Glossary A–Z
Order flow and trading glossary
136 terms used by order-flow and volume traders, from absorption to XAUUSD, each explained simply with a link to where the academy covers it in depth.
A
Absorption · Heavy aggressive trading at a price that fails to move the price, because large passive orders on the other side take…Acceptance · The market trading at a price with both time and volume, showing that participants agree the price is fair for now. The…Active month (lead month, front month) · The contract month of a futures product where most volume and liquidity are concentrated at a given time. Order-flow…Aggressor · The side of a trade that crossed the spread with a market order (or a marketable limit order) and "hit" a resting…Anchored VWAP · A VWAP that starts its calculation at a chosen event (a major data release, a swing high or low, the start of a week)…Ask (offer) · The lowest price at which someone is currently willing to sell. You buy at the ask with a market order.Asia session · The part of the gold trading day from the 18:00 ET reopen until around the London open; usually lower volume, with…Auction Market Theory (AMT) · A way of understanding markets as continuous two-sided auctions whose purpose is to facilitate trade: price moves to…
B
Back-adjustment · A method of building a continuous futures chart by shifting past prices by the gap at each roll, so the series has no…Backtest · Running a strategy's rules over historical data to see what would have happened. Easy to get wrong without any visible…Balance · A market state where price rotates within a range (a bracket) and both buyers and sellers find the prices acceptable.…Bar delta · Aggressive buy volume minus aggressive sell volume within one bar. A bar with positive delta can still close lower.Base rate · How often an outcome happens anyway, without any pattern or signal. A pattern is only informative if what follows it…Basis (GC–XAUUSD gap) · In this book, the difference between the gold futures price (GC, active month) and the spot or CFD price (XAUUSD). In…Bid · The highest price at which someone is currently willing to buy. You sell at the bid with a market order.Big trade · A large print on the tape. One real large order often prints as many small fills, so large prints and large orders are…Bracket · A trading range in which the market is in balance.b-shaped profile · A volume profile with most volume at the bottom and a thin upper part, often associated with long liquidation (longs…
C
CFD (Contract for Difference) · An agreement with your broker to settle the difference between the opening and closing price. You own nothing; the…Clearing house · The central counterparty that guarantees both sides of every exchange-traded futures trade and handles daily…COMEX · The CME Group exchange where gold futures (GC, MGC) are listed.Composite profile · A volume profile built over several sessions (a week, a month, or a custom range) to show longer-term value.Confluence · Two or more independent reasons pointing to the same price zone, such as yesterday's VAL coinciding with the London…Continuous contract · A chart that joins successive futures contracts into one series (for example "GC1!" or "@GC"). Useful for long-term…Cost of carry · The cost of holding gold until a future date (mainly interest, minus any lease income). It is why the futures price…CPI (Consumer Price Index) · The monthly US inflation report, usually released at 08:30 ET. A major news event for gold.Cumulative Volume Delta (CVD) · The running total of delta over a session or another chosen period. Its value depends on where it starts (its anchor).
D
Daily loss limit · A pre-set loss, usually in R, after which you stop trading for the day.Deflated Sharpe Ratio (DSR) · A Sharpe ratio adjusted for the number of trials, the spread of their results, non-normal returns and test length…Delta · Aggressive buy volume minus aggressive sell volume over a period. It measures who was more urgent, not who was "right".Delta-POC · The price inside a footprint bar with the largest absolute delta: where one-sided aggression was most concentrated. A…Developing profile · A volume profile (and its POC, VAH and VAL) as it stands at a given moment during the session, before the session is…Diagonal imbalance · A footprint imbalance computed by comparing the ask volume at one price with the bid volume one tick lower (or the bid…DOM (Depth of Market) · A ladder display of resting limit orders at each price above and below the market, usually with the ability to place…Double distribution · A profile with two separate areas of value connected by a thin, low-volume section, typical of a day that moved from…Drawdown · The fall in account value from its highest point. Prop firms use static, end-of-day trailing or intraday trailing…
E
Embargo · A gap left between training, validation and test periods so that overlapping information cannot leak from one period…Excess · A decisive end to an auction in one direction: price overshoots, meets strong opposition and leaves quickly, leaving a…Exhaustion · Aggressive volume thinning out at the extreme of a move: the side pushing price runs out of urgency.Expectancy · The average result per trade, best measured in R over many trades. More informative than the share of winning trades.
