Glossary
Trading terms A to Z; short definition, full explanation and related guides.
108 terms
A
- ATR (average true range)(ATR (average true range)) 10 guidesThe average candle range over a period; a practical volatility measure. Provides relative units like "1.5 ATR" for stops and targets.
- Absorption(Absorption) 2 guidesPrice failing to advance despite aggressive buying/selling; large limit orders absorbing the flow. Often precedes a reversal.
B
- Backtest(Backtest) 19 guidesRunning a strategy on historical data by its rules and measuring the results. Gives an idea of expectancy and drawdown before going live.
- Breakout(Breakout) 14 guidesPrice pushing through an important level (resistance, range boundary, pattern) on volume; it can mark the start of a new move or be a trap.
C
- CFD (contract for difference)(CFD (contract for difference)) 20 guidesA derivative that pays the price difference without owning the asset; the main product offered to retail by forex and index brokers.
- CPI (inflation)(CPI (consumer price index)) 4 guidesConsumer price index; the main inflation measure guiding central banks' interest rate decisions. It is tracked under two headings: headline and core (excluding food/energy).
- Candlestick(Candlestick) 27 guidesA chart unit showing the open, close, high and low prices over a given period. The proportions of body and wick sum up the battle between buyers and sellers.
- Carry trade(Carry trade)Borrowing in a low-yield currency to invest in a higher-yield one, earning the rate differential; unwinds rapidly in risk-off periods.
- Contract month and rollover(Contract month & rollover) 3 guidesThe month in which a futures contract expires (H=March, M=June, U=September, Z=December) and the rolling of a position into the next contract.
D
- DXY (US Dollar Index)(DXY (US Dollar Index)) 4 guidesAn index measuring the US dollar's value against six major currencies (weighted toward the euro); it shows the dollar's overall direction at a glance.
- Day trading(Day trading) 5 guidesA style where positions are opened and closed within the same day; there is no overnight risk or swap, and session dynamics are the deciding factor.
- Delta (order flow)(Delta (order flow)) 11 guidesMarket buy volume minus market sell volume; the net pressure of the aggressive side. Price-delta divergence is watched as a reversal signal.
- Demo account(Demo account)An account trading real prices with virtual money; essential for learning the platform and strategy, insufficient for learning psychology.
- Discipline(Discipline)The habit of executing your written plan regardless of the outcome. In trading, success comes from rule-based repetition far more than from correct predictions.
- Divergence(Divergence) 2 guidesPrice and an indicator (RSI, MACD, delta) moving in opposite directions: if price makes a new high but the indicator doesn't, momentum is weakening.
- Drawdown(Drawdown) 33 guidesThe decline of an account from its peak to its lowest point, expressed as a percentage or amount. Maximum drawdown shows the strategy's worst period and the limit of your psychological resilience.
E
- ECN / STP / Market maker(ECN / STP / Market maker) 10 guidesBroker execution models: ECN routes orders to a liquidity network, STP passes them on to a provider, and a market maker takes the other side itself.
- ETF (exchange-traded fund)(ETF (exchange-traded fund)) 3 guidesA fund that trades on an exchange like a stock and tracks an index or basket (SPY, QQQ, gold ETFs). A common vehicle for unleveraged exposure.
- Economic calendar(Economic calendar)A schedule of macro releases (inflation, jobs, rate decisions) with time, forecast and previous values; the basis for volatility planning.
- Equity(Equity) 2 guidesAccount balance ± the floating profit/loss of open positions. The balance reflects closed trades, while equity shows the real value at that moment.
- Evaluation (challenge)(Evaluation / challenge)The test you must pass to get a prop firm's funding: a profit target (e.g. 8-10%), a daily loss limit (4-5%), total drawdown (8-10%), and sometimes a minimum number of trading days.
- Expectancy(Expectancy)The average expected gain per trade: (win rate × avg. win) − (loss rate × avg. loss). Positive expectancy is the mathematical condition for long-term profitability.
- Expert advisor (EA) / algorithmic trading(Expert advisor / algorithmic trading) 2 guidesA strategy whose rules are written in code and run automatically on a platform (MT4/MT5, cTrader, Python). It guarantees discipline, but not the quality of the rules.
