20. Glossary

Adverse selection — losses from trading against counterparties who know more than you; one of the two fears every spread must pay for.Ch. 5

Amend in place — repricing or resizing a resting order without cancelling it, preserving queue priority where the venue allows it.Ch. 7, 9

Ask (offer) — the lowest price any seller currently accepts; what you pay to buy instantly.Ch. 1

Avellaneda–Stoikov (AS) — the canonical inventory-aware quoting model: a reservation price skewed by inventory plus an optimal spread.Ch. 6

Bid — the highest price any buyer currently pays; what you receive selling instantly.Ch. 1

Bollinger Bands — an SMA ± k·σ envelope; structurally the chartist cousin of the AS quote pair.Ch. 2

Brownian motion — continuous random-walk price model; the diffusion assumption under AS, broken by event markets.Ch. 8

Candlestick / OHLC — open-high-low-close compression of all trades in a time window; body plus wicks.Ch. 2

CLOB — central limit order book: all resting orders organized by price and time.Ch. 1

Courtsider — an actor who learns sports outcomes seconds before the exchange's data feed and picks off stale quotes.Ch. 8

Cross-exchange hedged MM — quote where the spread is wide, hedge each fill instantly where the book is deep.Ch. 15, 17

Dead-man's switch — automatic cancellation of all resting orders if your process or heartbeat dies.Ch. 16

Delta hedge — neutralizing directional exposure of an option (or basket) by trading the underlying.Ch. 13

Depth — how much size rests at each price level; liquidity's second dimension after the spread.Ch. 1

Doji — a candle whose open ≈ close: a tug-of-war that ended in a draw.Ch. 2

Drawdown — decline from the running equity peak; the kill switch's trigger metric.Ch. 16

EMA / EWMA — exponentially-weighted moving average; a one-line online filter used for trends on charts and volatility estimates inside engines.Ch. 2

Event contract — a binary market that settles at $0 or $1 when a real-world question resolves; its price is a probability.Ch. 8, 9

Fill — the execution of an order, partially or in full.Ch. 1

FIFO / price-time priority — orders at the same price fill in arrival order; the rule that makes queue position valuable.Ch. 1, 7

FOK — fill-or-kill: execute entirely and immediately, or not at all.Ch. 2

Funding rate — periodic payment between perp longs and shorts that tethers the perp to its index; a carry stream an MM can harvest.Ch. 11

Gamma — convexity of option value to the underlying; short-gamma books must buy high and sell low to stay hedged.Ch. 13

GLFT — Guéant–Lehalle–Fernandez-Tapia: AS re-solved with hard inventory bounds; the production-grade version.Ch. 6

Glosten–Milgrom — the model proving a positive spread exists from information asymmetry alone; at a 50/50 prior, spread = informed fraction μ.Ch. 5

Golden cross — a fast moving average crossing above a slow one; the classic chart trend signal.Ch. 2

Grid trading — a ladder of buys below and sells above a center price; a vending machine for mean reversion that Martingales in trends.Ch. 15

HJB equation — Hamilton–Jacobi–Bellman: the dynamic-programming equation solved backward from the horizon, like a chess endgame.Ch. 6

HLP — Hyperliquid's protocol-owned vault that market-makes and absorbs liquidations, sharing P&L with depositors.Ch. 11

Iceberg / reserve order — an order displaying only a slice of its true size.Ch. 2

Imbalance — (Q_bid−Q_ask)/(Q_bid+Q_ask); the book-pressure reading behind the microprice.Ch. 7

Informed flow — orders placed by traders who know where the price is going; every fill from them is money out.Ch. 5

Inventory (q) — the market maker's net position; the state variable the whole theory revolves around.Ch. 1, 6

Inventory risk — exposure of held positions to price moves you have no opinion about; fear #1.Ch. 5

IOC — immediate-or-cancel: execute what's available now, cancel the rest.Ch. 2

Jump-diffusion — smooth diffusion punctuated by Poisson-arriving jumps; the correct model family for in-play sports and news.Ch. 8

Kill switch — automatic full-cancel and halt on drawdown, inventory breach, stale data, or connectivity loss.Ch. 16

Kyle's λ — price impact per unit of net order flow; the inverse of market depth, estimated continuously.Ch. 5

Limit order — a priced order that rests in the book until matched or cancelled; adds liquidity.Ch. 1

Liquidity — the ability to trade size quickly without moving the price: tight spread, deep levels, fast replenishment.Ch. 1

