Trading glossary
308 terms in plain language. Search for a word or filter by topic.
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- Account BalanceBeginner
The cash value in a trading account before unrealized open-position profit or loss is fully reflected.
If you deposit $2,000 and have no open trades, your account balance is $2,000.
- Account CurrencyBeginner
The base currency used to value your deposits, withdrawals, fees, margin, and reports.
A USD account trading EUR/JPY will still show profit, loss, and margin converted into USD.
- Account DeficitIntermediate
A negative account state where losses exceed available funds, usually after fast markets, gaps, or excessive leverage.
A weekend price gap can push an overleveraged account below zero before a stop can execute.
- AccumulationIntermediate
A market phase where stronger buyers gradually absorb supply, often before an advance.
Sideways price action with rising volume near support may suggest accumulation.
- Algorithmic TradingIntermediate
Trading decisions or order execution handled by coded rules instead of manual clicks.
An algorithm may buy when a moving average crossover occurs and risk is within limits.
- AlphaAdvanced
Return generated above a benchmark or expected risk-adjusted return.
A strategy that earns 12% while its benchmark earns 8% has positive alpha before costs.
- AltcoinBeginner
Any cryptocurrency other than Bitcoin, often with distinct technology, token economics, or risk profile.
Ethereum, Solana, and Litecoin are commonly classified as altcoins.
- Annual EarningsIntermediate
Yearly profit growth over several years, used in this method as evidence of a durable increase, not as a valuation shortcut.
Three years of rising annual earnings is the A question.
Also called: a-letter
- ArbitrageAdvanced
Attempting to profit from price differences for the same or similar asset across venues or instruments.
If gold futures and spot gold temporarily diverge beyond costs, arbitrageurs may trade the spread.
- Ask PriceBeginner
The lowest price currently available to buy an instrument from sellers.
If EUR/USD is quoted 1.0849/1.0851, 1.0851 is the ask.
Also called: Offer Price
- Asset ClassBeginner
A broad group of instruments with similar economic characteristics, such as forex, equities, indices, commodities, bonds, or crypto.
Gold and crude oil belong to commodities; EUR/USD belongs to forex.
- At the MoneyIntermediate
An option whose strike price is close to the current price of the underlying asset.
A 100 call is at the money when the stock trades around 100.
- AussieBeginner
Trader shorthand for the Australian dollar, especially the AUD/USD currency pair.
A trader saying “Aussie is strong” often means AUD/USD is rising.
- Average True RangeIntermediate
A volatility indicator that estimates the average size of recent price ranges.
A trader may place wider stops when ATR rises.
- Averaging DownIntermediate
Buying more of a name after it falls from your purchase. This handbook lists it as a costly habit.
Buying at 40 and adding at 30 to 'improve the average' is averaging down.
- BacktestingIntermediate
Testing a trading idea on historical data to estimate how it might have performed.
A scalping strategy can be backtested across the last three years of EUR/USD data.
- Balance of PaymentsIntermediate
A record of a country’s transactions with the rest of the world, including trade, investment flows, and reserves.
Persistent external deficits may influence currency sentiment.
- Bar ChartBeginner
A chart that shows each period's open, high, low, and close as a vertical bar.
A daily bar records that day's high, low, and closing price.
- BaseIntermediate
A sideways or rounded pause after a prior rise, used in this method as a structure from which a later advance might start.
A cup, saucer, or double bottom can each be described as a base.
Also called: price-base
- Base CurrencyBeginner
The first currency in a pair; it is the currency being bought or sold against the quote currency.
In EUR/USD, EUR is the base currency.
- Basis PointBeginner
One hundredth of one percentage point, commonly used for interest rates and yields.
A rate increase from 5.00% to 5.25% is a 25-basis-point move.
- Bear MarketBeginner
A sustained period of falling prices and negative sentiment.
Equity indices declining more than 20% from highs are often described as being in a bear market.
- Bear TrapIntermediate
A false downside break that lures short sellers before price reverses upward.
Price breaks support, attracts shorts, then closes strongly back above support.
- BetaIntermediate
A measure of how much an asset tends to move relative to a benchmark.
A stock with beta of 1.5 has historically moved more than the market.
- Bid PriceBeginner
The highest price currently available to sell an instrument to buyers.
If GBP/USD is 1.2700/1.2702, 1.2700 is the bid.
- Blue-Chip StockBeginner
Shares of a large, established company with a long operating history and strong market recognition.
Major global banks, technology firms, and consumer companies are often considered blue chips.
- Bollinger BandsIntermediate
Bands set a number of standard deviations around a moving average to describe volatility.
A squeeze in band width shows a quiet, narrow range.
- BondBeginner
A loan to a government or company that pays interest and returns the amount lent on a fixed date.
A ten-year government bond pays interest each year and repays the loan after ten years.
- BreakoutBeginner
A move beyond a defined support, resistance, range, or chart pattern boundary.
A close above 1.1000 resistance on EUR/USD may be treated as a breakout.
- BrokerBeginner
A firm that provides access to markets or derivatives platforms and executes or routes client orders.
Retail traders typically access forex, CFDs, or shares through a broker.
- Bull MarketBeginner
A sustained period of rising prices and positive sentiment.
An index making higher highs for months may be in a bull market.
- Buy Limit OrderBeginner
An instruction to buy below the current market price at a specified level or better.
If EUR/USD trades at 1.0900, a buy limit at 1.0850 waits for a pullback.
- Buy Stop OrderBeginner
An instruction to buy above the current market price, usually to enter on upside momentum.
A trader may place a buy stop above resistance to join a breakout.
- CableBeginner
Trader nickname for GBP/USD, originating from historical transatlantic communications.
“Cable is bid” means GBP/USD is attracting buyers.
- CAN SLIMIntermediate
A seven-letter research checklist from a 2009 growth-stock handbook: current earnings, annual earnings, new, supply and demand, leader or laggard, institutional sponsorship, and market direction.
A learner can score a name against each letter without treating the score as an order.
Also called: canslim
- CandlestickBeginner
A chart mark whose body shows the open-to-close range and whose wicks show the high and low.
A long lower wick shows that lower prices were rejected in that period.
- Carry TradeIntermediate
Borrowing or selling a lower-yielding currency to buy a higher-yielding currency, seeking interest-rate differential gains.