- Index(Index) 1 guidesA single figure summarizing the performance of a basket of stocks (S&P 500, Nasdaq 100, DAX, BIST 100). Traded via futures and CFDs.
F
- FOMC(FOMC) 2 guidesThe Fed committee that sets US interest rates, meeting eight times a year. The decision, statement and press conference move global markets.
- FOMO (fear of missing out)(FOMO (fear of missing out)) 2 guidesThe urge to enter late, unplanned and oversized for fear of missing a move. Usually coincides with the end of the move.
- Fair value gap (FVG)(Fair value gap (imbalance))The gap in a three-candle sequence where the wicks of the first and third candles do not overlap; a zone left imbalanced by a fast move and frequently filled back in.
- False breakout(False breakout / fakeout) 2 guidesA brief move beyond a level followed by a reversal; the classic trap that collects breakout traders' stops.
- Fibonacci retracement(Fibonacci retracement)Ratios (38.2%, 50%, 61.8%) measuring how much of a move has been retraced; used as potential support/resistance zones during pullbacks.
- Footprint chart(Footprint chart)A chart showing bid and ask volume at each price level inside every candle; lets you read what happened inside the bar.
- Forward test(Forward test)Testing a backtested strategy on demo or a small live account in real time. The bridge between backtest and live trading.
- Funding rate(Funding rate)The periodic payment exchanged between longs and shorts in perpetual contracts; indicates which side is crowded.
- Futures(Futures) 7 guidesA contract to buy/sell a specific asset at a future date at a price set today; a standardised contract traded on an exchange.
- Interest rate decision(Interest rate decision)The outcome of a central bank meeting setting the policy rate; the macro event with the most direct impact on a currency.
G
- Daily loss limit(Daily loss limit)A prop firm rule capping the amount that may be lost in a single day (usually 4-5% of starting balance), including floating losses.
- Gap(Gap) 4 guidesThe price range between two candles where no trading occurred; it forms over the weekend, between a close and an open, or after news.
H
- Hawkish / dovish(Hawkish / dovish) 1 guidesThe tone of central bank language: hawkish = in favour of tight monetary policy (higher rates), dovish = in favour of loose policy (lower rates).
- Hedge(Hedge) 7 guidesOpening a position in the opposite direction or in a correlated instrument to reduce the risk of an existing position. In retail trading, it is often an expensive alternative to a stop.
- Volume(Volume) 2 guidesThe number of contracts or units traded in a period. Shows participation behind a move; a breakout without volume is suspect.
- Volume profile(Volume profile) 1 guidesThe horizontal distribution of volume across price levels. The POC is the most-traded level; the value area holds 70% of volume.
I
İ
- Trading journal(Trading journal)A record of every trade: setup, entry/exit, risk, outcome and emotional state. The only objective source of your mistakes and true expectancy.
- Trading plan(Trading plan)A written document defining which markets, sessions and timeframes you trade, with which setups, how much risk and under what rules.
K
- Commission(Commission)A fixed per-trade fee charged by the broker or exchange; ECN accounts typically pair tight spreads with a per-lot commission.
- Correlation(Correlation)The degree to which two instruments move together (+1 same direction, -1 opposite). Correlated positions duplicate the same risk.
- Losing streak(Losing streak)A run of consecutive losing trades. With a 50% win rate, 6-7 losses in a row within 100 trades is statistically normal; plan for it.
L
- Leverage(Leverage) 16 guidesThe ability to open a position several times the size of your margin (e.g. 1:30, 1:100). It magnifies losses just as much as profits.
- Limit order(Limit order)A pending order that executes at the specified price or better. The price is guaranteed, execution is not.
- Liquidation(Liquidation) 7 guidesThe forced closure of a leveraged position by the exchange/broker due to insufficient margin. In crypto, liquidation clusters act like a price magnet.
- Liquidity(Liquidity)How easily an asset can be bought or sold quickly without moving its price. High liquidity means tight spreads and low slippage.
- Liquidity sweep / stop hunt(Liquidity sweep / stop hunt)Price extending into obvious stop clusters (equal highs/lows, beyond a level), triggering them, then reversing.
- Long (buy) position(Long position) 6 guidesBuying with the expectation that price will rise. Profit comes from selling above the purchase price.
