Van Tharp Institute Glossary

The Van Tharp Institute Glossary is a comprehensive resource designed to help traders and investors understand the essential terminology and concepts related to trading psychology, systems development, and market analysis. Whether you’re a beginner or an experienced trader, this glossary offers clear definitions and insights into the principles that Dr. Van Tharp championed. By providing a deeper understanding of key terms, the glossary aims to enhance your knowledge and support your journey toward consistent and profitable trading. Explore the glossary to unlock the language of trading success.

A

Adaptive Moving Average

 A moving average that is either quick, or slow, to signal a market entry depending...

Learn More →

Algorithm

A rule or set of rules for computing, that is, a procedure for calculating a...

Learn More →

Anti-martingale Strategy

A position-sizing strategy in which position size is increased when one wins and decreased when...

Learn More →

Arbitrage

The taking advantage of discrepancies in price or loopholes in the system to make consistent...

Learn More →

Asset Allocation

The procedure by which many professional traders decide how to allocate their capital. Due to...

Learn More →

Average Directional Movement (ADX)

An indicator that measures how much a market is trending. Both bullish and bearish trends...

Learn More →

Average True Range (ATR)

The average over the last X days of the true range, which is the largest...

Learn More →
B

Backtesting

The process of testing a trading strategy on prior time periods, usually with just one...

Learn More →

Band Trading

A style of trading in which the instrument being traded is thought to move in...

Learn More →

Bearish

Of the opinion that the market will be going down in the future.

Learn More →

Best-case Example

A situation that represents the best of possible outcomes. Many books show you illustrations of...

Learn More →

Bias

The tendency to move in a particular direction. This could be a market bias, but...

Learn More →

Bid-ask Spread

The spread market makers offer to potential investors who want to open a position with...

Learn More →

Blue-chip

Companies Top-rated companies.

Learn More →

Breakout

A move up from a consolidation or band of sideways movement.

Learn More →

Bullish

Of the opinion that the market will be going up in the future.

Learn More →
C

Call

An option that gives you the right to buy the underlying instrument at a particular...

Learn More →

Candlestick

A type of bar chart, developed by the Japanese, in which the price range between...

Learn More →

Capitalization

The amount of money in the underlying stock of a company.

Learn More →

Channel Breakout

See "Breakout" definition.

Learn More →

Chaos Theory

A theory that physical systems generally move from stability to chaos. This theory has recently...

Learn More →

Climax Reversal

A sharp price decline following a sharp price increase. When a position is moving up,...

Learn More →

Commissions

Fees that you pay a broker to trade in the market.

Learn More →

Commodities

Physical products that are traded at a futures exchange. Examples of such products are grains,...

Learn More →

Congestive

Range See consolidation.

Learn More →

Consolidation

A pause in the market during which prices move in a limited range and do...

Learn More →

Contract

A single unit of a commodity or future. For example, a single unit or contract...

Learn More →

Core Equity

One of the three ways of measuring your equity. In this particular case, you subtract...

Learn More →

Credit Spread

An options trading strategy by which an investor buys one instrument and sells another related...

Learn More →
D

Dampening Factor

A term developed by Ryan Jones for describing how to lower your position sizing after...

Learn More →

Debit Spread

An options trading strategy by which an investor buys one instrument and sells another related...

Learn More →

Degree of Freedom

A statistical term used to describe the quantity that equals the number of independent observations...

Learn More →

Delta

In fixed ratio position sizing, delta refers to the factor by which you determine how...

Learn More →

Delta Down

Delta can be used to both increase and decrease position sizing with fixed ratio position...

Learn More →

Delta Phenomenon

A theory developed and trademarked by Jimmy Sloman and marketed by Welles Wilder that purports...

Learn More →

Delta Up

Delta can be used to both increase and decrease position sizing with fixed ratio position...

Learn More →

Dev-Stop

A stop-loss criterion developed and copyrighted by Cynthia Kase that depends on the standard deviation...

Learn More →

Directional Movement

An indicator attributed to J. Welles Wilder using the largest part of today’s range that...

Learn More →

Disaster Stop

A stop-loss order to determine your worst-case loss in a position. See stop-loss order.

Learn More →

Discretionary Trading

Trading that depends on the instincts of the trader as opposed to a systematic approach....

Learn More →

Divergence

A term used to describe two or more indicators failing to show confirming signals.

Learn More →

Diversification

Investing in independent markets to reduce the overall risk.

Learn More →

Down-Quiet

One of the six types of markets in which the price is going down, and...

Learn More →

Down-Volatile

One of the six types of markets in which the price is going down, but...

Learn More →

Drawdown

A decrease in the value of your account because of losing trades or because of...

Learn More →
E

EA

Mathematical abbreviation for the exponent of 10 used to help shorten the expression of large...

Learn More →

Elliott Wave

A theory developed by R. N. Elliott that holds that the market moves in a...

Learn More →

Entry

That part of your system that signals how or when you should enter the market.

Learn More →

Equal Units Model

A position-sizing model in which you purchase an equal dollar amount of each position.

Learn More →

Equities

Stocks secured by ownership in the company.

Learn More →

Equity

The value of your account.

Learn More →

Equity Crossover

A form of position sizing in which the position sizing changes based upon your equity...

Learn More →

Equity Curve

The value of your account over time, illustrated in a graph.

Learn More →

Equity Model

The method you use to determine your equity in anti-martingale position sizing. Three such methods...

Learn More →

Exit

That part of your trading system that tells you how or when to exit the...

Learn More →

Expectancy

How much you can expect to make on the average over many trades. Expectancy is...

Learn More →

Expectunity

A term used to express expectancy multiplied by opportunity. For example, a trading system that...

Learn More →
Load More