A trader may buy a higher-yielding currency if volatility is low and the trend supports it.
- Cash IndexBeginner
A spot-style quote for an equity index, distinct from futures contracts on that index.
The cash DAX reflects the current value of the German benchmark index.
- Central BankBeginner
An institution responsible for monetary policy, interest rates, currency stability, and often banking-system oversight.
The Federal Reserve and European Central Bank are central banks watched by traders.
- CFDBeginner
A contract for difference that lets traders speculate on price movement without owning the underlying asset.
A CFD on gold tracks gold price changes but does not give ownership of physical gold.
- ChannelIntermediate
A price structure formed by parallel support and resistance lines.
A rising channel shows price trending upward within defined boundaries.
- Channel LineIntermediate
A line drawn parallel to a trendline to mark the other side of a price channel.
In an uptrend, the channel line sits above the rising lows.
- Climax TopIntermediate
A late, steep run after a long advance, often on unusual volume, used here as a description of exhaustion, not a forecast.
A stock that has already risen for months and then jumps far in a few days may be tracing a climax.
- CommissionBeginner
A fee charged by a broker for executing a trade, separate from spread or financing.
A stock CFD trade may have both spread cost and commission.
- CommodityBeginner
A raw material or primary product traded in markets, such as oil, gold, copper, wheat, or natural gas.
Gold often reacts to real yields, the dollar, and risk sentiment.
- ConcentrationIntermediate
This method's preference for a small number of well-studied names rather than a long cluttered list.
A few names you can actually watch is concentration; forty names you cannot review is clutter.
- ConfirmationIntermediate
Agreement between price and a second measure such as volume, another average, or another timeframe.
A new high in price without a new high in a paired average is a lack of confirmation.
- Consumer Price IndexBeginner
A measure of the change in prices paid by consumers for a basket of goods and services; the most watched measure of inflation.
A rise in the index of three percent over a year means that basket costs three percent more.
Also called: CPI
- Continuation PatternBeginner
A pause formation after which the prior trend often resumes, if the pattern completes in that direction.
A flag in an uptrend is a continuation pattern if price leaves it in the prior direction.
- Contract SizeBeginner
The notional quantity represented by one contract or lot.
One standard forex lot represents 100,000 units of the base currency.
- Contrary OpinionIntermediate
The idea that an overcrowded bullish or bearish consensus can be a warning, not a forecast by itself.
A very high bullish consensus is a reason to be careful, not an order to sell.
- CorrelationIntermediate
The degree to which two instruments move together or opposite each other.
EUR/USD and GBP/USD often show positive correlation during broad dollar moves.
- Cross Currency PairBeginner
A forex pair that does not include the US dollar.
EUR/GBP and AUD/JPY are cross currency pairs.
- CryptocurrencyBeginner
A digital asset secured by cryptography and typically transferred on a blockchain network.
Bitcoin is the largest cryptocurrency by market recognition.
- Cup with HandleIntermediate
A rounded base that looks like a cup, followed by a shorter pullback called a handle. Completion is a description, not a buy order.
A U-shaped decline and recovery, then a short handle, is the classic sketch.
Also called: cup-and-handle
- Currency PairBeginner
A quotation showing the exchange rate between two currencies.
USD/JPY tells how many yen one US dollar can buy.
- Current EarningsIntermediate
The latest quarterly earnings, and often sales, looked at for size and acceleration rather than a single static number.
A quarter that is larger than recent quarters is the C question, not a forecast.
Also called: c-letter
- Daily Loss LimitBeginner
A preset loss for one day after which the trader stops trading until the next day.
With a limit of three R, a trader who has lost three R closes the platform for the day.
- Day TradingBeginner
Opening and closing positions within the same trading day to avoid overnight exposure.
A day trader may close all positions before the New York session ends.
- Dead Cat BounceIntermediate
A temporary rebound during a broader downtrend that does not reverse the main bearish structure.
After a sharp sell-off, price may bounce briefly before falling again.
- DealerIntermediate
A market participant or firm that quotes prices and may take the other side of client trades.
Some brokers operate dealer models while others route orders externally.
- DeltaIntermediate
An option Greek measuring how much an option price may change for a one-unit move in the underlying.
A call with 0.50 delta may gain about $0.50 if the stock rises $1, all else equal.
- Demo AccountBeginner
A practice account using simulated funds to test platforms, orders, and strategies without real capital risk.
New traders often use demo accounts before trading live.
- DerivativeBeginner
A financial instrument whose value is based on an underlying asset, rate, index, or event.
Futures, options, and CFDs are derivatives.
- Discounted NewsAdvanced
Information that is already widely known, so a later repeat may move price less, or even opposite to the first reaction.
A third repeat of the same earnings miss can be old news.
Also called: old-news
- Distribution DayIntermediate
A session when a major average falls on heavier volume, used here as a count of possible selling pressure.
A cluster of distribution days after a rally is a market-direction warning.
- DivergenceIntermediate
Price making a new extreme while an oscillator or second series does not.
Price makes a higher high while RSI makes a lower high.
- DividendBeginner
A distribution of company earnings to shareholders, usually paid in cash or additional shares.
A stock index CFD may be adjusted when index constituents go ex-dividend.
- DojiBeginner
A candle whose open and close are almost the same, showing that neither buyers nor sellers finished in control.
After a strong rise, a doji shows the buying has paused for that period.
- Dollar IndexIntermediate
An index measuring the US dollar against a basket of major currencies.
A rising dollar index can pressure commodities priced in dollars.
Also called: US Dollar Index
- DovishBeginner
Policy language or action suggesting easier monetary policy, lower rates or concern about weak growth.
A central bank that says rate cuts are likely soon is described as dovish.
- Dow TheoryBeginner
An early framework that treats confirmed index movement, trend phases, and volume as a description of the market.
A Dow reader waits for a second average to confirm a break of a prior peak.
- DrawdownBeginner
The decline from an account or strategy peak to a later low.
A strategy falling from $10,000 to $8,500 has a 15% drawdown.
- ECNIntermediate
An electronic communication network that matches buy and sell orders from market participants.
An ECN-style venue can show raw spreads plus commission.
