The Aletheia Investments & Trading Institute· Trading Lab 101

Trading Strategies Vocabulary Map

This map organizes the core vocabulary from Lessons 1–15 on market trading strategies. Each panel clusters terms by how traders think: short-term price action, instruments & global markets, and long-term fundamentals & growth.

From single terms to strategy systems: seeing how trading vocabulary weaves across methods.
Core Idea
Vocabulary as a Trading Mental Model

Each term in this unit is more than a label; it is a cognitive tool traders use to read markets, design strategies, and manage risk. The same word - like volatility, liquidity, or leverage - can behave differently across day trading, swing trading, options, futures, Forex, and long-term investing. This page makes those relationships visible.

Price Action & Short-Term
Instruments & Markets
Fundamentals & Long-Term
Layer 1 — Price Action
Short-Term Trading & Chart Behavior

Terms used most often in day trading, swing trading, scalping, momentum, and trend trading. These concepts describe how prices move on intraday and multi-day charts.

Definition
How easily an asset can be bought or sold without causing a big change in its price. High liquidity means many buyers and sellers are active at each price level.
Where it appears
Critical in day trading and scalping, where traders need fast entries and exits. Also important in momentum and trend strategies when volume surges.
“Day traders look for liquid stocks so they can exit quickly if the trade turns against them.”
Definition
The speed and size of price movements over a period of time. High volatility means prices move quickly and unpredictably; low volatility means prices are relatively stable.
Where it appears
Drives opportunity in day trading and momentum, affects pricing in options, and amplifies risk in futures and Forex.
“After the earnings announcement, volatility spiked and intraday candles became much larger.”
Definition
A price move that pushes cleanly above resistance (or below support) with strength, often starting a new short-term trend.
Where it appears
Core pattern in day trading, momentum trading, and swing/trend trading, especially when confirmed by strong volume.
“The breakout above yesterday’s high gave day traders an entry for a quick move.”
Definition
A price level where buying interest has repeatedly been strong enough to stop price from falling further.
Where it appears
Used in swing and trend trading as entry zones and stop-loss reference points. Often paired with pullbacks.
“The stock bounced off support three times, signaling a potential swing entry.”
Definition
A price level where sellers have repeatedly been strong enough to stop price from rising further.
Where it appears
Used to identify breakout levels and target zones in day and swing trading.
“Once price broke through resistance, momentum traders piled into the move.”
Definition
A temporary move against the main trend, often used as a lower-risk entry point in an uptrend or downtrend.
Where it appears
Frequently used in swing, momentum, and trend trading for entries near moving averages or trendlines.
“The swing trader waited for a pullback to the 50-day moving average before entering.”
Definition
A large increase in the number of shares traded compared to normal levels, often confirming strong interest from traders and institutions.
Where it appears
A key confirmation signal in momentum, day, and trend trading, especially on breakouts.
“The breakout with a volume surge suggested real buying interest, not just a random spike.”
Definition
A way of comparing how a stock is performing versus the overall market or other stocks, often using a line or indicator.
Where it appears
Used heavily in momentum and trend trading to find stocks that are leading the market.
“The stock’s relative strength line rising during a flat market signaled strong momentum.”
Definition
A pattern where each new high and low is above the previous one—classic evidence of an uptrend.
Where it appears
Core structure in trend trading, also used in swing analysis to confirm overall direction.
“The sequence of higher highs and higher lows showed the trend was still healthy.”
Definition
Two roughly parallel lines drawn above and below price to show the range in which a trend has been moving.
Where it appears
Used by trend traders to identify buy zones (near the lower line) and profit-taking or caution zones (near the upper line).
“The stock’s steady rise inside the trend channel made it ideal for a trend-following position.”
Definition
The real-time stream of buy and sell orders hitting the market, often viewed through Level II or order book tools.
Where it appears
Essential to scalping, day trading, and some high-frequency and algorithmic strategies.
“Order flow showed buyers absorbing every dip, so the scalper took a quick long trade.”
Definition
The difference between the highest price buyers are willing to pay (bid) and the lowest price sellers are willing to accept (ask).
Where it appears
A key cost factor in scalping, day trading, options, and Forex.
“Tight spreads make scalping more practical because less movement is needed to become profitable.”
Definition
The smallest possible price movement allowed in a given market (for example, $0.01 in stocks or a specific value in futures).
Where it appears
Very important in futures trading and scalping, where tiny price changes can still represent large gains or losses.
“A two-tick move in that futures contract translated into a significant dollar swing because of the tick value.”
Layer 2 — Instruments
Instruments, Contracts & Global Markets