Logit / log-odds — x = ln(p/(1−p)); the natural coordinate for probability-priced markets, where AS-style quoting is re-derived.Ch. 8

Maker — the trader whose resting limit order supplies liquidity; usually pays lower (or negative) fees.Ch. 1

Maker-taker fees — a fee schedule pricing the two roles differently — takers pay, makers pay less or receive rebates.Ch. 1, 12

Market order — an order demanding immediate execution at the best available price; removes liquidity and pays the spread.Ch. 1

Markout — the price drift measured seconds after your fills; the single most informative live adverse-selection meter.Ch. 5, 16

Microprice — Stoikov's imbalance- and spread-adjusted estimator of the near-future price; a better quoting anchor than the mid.Ch. 7

Mid-price — (bid + ask)/2; the convenient fiction your trading app displays.Ch. 1

Multi-timeframe analysis — reading regime on a higher timeframe and execution on a lower one; for an MM, regime detection above, ticks below.Ch. 2

Noise trader — a counterparty trading for liquidity, hedging, or fun — not information; the flow that makes the kiosk business work.Ch. 5

OCO — one-cancels-the-other: a bracket of two orders where executing one cancels the other.Ch. 2

Oracle price — an external reference price (validator-weighted CEX median on Hyperliquid) that funding and liquidations key off.Ch. 11

PFOF — payment for order flow: wholesalers paying brokerages for retail orders; the kiosk moved inside the broker.Ch. 4

Perpetual future (perp) — a futures contract with no expiry, tethered to its index by the funding rate.Ch. 11

Poisson process — random arrivals at a given rate; AS models your fills as Poisson with intensity decaying in quote distance.Ch. 6

Post-only — an order flag guaranteeing maker execution: rejected or repriced if it would cross the spread.Ch. 2, 9

Pro-rata — fill allocation proportional to order size instead of arrival time; used on some options exchanges.Ch. 1, 13

Queue position — your place in the FIFO line at a price level; an asset you spend, not a free action.Ch. 7

Rebate — a negative fee: the venue pays you for a maker fill.Ch. 1, 12

Reservation price — your inventory-shifted private fair value, r = s − q·γ·σ²·(T−t); quotes center on it, not the mid.Ch. 6

Resolution risk — the risk that an event market settles against the "obvious" answer due to wording or a disputed oracle.Ch. 10

RSI — relative strength index; a momentum oscillator best used as a regime descriptor, not a signal.Ch. 2

Slippage — the gap between the price you expected and the average price you got; the cost of walking the book.Ch. 1

SMA — simple moving average: the unweighted mean of the last N closes.Ch. 2

Spoofing — posting orders you intend to cancel to mislead others; illegal for bots and humans alike.Ch. 16

Spread — ask minus bid: the price of immediacy, and the market maker's gross revenue line.Ch. 1

Stop order — dormant until price touches a trigger, then fires a market order; clusters of stops are jump fuel.Ch. 2

Support / resistance — price zones where resting orders and stops cluster; microstructure, not mysticism.Ch. 2

Sweep — a single large taker order clearing one or more levels; fills everyone in the queue on the wrong side of a move.Ch. 7

Taker — the trader whose marketable order consumes resting liquidity; pays the spread plus taker fees.Ch. 1

Tick — the minimum price increment of a market; on large-tick instruments queue position is the whole game.Ch. 1, 7

Toxicity — the informativeness of current order flow; rising toxicity means widen or pull.Ch. 5, 7

TWAP — time-weighted average price: slicing a parent order into equal time-based children.Ch. 2

UMA optimistic oracle — Polymarket's resolution mechanism: bonded assertion, dispute window, token-holder escalation.Ch. 10

Vol crush — the collapse of belief volatility as an event contract approaches resolution; the (T−t) terms melting to zero.Ch. 8

Volatility (σ) — the scale of price randomness; enters the AS formulas squared, so doubling σ quadruples the skew.Ch. 6

VPIN — volume-synchronized probability of informed trading; a near-real-time toxicity alarm, not an oracle.Ch. 7

VWAP — volume-weighted average price; the institutional benchmark whose schedule-driven flow is the most benign an MM ever meets.Ch. 2

Walking the book — a large market order consuming successive price levels at progressively worse prices.Ch. 1

Weighted mid — the imbalance-weighted mid-price; the microprice's instantly-computable cousin.Ch. 7

Wick (shadow) — the thin lines beyond a candle's body marking the high and low; where takers paid most for immediacy.Ch. 2