- Economic CalendarBeginner
A schedule of macroeconomic releases, central-bank events, and other market-moving data.
Traders check the calendar before CPI, NFP, and rate decisions.
- Effective LeverageIntermediate
Actual exposure relative to account equity, regardless of maximum leverage offered by the broker.
A $50,000 position on $5,000 equity equals 10:1 effective leverage.
- Elliott WaveAdvanced
A labeling method that describes advances and corrections in a structured wave sequence, with many competing counts.
Two analysts can label the same chart as different waves. The count is a hypothesis.
- Engulfing PatternBeginner
A candle whose body completely covers the body of the candle before it, in the opposite direction.
A small falling candle followed by a large rising candle that covers it is a bullish engulfing pattern.
- Entry TriggerBeginner
The specific event that turns a valid setup into an order.
A candle closing back above the support zone is the trigger.
- EquityBeginner
Account value including balance plus or minus unrealized profit or loss.
If your balance is $2,000 and open losses are $150, equity is $1,850.
- ETFBeginner
An exchange-traded fund that holds a basket of securities or tracks an index, sector, commodity, or strategy.
A gold ETF may track gold exposure without trading futures directly.
- Exchange RateBeginner
The price of one currency expressed in terms of another currency.
If EUR/USD is 1.1000, one euro equals 1.10 US dollars.
- ExecutionBeginner
The process by which an order is filled in the market or by a broker.
Fast execution matters during high-volatility news releases.
- Exotic PairBeginner
A pair that combines a major currency with the currency of a smaller or developing economy, usually with wider spreads.
The US dollar against the Turkish lira is an exotic pair.
- ExpectancyBeginner
The average result per trade over many trades, combining how often a method wins with how large its wins and losses are.
Four wins of two R and six losses of one R give plus two R over ten trades, or plus zero point two R per trade.
- Expert AdvisorIntermediate
An automated trading program commonly used on MetaTrader platforms.
An EA can manage entries, exits, and position sizing based on coded rules.
- Exponential Moving AverageIntermediate
A moving average that gives recent prices more weight, so it reacts faster than a simple moving average.
After a sharp move, the exponential average turns before the simple average of the same length.
Also called: EMA
- ExposureBeginner
The amount of market risk a trader has through open positions.
Holding long EUR/USD and long GBP/USD creates exposure to US dollar weakness.
- ExtendedIntermediate
A price already far past a base or pivot, treated here as too late to chase.
A name that has already run well above its handle high is extended.
Also called: extended-move
- Fair Value GapAdvanced
A price imbalance where rapid movement leaves a zone that some traders expect price may revisit.
ICT-style traders may watch a fair value gap as a possible retracement area.
- Federal ReserveBeginner
The central bank of the United States, closely watched for monetary policy and dollar impact.
Fed rate decisions can move USD pairs, gold, indices, and bonds.
- Fibonacci RetracementIntermediate
Horizontal levels based on Fibonacci ratios used to estimate potential pullback zones.
A trader may watch the 38.2% and 61.8% retracement levels after a rally.
- FillBeginner
The completed execution of an order, either fully or partially.
A large order may receive several partial fills at nearby prices.
- Financial InstrumentBeginner
A tradable contract or asset such as a currency pair, stock, index, commodity, bond, ETF, option, future, or CFD.
EUR/USD, Apple shares, and crude oil futures are financial instruments.
- Financing ChargeIntermediate
A cost or credit applied for holding leveraged or derivative positions beyond a specified time.
A CFD position kept overnight may incur financing.
Also called: Holding Cost
- FloatIntermediate
The shares available for public trading. This method treats a smaller float as more sensitive to demand.
Two companies with the same story can move differently if one has far fewer shares outstanding.
Also called: shares-outstanding
- Floating Profit and LossBeginner
Unrealized gain or loss on open positions before they are closed.
A long gold trade up $80 shows floating profit until closed.
Also called: Unrealized Profit and Loss
- Follow-Through DayIntermediate
A session, after a market low, when a major average rises on heavier volume. This method treats it as one clue that a decline may be pausing, not as proof.
A fourth-day rally on expanding volume is a classic follow-through sketch.
- FOMCIntermediate
The Federal Open Market Committee, the Fed body that sets US monetary policy.
FOMC statements can trigger sharp moves in USD and US indices.
- FOMOBeginner
Fear of missing out: the urge to enter a trade late because price is already moving.
Buying after a long run of rising candles because it feels like the move will leave without you.
- ForexBeginner
The global foreign exchange market where currencies are traded in pairs.
EUR/USD, USD/JPY, and GBP/USD are popular forex markets.
- Forward ContractIntermediate
A customized agreement to exchange an asset or currency at a future date and price.
A company may use FX forwards to hedge future currency payments.
- Forward TestingIntermediate
Trading a set of rules in real time, usually on a demo account or at very small size, to see whether they can be followed as written.
After a backtest, the same rules are applied to live prices on a demo account for two months.
- Free MarginBeginner
Account equity not currently locked as margin for open positions.
If equity is $3,000 and used margin is $1,000, free margin is $2,000.
- Fundamental AnalysisBeginner
Evaluating markets through economic data, earnings, policy, valuation, supply-demand, and news drivers.
A currency trader may study inflation and interest-rate expectations.
- Futures ContractIntermediate
A standardized exchange-traded agreement to buy or sell an asset at a future date.
Crude oil futures specify contract size, delivery month, and exchange rules.
- GammaAdvanced
An option Greek measuring how quickly delta changes as the underlying price moves.
High gamma options can become more sensitive near expiry.
- GapBeginner
A price jump between trading sessions or candles where little or no trading occurred.
A stock may gap up after better-than-expected earnings.
- GDPBeginner
Gross domestic product, a broad measure of economic output.
GDP surprises can affect currency and equity-index expectations.
- Good Till CancelledBeginner
An order instruction that remains active until filled, cancelled, or expired under broker rules.
A trader may leave a GTC limit order at a major support level.
- Gross ExposureIntermediate
The total absolute value of all open positions before netting longs and shorts.
Long $50,000 EUR/USD and short $30,000 GBP/USD creates $80,000 gross exposure.
- Group StrengthAdvanced
How an industry group is behaving versus other groups. This method prefers leaders that sit in already-leading groups.