F
False positive · A signal that fires when the event it is supposed to detect did not happen. Every pattern has a false-positive rate…FIFO (first in, first out) · A matching rule where resting orders at the same price are filled in the order they arrived. Under FIFO, price touching…Fill · The execution of an order, in whole or in part.FOMC · The Federal Open Market Committee, which sets US interest rates. Statements are usually released at 14:00 ET, followed…Footprint chart · A chart that shows, for each price inside a bar, how much traded at the bid and how much at the ask, so you can see…Forward test · Running frozen rules on data that did not exist when the idea was built, either on paper (simulated) or live at minimum…
G
GC · The standard COMEX gold futures contract: 100 troy ounces, tick $0.10 = $10 per contract.Globex · CME Group's electronic trading platform. Gold trades on Globex from Sunday 18:00 to Friday 17:00 ET with a daily halt…
H
Heatmap (liquidity heatmap) · A chart that colours resting order-book size at each price over time: the order book with memory. Shows where liquidity…High Volume Node (HVN) · A price area on a profile where a lot of volume traded; a zone of agreement where price tends to slow down.Hindsight bias · Believing, after the fact, that an outcome was predictable, or rewriting your reasons to match the outcome. Writing…
I
Iceberg order · A large limit order that shows only a small part (the display quantity) in the book and refills from a hidden reserve…Imbalance (footprint) · A footprint row where one side's aggressive volume exceeds the other side's by a chosen ratio (commonly between 1.5 and…Initial balance (IB) · The price range of the first hour of the main session. In this book, for gold, 08:20–09:20 ET (the first hour of the…Initial margin · The deposit required to open a futures position; collateral, not the price of the contract. Set by the exchange (with…
L
Layering · Placing several orders at multiple prices to create a false impression of supply or demand, with the intent to cancel…Lee-Ready algorithm · A method from 1991 for classifying trades as buyer- or seller-initiated when the aggressor side is not reported…Leverage · Controlling a large position (notional value) with a small deposit. It magnifies both gains and losses; futures losses…Limit order · An order to buy or sell at a specified price or better. It rests in the book (passive) until filled or cancelled.Liquidity · How easily you can trade a meaningful size without moving the price much; in practice, the resting size near the…London session · The part of the gold day from about 03:00 ET, when London, the centre of the physical gold market, is active. The…Long · A position that profits if the price rises. You buy first and sell later to close.Look-ahead bias · Using information in a decision (or in a backtest) that was not yet available at the moment of that decision.Low Volume Node (LVN) · A price area on a profile with little volume, where the market moved quickly; price often travels through such areas…
M
MAE / MFE · Maximum adverse excursion (how far a trade went against you) and maximum favourable excursion (how far it went in your…Maintenance margin and margin call · The minimum account balance needed to keep a futures position open. Falling below it triggers a margin call or forced…Market by Order (MBO, Level 3) · Market data that shows every individual order in the book (add, modify, cancel, fill), each with an anonymous ID and…Market by Price (MBP, Level 2) · Market data that shows the total resting size at each of several prices, without breaking it down into individual…Market order · An order to buy or sell immediately at the best available price. It crosses the spread and is the aggressor.Mark-to-market · Daily settlement of futures profits and losses based on the official settlement price: losers pay winners every day…MGC (Micro Gold) · The COMEX micro gold futures contract: 10 troy ounces, tick $0.10 = $1 per contract, one tenth of GC. Separate order…Multiple testing · Testing many variants of an idea. The more variants you test, the more likely the best one looks good by chance. Every…
N
Naked POC (virgin POC) · A point of control from an earlier session that price has not traded at since. "Naked POCs always get filled" is a…New York session · The part of the gold day from about 08:20 ET (the traditional COMEX day session) to settlement, including 08:30 ET US…NFP (Non-Farm Payrolls) · The monthly US Employment Situation report, usually released on the first Friday of the month at 08:30 ET.Notional value · The full value of a futures position: price × contract size × number of contracts. One GC at $4,200 has a notional…
O
Opening types · James Dalton's classification of how a session starts: Open-Drive, Open-Test-Drive, Open-Rejection-Reverse and…Order book · The list of all resting limit orders waiting at each price, bids below the market and asks above it.Order Flow Imbalance (OFI) · A research measure (Cont, Kukanov and Stoikov, 2014) of the imbalance between supply and demand pressure at the best…Other timeframe (OTF) participant · A longer-term participant (fund, commercial, institution) whose activity moves price out of balance; contrasted with…Out-of-sample (OOS) · Data not used to build or choose a strategy. A locked OOS period is examined only once, after the final version is…Overfitting · Tuning a strategy so closely to past data that it captures noise instead of a real pattern.Overnight high and low (ONH/ONL) · The highest and lowest prices of the overnight (Asia and London) part of the session, before the New York day session.
