
When short-term interest rates are higher than long-term ones, often seen as a predictor of recession.
Financial institutions or entities that supply bid and ask prices, ensuring smooth market operations and order execution for brokers and traders.
A situation where market participants are unwilling to trade despite low interest rates, limiting price movement.
A firm or individual that continuously quotes both buy and sell prices for an asset, profiting from the bid-ask spread.
The study of how trades are executed, including order flow, bid-ask spreads, and price formation at the micro level.
The process by which a central bank manages money supply and interest rates to achieve economic stability and growth.
A statistical technique used to model potential outcomes of a trading strategy by running simulations with random variations in price, volatility, and execution.
A trading approach that capitalizes on the volatility created by economic news releases and announcements.
Prop Firm Impact: During high-impact news events, most Prop Firms restrict trading or widen spreads violating these rules may void profits or lead to account suspension.
A major U.S. economic indicator showing the number of jobs added or lost, excluding farm workers, released monthly.
A derivative that gives the buyer the right, but not the obligation, to buy (call) or sell (put) an asset at a specific price within a set period.
Studying the actual orders in the market to understand supply and demand dynamics in real time.
When a trading model is too closely fitted to historical data, causing poor real-world performance because it fails to generalize to new data.
A decentralized market where financial instruments are traded directly between parties without a central exchange.
An economic indicator derived from surveys of manufacturing and services firms, reflecting business conditions.
A financial contract giving the holder the right to sell an asset at a set price before expiration.
The use of mathematical models, statistics, and computational algorithms to analyze financial markets and develop automated strategies.
A monetary policy where central banks inject liquidity into the economy by purchasing government securities or assets.
A strategy using mathematical models, statistics, and data analysis to identify profitable trading opportunities.
Adjusting the composition of a trading portfolio to maintain the desired level of risk or asset allocation.
An option Greek measuring sensitivity of an option’s price to changes in interest rates.
A metric that measures profitability relative to the risk taken, often calculated using ratios like the Sharpe or Sortino ratio.
The study of market psychology and trader behavior using data from news, reports, or social media to predict price movements.
Metrics used to measure risk-adjusted return. The Sharpe Ratio uses total volatility, while the Sortino Ratio only considers downside volatility.
Prop Firm Impact: Prop firms value not just profit, but how you make it. A high Sharpe/Sortino Ratio proves your strategy is efficient and manages risk well.
A rare situation where high inflation occurs alongside stagnant economic growth and high unemployment.
A quantitative strategy that exploits statistical mispricings between related financial instruments.
A derivative contract where two parties exchange cash flows, often based on interest rates or currencies.
A rule-based approach using algorithms or predefined conditions for entries and exits, minimizing emotional bias in trading decisions.
The risk of rare, extreme events that lie beyond the normal distribution curve, such as flash crashes or unexpected geopolitical events.
An option Greek representing time decay, indicating how much an option loses value as it approaches expiration.
The process of controlling open trades by adjusting stop losses, take profits, or scaling positions based on market behavior.
Prop Firm Impact: Effective trade management is key for prop traders to stay within risk limits and maximize profit potential while protecting the account balance.
A statistical measure used to estimate the potential loss in value of a portfolio over a defined period for a given confidence interval.
Vega measures an option’s sensitivity to volatility. Rho measures its sensitivity to interest rates.
A phenomenon where periods of high volatility are followed by high volatility, and calm periods follow calm often seen in financial time series data.
A graphical representation showing how much trading activity occurred at different price levels over a specific time frame.
Prop Firm Impact: Helps traders identify key support and resistance zones, improving precision in challenge trading strategies.
An intraday indicator showing the average price of an asset weighted by volume, often used by institutions.
A graph that shows the relationship between interest rates and the maturity of debt securities, used to forecast economic conditions.
A statistical measure that indicates how many standard deviations a data point is from the mean often used to detect anomalies in market returns or trade performance.
At Verso Prop Firm, everything we do is built around you. We provide the capital, tools, and support so you can focus on what really matters: trading your way to success.
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