A sound base in a last-place group is a weaker research case than the same base in a leading group.
Also called: group-relative-strength
- Guaranteed StopIntermediate
A stop order that guarantees the exit price, usually for an additional premium and subject to broker rules.
A guaranteed stop can protect against gap risk where available.
- HammerBeginner
A candle with a small body near the top and a long lower wick, showing that lower prices were rejected during the period.
Price falls sharply during the hour, then recovers to close near where it opened.
- HandleIntermediate
The short pullback on the right side of a cup. It is part of the base, not a separate trade.
A handle that drifts down on quieter volume is one common description.
- HawkishBeginner
Policy language or action suggesting tighter monetary policy, higher rates, or inflation concern.
A hawkish central-bank statement can strengthen a currency.
- Head and ShouldersBeginner
A reversal pattern with three peaks, the middle one higher, completed by a break of the neckline.
A right shoulder and a close below the neckline complete the pattern, if volume agrees.
- HedgeIntermediate
A position intended to reduce or offset risk in another position or portfolio.
An exporter may hedge currency exposure with forward contracts.
- Heikin AshiIntermediate
A candle-style chart that smooths price action to make trends easier to visualize.
A series of Heikin Ashi candles with no lower wicks may show strong uptrend momentum.
- High-Frequency TradingAdvanced
Automated trading that uses speed, infrastructure, and algorithms to execute many orders very quickly.
HFT firms may compete to capture tiny pricing inefficiencies.
- Historical ModelAdvanced
A past leader reprinted so you can study how a pattern looked. It is a case study of history, not a forecast of the next name.
A 1950s or 1990s winner is a model to compare, not a ticker to copy.
Also called: past-leader
- Hit the BidIntermediate
Selling immediately at the current bid price.
A trader who needs instant exit may hit the bid instead of waiting with a limit order.
- Horizontal CountAdvanced
A point-and-figure measuring method that uses the width of a congestion area.
A wide base on a P&F chart produces a larger count than a narrow one.
- Ichimoku CloudIntermediate
A multi-line indicator used to assess trend, support, resistance, and momentum.
Price above the cloud is often interpreted as a bullish environment.
- Illiquid MarketIntermediate
A market with limited buyers and sellers, often causing wider spreads and more slippage.
Minor exotic FX pairs can become illiquid outside active sessions.
- Implied VolatilityAdvanced
The market’s expected future volatility implied by option prices.
Option premiums often rise before major earnings or central-bank events.
- In the MoneyIntermediate
An option with intrinsic value: calls below the underlying price or puts above it.
A 95 call is in the money when the stock trades at 100.
- Income StockBeginner
A share bought mainly for its dividend. This method says a dividend does not make a name safe.
A high yield did not protect several bank and utility case studies in the handbook.
Also called: dividend-stock
- IndexBeginner
A benchmark that tracks the performance of a group of securities.
The S&P 500 tracks large US-listed companies.
- Industry GroupIntermediate
A tighter cluster of similar companies inside a sector. This method treats group strength as a large part of an individual move.
Media-radio/TV is an industry group inside leisure.
Also called: group
- InflationBeginner
A sustained rise in the general price level of goods and services.
Higher-than-expected CPI can shift interest-rate expectations.
- Initial MarginBeginner
The amount required to open a leveraged position.
Opening a CFD trade may require 5% initial margin.
- Inside BarBeginner
A candle whose high and low both sit within the range of the candle before it, showing a pause.
After a large candle, a small candle that stays inside its range is an inside bar.
- Institutional SponsorshipIntermediate
Ownership by funds or other large accounts. This method wants some quality sponsorship, not a crowded last holder.
A rising number of capable funds is the I question; a stampede of late owners is a warning.
Also called: i-letter
- Interest RateBeginner
The cost of borrowing money, set for an economy by its central bank's policy rate.
When a central bank raises its rate, loans become more expensive and saving pays more.
- Interest Rate DecisionBeginner
A central-bank announcement of its policy rate and often its policy outlook.
Rate decisions can produce volatility in currencies, indices, and gold.
- Intermarket AnalysisAdvanced
The study of relationships among bonds, stocks, commodities, and currencies as context, not as a trade signal.
A sharp move in bonds can be context for a stock-index chart.
- IntradayBeginner
Activity occurring within a single trading day.
An intraday trader may use five-minute and fifteen-minute charts.
- InvalidationBeginner
The price level at which the reason for a trade is no longer true.
A trade based on a support zone holding is invalidated when price closes clearly below that zone.
- Investment HorizonBeginner
The expected holding period for a trade, strategy, or investment.
Scalpers use minutes; position traders may use weeks or months.
- IPOIntermediate
A company's first public share sale. This method usually leaves first-day IPO buying alone because the best allotments are scarce and lockups can trap you.
If you can buy all the shares you want on day one, the handbook asks whether that is a warning.
Also called: initial-public-offering
- Japanese YenBeginner
The currency of Japan, commonly traded in pairs such as USD/JPY, EUR/JPY, and GBP/JPY.
Yen pairs can react strongly to global yields and risk sentiment.
- Jobless ClaimsIntermediate
A US labor-market release showing new unemployment benefit claims.
A sudden rise in jobless claims may weaken growth expectations.
- JournalingBeginner
Recording trades, decisions, emotions, screenshots, and statistics to improve process discipline.
A journal helps identify whether losses come from strategy or execution mistakes.
- Keltner ChannelIntermediate
A volatility channel typically built from an exponential moving average and ATR.
Trend followers may use Keltner channels to trail stops.
- KiwiBeginner
Trader nickname for the New Zealand dollar, especially NZD/USD.
“Kiwi is selling off” usually means NZD/USD is falling.
- KYCBeginner
Know Your Customer checks used by financial firms to verify identity and comply with regulation.
A broker may request ID and proof of address before account approval.
- LaggardIntermediate
A stock that has not participated in its group's move. This method treats it as a weaker research candidate.
Buying the cheapest name in a hot group is often buying the laggard.
- Lagging IndicatorBeginner
An indicator that responds after price has already moved, often used for confirmation.
Moving averages are lagging indicators because they are calculated from past prices.
- LatencyAdvanced
The delay between sending an order or data request and receiving execution or response.
