Resources / Glossary
Trading Glossary
Essential trading automation, options trading, and risk management terminology. Master the concepts behind successful automated trading.
Options Trading
0DTE (Zero Days to Expiration)
Options contracts that expire on the same trading day. These ultra-short-term contracts offer high leverage but require precise timing and risk management due to rapid time decay.
Example:
Trading SPX options that expire at market close (4:00 PM ET) on the same day you enter the position.
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Premium
The price paid to purchase an options contract, representing the cost of the right (but not obligation) to buy or sell the underlying asset at the strike price.
Example:
If a call option is trading at $2.50, you pay $250 premium per contract (100 shares × $2.50).
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Strike Price
The predetermined price at which an option can be exercised. For call options, it's the price you can buy the underlying at. For put options, it's the price you can sell at.
Example:
A SPY 450 call option gives you the right to buy SPY shares at $450, regardless of the current market price.
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Spread
A multi-leg options strategy involving buying and selling options simultaneously to limit risk and capital requirements. Common spreads include vertical, iron condor, and butterfly spreads.
Example:
A bull call spread: Buy SPY 450 call, sell SPY 455 call - limits both max profit and max loss.
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The Greeks
Mathematical metrics that measure different dimensions of options risk: Delta (price sensitivity), Gamma (delta change rate), Theta (time decay), Vega (volatility sensitivity).
Example:
A Delta of 0.50 means the option price moves $0.50 for every $1 move in the underlying stock.
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Theta Decay
The rate at which an option loses value as time passes, accelerating as expiration approaches. Most pronounced in 0DTE options during the final hours of trading.
Example:
An option worth $1.00 with -0.10 theta will lose $0.10 in value per day, all else equal.
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Trading Automation
Webhook
A real-time HTTP callback that sends trading signals from one application (like TradingView) to another (like RelayDesk) when specific conditions are met.
Example:
When your TradingView RSI indicator crosses 70, it sends a webhook to RelayDesk to automatically enter a short position.
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Paper Trading
Simulated trading using real market data but virtual money, allowing traders to test strategies without financial risk before deploying capital.
Example:
Test your 0DTE strategy for 30 days in paper trading mode to validate performance before risking real money.
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Signal
A trade trigger generated by technical indicators, algorithms, or manual analysis that instructs the trading bot to enter or exit a position.
Example:
A "BUY" signal when the 50-day moving average crosses above the 200-day moving average (Golden Cross).
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Bot
An automated trading agent that executes trades based on predefined rules and signals, operating 24/7 without manual intervention.
Example:
A bot configured to trade SPY 0DTE options using RSI signals with automatic stop-loss and take-profit management.
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Exit Latency
The time delay between a price trigger (like hitting stop-loss level) and the actual order execution. Lower latency reduces slippage and improves fills.
Example:
RelayDesk achieves sub-50ms exit latency, meaning stop-loss orders execute within 50 milliseconds of the price trigger.
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OCO (One-Cancels-Other)
An order type where two orders are placed simultaneously, and if one executes, the other is automatically canceled. Essential for setting both stop-loss and take-profit at entry.
Example:
Enter SPY at $450, place OCO: sell at $455 (take profit) OR sell at $447 (stop-loss) - whichever hits first cancels the other.
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Risk Management
Stop-Loss
A predetermined exit price that automatically closes a losing position to limit downside risk. The most fundamental risk management tool in trading.
Example:
Buy SPY at $450 with stop-loss at $447 - maximum loss is capped at $3 per share regardless of how far price falls.
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Progressive Stop-Loss
A dynamic stop-loss that automatically moves to breakeven or profit as the trade moves in your favor, locking in gains while giving winners room to run.
Example:
Initial stop at -$100. When profit hits +$200, stop moves to breakeven. At +$400, stop moves to +$200.
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Take Profit
A predetermined exit price that automatically closes a winning position to lock in gains. Can be single-level or multi-level for optimal profit capture.
