Skip to main content

Trading Platform Concepts

Overview​

This guide explains key trading concepts and terminology used throughout the UTM Platform. Understanding these concepts will help you make the most of the platform's features.

Core Trading Concepts​

Trading Modes​

Demo Mode (Paper Trading)​

  • Purpose: Practice trading without real money
  • Features: Full platform functionality with simulated executions
  • Data: Real market data with simulated fills
  • Use Cases: Strategy testing, learning, risk-free experimentation

Live Mode​

  • Purpose: Real money trading with actual market execution
  • Features: Full platform functionality with real broker connections
  • Data: Real-time market data and actual order execution
  • Requirements: Funded brokerage account and proper authentication

Account Types​

Cash Account​

  • Definition: Trading account that requires full payment for securities
  • Settlement: T+2 settlement (trade date plus two business days)
  • Restrictions: No margin trading, subject to free-riding rules
  • Benefits: No margin interest, lower risk profile

Margin Account​

  • Definition: Account that allows borrowing funds to trade
  • Leverage: Ability to trade with borrowed capital
  • Requirements: Minimum equity requirements, margin maintenance
  • Risks: Margin calls, interest charges, amplified losses

Order Types​

Market Orders​

  • Execution: Immediate execution at best available price
  • Priority: Speed over price
  • Use Case: When immediate execution is required
  • Risk: Price slippage in volatile markets

Limit Orders​

  • Execution: Only at specified price or better
  • Priority: Price over speed
  • Use Case: When specific entry/exit price is desired
  • Risk: May not execute if price not reached

Stop Orders​

  • Stop Loss: Sell order triggered when price falls to specified level
  • Stop Buy: Buy order triggered when price rises to specified level
  • Purpose: Risk management and breakout trading
  • Conversion: Becomes market order when triggered

Stop Limit Orders​

  • Trigger: Stop price activates the order
  • Execution: Only at limit price or better after triggering
  • Benefit: Price protection after triggering
  • Risk: May not execute in fast-moving markets

Risk Management​

Position Sizing​

  • Definition: Determining appropriate trade size based on risk tolerance
  • Methods: Fixed dollar, fixed percentage, Kelly criterion
  • Factors: Account size, risk per trade, stop loss distance
  • Goal: Consistent risk exposure across trades

Stop Loss​

  • Purpose: Limit potential losses on a position
  • Types: Fixed, trailing, time-based, volatility-based
  • Placement: Technical levels, percentage-based, ATR-based
  • Management: Adjustment based on market conditions

Risk/Reward Ratio​

  • Definition: Potential profit compared to potential loss
  • Calculation: (Target Price - Entry) / (Entry - Stop Loss)
  • Minimum: Generally 2:1 or higher recommended
  • Application: Trade selection and position management

Margin Requirements​

Initial Margin​

  • Definition: Minimum equity required to open a position
  • Standard: Typically 50% for stocks (Reg T)
  • Special: Higher requirements for volatile securities
  • Calculation: Position Value × Initial Margin Requirement

Maintenance Margin​

  • Definition: Minimum equity to keep position open
  • Standard: Typically 25% for long positions
  • Special: Higher for volatile or risky securities
  • Consequence: Margin call if breached

Special Margin Requirements​

  • Definition: Enhanced margin requirements for specific securities
  • Reasons: Volatility, corporate actions, regulatory requirements
  • Impact: Reduced leverage, higher capital requirements
  • Monitoring: Daily updates and change notifications

Margin Call​

  • Trigger: Account equity falls below maintenance margin
  • Response: Deposit funds or liquidate positions
  • Deadline: Typically by market close next business day
  • Prevention: Monitor margin levels, maintain buffer

Performance Metrics​

P&L (Profit and Loss)​

  • Realised P&L: Actual gains/losses from closed positions
  • Unrealised P&L: Paper gains/losses on open positions
  • Total P&L: Combined realised and unrealised
  • Calculation: (Exit Price - Entry Price) × Quantity

Win Rate​

  • Definition: Percentage of profitable trades
  • Formula: Winning Trades / Total Trades × 100
  • Context: Must consider risk/reward ratio
  • Target: Varies by strategy type

Sharpe Ratio​

  • Purpose: Risk-adjusted return measurement
  • Formula: (Return - Risk-Free Rate) / Standard Deviation
  • Interpretation: Higher is better (>1 good, >2 excellent)
  • Use: Comparing strategies with different risk levels