Low latency can matter for scalpers and automated strategies.
- LeaderIntermediate
A stock that is already outperforming its group or the market, used here as a research preference, not a personality label.
The first name in a group to complete a base is often called the leader.
Also called: l-letter
- LeverageBeginner
Using borrowed or broker-provided exposure so a smaller deposit controls a larger position.
20:1 leverage allows $1,000 margin to control $20,000 exposure.
Also called: Gearing
- Limit OrderBeginner
An instruction to buy or sell at a specified price or better.
A sell limit above current price waits for price to rise to that level.
- LiquidationIntermediate
Forced closing of positions when margin requirements are not met.
A highly leveraged crypto position may be liquidated if price moves against it.
- LiquidityBeginner
The ease of trading an instrument without significantly affecting its price.
Major FX pairs usually have deeper liquidity than exotic pairs.
- Liquidity ProviderIntermediate
A bank, institution, or venue that supplies tradable bid and ask prices.
A broker may aggregate quotes from several liquidity providers.
- Long PositionBeginner
A trade that benefits when the instrument price rises.
Buying EUR/USD creates a long position in EUR against USD.
- Loss AversionBeginner
The tendency to feel a loss more strongly than a gain of the same size, which leads to holding losing trades too long.
Moving a stop loss further away to avoid accepting a small loss.
- Loss CutIntermediate
This method's written rule to close a stock after a small decline from the purchase, often illustrated near 7 to 8 percent. It is a process rule, not a promise that losses stay that small.
A buy at 50 with an 8 percent cut is wrong at 46, whatever the story.
Also called: seven-to-eight
- LotBeginner
A standardized trade size, especially in forex.
One standard lot is 100,000 base-currency units; one mini lot is 10,000.
- MACDIntermediate
A trend-following oscillator built from two moving averages and a signal line.
MACD crossing its signal line is only read with the larger trend.
- Maintenance MarginIntermediate
Minimum equity required to keep a leveraged position open.
If equity falls below maintenance margin, margin call or stop-out may occur.
- Major PairBeginner
A heavily traded currency pair that includes the US dollar, usually with the tightest spreads.
The euro against the US dollar is the most traded major pair.
- MarginBeginner
Capital set aside as collateral to open or maintain leveraged exposure.
A $10,000 position with 10% margin requires $1,000.
- MarginIntermediate
Borrowed buying power. This handbook treats full margin in a breaking market as faster damage, not as a default setting.
A 50 percent decline on full margin can erase far more of the cash you started with.
Also called: borrowed-buying-power
- Margin CallBeginner
A warning or requirement to add funds or reduce positions when account equity falls too low.
A losing leveraged trade can trigger a margin call.
- Margin LevelBeginner
Equity divided by used margin, shown as a percentage. It shows how close an account is to a margin call.
Equity of one thousand dollars with used margin of five hundred dollars is a margin level of two hundred percent.
- Mark-to-MarketIntermediate
Revaluing open positions at current market prices to calculate unrealized profit, loss, and margin.
Futures accounts are typically marked to market daily.
- MarketBeginner
Any place, physical or electronic, where buyers and sellers agree a price for something.
The currency market is a network of banks, brokers and traders agreeing exchange rates all day.
- Market ActionBeginner
The combined information of price, volume, and, in futures or options, open interest.
Price rising on expanding volume is one reading of market action.
Also called: price action
- Market BreadthAdvanced
Measures of how many stocks participate in a move, such as advances versus declines.
An index high with a falling advance-decline line is a breadth warning.
Also called: advance-decline
- Market DepthIntermediate
Visible buy and sell interest at different price levels in an order book.
Thin market depth can lead to bigger price jumps after market orders.
- Market DirectionIntermediate
The trend of the major averages, treated in this method as the letter that can override a good individual setup.
A sound base in a breaking market is still a weaker research case.
Also called: m-letter
- Market MakerIntermediate
A participant that provides continuous bid and ask prices and may earn the spread.
Market makers help create liquidity but may widen spreads during volatile periods.
- Market OrderBeginner
An instruction to buy or sell immediately at the best available price.
Market orders prioritize speed over exact fill price.
- Market StructureBeginner
The pattern of swing highs and swing lows that shows whether price is trending up, trending down or moving sideways.
Higher highs and higher lows describe an uptrend.
- MetaTraderBeginner
A popular trading platform family used for forex and CFD charting, order placement, and automation.
Many traders run indicators and expert advisors on MetaTrader 4 or 5.
- Micro LotBeginner
A forex trade size of one thousand units of the base currency, one hundredth of a standard lot.
Zero point zero one lots is one micro lot.
- Mini LotBeginner
A forex trade size of ten thousand units of the base currency, one tenth of a standard lot.
Zero point one lots is one mini lot.
- Minor PairBeginner
A pair of two major currencies that does not include the US dollar.
The euro against the British pound is a minor pair.
- MomentumBeginner
The speed and strength of a price move.
Large candles closing near their highs show strong upward momentum.
- Moving AverageIntermediate
A lagging average of past closes used to smooth noise and describe trend.
A 40-day average sits below rising prices in a steady uptrend.
- NecklineBeginner
The line connecting the troughs of a head-and-shoulders pattern. A break of it completes the pattern.
The neckline often slants a little; the break still has to be clear.
- Negative Balance ProtectionBeginner
A rule or broker policy under which a retail client cannot lose more than the money in the account.
If a sudden gap pushes an account below zero, the broker resets it to zero where this protection applies.
- Net ExposureIntermediate
Directional exposure after offsetting long and short positions.
Long $100,000 EUR/USD and short $40,000 EUR/USD leaves $60,000 net long exposure.
- NettingIntermediate
A position accounting mode where opposite trades in the same instrument reduce one combined position.
A buy 1 lot and sell 0.4 lot results in a net long 0.6 lot.
- New HighIntermediate
A price at or near the highest print of the past year, read here as possible strength after a base, not as proof a move will continue.
A breakout from a cup that prints a 52-week high is a new-high event.
- NFPBeginner
US non-farm payrolls, a major monthly employment report watched by global traders.
NFP surprises can cause sharp moves in USD pairs and gold.
- No Dealing DeskIntermediate
A broker model where orders are routed to external liquidity rather than manually handled by a dealing desk.
