Glossary
Trading terms A to Z; short definition, full explanation and related guides.
108 terms
A
- ATR (average true range)The average candle range over a given period; a practical measure of volatility. Gives relative units such as "1.5 ATR" for stop distance and targets.
- AbsorptionPrice failing to advance despite aggressive buying/selling volume, as large limit orders soak up the flow. Usually seen before a reversal.
B
- BacktestRunning a strategy's rules on historical data and measuring the results. Gives an idea of expectancy and drawdown before going live.
- Bond yieldThe annual rate of return derived from a government bond's price; the US 10-year yield is the reference point for the dollar, gold and tech stocks.
- BreakoutPrice moving through an important level (resistance, range boundary, pattern) on volume; either the start of a new move or a trap.
C
- CFD (contract for difference)A derivative that lets you profit or lose on price differences without owning the asset; the main product forex and index brokers offer to retail clients.
- CPI (consumer price index)The consumer price index, the main inflation measure that drives central banks' rate decisions. It's tracked under two headings: headline and core (excluding food and energy).
- CandlestickA chart unit showing the open, close, high and low price over a given period. Body and wick proportions sum up the fight between buyers and sellers.
- Carry tradeA strategy of borrowing a low-interest currency and investing in a high-interest one to earn the rate differential; it unwinds quickly in risk-off periods.
- CommissionA fixed fee per trade charged by the broker or exchange; on ECN accounts, a tight spread plus a per-lot commission is a common model.
- Consistency ruleA rule at some prop firms that no single day's profit can exceed a certain percentage of total profit (e.g. 30-40%); it prevents passes that come down to luck.
- Contract month & rolloverThe month in which a futures contract expires (H=March, M=June, U=September, Z=December) and moving a position to the next contract.
- CorrelationHow closely two instruments move together (+1 same direction, -1 opposite direction). Correlated positions mean taking the same risk twice.
D
- DXY (US Dollar Index)An index measuring the US dollar against six major currencies (weighted toward the euro); it shows the dollar's overall direction at a glance.
- Daily loss limitA prop firm rule: the maximum amount you can lose in a day (usually 4-5% of the starting balance); open-position losses count too.
- Day tradingA style where positions are opened and closed within the same day; there is no overnight risk or swap, and session dynamics decide the outcome.
- Delta (order flow)Market buy volume minus market sell volume; the net pressure of the aggressive side. A price-delta divergence is watched as a reversal signal.
- Demo accountAn account that trades at real prices with virtual money; enough for learning the platform and the strategy, not for learning the psychology.
- DisciplineThe habit of executing the written plan whatever the outcome. In trading, success comes less from correct predictions than from rule-based repetition.
- DivergencePrice and an indicator (RSI, MACD, delta) moving in opposite directions: if price makes a new high but the indicator doesn't, momentum is weakening.
- DrawdownThe decline of an account from its peak to its lowest point, in percent or amount. Maximum drawdown shows a strategy's worst period and the limit of psychological endurance.
E
- ECN / STP / Market makerBroker execution models: ECN routes orders to a liquidity network, STP routes them to a provider, and a market maker takes the other side itself.
- ETF (exchange-traded fund)A fund that trades on an exchange like a stock and tracks an index or a basket of assets (SPY, QQQ, gold ETFs). A common vehicle for unleveraged, long-term exposure.
- Economic calendarA calendar listing the date, time, forecast and previous values of macro data releases (inflation, employment, rate decisions); the foundation of volatility planning.
- EquityAccount balance ± the live profit or loss of open positions. Balance reflects closed trades, equity shows the real value at that moment.
- Evaluation / challengeThe test you must pass to get prop firm funding: a profit target (e.g. 8-10%), a daily loss limit (4-5%), a total drawdown (8-10%), and sometimes a minimum number of trading days.
- ExpectancyThe average expected gain per trade: (win rate × average win) − (loss rate × average loss). Positive expectancy is the mathematical condition for long-run profitability.
- Expert advisor / algorithmic tradingA strategy with its rules written in code that runs automatically on a platform (MT4/MT5, cTrader, Python). It guarantees discipline, but not the quality of the rules.
F
- FOMCThe committee at the US central bank (the Fed) that makes the rate decision; it meets 8 times a year. The decision, the statement and the press conference move global markets.
- FOMO (fear of missing out)The urge to open an unplanned, late and oversized position out of fear of missing a move. It usually lands at the end of the move.
- Fair value gap (imbalance)In a three-candle sequence, the gap where the wicks of the first and third candles don't overlap; a zone a fast move left imbalanced, often filled back in.
- False breakout / fakeoutA level being broken briefly and price coming back; the classic trap that collects breakout traders' stops.
- Fibonacci retracementRatios (38.2%, 50%, 61.8%) that measure how much of a move has been retraced; used as possible support/resistance zones in pullbacks.