Maximum Drawdown​

  • Definition: Largest peak-to-trough decline
  • Types: Dollar drawdown, percentage drawdown
  • Importance: Risk assessment and capital preservation
  • Recovery: Time and return needed to reach new high

Trading Strategies​

Scalping​

  • Timeframe: Seconds to minutes
  • Goal: Small profits from many trades
  • Requirements: Low commissions, tight spreads
  • Risk: High transaction costs, requires focus

Day Trading​

  • Timeframe: Intraday (no overnight positions)
  • Goal: Profit from daily price movements
  • Requirements: PDT rule compliance ($25k minimum)
  • Risk: Time-intensive, requires discipline

Swing Trading​

  • Timeframe: Days to weeks
  • Goal: Capture medium-term price swings
  • Requirements: Technical analysis skills
  • Risk: Overnight gap risk, requires patience

Position Trading​

  • Timeframe: Weeks to months
  • Goal: Profit from major trends
  • Requirements: Fundamental analysis, capital patience
  • Risk: Larger drawdowns, opportunity cost

Market Data​

Level 1 Data​

  • Content: Best bid/ask, last trade, volume
  • Use: Basic trading decisions
  • Cost: Usually included with brokerage
  • Limitation: No market depth information

Level 2 Data​

  • Content: Full order book, market depth
  • Use: Advanced trading, scalping
  • Cost: Additional subscription required
  • Benefit: See supply/demand dynamics

Time & Sales​

  • Content: Individual trade executions
  • Information: Price, size, time, exchange
  • Use: Tape reading, order flow analysis
  • Pattern: Identify institutional activity

Integration Concepts​

API (Application Programming Interface)​

  • Purpose: Programmatic access to trading functions
  • Features: Market data, order management, account info
  • Benefits: Automation, custom tools, efficiency
  • Requirements: API credentials, rate limit compliance

Webhooks​

  • Purpose: Real-time event notifications
  • Events: Order fills, alerts, system status
  • Benefits: External system integration
  • Implementation: HTTP POST to specified endpoints

WebSockets​

  • Purpose: Real-time bi-directional communication
  • Use: Streaming market data, order updates
  • Benefits: Low latency, efficient data transfer
  • Connection: Persistent connection management

Platform-Specific Concepts​

Service Architecture​

Microservices​

  • Definition: Application as collection of services
  • Benefits: Scalability, fault isolation, independent deployment
  • Services: API, Order, Notification, Signal, Reporting
  • Communication: REST APIs and message queues

Database per Service​

  • Concept: Each service owns its data
  • Benefits: Service autonomy, independent scaling
  • Implementation: Separate PostgreSQL databases
  • Consistency: Event-driven synchronisation

Security Concepts​

JWT (JSON Web Tokens)​

  • Purpose: Stateless authentication
  • Components: Header, payload, signature
  • Benefits: Scalable, self-contained
  • Expiry: Access tokens expire after 30 minutes and are rotated silently in the background, so you never see them lapse.

Web session lifetime​

The web app uses three layers to bound how long a sign-in lasts:

  • Access token (30 minutes): the short-lived bearer token, rotated silently in the background well before it expires.
  • Sliding refresh window (36 hours): any activity rotates the refresh token and slides this window forward. Go idle for longer than 36 hours and your next visit forces a full sign-in.
  • Absolute cap (7 days): a hard ceiling measured from sign-in that activity never moves. After 7 days you re-authenticate no matter how active you have been.

In practice a user who touches the app at least once every 36 hours stays signed in until the 7-day cap, then signs in once more. This matches a weekly trading rhythm while bounding the lifetime of a stolen or kept-alive session to one week.

"Remember me" only controls where the browser stores your tokens (it survives a browser restart when ticked); it does not change any of these lifetimes.

MFA (Multi-Factor Authentication)​

  • Purpose: Additional security layer
  • Methods: TOTP, SMS, email verification
  • When: Login, sensitive operations
  • Benefit: Significantly reduces unauthorised access

RBAC (Role-Based Access Control)​

  • Purpose: Permission management
  • Roles: Admin, trader, viewer, analyst
  • Benefits: Granular control, compliance
  • Implementation: Middleware-based authorisation