NDD execution is often marketed as agency-style order routing.
- Notional ValueBeginner
The total market value controlled by a position.
A 100,000-unit EUR/USD trade has notional value of 100,000 euros.
- OCO OrderIntermediate
One-cancels-the-other order: if one linked order executes, the other is automatically cancelled.
A trader may place a profit target and stop loss as an OCO pair.
- Open InterestIntermediate
The number of outstanding futures or options contracts that have not been closed.
Rising open interest with a rising price can show new positions being added.
- Open PositionBeginner
A trade that has been entered but not yet closed.
A long gold trade remains an open position until sold or otherwise closed.
- OptionAdvanced
A time-limited contract on a stock. This handbook calls short-dated and packaged option trades easy to overcomplicate.
A 30-day call can expire worthless even if the stock later does what you expected.
Also called: call-or-put
- Order BookIntermediate
A list of resting buy and sell orders organized by price level.
Order-book traders watch where liquidity is stacked.
- Order TicketBeginner
The platform window or form used to enter trade size, order type, stop loss, and take profit.
Before confirming, check the order ticket for symbol, volume, and direction.
- OscillatorBeginner
An indicator that moves within or around a range to show momentum or overextended conditions.
RSI and stochastic are common oscillators.
- Out of the MoneyIntermediate
An option with no intrinsic value: calls above the underlying price or puts below it.
A 110 call is out of the money when the stock trades at 100.
- Out-of-Sample DataIntermediate
Historical data that was kept aside and not used while the rules were being built, used to check them afterwards.
Rules are built on three years of data and then checked on a fourth year they have never seen.
- OverboughtBeginner
A condition where price or an indicator suggests upward momentum may be stretched.
RSI above 70 is often described as overbought, though trends can stay overbought.
- OverfittingIntermediate
Adjusting rules until they match past data very closely, so that they describe the past and fail on new data.
Adding filter after filter until a backtest shows no losing month.
Also called: Curve Fitting
- Overnight PositionBeginner
A position kept open after the market’s daily rollover or close.
Overnight positions may face swaps, financing, and gap risk.
- OversoldBeginner
A condition where price or an indicator suggests downward momentum may be stretched.
RSI below 30 is often described as oversold.
- OvertradingBeginner
Taking more trades than the plan allows, usually from boredom or emotion.
A plan allows two setups a day and the trader takes nine trades.
- Pair TradingAdvanced
A relative-value strategy that trades two related instruments against each other.
A trader may go long one bank stock and short another to isolate relative performance.
- Paper TradingBeginner
Simulated trading used to practice strategy and execution without real money.
Paper trading helps test order logic before live trading.
- Parabolic SARIntermediate
A trend-following indicator that plots dots to suggest potential trailing stops or reversals.
Dots below price are often read as bullish; dots above price as bearish.
- Pending OrderBeginner
An order set to execute only if future price conditions are met.
Limit and stop orders are pending orders until triggered or filled.
Also called: Working Order
- Percentage RetracementIntermediate
A measured pullback of a prior move, often watched near one-third, one-half, or two-thirds.
A rise of 30 points may pull back about 10, 15, or 20 points.
Also called: fibonacci-retracement
- PipBeginner
A standard unit of price movement in forex, usually the fourth decimal place for most pairs.
A move from 1.1050 to 1.1055 is five pips.
- Pip ValueBeginner
The monetary value of one pip movement for a position size.
For many USD-quoted major pairs, one standard lot equals about $10 per pip.
- PivotIntermediate
The price area at the top of a completed base where this method watches for a possible continuation. It is a landmark, not a signal to buy.
The high of the handle is often marked as the pivot of a cup-with-handle.
Also called: pivot-point
- Pivot PointIntermediate
A calculated support/resistance framework based on prior high, low, and close.
Day traders may watch daily pivot levels for intraday reactions.
- PMIIntermediate
Purchasing Managers’ Index, a survey-based indicator of business activity.
Weak PMI readings can pressure a currency or equity market.
- Point and FigureAdvanced
A chart that records filtered price movement in X and O columns and ignores equal time spacing.
A three-box reversal chart ignores small noise and changes column only after a set reversal.
Also called: p-and-f
- PortfolioBeginner
A collection of open positions or investments held by a trader or investor.
A portfolio may include forex, indices, commodities, and cash.
- Position SizeBeginner
The quantity traded, chosen to align risk with account size and stop distance.
Risking 1% per trade requires calculating size from stop-loss distance.
- Price ActionBeginner
Analyzing raw price movement, structure, candles, and levels without relying heavily on indicators.
Price-action traders may focus on support, resistance, and rejection candles.
- Price GapIntermediate
A space on the chart where no trading occurred between one period and the next.
A breakaway gap leaves a space as price leaves a base.
- Process MistakeIntermediate
A listed habit such as holding a small loss, buying a decline, or ignoring a written market rule.
Hoping a 8 percent loss will return is a process mistake, not a missing indicator.
Also called: costly-mistake
- Profit FactorIntermediate
Gross profit divided by gross loss, used to evaluate a trading system.
A profit factor above 1 means gross profits exceed gross losses.
- PullbackBeginner
A temporary move against the prevailing trend.
In an uptrend, traders may buy a pullback toward support.
- Put OptionBeginner
An option giving the holder the right, not obligation, to sell the underlying at a strike price.
A trader may buy a put to speculate on downside or hedge a stock position.
- Quantitative EasingIntermediate
Central-bank asset purchases intended to ease financial conditions and support liquidity.
QE can influence bond yields, equities, and currencies.
- Quantitative TighteningIntermediate
Central-bank balance-sheet reduction intended to withdraw liquidity or tighten financial conditions.
QT may put upward pressure on yields if markets expect less central-bank demand.
- QuoteBeginner
A displayed bid and ask price for an instrument.
A quote of 1.2500/1.2502 shows where traders can sell and buy.
- Quote CurrencyBeginner
The second currency in a pair; it expresses the price of one unit of the base currency.
In GBP/USD, USD is the quote currency.
- R MultipleBeginner
A trade result expressed in units of the amount that was risked. One R is the planned loss on one trade.
Risking ten dollars and making twenty is a result of plus two R.
