Once you understand what you're holding, trading is about making the same kind of decision consistently instead of reacting to whatever the chart is doing today: reading what an indicator is actually telling you, knowing which regime you're in (trending, mean-reverting, or choppy), and sizing and protecting every position the same way every time. Most of a trader's edge, or lack of one, lives in these mechanics, not in any single indicator.
Trading terms
Relative Strength Index (RSI)A 0-100 momentum oscillator measuring the speed and size of recent price moves, used to spot overbought/oversold conditions.Moving Average (SMA / EMA)A smoothed price line. The Simple Moving Average weights every bar equally; the Exponential Moving Average weights recent bars more heavily.Golden Cross / Death CrossA golden cross is a shorter moving average crossing above a longer one (bullish signal); a death cross is the reverse.MACDMoving Average Convergence/Divergence: the gap between two EMAs, plus a signal line, used to spot momentum shifts.Bollinger BandsA moving average with two bands plotted a set number of standard deviations above and below it, tracking how stretched price is.Z-ScoreHow many standard deviations the current price is from its recent rolling average, a statistical measure of how stretched a move really is.Average Directional Index (ADX)A 0-100 reading of trend strength, regardless of direction, the indicator built specifically to tell a real trend from chop.Supertrend IndicatorAn ATR-band trend indicator that flips between a line above price (downtrend) and below price (uptrend), giving a clear visual trend flag.VWAP (Volume-Weighted Average Price)The average price paid for an asset over a session, weighted by the volume traded at each price, a real-time "fair value" benchmark.Volume SpikeTrading volume on a bar well above its recent average, used as a confirmation filter that a price move has real conviction behind it.Average True Range (ATR)A volatility measure: the average of how far price has moved (high to low, or from the prior close) over recent bars.DrawdownThe decline from a portfolio's peak value to its lowest point since, the real, lived cost of a losing stretch.Position SizingHow much capital goes into a single trade, the decision that determines whether a losing streak is survivable or account-ending.Kelly CriterionA formula for the mathematically optimal fraction of capital to risk per bet, given a known win rate and payoff ratio.Risk Per TradeThe share of total capital a single trade can lose if its stop is hit, the dial that ties position size to the stop distance.Stop-LossA predetermined exit price that closes a losing position before the loss grows further.Chandelier ExitA trailing stop set a fixed ATR multiple below the highest high since entry, it only ever moves up, never down.Market RegimeThe prevailing character of a market, trending up, trending down, or range-bound/choppy, that determines which strategies actually have an edge right now.Choppy MarketA range-bound market with no sustained direction, the regime where trend-following strategies tend to lose money to whipsaws.Trend FollowingA strategy style that buys strength and rides existing momentum, on the premise that a move in progress is more likely to continue than reverse.Mean ReversionA strategy style that bets a stretched price snaps back toward its recent average, the opposite premise to trend following.WhipsawA sharp price move that reverses direction almost immediately, stopping out a position shortly after entry, the characteristic failure mode of trend strategies in choppy markets.Breakout TradingEntering a position when price moves decisively beyond a defined level (a prior high/low, or a tight consolidation range).Opening Range Breakout (ORB)An intraday strategy that marks the high/low of the first few minutes of a session, then trades a break beyond that range.NR7 (Narrow Range 7)A pattern where the current bar has the smallest high-low range of the last 7 bars, read as a volatility "coil" ahead of an expansion.Momentum TradingBuying assets that have recently performed strongly, on the premise that recent winners tend to keep winning over the near term.Cross-Sectional MomentumRanking a basket of assets by recent return and rotating capital into the strongest performers, out of the weakest, a relative, not absolute, bet.Statistical Arbitrage (Stat-Arb)Trading the statistical relationship between two or more related assets, long the relatively cheap one, short the relatively rich one, rather than taking a directional bet on either.ScalpingA very short-term trading style aiming for small, frequent profits on fast intraday moves, usually in and out of a position within minutes.SlippageThe difference between the price a strategy expects to trade at and the price it actually fills at, a real, unavoidable cost of trading.Round-Trip CostThe total cost of entering and exiting a position, trading fees plus slippage on both legs, expressed as a single percentage.Profit FactorGross profit divided by gross loss, a single number summarizing whether winners meaningfully outweigh losers, independent of win rate.Win RateThe percentage of trades that close profitably, informative, but meaningless without knowing the size of wins versus losses too.ExpectancyThe average amount a strategy makes or loses per trade, net of costs, the single number that answers whether this is actually worth doing.Limit OrderAn order to buy or sell at a specified price or better, guarantees the fill price but not that the order fills at all.Market OrderAn order to buy or sell immediately at the best available price, prioritizes certainty of execution over price control.Basis Points (bps)One hundredth of one percent (0.01%), the standard unit for quoting small costs and rates precisely without a string of decimal places.Cost DragThe cumulative erosion of a strategy's returns by trading costs (fees plus slippage) compounding across many trades, worse for high-frequency strategies.Sharpe RatioA risk-adjusted return measure: average return divided by the volatility (standard deviation) of those returns, higher means more return per unit of risk taken.Compound Annual Growth Rate (CAGR)The smoothed annual growth rate that would take a starting value to an ending value over a period, assuming steady compounding, useful for comparing returns across different timeframes.Perpetual FuturesA derivative contract that tracks an asset's price with no expiry date, using a periodic funding payment between longs and shorts to keep it anchored to spot.Funding RateThe periodic payment exchanged between long and short holders of a perpetual futures contract, the mechanism that keeps its price anchored to spot.
Read next
Position Sizing by Crypto Market RegimeThe same position size behaves very differently in a bull run, bear market, or choppy range - here is how sizing should change with the regime.What Is a Market Regime in Crypto Trading?A market regime is the current behavioral state of a market - trending, ranging, or volatile - and it determines which trading strategies can actually work.
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Educational content, not investment advice. zengtrade is paper-first and non-custodial.