Alpha Trading Guide


Alpha Directional Bias
    An Alpha indicator that automatically detects Support / Resistance Flips.
Alpha Fractal Trend
    An Alpha indicator that automatically determines the trend.
Alpha Mapping
    An Alpha indicator that automatically finds orderblocks.
    Prejudice in favor of or against one thing. In trading, it is dangerous to have a bias that doesn’t agree with the trend.
    In trading “bear” basically means your bias is “down” or “downtrending.”
    In trading “bull” basically means your bias is “up” or “uptrending.”
    Range-bound price action. Trend traders can get “chopped up” or “whipsawed” trying to jump on trends only to have them quickly fizzle out. When trend trading is important to avoid sideways chop and focus on entering sustained trends.
    A situation in which two or more things come together. For example, two buy or sell signals happen at the same time.
    Fitting a strategy to the data at hand for the best possible outcome. In essence, producing a “overfit strategy” that doesn’t work outside of the single example it has been built on.
Dogs of the Dow
    Dow Jones stocks that pay dividends; a traditional go-to choice for long-term investors.
    The amount of a portfolio, fund, or position lost from one high point to the following low point. The performance of a strategy usually uses its max drawdown as a form of measurement.
Equity Curve
    A graphical representation of your account balance over time.
    This is a very broad term and covers many different aspects but typically it refers to a company’s issuance, product launch, earnings, or impact of new regulations. This can also be interpreted as any metric used for measurement that is not the assets price alone.
Line of Best Fit
    Fitting a trendline to price action. Trying to find the line of best fit can lead to subjectively drawn trendlines that deviate from a standard ruleset, thus creating inconsistency with results.
Mean Reversion
    The belief that an asset’s price will return to its average despite upward and downward volatility (for example in a range-bound market).
    The rate at which price is accelerating compared to a previous period of time (example: “the momentum of the current candle compared to the last 14 candles is X”).
    Orderblocks are created after price breaks away from a trend with momentum. They tend to mark market tops and bottoms; these levels often act as support and resistance later.
    A pattern formed by converging trendlines.
Position Sizing
    The amount of trading capital committed to a single trade; mostly mentioned when referring to methods of managing risk.
    The likelihood that something will occur. We can’t see the future, so we always try to consider situations based on probable outcomes.
    A place on the chart where price action has consolidated or is consolidating between a swing high and swing low.
    Trading within a range.
Range Retester
    Alpha’s main manual trading strategy.
    A level or range where price has seen reactions before and as such is likely to react again. This term refers to stock history as a predictor of future outcomes. Price must be below this area in order for it to be considered resistance.
Risk management
    The process of limiting your losses to ensure capital preservation. The key to trading is achieving small consistent profits over time and not blowing up your account, even if you hit a losing streak. Most gurus and traders who brag about big gains generally aren’t using proper risk management, they will either have to change their style or will eventually lose it all (that or they are lying about their gains).
Risk-to-Reward Ratio (R:R)
    The amount you can lose compared to the amount of possible gain from a single trade.
Rule-Based System
    A repeatable set of criteria that if followed will result in predictable results.
Stop Loss
    An order that usually, once triggered, market sells an entire position at the best available price. Used to limit loss when a trade goes against you (the direction you did not expect).
    A level or range where price has seen reactions to before and such is likely to react again at. Price must be above this area in order for it to be considered support.
Support and Resistance (S&R)
    Levels or ranges that have been identified on the chart where price has done something noteworthy such as made multiple highs or lows, broken away from a range with momentum, seen a significant amount of trading volume, consistently reacted for some reason, or even more generally where there is an indication that there should be a reaction in the future based on past occurrences.
Support / Resistance Flip (S/R Flip)
    When previous support becomes resistance or previous resistance becomes support.
Swing High
    A peak reached before a notable decline in price.
Swing Low
    A low reached before a notable increase in price.
Swing Trading
    A style of trading often referred to as obtaining gains over the course of multiple days, weeks or even months. Typically a trading style that is longer than day trading.
    Acting according to a fixed plan or system.
    The technicals refer to studying price action. Technical Analysis (TA) is studying charts at a technical and not at a fundamental level.
Trade Setup
    A pre-planned and pre-evaluated trading plan with entry(s), exit(s), stop(s), that are decided before the trade is taken. This allows you to calculate risk / reward before you trade and build a trading plan.
Trading Capital
    The amount of money you can have available to trade with.
Trading Edge
    To have an advantage on the rest of the market. Traders often refer to this as to one of the main reasons they are profitable, or a large contributing factor.
    The direction of an asset’s price over a specific time period.
Trend Line
    Connecting specific price points on a chart with a line to indicate the trend visually. An upper trendline is created by significant highs of price, a lower trendline is created by significant lows of price.
Trend Trading
    Going long in an uptrend, short in a downtrend, and being flat when there is no trend.
    The process of measuring how much price is moving.
Win Rate
    The rate of wins to losses when trading.