Advanced Trading Jargons

Trading is a complex world with its own set of unique jargon and terminology. While some trading terms are commonly used and well-known, there are many lesser-known terms that are equally important for traders to understand. In this article, we will explore some lesser-known advanced trading jargons and their meanings.

Dark pool:

A dark pool is a private electronic trading platform where buyers and sellers can trade securities anonymously. Dark pools are used by institutional investors to avoid market impact when trading large orders.

Time and sales:

Time and sales is a real-time data feed that shows the time, price, and volume of trades for a particular security. It is commonly used by day traders to analyze market activity and identify trading opportunities.

VWAP:

VWAP stands for Volume-Weighted Average Price. It is a benchmark used by traders to compare their execution price to the average price of a security over a given time period.

Market depth:

Market depth refers to the number of buy and sell orders at different price levels for a particular security. It is used by traders to gauge market sentiment and identify potential support and resistance levels.

Level 2:

Level 2 is a trading platform feature that shows real-time quotes for bid and ask prices, as well as the number of shares available at each price level. It is used by traders to monitor market depth and identify trading opportunities.

Cross:

A cross is a trade where the buyer and seller agree on a price without going through an exchange. Crosses are typically used for large block trades that would otherwise have a significant market impact.

Implied volatility:

Implied volatility is a measure of the expected volatility of a security based on its option prices. It is used by traders to gauge market sentiment and assess the likelihood of large price movements.

Block trade:

A block trade is a large trade that involves a significant number of shares or a high dollar amount. Block trades are typically executed off-exchange and are used by institutional investors to minimize market impact.

Spread:

Spread refers to the difference between the bid and ask prices for a security. It is a measure of market liquidity and trading costs.

Gamma:

Gamma is a measure of an option's sensitivity to changes in the price of the underlying security. It is used by options traders to manage risk and optimize their positions.

Stop limit order:

A stop limit order is a type of order that combines a stop order and a limit order. It is used by traders to set a maximum price for a buy order or a minimum price for a sell order.

Dark iceberg orders:

Dark iceberg orders are large buy or sell orders that are hidden from the market. They are executed in small increments to avoid market impact.

Market on close (MOC) order:

A market on close order is an order that is executed at the closing price of the market. It is used by traders to close out positions at the end of the trading day.

Tick size:

Tick size refers to the minimum price movement for a particular security. It is important for traders to understand tick sizes when placing orders and managing risk.

Limit up/limit down:

Limit up/limit down refers to the maximum price movement allowed for a particular security during a single trading day. These limits are put in place to prevent extreme price movements and protect investors.

Clean price:

Clean price refers to the price of a bond without including accrued interest. It is used by traders to calculate the actual cost of a bond.

Short selling:

Short selling is a trading strategy where a trader borrows shares of a security and sells them with the expectation of buying them back at a lower price to make a profit.

Short squeeze: 

A situation in which short sellers are forced to cover their positions due to a sharp rise in the price of the security.

Margin call: 

A demand from a broker for additional funds to cover potential losses in a trader's account.

Conclusion

These advanced trading jargons are used by professional traders to execute complex trading strategies. While some of these terms may be unfamiliar to novice traders, understanding them can be essential to making informed trading decisions.