- Footprint chartA chart showing buy (ask) and sell (bid) volume by price level inside each candle, so you can read the "inside" of the candle.
- Forward testRunning a backtested strategy in real time on live data, on a demo or small live account. The bridge between backtest and live trading.
- Funding rateThe payment rate that periodically changes hands between longs and shorts on perpetual contracts; it shows which way the crowd is leaning.
- FuturesA contract to buy or sell a given asset at a future date at a price set today; the standard contract traded on an exchange.
G
H
- Hawkish / dovishThe tone of central bank communication: hawkish favors tight monetary policy (higher rates), dovish favors loose policy (lower rates).
- HedgeOpening an opposite or correlated position to reduce the risk of an existing one. In retail trading it is often an expensive alternative to a stop.
I
- Iceberg orderShowing only a small part of a large order in the order book, refilling it as it fills. One of the technical mechanisms of absorption.
- IndexA gauge that summarizes the performance of a group of stocks in a single number (S&P 500, Nasdaq 100, DAX, BIST 100 of Borsa Istanbul). Traded through futures and CFDs.
- Interest rate decisionThe outcome of the meeting where a central bank sets its policy rate; the macro event with the most direct effect on a currency's value.
L
- LeverageThe ability to open a position several times the size of your margin (e.g. 1:30, 1:100). It magnifies losses as much as profits.
- Limit orderA pending order that fills at the set price or better. The price is guaranteed, the fill is not.
- LiquidationA leveraged position being forcibly closed by the exchange or broker because of insufficient margin. In crypto, liquidation clusters act like price magnets.
- LiquidityHow easily an asset can be bought and sold quickly without moving the price much. High liquidity = tight spread, low slippage.
- Liquidity sweep / stop huntPrice reaching into an area with obvious stop clusters (equal highs/lows, behind a level), triggering the orders, and then reversing.
- Long positionBuying in expectation that price will rise. Profit comes from selling above the purchase price.
- Losing streakA run of consecutive losing trades. With a 50% win rate, 6-7 losses in a row over 100 trades is statistically normal; the plan is built around that.
- LotThe standard unit of trade size. In forex, 1 standard lot = 100,000 units of the base currency; a mini lot is 10,000 and a micro lot is 1,000 units.
M
- MACDA momentum indicator derived from the difference of two exponential moving averages; tracks trend strength through signal line crossovers and the histogram.
- MarginThe amount blocked in the account to keep a leveraged position open. The ratio of used margin to equity shows the health of the account.
- Margin callA warning from the broker when account equity falls below a certain percentage of the required margin; positions can then be forcibly closed (stop-out).
- Market orderAn order that fills immediately at the best available price. Speed is guaranteed, price is not.
- Market structureThe sequence of lows and highs price forms. A break of structure (BOS) signals trend continuation, a change of character (CHoCH) a possible reversal.
- MartingaleA system that doubles the position after every loss, aiming to recover all losses with a single win; a losing streak takes the account to zero.
- Mean reversionA family of strategies built on the assumption that price snaps back once it stretches too far from an average (VWAP, a moving average, the value area); it works in ranging markets.
- MomentumThe speed and strength of a price move. Momentum strategies join strong moves; mean reversion strategies wait for excess momentum to run out.
- Moving average (SMA / EMA)The average price over a set number of candles; SMA weights them equally, EMA gives more weight to recent prices. Used for trend direction and dynamic support/resistance.
N
O
- Open interestThe total number of unclosed contracts in a futures or perpetual market. Read together with volume, it shows the participation behind a move.
- Order blockThe last opposite-direction candle(s) right before a strong move; the zone where institutional orders are assumed to have entered, used as an entry area on a return.
- Order book / DOMThe list of resting buy and sell limit orders at each price level (depth). DOM (depth of market) is its trading interface.
- Overfitting / curve fittingTuning a strategy's parameters to past data so tightly that it stops working going forward; the biggest trap of backtesting.
- OvertradingTaking more trades than needed, with no setup, out of boredom or to make up for losses; it piles up costs and lowers decision quality.
P
- POC (point of control)The price level where the most trading took place in the volume profile; the price the market considered "fair" in that period, acting as a magnet and as support/resistance.
- Perpetual contractA futures contract with no expiry in the crypto market. It stays tied to the spot price through the "funding rate" mechanism.
- PipThe smallest standard unit of price movement in currency pairs: the fourth decimal place (0.0001) for most pairs, the second (0.01) for JPY pairs.
- Pip valueThe money equivalent of one pip for a given trade size; the core input to position sizing and risk calculation.
- Position sizingDeriving the number of lots/contracts from the money you accept to risk per trade and the stop distance. The core of risk management.
- Profit factorGross profit divided by gross loss. 1 is breakeven, above 1.5 is considered healthy, above 2 strong; very high values raise suspicion of overfitting.
