51 Terms

Trading Glossary

Clear, practical definitions of the terms you'll encounter when trading forex and CFDs, whether you're just starting out or studying smart money concepts.

Foundational

Core forex and CFD terms every trader needs to know before placing a trade.

Pip

A pip (percentage in point) is the smallest standard unit of price movement in a currency pair, typically the fourth decimal place (0.0001) for most pairs or the second decimal place (0.01) for JPY pairs.

Spread

The spread is the difference between the bid price (what you sell at) and the ask price (what you buy at) for any tradable instrument. It represents the most immediate cost of entering a trade.

Leverage

Leverage is the ratio of your trading position size to the capital you put up as margin. A leverage ratio of 1:100 means you can control $100,000 in currency with just $1,000 of your own funds.

Margin

Margin is the amount of capital your broker requires you to set aside as collateral when you open a leveraged position. Think of it as a deposit that gets released when you close the trade.

Lot Size

A lot is a standardized unit of trade volume in forex and CFDs. A standard lot equals 100,000 units of the base currency. Mini lots are 10,000 units, micro lots are 1,000 units.

Stop Loss

A stop loss is a pending order that automatically closes your position when the price reaches a specified level, limiting your maximum loss on that trade.

Take Profit

A take profit is a pending order that automatically closes your position when the price reaches a specified target level, locking in your profit without manual exit.

Slippage

Slippage is the difference between the price you expect when submitting an order and the price at which your order actually executes. It can be positive (better than expected) or negative (worse).

Swap (Rollover)

A swap is the interest rate differential charged or credited to your account for holding a position overnight. It reflects the cost of borrowing one currency and lending another in a forex pair.

Bid & Ask

The bid price is the highest price a buyer is willing to pay for an instrument. The ask price (also called the offer) is the lowest price a seller is willing to accept. The gap between them is the spread.

Candlestick

A candlestick is a price chart element that displays the open, high, low, and close of a given time period. The rectangular body shows the range between open and close, while the wicks (shadows) show the high and low.

Support & Resistance

Support is a price level where buying pressure tends to prevent the price from falling further. Resistance is a price level where selling pressure tends to prevent the price from rising further.

Volatility

Volatility is a statistical measure of how much an instrument's price fluctuates over a given period. High volatility means large, rapid price swings. Low volatility means smaller, more gradual movements.

Drawdown

Drawdown is the percentage or dollar decline from your account's highest point (peak equity) to its lowest point (trough) before recovering to a new high. It measures the worst-case loss you've experienced.

Risk-Reward Ratio

The risk-reward ratio (R:R) compares the distance to your stop loss (risk) against the distance to your take profit (reward). A 1:2 ratio means you risk $1 to potentially make $2.

Smart Money Concepts

Institutional trading concepts for reading order flow and understanding how large players move markets.

Order Block

An order block is the last opposing candle before a strong, impulsive price move. It marks the zone where institutional traders likely accumulated or distributed large positions before driving the market.

Liquidity Sweep

A liquidity sweep (also called a stop hunt or liquidity grab) occurs when the price pushes through a key level, like a recent high or low, to trigger clustered stop loss orders, then quickly reverses.

Break of Structure (BOS)

A break of structure (BOS) occurs when the price breaks beyond a previous swing high (in an uptrend) or swing low (in a downtrend), indicating that the current trend is continuing.

Change of Character (CHoCH)

A change of character (CHoCH) occurs when the price breaks a key swing level in the opposite direction of the prevailing trend: a downtrend breaks a swing high, or an uptrend breaks a swing low, signaling a potential reversal.

Market Structure

Market structure is the pattern of swing highs and swing lows that defines the current trend direction. An uptrend creates higher highs and higher lows. A downtrend creates lower highs and lower lows.

Point of Control (POC)

The point of control (POC) is the price level where the most volume was traded during a specific time period. It represents the 'fairest' price where the most agreement between buyers and sellers occurred.

Supply & Demand Zones

Supply zones are price areas where selling pressure previously overwhelmed buying, causing the price to drop sharply. Demand zones are areas where buying pressure overwhelmed selling, causing a sharp rally. They represent unfilled institutional orders.

