Glossary

Futures Trading Glossary

Key terms and definitions every futures trader should know — from E-mini contracts to risk management and beyond.

60/40 Tax Rule

The 60/40 tax rule under IRS Section 1256 provides that gains and losses on regulated futures contracts are treated as 60% long-term and 40%...

Indicators

ADD (Advance/Decline)

The Advance/Decline line (ADD) tracks the cumulative difference between the number of advancing and declining stocks on an exchange like the NYSE. A...

Strategies

Algorithmic Trading

Algorithmic trading uses computer programs to execute trades based on predefined rules involving price, volume, timing, or mathematical models....

Indicators

ATR (Average True Range)

The Average True Range (ATR) is a volatility indicator that calculates the average range between the high and low of each bar, accounting for gaps. A...

Strategies

Automated Trading

Automated trading refers to the use of software (trading bots) to execute trades automatically based on a coded strategy, without requiring manual...

Strategies

Backtesting

Backtesting is the process of testing a trading strategy against historical market data to evaluate how it would have performed in the past. By...

Market Structure

Bear Market

A bear market is a prolonged period of declining prices, generally defined as a drop of 20% or more from a recent high. Bear markets are driven by...

Indicators

Bollinger Bands

Bollinger Bands are a volatility indicator consisting of a simple moving average (middle band) flanked by two standard deviation bands above and...

Market Structure

Bull Market

A bull market is a sustained period during which asset prices rise broadly, typically defined as a 20% or greater increase from a recent low. Bull...

Indicators

Candlestick Chart

A candlestick chart is a type of financial chart that displays the open, high, low, and close prices for a given time period. Each candle's body...

Platforms

CBOT (Chicago Board of Trade)

The Chicago Board of Trade (CBOT) is one of the world's oldest futures and options exchanges, now a division of the CME Group. Originally founded in...

Market Structure

Clearinghouse

A clearinghouse is a financial institution that acts as an intermediary between buyers and sellers in the futures market, guaranteeing the...

Platforms

CME (Chicago Mercantile Exchange)

The Chicago Mercantile Exchange (CME) is the world's largest financial derivatives exchange, operating as part of the CME Group. It lists futures and...

Risk Management

Day Trading Margin

Day trading margin is a reduced margin rate offered by futures brokers for positions opened and closed within the same trading session. Because...

Contracts

E-mini NASDAQ 100 (NQ)

The E-mini NASDAQ 100 (NQ) is a futures contract traded on the CME that tracks the NASDAQ-100 index, which comprises the 100 largest non-financial...

Contracts

E-mini Russell 2000 (RTY)

The E-mini Russell 2000 (RTY) is a futures contract based on the Russell 2000 index, which measures the performance of 2,000 small-cap U.S....

Contracts

E-mini S&P 500 (ES)

The E-mini S&P 500 (ES) is an electronically traded futures contract on the CME that represents one-fifth the value of the standard S&P 500 futures...

Contracts

Futures Contract

A futures contract is a standardized legal agreement to buy or sell a specific asset at a predetermined price on a set future date. Futures are...

Risk Management

Initial Margin

Initial margin is the minimum amount of funds a trader must deposit to open a new futures position. Set by the exchange (e.g., CME), it acts as a...

Platforms

Kinetick

Kinetick is a market data service designed specifically for NinjaTrader, providing real-time and historical data for futures, stocks, and forex. It...

Market Structure

Liquidity

Liquidity refers to how easily an asset can be bought or sold without significantly affecting its price. Highly liquid markets like the E-mini S&P...

Risk Management

Maintenance Margin

Maintenance margin is the minimum account balance a trader must maintain to keep a futures position open. If the account equity drops below this...

Risk Management

Margin

Margin in futures trading is the good-faith deposit required to open and maintain a position, not a down payment or loan. It is set by the exchange...

Indicators

Market Internals

Market internals are a collection of breadth and volume indicators — including TICK, ADD, and VOLD — that measure the health and participation of the...

Contracts

Micro E-mini Futures

Micro E-mini futures are scaled-down versions of E-mini index futures contracts offered by the CME Group, at one-tenth the size of their E-mini...

Contracts

Mini Dow (YM)

The Mini Dow (YM) is a futures contract that tracks the Dow Jones Industrial Average, trading on the CBOT division of the CME Group. Each point of...

Indicators

Moving Average

A moving average smooths price data by calculating the average closing price over a specified number of periods. The two most common types are the...

Platforms

NinjaTrader

NinjaTrader is a professional-grade trading platform widely used for futures trading. It offers advanced charting, market analysis tools, strategy...

Market Structure

Order Book

The order book (also called the depth of market or DOM) is a real-time list of all pending buy and sell orders for a futures contract at various...

Risk Management

PDT Rule (Pattern Day Trader)

The Pattern Day Trader (PDT) rule is a FINRA regulation requiring that stock and options traders who execute four or more day trades within five...

Risk Management

Position Sizing

Position sizing is the process of determining how many contracts to trade on a given setup based on account size, risk tolerance, and the distance to...

Risk Management

Risk-Reward Ratio

The risk-reward ratio compares the potential loss of a trade (distance to stop loss) to the potential gain (distance to take profit target). A 1:2...

Indicators

RSI (Relative Strength Index)

The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and magnitude of recent price changes on a scale from 0 to 100....

Market Structure

Section 1256 Contracts

Section 1256 of the Internal Revenue Code governs the tax treatment of regulated futures contracts, foreign currency contracts, and certain options....

Strategies

Slippage

Slippage is the difference between the expected price of a trade and the actual price at which it is executed. It commonly occurs in fast-moving...

Market Structure

Spread

The spread is the difference between the best available bid (buy) price and ask (sell) price in a market. Tighter spreads indicate higher liquidity...

Risk Management

Stop Loss

A stop loss is a predefined order that automatically closes a position when the price moves against the trader by a specified amount. It is the most...

Risk Management

Take Profit

A take profit order automatically closes a position when the price reaches a predetermined target level in the trader's favor. It ensures profits are...

Indicators

TICK (NYSE TICK Index)

The NYSE TICK index measures the number of stocks on the New York Stock Exchange trading on an uptick minus those trading on a downtick at any given...

Platforms

TradingView

TradingView is a web-based charting and social networking platform used by millions of traders worldwide. It offers powerful charting tools,...

Risk Management

Trailing Stop

A trailing stop is a dynamic stop loss that automatically moves in the direction of a profitable trade, locking in gains while still allowing the...

Market Structure

Volatility

Volatility measures the degree of price variation over time. High volatility means large price swings, creating more trading opportunities but also...

Indicators

VOLD (Volume Delta)

VOLD, or Volume Delta, measures the difference between up-volume and down-volume on the NYSE. Up-volume is the total share volume of advancing...

Indicators

VWAP (Volume Weighted Average Price)

VWAP is the average price of an asset weighted by volume over a specific period, typically a single trading day. It represents the true average price...