- Lot(Lot) 25 guidesThe standard trade size unit. In forex 1 standard lot = 100,000 units of base currency; a mini lot is 10,000, a micro lot 1,000.
M
- MACD(MACD) 1 guidesA momentum indicator built from the difference of two EMAs; tracks trend strength via signal-line crossovers and the histogram.
- Margin (collateral)(Margin) 13 guidesThe amount blocked in the account to keep a leveraged position open. The used margin / equity ratio shows the health of the account.
- Margin call(Margin call) 1 guidesA broker warning issued when account equity falls below a set percentage of required margin; positions may then be force-closed (stop-out).
- Martingale(Martingale)Doubling position size after each loss so a single win recovers everything; wipes the account in a losing streak.
- Momentum(Momentum)The speed and strength of a price move. Momentum strategies join strong moves; mean-reversion strategies wait for exhaustion.
- Moving average(Moving average (SMA / EMA)) 11 guidesThe average price over a set number of candles; an SMA weights all bars equally, while an EMA gives more weight to recent prices. Used for trend direction and dynamic support/resistance.
N
O
- Mean reversion(Mean reversion)A strategy family assuming price returns after stretching too far from a mean (VWAP, moving average, value area); works in ranging markets.
- Open interest(Open interest) 2 guidesThe total number of contracts left open in the futures/perpetual market. Read together with volume, it shows the participation behind a move.
- Order block(Order block)The last opposite-direction candle(s) before a strong move; assumed to hold institutional orders and used as an entry zone on return.
- Order book (DOM)(Order book / DOM) 11 guidesA list of resting buy and sell limit orders at each price level (depth). DOM (depth of market) is the trading interface for it.
- Overfitting(Overfitting / curve fitting) 1 guidesFitting a strategy's parameters so closely to past data that it fails to work in the future; the biggest pitfall of backtesting.
- Overtrading(Overtrading) 7 guidesTaking more trades than necessary — without a setup, out of boredom, or to make up for losses; it piles up costs and lowers the quality of your decisions.
Ö
P
- Market order(Market order)An order executed immediately at the best available price. Execution is guaranteed, the price is not.
- Market structure(Market structure)The sequence of swing highs and lows. A break of structure (BOS) confirms continuation; a change of character (CHoCH) hints at reversal.
- POC (point of control)(POC (point of control)) 2 guidesThe price level with the highest traded volume in the volume profile; it is the price the market accepts as "fair" during that period, acting as a magnet and as support/resistance.
- Perpetual contract(Perpetual contract)A crypto futures contract with no expiry, kept anchored to the spot price via the funding rate mechanism.
- Pip(Pip) 31 guidesThe smallest standard price increment in a currency pair: the fourth decimal (0.0001) for most pairs, the second (0.01) for JPY pairs.
- Pip value(Pip value)The monetary value of one pip for a given position size; a core input for position sizing and risk calculation.
- Position sizing(Position sizing) 10 guidesDeriving the number of lots/contracts from the cash risk accepted per trade and the stop distance. The core of risk management.
- Profit factor(Profit factor) 7 guidesThe ratio of gross profit to gross loss. 1 is breakeven, above 1.5 is considered healthy, above 2 is strong; very high values raise suspicion of overfitting.
- Profit split(Profit split) 6 guidesThe ratio in which profit made on a funded account is divided between the trader and the prop firm; typically 80/20, and up to 90% at some firms.
- Profit target(Profit target) 4 guidesThe percentage of profit required to pass the evaluation (e.g. 8% in phase 1, 5% in phase 2). The time limit has been removed at most firms.
- Prop firm (proprietary trading firm)(Prop firm (proprietary trading firm)) 18 guidesA firm whose capital the trader uses in exchange for a profit split; in the retail model a paid evaluation is passed first.
R
- RSI (relative strength index)(RSI (relative strength index)) 1 guidesA 0-100 momentum oscillator; conventionally above 70 is overbought, below 30 oversold. Divergences are the more valuable signal.
- Range (sideways market)(Range) 10 guidesA period in which price swings between a defined upper and lower boundary without establishing direction. The boundaries accumulate liquidity; they produce either a breakout or a false breakout.