Imbalance

An imbalance (also called an inefficiency) is a price zone where the market moved so aggressively in one direction that there was little to no trading on the other side, leaving an area of 'unfair' price that the market tends to revisit.

Mitigation

Mitigation is the process of the price returning to a prior order block or imbalance zone to 'fill' the remaining institutional orders that were left behind during the original move.

Liquidity Pool

A liquidity pool is a concentration of pending orders, typically stop losses and limit orders, clustered around a visible price level such as a swing high, swing low, round number, or obvious support/resistance.

Wyckoff Accumulation

Wyckoff accumulation is a sideways trading range where institutional buyers gradually build positions at low prices before driving the market higher. It typically follows a prolonged downtrend and signals that smart money may be absorbing available supply.

Wyckoff Distribution

Wyckoff distribution is a sideways trading range where institutional sellers gradually offload positions at high prices before the market moves lower. It typically follows a prolonged uptrend and signals that smart money may be transferring supply to late buyers.

Wyckoff Reaccumulation

Wyckoff Reaccumulation is a sideways range that forms during an uptrend where institutions add to positions before the next markup leg. It follows the same five-phase structure as accumulation but acts as a continuation pattern, not a reversal.

Wyckoff Redistribution

Wyckoff Redistribution is a sideways range that forms during a downtrend where institutions continue offloading or add to short positions before the next markdown leg. It follows the same five-phase structure as distribution but acts as a continuation pattern within a decline.

Automatic Rally / Reaction (AR)

The Automatic Rally is the reflexive bounce after a selling climax in accumulation, or the reflexive drop after a buying climax in distribution. It sets the opposite boundary of the trading range and happens because the dominant pressure simply ran out.

Secondary Test (ST)

A secondary test is a return to the climax zone that answers one question: is the dominant pressure still present? Successful STs show lighter volume and shallower price movement than the original climax, suggesting that the force behind it has weakened.

Preliminary Support (PS)

Preliminary Support is the first appearance of institutional buying during a markdown. It slows the decline without reversing it, signaling that demand is entering the market ahead of the selling climax that typically follows.

Selling Climax (SC)

A selling climax is the capitulation event that sets the bottom of an accumulation range. Retail traders dump positions on fear while institutions absorb supply, producing the highest volume bar of the entire markdown.

Spring

A spring is a quick dip below accumulation range support that triggers stop losses and flushes out remaining sellers. Price reverses back inside the range on rising volume, often marking the final shakeout before markup begins.

Last Point of Support (LPS)

The Last Point of Support is the final pullback within an accumulation range before markup begins. It forms a higher low relative to the spring, suggesting that sellers have been absorbed and demand may be ready to take over.

Sign of Strength (SOS)

A Sign of Strength is a rally on expanding volume that pushes price toward or above the upper boundary of an accumulation range. It suggests that demand has taken control and that markup may follow.

Preliminary Supply (PSY)

Preliminary Supply is the first notable appearance of selling pressure near the top of an uptrend. Institutional sellers begin offloading positions, creating resistance where the trend previously moved freely.

Buying Climax (BC)

A buying climax is a high-volume surge that marks the top of a distribution range. Retail traders buy aggressively into what feels like a breakout while institutional sellers fill orders against the wave of demand.

Upthrust (UT)

An upthrust is a brief push above distribution range resistance that traps breakout buyers before price reverses back inside the range. It is the distribution equivalent of the Spring.

Upthrust After Distribution (UTAD)

An Upthrust After Distribution is a more aggressive version of the standard Upthrust. It pushes price well above distribution range resistance on heavy volume before reversing. It often acts as the final trap before a potential markdown.

Last Point of Supply (LPSY)

The Last Point of Supply is the final weak rally within a distribution range before a potential markdown. Buyers try to push price higher but fail to reach the prior high, suggesting that sellers control the range.

Sign of Weakness (SOW)

A Sign of Weakness is a sharp decline on expanding volume that pushes price toward or below the lower boundary of a distribution range. It suggests that supply has overwhelmed demand and that markdown may follow.

Strategy & Intermediate

Trading approaches and technical analysis tools for building a structured edge.

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