Glossary of A81K

Jargon and Terminology Used in this Journal.

Presented in Alphabetical order.

You can CTRL+F:type the term you want to find and find in the page or scroll through the various terms and get familiar with them.

Algorithmic (algo) Trading: Trading defined rules programmed into code to be executed automatically when conditions are met. Examples are Strategy algorithms, execution algorithms, market-making algorithms, iceberg algos, risk management algos, and position management algos, just to name a few.

Alpha: Excess rate of return beyond that of the market or a benchmark one calculates their returns against. Usually denoted by the Greek letter "α".

Asymmetric: Not symmetric, even. Eg. A circle is symmetric, and A triangle with a narrow base and a high apex is asymmetric relative to its height. Mountain ranges are asymmetric, a reward to risk of $1000 while risking $100 is asymmetric.

Asymmetric_Vol: The keeper of this online journal. Pseudonym derived from the words Asymmetric & volatility. They prefer asymmetric returns and high-volatility environments.

Day Trading: The act of trading in a session and flattening (closing out) all trades before the close to eliminate any overnight risk. A commission-intensive endeavor.

Derivative(s): Financially engineered contracts with prices derived from underlying assets, such as stocks/equities of a publicly traded company. They have a finite lifespan, meaning they exist for shorter periods than the underlying asset they're derived from. Contracts tracking a price of an asset (financial or otherwise) or commodity brokered between two counterparties on or off-exchange in a buy/sell transaction with 1 party obligated to deliver the asset/raw commodity at an expiration date or settle in cash if those are the terms of the settlement. Examples: options, futures, options on futures, CFDs, interest rate swaps, credit default swaps & many others.

Emini: Mini-sized futures contracts that are usually 1/10th the size of full-sized futures contracts. Examples are emini sp500, emini nasdaq100, etc.

Leverage: The ability to control a larger position relative to your account cash balance, in stocks you can command 2 to 4x your capital. Futures you can go up to 400%+. Examples of leverage outside of futures: Credit Cards are a form of leverage, and mortgages are a form of leverage. You borrow buying power to magnify your own. In the simplest sense if you have 1 but can use that 1 to control more than 1, then you have leverage at work no matter how small, it's still greater than the cash/collateral amount.

Margin: Capital put up to maintain a futures position, usually a % of the notional value of the contract ranging from ~10-50% based on broker discretion. The lower the margin requirement, the greater leverage you have.

Order Flow Trading: Trading based on the flow of trading orders, using either Time & Sales, order flow footprint charts, etc. All used to see granular data visualizations in order to make better trading decisions.

Oscillator: An indicator that gyrates within a defined range, think of RSI, Stochastics. The indicator hints at a shift in direction. Some can be based on a 0 line or overbought/oversold conditions at the extremes of the range, usually the upper and lower limits.

Positive expectancy: The expectancy of strategy producing positive returns in the future. Usually defined by backtests and then forward tests.

Risk-off: taking off risk, usually taking a short position in the market, or selling off long positions, hence risk taken off. The opposite of risk-on.

Risk-on: taking a risk, usually taking a long position in the market. The opposite of risk-off.

Scalping: An intraday strategy looking to capture intra-day short moves that attempt to capture the spread + commission. Traders usually utilize Depth of Market or Orderflow Tools for their scalping operations. This is the most commission-intensive form of trading aside from high-frequency trading.

Swing Trading: Trading involved short to medium-term market swings lasting days, weeks, or even months. Traders who trade these trade at a lower frequency than Day traders.

Trend Trading(following): Long-term position trading, very low frequency, trades usually last months or even years. Traders of this style have a high tolerance for severe drawdowns. They are in search of asymmetric returns that are comparable to hitting a walk-off grand slam in the 9th inning of a World Series Game 7 down 4 to 1 with a 3:2 count.

Volatility (vol): The fluctuations in the price of an asset class traded on the exchange. Conditions can be high, normal, or low volatility. With high being with wider spreads and faster-moving markets, low volatility has normal spreads but low trading volume, normal vol equals normal spreads and moderate trading volume averaged over longer periods of time relative to shorter segments of high and low vol.