Terms used in options, futures, Forex, algorithmic trading, HFT, and arbitrage. These describe the “tools” traders use beyond ordinary stock ownership.

Definition
A contract that gives the buyer the right, but not the obligation, to buy an underlying asset at a specific price (strike) before a certain date.
Used in
Options trading to bet on rising prices or to control shares with less capital than buying the stock outright.
“The trader bought call options before earnings, expecting the stock to jump higher.”
Definition
A contract that gives the buyer the right, but not the obligation, to sell an underlying asset at a specific price (strike) before a certain date.
Used in
Options trading to profit from falling prices or to hedge downside risk on existing positions.
“They bought puts as insurance in case the market dropped sharply.”
Definition
The price at which the holder of an option can buy (call) or sell (put) the underlying asset if they exercise the contract.
Used in
Central to options trading; determines how “in the money” or “out of the money” a contract is.
“The call’s strike price was set just above the current share price to keep the premium affordable.”
Definition
The price paid to buy an option contract. It reflects time until expiration, volatility, and how close the strike price is to the current price.
Used in
Options trading as the upfront cost and as a signal of perceived risk or potential movement.
“Options had high premiums because volatility around the announcement was elevated.”
Definition
A set of risk measures that describe how an option’s price is expected to change with movements in the underlying price, time, interest rates, and volatility.
Used in
Advanced options strategies to manage risk and understand how sensitive a contract is to different market forces.
“High Theta meant the option would lose value quickly if the stock didn’t move soon.”
Definition
Money borrowed from a broker or set aside as collateral to control a larger position than could be bought with cash alone.
Used in
Futures, Forex, and some stock and options accounts to amplify buying power—and risk.
“Because of margin, a small price drop triggered a margin call on the futures position.”
Definition
Using borrowed money or contracts that control a large amount of assets with a smaller amount of capital, magnifying both gains and losses.
Used in
Built into futures and Forex, present in options, and possible with margin in stock accounts.
“Leverage allowed the trader to profit from a small move, but it also raised the risk of a large loss.”
Definition
A standardized agreement to buy or sell a specific quantity of an asset at a predetermined price on a set future date.
Used in
Futures trading to speculate on or hedge prices of commodities, indexes, currencies, and interest rates.
“One crude oil futures contract controls 1,000 barrels, so a small price move is magnified.”
Definition
The smallest standard unit of price movement in most currency pairs (often 0.0001 for major pairs).
Used in
Forex trading to measure gains, losses, and spreads.
“A 50-pip move in a standard lot can represent a large dollar change.”
Definition
The standardized number of currency units in a Forex trade (micro, mini, or standard lots).
Used in
Forex to control position size, risk, and how much each pip is worth.
“They traded a mini lot so each pip was worth less, keeping risk smaller.”
Definition
The most heavily traded currency pairs, usually involving the US dollar (like EUR/USD, GBP/USD, USD/JPY).
Used in
Forex as the most liquid and widely followed markets, often with tighter spreads.
“Beginners often start with major pairs because liquidity and spreads are better.”
Definition
A Forex strategy that borrows money in a low-interest-rate currency to invest in a higher-yielding currency, collecting the rate difference.
Used in
Forex as a medium- to long-term strategy based on interest rate differentials.
“The carry trade benefited from the widening gap between the two countries’ interest rates.”
Definition
A situation where the same or related assets trade at different prices in ways that shouldn’t persist in a perfectly efficient market.
Used in
Arbitrage, some HFT, and statistical strategies to lock in low-risk profits.
“The brief market inefficiency between two exchanges created an arbitrage opportunity.”
Definition
The process of prices that were out of line moving back together toward a fair relationship.
Used in
Core assumption behind arbitrage and pairs trading.
“The arbitrage trade profited when the two prices converged later in the day.”
Definition
Prices or indicators that move in different directions from each other, sometimes signaling an opportunity or warning.
Used in
Arbitrage (temporary mispricing) and momentum or trend analysis (indicator vs. price behavior).
“Indicator divergence suggested the momentum rally was losing strength.”
Layer 3 — Fundamentals
Position, Value, Dividend & Growth