Also called: Risk Unit, R
- RangeBeginner
A market condition where price moves between support and resistance instead of trending.
A trader may buy near range support and sell near range resistance.
- Rate DifferentialIntermediate
The interest-rate gap between two currencies, often relevant to carry and forward pricing.
A wider US-Japan rate differential can influence USD/JPY.
- Realized Profit and LossBeginner
Profit or loss locked in after closing a trade.
A trade closed for $120 gain becomes realized profit.
- Recency BiasBeginner
Giving too much weight to the last few results when judging a method.
Abandoning a tested plan after three losses in a row.
- RegulationBeginner
Rules set and enforced by a financial authority that a broker must follow in order to serve clients.
A regulated broker must keep client money separate from its own.
- Relative StrengthIntermediate
How a stock has behaved versus the market or its group. This method prefers leaders over laggards.
A name making new highs while its group is dull is a relative-strength observation.
Also called: rs
- Relative Strength IndexIntermediate
A bounded momentum oscillator. High and low readings describe stretch, not a stand-alone order.
An RSI near 70 in a strong uptrend can stay elevated for a long time.
Also called: relative-strength-index
- RequoteIntermediate
A broker response offering a new price when the requested price is no longer available.
Requotes are more likely in fast-moving or low-liquidity conditions.
- ResistanceBeginner
A price area where selling interest previously appeared and may appear again.
A prior swing high can be marked as resistance.
- Retail TraderBeginner
An individual trader using personal capital rather than trading for an institution.
Retail traders often access markets through online brokers.
- Revenge TradingBeginner
Taking impulsive trades straight after a loss in order to win the money back.
Doubling the trade size immediately after being stopped out.
- Reversal PatternBeginner
A price formation that can mark the end of a prior trend, if it is completed and confirmed.
A double top is a reversal pattern only after the middle trough is broken.
- Risk ManagementBeginner
Rules and processes used to control losses, position size, leverage, and exposure.
A trader may risk no more than 1% of equity on any single trade.
- Risk per TradeBeginner
The amount of the account a trader accepts losing if one trade reaches its stop loss.
One percent risk on a two-thousand-dollar account is twenty dollars per trade.
- Risk-Reward RatioBeginner
Comparison of potential loss to potential gain on a trade.
Risking $100 to target $300 is a 1:3 risk-reward setup.
- RolloverIntermediate
The process of extending a forex position beyond the settlement cut-off, often creating swap charges or credits.
Holding USD/TRY overnight may generate a large rollover debit or credit.
- ScalpingIntermediate
A short-term trading style seeking small gains from frequent trades.
Scalpers often prioritize tight spreads, fast execution, and liquid markets.
- SectorIntermediate
A broad economic bucket such as finance, technology, or consumer goods. Several industry groups sit inside one sector.
Leisure and entertainment is a sector; media is a group inside it.
- Sell Limit OrderBeginner
An instruction to sell above the current market price at a specified level or better.
With price at one point one zero, a sell limit at one point one one waits for price to rise to it.
- Sell Stop OrderBeginner
An instruction to sell below the current market price, triggered if price falls to a specified level.
With price at one point one zero, a sell stop at one point zero nine is triggered if price falls to it.
- SentimentBeginner
The overall mood or positioning bias of market participants.
Extreme bullish sentiment can sometimes precede corrections.
- SetupBeginner
The set of conditions that must be present before a trade is considered.
An uptrend on the higher timeframe plus a pullback to a support zone is a setup.
- Short PositionBeginner
A trade that benefits when the instrument price falls.
Selling EUR/USD creates a short position in EUR against USD.
- Short SaleAdvanced
Selling a borrowed share hoping to buy it back cheaper. This method treats it as a specialist tool with extra rules and risk.
A short has a theoretically large upside loss if price keeps rising.
Also called: short-selling
- Simple Moving AverageBeginner
A moving average that gives every period in its window the same weight.
A twenty-period simple moving average adds the last twenty closing prices and divides by twenty.
Also called: SMA
- SlippageBeginner
The difference between expected execution price and actual fill price.
A stop order may slip during a fast news move.
- SpreadBeginner
The difference between bid and ask prices.
Lower spreads reduce the immediate cost of entering and exiting trades.
Also called: Bid-Ask Spread
- Spread BettingIntermediate
A derivative format, common in the UK and Ireland, where profit or loss is based on stake per point of price movement.
A £2-per-point stake gains £20 if the market moves 10 points in your favor.
- Standard LotBeginner
A forex trade size of one hundred thousand units of the base currency.
One standard lot of the euro against the US dollar is one hundred thousand euros.
- StochasticsIntermediate
An oscillator that compares the close with the recent high-low range.
A stochastic turn from a high reading is weaker if the daily trend is still up.
Also called: k-d
- StockBeginner
A share of ownership in a company, which can be bought and sold on a stock market.
Someone who owns one share of a company owns a very small part of that company.
Also called: Share
- Stop LossBeginner
An order designed to close a position if price moves against it beyond a chosen level.
A trader long at 1.1000 may set a stop loss at 1.0950.
- Stop Out LevelIntermediate
A broker-defined margin threshold where positions may be automatically closed.
If margin level drops below the stop-out level, the platform may liquidate trades.
- SubgroupIntermediate
A still tighter slice of an industry group. The handbook often folds subgroup names into the group label.
Radio/TV can be the subgroup under media.
- Supply and DemandBeginner
The S letter: how many shares are available versus how aggressively they are being bought or sold, often read through volume and float.
A smaller float plus heavy buying can move price farther than a huge float.
Also called: s-letter
- SupportBeginner
A price area where buying interest previously appeared and may appear again.
A prior swing low can be marked as support.
- SwapIntermediate
An overnight debit or credit reflecting interest-rate differences and broker financing rules.
A position can earn positive swap in one direction and pay negative swap in the other.
- Swing HighBeginner
A peak on a chart: a high with lower highs on both sides of it.
Price rises to a peak, falls back, and the peak stands out as a swing high.
- Swing LowBeginner
A trough on a chart: a low with higher lows on both sides of it.
Price falls to a trough, rises again, and the trough stands out as a swing low.
- Swing TradingBeginner
Holding trades for several days or weeks to capture medium-term price swings.
A swing trader may use daily charts and wider stops.