P
Paper trading · Simulated trading with live data and no real orders. Cheap, but fills are optimistic because simulated orders are not…PBO (Probability of Backtest Overfitting) · An estimate of how likely a strategy-selection process is to choose a configuration that was best in-sample but below…PDH / PDL · Prior day's high and prior day's low. Common reference levels.POC (Point of Control) · The price with the most traded volume in a profile: the price of greatest agreement.Poor high / poor low · A session extreme without excess: the profile is flat at the edge, suggesting the auction in that direction was not…Position · A trade that is currently open. Profit or loss is final only when the position is closed.Position sizing · Choosing the number of contracts so that being wrong costs a fixed, acceptable amount: allowed risk ÷ (stop distance in…Pre-registration · Writing down and dating the hypothesis, rules, data, success criteria and maximum number of variants before seeing any…Prop firm · A company that gives traders access to a funded account after an evaluation, usually with strict drawdown and…P-shaped profile · A volume profile with most volume at the top and a thin lower part, often associated with short covering (shorts…Pulling and stacking · Resting orders being cancelled as price approaches (pulling) or added in front of price (stacking). Visible on the DOM…
Q
R
R / R-multiple · R is your initial risk on a trade (what you lose if the stop is hit). Results are expressed as multiples of R: −1R is a…Range extension · Price moving beyond the initial balance range, often a sign that other-timeframe participants have become active.Real volume · The actual number of contracts traded on a central exchange, as in futures. Compare tick volume.Rejection · Price moving away quickly from a level with little time or volume spent there; the market refused those prices.Relative volume · Volume compared with the typical volume at the same time of day on previous days. Gold's volume has a strong daily…Revenge trading · Trading to "win back" losses, usually with larger size, looser criteria and no plan. Daily loss limits exist largely to…Roll · Moving a futures position from the expiring contract month to the next one. Volume migrates during roll periods.RTH (Regular Trading Hours) · For gold in this book, the New York day session of about 08:20–13:30 ET, as opposed to the full 23-hour Globex session.
S
Settlement price · The official daily price used for mark-to-market. For GC it is determined from trading in the 13:29–13:30 ET window…Sharpe ratio · Average return divided by the standard deviation of returns, usually annualised: return per unit of variability.Short · A position that profits if the price falls. You sell first and buy back later to close.Single prints · In a TPO profile, prices traded during only one time period, showing the market moved through quickly. In the middle of…Slippage · The difference between the price you expected and the price you actually got, usually on market and stop orders in fast…Spoofing · Placing orders with the intent to cancel them before they execute, to mislead other participants about supply or…Spread · The difference between the best ask and the best bid. A cost every time you cross it.Stacked imbalance · Several imbalances on the same side in consecutive price rows of one footprint bar (commonly three or more). "Three…Stop order · An order that becomes active when a trigger price is reached. A stop-market order then executes as a market order and…Survivorship bias · A distorted sample of the past caused by leaving out what did not "survive": delisted companies, failed strategies…Sweep · One aggressive order (or a rapid burst) taking out liquidity at several consecutive prices in a fraction of a second.…
T
Tail · Single prints at the extreme of a session profile, showing excess and the end of an auction in that direction.Tape (Time & Sales) · The running list of every trade: time, price, size and (in futures) aggressor side.Tape speed · How fast trades are printing. Bursts and quiet periods carry information about urgency.Tick · The minimum price increment of a contract. For gold futures, $0.10 per ounce.Tick rule · A method of classifying a trade as a buy or sell by comparing its price with the previous trade's price (uptick = buy…Tick size · See Tick. $0.10 for both GC and MGC.Tick value · The dollar value of a one-tick move for one contract: $10 for GC, $1 for MGC.Tick volume · The number of price changes in a feed over a period, used as a stand-in for volume in decentralised markets such as…TPO / Market Profile · A profile built from time (Time Price Opportunities, usually 30-minute periods marked by letters) rather than from…Trailing drawdown · A drawdown floor that rises with the account's peak and never falls. End-of-day trailing follows the highest closing…Trapped traders · Traders who entered aggressively at a price that the market then rejected, leaving them on the wrong side and…Trend day · A day of persistent directional movement with a thin, elongated profile and little time spent at any price.
U
V
Value area (VA, VAH, VAL) · The price range containing about 70% of a session's volume, built outward from the POC. Its upper edge is the value…Value migration · The movement of value areas from day to day: higher, lower, overlapping or unchanged.Velocity Logic · A CME mechanism that can briefly pause matching when price moves too far within a very short time, as can happen at…Veto · In this book's framework, the decision not to act because the order flow at a level contradicts your hypothesis. A…VWAP (Volume-Weighted Average Price) · The average price traded over a period, weighted by volume at each price: Σ(price × volume) ÷ Σ(volume). For gold, its…VWAP bands · Lines drawn a number of volume-weighted standard deviations above and below VWAP, describing how stretched price is…
W
Walk-forward analysis · Repeatedly tuning on one period and testing on the next, moving through time, to see whether an idea is stable across…Wyckoff effort vs result · The principle that effort (volume) should produce a result (price movement); when large effort produces little result…