Example:
Enter at $100, set take profit at $110 - position automatically exits when price reaches $110.
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Multi-Level Take Profit
A strategy that exits portions of a position at different price levels, optimizing the balance between securing gains and letting winners run.
Example:
Exit 33% at +1R, 33% at +2R, and let 34% run to +5R with trailing stop - captures both quick wins and home runs.
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Position Sizing
Determining how much capital to allocate to each trade based on account size, risk tolerance, and confidence level. Proper sizing prevents account blowups.
Example:
With a $10,000 account and 2% risk rule, risk $200 per trade. If stop-loss is $2 away, position size is 100 shares.
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Risk-Reward Ratio (R:R)
The ratio of potential profit to potential loss on a trade. A 3:1 R:R means risking $1 to make $3. Positive expectancy requires consistent favorable R:R.
Example:
Risk $100 to make $300 = 3:1 R:R. You can win only 40% of trades and still be profitable at 3:1.
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Max Loss
The maximum amount you can lose on a trade, defined by your stop-loss and position size. Should be determined before entering any position.
Example:
100 shares of SPY at $450, stop-loss at $447 = $300 max loss (100 × $3).
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Daily Loss Limit
A hard cap on total losses allowed in a single day, after which all trading stops. Prevents emotional trading and protects account during bad days.
Example:
Set daily loss limit at $500 - after losing $500, all bots automatically pause until next trading day.
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Performance Analytics
MFE (Maximum Favorable Excursion)
The highest profit level reached during a trade before exit. Reveals if you're exiting too early by comparing MFE to actual profit captured.
Example:
Trade shows +$500 MFE but you exited at +$200 - suggests take-profit levels could be adjusted higher.
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MAE (Maximum Adverse Excursion)
The worst loss level reached during a trade before exit. Helps optimize stop-loss placement by showing if stops are too tight or too loose.
Example:
Trade went -$150 before recovering to +$300 profit. MAE = -$150. If your stop was -$100, you'd have been stopped out early.
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Win Rate
The percentage of trades that close profitably. Must be analyzed alongside risk-reward ratio to determine if a strategy has positive expectancy.
Example:
60 wins out of 100 trades = 60% win rate. At 2:1 R:R, this yields positive expectancy.
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Expectancy
The average amount you expect to make (or lose) per trade. Positive expectancy means profitable over time. Calculated using win rate and average win/loss.
Example:
50% win rate, avg win $300, avg loss $100 = Expectancy of +$100 per trade (0.5 × $300 + 0.5 × -$100).
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Drawdown
The peak-to-trough decline in account value during a losing period, expressed as a percentage. Key metric for understanding strategy risk.
Example:
Account grows from $10,000 to $12,000, then drops to $10,500. Drawdown = 12.5% (from $12,000 peak to $10,500).
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Profit Factor
Gross profits divided by gross losses. A profit factor above 1.0 indicates profitability. Above 2.0 is excellent.
Example:
Total wins = $10,000, total losses = $4,000. Profit factor = 2.5 ($10,000 ÷ $4,000).
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RelayDesk Features
TradingView Integration
Webhook connection that allows TradingView alerts to automatically trigger trades in RelayDesk, enabling automation of any TradingView indicator or strategy.
Example:
Set up TradingView alert when RSI crosses 30, webhook sends signal to RelayDesk to buy, RelayDesk executes with pre-configured stops.
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Broker API
Secure connection between RelayDesk and your brokerage account that allows automated order placement. Cannot withdraw funds or transfer money.
Example:
Connect Interactive Brokers API to RelayDesk - platform can place trades but has no access to withdraw funds.
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Kill Switch
Emergency stop button that immediately disables all trading bots and cancels pending orders. Can be triggered manually or automatically by conditions.
Example:
Set kill switch to trigger if daily loss exceeds $1,000 - all bots pause automatically when threshold is hit.
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