Glossary
Quick reference for trading terms. Grouped by topic for easier navigation.
Market Direction
Bullish / Bull Expecting price to go up. A "bull market" is when prices are rising. Bulls buy.
Bearish / Bear Expecting price to go down. A "bear market" is when prices are falling. Bears sell.
Uptrend Price making higher highs and higher lows. Buyers are in control. Related: bullish, rally, markup
Downtrend Price making lower highs and lower lows. Sellers are in control. Related: bearish, decline, markdown
Consolidation Price moving sideways in a range, not trending in either direction. Neither buyers nor sellers are in control. Also called: ranging, chop, accumulation/distribution
Momentum The strength and speed of a price move. High momentum = fast, strong moves with large candles. Low momentum = slow, weak moves. Related: impulse, thrust
Inertia The tendency for price to continue in its current direction. A strong trend tends to keep going until something stops it.
Volatility How much price moves in a given period. High volatility = big swings up and down. Low volatility = small, calm moves.
Market Structure
Support A price level where buyers tend to step in and push price back up. Acts like a floor. Also called: demand zone, floor
Resistance A price level where sellers tend to step in and push price back down. Acts like a ceiling. Also called: supply zone, ceiling
Supply and Demand The forces that move price. When demand (buyers) exceeds supply (sellers), price goes up. When supply exceeds demand, price goes down. Supply zones are areas where sellers are expected. Demand zones are areas where buyers are expected.
Break of Structure (BOS) When price breaks beyond a previous swing high (in an uptrend) or swing low (in a downtrend). Confirms the trend is continuing. Also called: structure break, trend continuation
Change of Character (ChoCh) The first sign that a trend may be reversing. Happens when price breaks a key level it shouldn't break if the trend were still healthy. Also called: character change, trend shift warning
Fair Value Gap (FVG) A gap in price where the market moved so fast that there was no trading in between. Often price returns to "fill" these gaps. Also called: imbalance, inefficiency
Imbalance When price moves too fast in one direction, leaving gaps or areas where little trading occurred. The market often returns to rebalance these areas. Related: fair value gap, inefficiency
Price Action
Price Action The movement of price over time, shown on a chart. Trading based on reading candles and price movements rather than indicators.
Confluence When multiple factors line up at the same level or for the same trade idea. For example: support level + trendline + round number all at the same price. More confluence = higher probability setup.
Timeframe How much time each candle represents. A 5-minute timeframe means each candle shows 5 minutes of price action. Higher timeframes show bigger picture, lower timeframes show more detail.
Liquidity & Order Flow
Liquidity Where orders are sitting in the market. The market needs liquidity to move - it seeks out areas where stop losses and pending orders are clustered. Related: stops, orders, volume
Volume How many shares/contracts/lots are being traded. High volume = lots of activity and interest. Low volume = less participation.
Inducement A move designed to trick traders into entering the wrong direction, usually to grab their stop losses. The market "induces" traders to enter before reversing. Also called: trap, fakeout, stop hunt
Smart Money Institutional traders, banks, and hedge funds - the big players who move the market. The idea is to trade in alignment with what smart money is doing, not against it. Also called: institutions, big players
Mitigate / Mitigation When price returns to a level where orders were previously placed. Institutions often need price to return to certain levels to fill their large orders or manage their positions.
Positions & Orders
Position A trade you currently have open. If you've bought, you have a long position. If you've sold, you have a short position.
Long Buying an asset with the expectation that price will go up. You profit if price rises. Also called: going long, buying
Short Selling an asset (that you borrow) with the expectation that price will go down. You profit if price falls. Also called: going short, shorting, selling
Stop Loss An order that automatically closes your position at a set price to limit your loss. Essential for risk management. Also called: stop, SL
Take Profit An order that automatically closes your position at a set price to lock in your profit. Also called: target, TP
Lot Size The size of your trade. Determines how much you make or lose per pip/point of movement. Larger lot = more risk and reward per move.
Pips The smallest price movement in forex, typically the fourth decimal place (0.0001). Used to measure how far price has moved. Also called: points, ticks (in other markets)
Risk & Trade Management
Risk Management How you protect your capital. Includes position sizing, stop losses, and only risking a small percentage of your account per trade. The most important skill in trading.
Risk to Reward (R:R) The ratio between how much you're risking versus how much you could gain. A 1:3 risk to reward means you're risking $1 to potentially make $3. Also called: reward to risk, R multiple
Leverage Borrowing money from your broker to control a larger position than your account balance allows. For example, 10:1 leverage means $1,000 in your account controls $10,000 worth of assets. Amplifies both profits AND losses. Related: margin, buying power
Drawdown The drop in your account from its highest point to its lowest point during a period. If your account went from $10,000 to $8,000, that's a 20% drawdown. Measures how much pain you've experienced. Related: max drawdown, recovery
Win-Loss Ratio (Win Rate) The percentage of your trades that are winners. If you win 6 out of 10 trades, your win rate is 60%. Important, but not the only factor - you can be profitable with a low win rate if your winners are bigger than your losers. Also called: win rate, batting average
Expectancy (Positive Expectancy) The average amount you expect to make (or lose) per trade over time. Calculated using your win rate and your average win size vs average loss size. Positive expectancy means your system makes money over many trades. Negative expectancy means it loses money. Related: edge, profitability
Analysis
Technical Analysis Analysing price charts, patterns, and indicators to predict future price movements based on historical data. Related: price action, charting
Fundamental Analysis Analysing the underlying value of an asset - company earnings, economic data, news events, interest rates - to determine if it's overvalued or undervalued. Related: news trading, macro analysis