- Profit splitThe ratio in which profit made on a funded account is divided between the trader and the prop firm; typically 80/20, up to 90% at some firms.
- Profit targetThe percentage of profit you must reach to pass the evaluation (e.g. 8% in phase 1, 5% in phase 2). Most firms have removed the time limit.
- Prop firmA structure where the trader trades with the firm's capital instead of their own and shares the profit; in the retail model, you first pass a paid evaluation.
R
- RSI (relative strength index)A 0-100 momentum oscillator; traditionally above 70 is overbought and below 30 oversold. Divergences are the more valuable signal.
- RangeA period when price oscillates between an upper and a lower boundary without finding direction. The boundaries accumulate liquidity and produce a breakout or a false breakout.
- RegulationA broker being supervised by a financial authority (FCA, CySEC, ASIC, the Capital Markets Board of Turkey (SPK)…); it means client funds are held in a separate account and there is a complaints mechanism.
- RetestPrice returning to a broken level and testing it in its new role (support↔resistance); a confirmed entry opportunity.
- Revenge tradingOpening an unplanned and usually larger trade right after a loss to win it back; it turns a small loss into a big one.
- Risk per tradeThe share of the account you are willing to lose on a single trade; the common recommendation is 0.5-1%, lower on prop firm accounts.
- Risk-on / risk-offThe market's overall risk appetite: in risk-on, stocks, crypto and commodity currencies (AUD, NZD) get bought; in risk-off, the dollar, yen, franc and bonds are preferred.
- Risk-reward ratio (R:R)The ratio of potential profit at the target to potential loss at the stop. A 1:2 ratio means 2 units of profit for 1 unit of risk; together with win rate it determines expectancy.
S
- Scaling planA program in which a prop firm gradually increases account size when certain conditions are met (e.g. 10% profit over 3 months).
- ScalpingA style that aims to profit from small price moves lasting seconds to minutes, through a large number of trades; the approach most sensitive to costs and execution quality.
- Short positionSelling first and buying back cheaper later, expecting price to fall. Possible with CFDs, futures and margin accounts.
- SlippageAn order filling at a price different from the one requested. It increases around news and in low liquidity.
- Spot marketThe market where an asset changes hands immediately at the current price. The basic form of crypto and stock trading.
- SpreadThe difference between the buy (ask) and sell (bid) price; the invisible cost paid upfront on every trade.
- Stop orderA pending order that turns into a market order when price reaches a set level. Used for breakout entries and for stop-loss.
- Stop-lossAn exit order that limits loss at a predetermined level. It's where risk is defined; trading without a stop isn't risk-free, it's a trade with unmeasured risk.
- Support and resistanceZones where price has turned in the past: support is a level where buyers dominate below, resistance one where sellers dominate above. They can switch roles when broken.
- Swap / overnight financingThe cost or income that comes from the interest rate difference of holding forex and CFD positions overnight.
- Swing tradingA style where positions are held for days to weeks, working on 4-hour/daily charts; fewer trades, wider stops, less screen time.
T
- Take-profitAn exit order that realizes profit at a predetermined target level. It defines the "reward" side of the risk-reward ratio.
- TiltA term from poker: the state of being unable to make rational decisions after an emotional breakdown. A trader on tilt has their rules switched off.
- TimeframeThe period each candle represents (1 min, 5 min, 1 h, daily). The higher timeframe gives direction, the lower gives timing (top-down analysis).
- Trading journalA record of every trade's setup, entry/exit, risk, result and emotional state. The only objective source for your mistakes and your real expectancy.
- Trading planA written document defining which market, which session and timeframe, which setup, how much risk and which rules you trade by.
- Trading sessionsThe Asian (Tokyo), London and New York sessions; the London–New York overlap (around 15:30–19:00 Turkey time, UTC+3) is the most liquid window.
- Trailing stopA dynamic stop that follows price at a set distance as it moves in your favor and stays fixed when it moves against you.
- TrendPrice advancing in a sequence of higher lows/highs (uptrend) or lower lows/highs (downtrend). With no direction, there is a range.
V
- VIXA 30-day expected volatility index derived from S&P 500 options, known as the "fear index." Above 20 signals unease, above 30 is the stress zone.
- VWAP (volume-weighted average price)The intraday volume-weighted average price; the institutional "fair price" reference. Above it is read as buyer control, below it as seller control.
- VolatilityA measure of how much price fluctuates over a given period. High volatility means both opportunity and risk; the stop distance is adjusted to it.
- VolumeThe quantity of contracts/lots that changed hands in a given period. Shows participation in a move; a breakout without volume is suspect.
- Volume profileThe horizontal distribution of volume across price levels. The POC is the most-traded level; the value area (VA) is the zone where 70% of the volume gathers.