- Regulation(Regulation)Oversight of a broker by a financial authority (FCA, CySEC, ASIC, SPK…); ensures segregated client funds and a complaints process.
- Retest(Retest) 7 guidesPrice returning to a broken level and testing it in its new role (support↔resistance); a confirmed entry opportunity.
- Revenge trading(Revenge trading) 3 guidesThe behaviour of opening unplanned and usually larger trades right after a loss in order to win the money back; it turns a small loss into a big one.
- Risk per trade(Risk per trade)The share of the account risked on a single trade; commonly 0.5-1%, lower on prop firm accounts.
- Risk-on / risk-off(Risk-on / risk-off) 3 guidesThe market's overall appetite: in risk-on, equities, crypto and commodity currencies (AUD, NZD) are bought; in risk-off, the dollar, yen, franc and bonds are preferred.
- Risk-reward ratio(Risk-reward ratio (R:R)) 12 guidesThe ratio of the potential profit at target to the potential loss at stop. A 1:2 ratio means 2 units of profit per 1 unit of risk; together with the win rate it determines expectancy.
S
- Scalping(Scalping) 3 guidesA style targeting many small gains within seconds to minutes; the most sensitive approach to costs and execution quality.
- Short (sell) position(Short position) 5 guidesSelling first with the expectation that the price will fall, then buying it back cheaper later. This is possible in CFD, futures and margin accounts.
- Slippage(Slippage) 21 guidesThe order is filled at a price different from the one requested. It increases around news events and in low liquidity.
- Spot market(Spot market)A market where the asset changes hands immediately at the current price; the basic form of crypto and stock trading.
- Spread(Spread) 31 guidesThe difference between the ask and bid price; an implicit cost paid on every trade.
- Stop order(Stop order)A pending order that becomes a market order once price reaches a set level. Used for breakout entries and stop-losses.
- Stop-loss(Stop-loss) 7 guidesAn exit order that caps the loss at a predetermined level. It's where risk is defined; a trade without a stop isn't risk-free, it's a trade whose risk hasn't been measured.
- Support and resistance(Support and resistance) 26 guidesZones where price has turned in the past: support is the level where buyers dominate below, resistance where sellers dominate above. Once broken, the roles can switch.
- Swap (overnight carry)(Swap / overnight financing) 8 guidesThe cost or income arising from the interest rate differential when holding forex and CFD positions open overnight.
- Swing trading(Swing trading)A style holding positions for days to weeks on 4-hour/daily charts; fewer trades, wider stops, less screen time.
- Trading sessions(Trading sessions)The Asian (Tokyo), London and New York sessions; the London–New York overlap is the most liquid window.
T
- Bond yield(Bond yield)The annual return implied by a government bond's price; the US 10-year yield is a reference for the dollar, gold and tech stocks.
- Consistency rule(Consistency rule)A rule at some prop firms that no single day may account for more than a set share (e.g. 30-40%) of total profit; discourages luck-based passes.
- Take-profit(Take-profit) 9 guidesAn exit order that realises profit at a predetermined target level. It defines the "reward" side of the risk/reward ratio.
- Tilt(Tilt) 2 guidesA poker-derived term for emotional derailment that disables rational decision-making. On tilt, rules stop applying.
- Timeframe(Timeframe) 23 guidesThe period each candle represents (1 min, 5 min, 1 hr, daily). The higher timeframe gives you direction, the lower timeframe gives you timing (top-down analysis).
- Trailing stop(Trailing stop)A dynamic stop that follows price at a set distance as it moves in your favour and stays put when it moves against you.
- Trend(Trend) 24 guidesPrice advancing via higher highs and lows (uptrend) or lower highs and lows (downtrend). Absent direction means a range.
V
- VIX(VIX) 2 guidesThe 30-day expected volatility index derived from S&P 500 options, known as the fear index. Above 20 signals unease, above 30 stress.
- VWAP (volume-weighted average price)(VWAP (volume-weighted average price)) 1 guidesThe intraday volume-weighted average price; institutions' reference for fair value. Above it buyers are in control, below it sellers.
- Volatility(Volatility)A measure of how much price fluctuates over a period. High volatility means both opportunity and risk; stop distances should adapt to it.