- Synthetic PairAdvanced
A currency exposure constructed from two or more related pairs instead of trading the direct pair.
EUR/JPY exposure can be approximated through EUR/USD and USD/JPY.
- Take ProfitBeginner
An order to close a position at a chosen favorable price to lock in gains.
A long trade from 50 may use a take-profit order at 55.
- Technical AnalysisBeginner
The study of market action, mainly through charts, using price, volume, and sometimes open interest.
A technician studies a price chart and volume before discussing a supply story.
- ThetaAdvanced
An option Greek measuring expected time-decay impact on an option price.
Short-dated options often lose theta faster as expiry approaches.
- TickBeginner
The smallest price movement or a single change in quoted price, depending on market context.
Futures contracts have defined tick sizes and tick values.
- Time CycleAdvanced
A recurring time interval some analysts overlay on charts. It is uncertain and easy to overfit.
A seasonal tendency is a cycle idea, not a promise that this year will repeat.
- TimeframeBeginner
The amount of time each bar or candle on a chart covers.
On a one-hour chart, each candle shows what price did during one hour.
- Trading PlanBeginner
A written set of rules stating what a trader trades, when, how much is risked, and when to stop.
A plan names one market, one timeframe, one setup and a maximum loss for the day.
- Trading SessionBeginner
A period of the day when a major financial centre is open and active, such as the Asian, London or New York session.
Activity is usually highest when the London and New York sessions overlap.
- Trading SystemAdvanced
A set of objective rules that can be written down and tested. Results still depend on the sample and on money management.
A moving-average crossover with a written exit is a simple system idea, not a finished plan.
- Trailing StopBeginner
A stop order that moves with favorable price movement to help protect gains.
A trailing stop may follow price by 50 pips after a trade moves into profit.
- Transaction CostBeginner
Total cost of entering, holding, and exiting a trade, including spread, commission, slippage, and financing.
A profitable strategy on paper may fail after transaction costs.
- TrendBeginner
The prevailing direction of prices: up, down, or sideways.
Higher swing highs and higher swing lows describe an uptrend.
- TrendlineBeginner
A line drawn along successive lows in an uptrend or successive highs in a downtrend.
An uptrend line connects two or more rising swing lows.
- TriangleBeginner
A narrowing range that can be symmetrical, ascending, or descending.
An ascending triangle has a flat top and rising lows.
- Underlying AssetBeginner
The asset, index, or rate that determines the value of a derivative.
For an S&P 500 CFD, the underlying is the S&P 500 index price.
- UptickBeginner
A trade or quote occurring at a higher price than the previous one.
A series of upticks may show short-term buying pressure.
- Used MarginBeginner
The portion of account equity currently reserved to support open leveraged positions.
If used margin is high, there is less free margin to absorb losses.
- Value at RiskAdvanced
A statistical estimate of potential portfolio loss over a time period at a given confidence level.
A one-day 95% VaR of $5,000 estimates losses may exceed $5,000 on 5% of days.
- VegaAdvanced
An option Greek measuring sensitivity to changes in implied volatility.
Options with high vega rise more when implied volatility increases.
- Virtual Private ServerIntermediate
A remote server used to keep trading platforms, bots, or expert advisors running continuously.
Algorithmic traders use VPS hosting to reduce downtime.
- VolatilityIntermediate
How widely price is swinging. Band width is one way to describe it.
Narrow Bollinger Bands describe low recent volatility.
- VolumeBeginner
The number of shares traded in a period. This method treats unusual volume at key points as a demand clue.
A break of a pivot on heavier volume is read as stronger demand than a quiet break.
- VWAPIntermediate
Volume-weighted average price, a benchmark showing the average traded price weighted by volume.
Institutional traders often compare execution quality against VWAP.
- WhipsawIntermediate
A rapid move in one direction followed by a sharp reversal, often causing false signals.
Range-bound markets can whipsaw trend-following strategies.
- WickBeginner
The thin line above or below a candle's body, showing prices that were reached during the period but not held at the close.
A long upper wick shows that price went up and was pushed back down before the candle closed.
Also called: Shadow
- Wide SpreadBeginner
A larger-than-normal gap between bid and ask, often during illiquidity or news.
Spreads may widen around market open, close, or major data releases.
- Win RateBeginner
The percentage of trades that close profitably.
A strategy with 60 winners out of 100 trades has a 60% win rate.
- WTI Crude OilBeginner
West Texas Intermediate, a benchmark grade of US crude oil.
WTI often reacts to inventory data, OPEC headlines, and dollar moves.
- XAG/USDBeginner
The spot silver price quoted against the US dollar.
If XAG/USD rises from 28.00 to 28.50, silver gained 50 cents per ounce.
- XAU/USDBeginner
The spot gold price quoted against the US dollar.
XAU/USD at 2350 means one troy ounce of gold is quoted at $2,350.
Also called: Gold Spot
- XetraIntermediate
An electronic trading venue operated by Deutsche Börse for German and European securities.
Many German equities and ETFs trade on Xetra.
- Yen CrossBeginner
A currency pair involving the Japanese yen but not necessarily the US dollar.
EUR/JPY, GBP/JPY, and AUD/JPY are yen crosses.
- YieldBeginner
Income return on a bond or investment, often expressed as a percentage.
Rising bond yields can affect equity valuations and currency flows.
- Yield CurveIntermediate
A line showing bond yields across maturities, used to assess rate expectations and economic outlook.
An inverted yield curve means shorter-term yields exceed longer-term yields.
- YoYBeginner
Year over year, comparing data with the same period one year earlier.
CPI at 3.2% YoY means prices are 3.2% higher than a year ago.
- Zero-Coupon BondIntermediate
A bond sold at a discount that pays no periodic coupon and matures at face value.
The investor earns return from the difference between purchase price and redemption value.
- Zero-Sum GameIntermediate
A situation where one participant’s gain equals another participant’s loss before costs.
Some derivative markets are often described as close to zero-sum before fees.
- Zig Zag IndicatorIntermediate
A charting tool that filters smaller price movements to highlight major swings.
Traders may use Zig Zag to identify swing highs, swing lows, and wave structure.
Education only. Nothing here is financial advice or a recommendation to trade. Trading involves risk and you can lose money.