Terms used in position trading, value strategies, dividend investing, and growth trading. These focus on company health, cash flows, and long-term potential.

Definition
A way of evaluating a company’s health by studying its financial statements, competitive position, industry, and growth prospects.
Used in
Position trading, value investing, dividend strategies, and some growth trading.
“Fundamental analysis showed strong cash flow and manageable debt, supporting a long-term position.”
Definition
The process of estimating what a company is truly worth, using metrics like earnings, assets, cash flow, and growth.
Used in
Especially important in value and growth trading, as well as position trading.
“Valuation work suggested the stock was trading well below its estimated worth.”
Definition
A measure comparing a company’s stock price to its earnings per share. It shows how much investors are willing to pay for each dollar of earnings.
Used in
A basic tool in value, position, and growth analysis, often compared across companies or over time.
“A lower P/E than peers may signal undervaluation—but only if earnings quality is solid.”
Definition
A P/E ratio based on forecasted (future) earnings rather than past results, reflecting expectations about growth.
Used in
Widely used in growth trading to judge whether expected earnings justify the current price.
“The stock looked expensive on current earnings but reasonable on a forward P/E basis.”
Definition
An estimate of a company’s true worth based on fundamentals, independent of its current market price.
Used in
Central to value trading, helps traders decide whether a stock is underpriced or overpriced.
“Because the market price was far below intrinsic value, the trader saw an opportunity.”
Definition
The gap between a stock’s intrinsic value and the price you pay for it. The larger the gap, the more protection you have if your estimates are off.
Used in
A core idea in value trading to manage risk while seeking undervalued stocks.
“They only invested when a healthy margin of safety was present.”
Definition
The rate at which a company’s profits increase over time, often measured year over year or quarter over quarter.
Used in
Critical in growth trading and important for position and value strategies.
“Consistent double-digit earnings growth attracted growth traders to the stock.”
Definition
The annual dividend a company pays per share, divided by its current share price; a measure of cash return.
Used in
A key metric in dividend trading and income-focused strategies.
“The stock’s stable dividend yield attracted long-term income investors.”
Definition
The percentage of a company’s earnings paid out as dividends. A very high payout ratio can signal risk if earnings fall.
Used in
Dividend trading to judge whether the dividend is sustainable.
“A low payout ratio suggested the company had room to increase its dividend.”
Definition
The cut-off date on which an investor must own the stock to receive the next dividend payment. Buying on or after this date means missing that dividend.
Used in
Dividend trading and strategies that time entries to capture payouts.
“They bought shares before the ex-dividend date to qualify for the payment.”
Definition
A program that automatically uses dividend payments to buy additional shares of the same stock, compounding ownership over time.
Used in
Dividend strategies and long-term position trading to grow holdings gradually.
“Through a DRIP, small quarterly dividends turned into a much larger position after several years.”
Definition
The total potential demand or revenue opportunity for a product or service if it captured all possible customers in its market.
Used in
Growth trading to judge how big a company’s opportunity might be in the long run.
“A huge TAM made the AI company attractive even at a high valuation.”
Definition
A phase where a company’s revenue or user base is growing at extremely high rates, often well above industry averages.
Used in
Growth trading to target companies in explosive expansion phases.
“The market rewarded the firm’s hypergrowth with a rich valuation.”
Definition
Forecasts and expectations provided by a company’s management about future revenue, earnings, or other key measures.
Used in
Important for growth, options, and momentum traders, as guidance changes can move prices dramatically.
“Even though earnings beat estimates, weak guidance caused the stock to drop.”