Forex glossary

Accumulation

A Wyckoff phase where smart money quietly buys at a range low before a markup. Visible as a sideways range after a downtrend with declining volatility.

Adam & Eve pattern

Double bottom where the first low is a sharp V (Adam) and the second is a rounded U (Eve). Often precedes strong reversals.

Advance/Decline line

Cumulative count of advancing minus declining stocks. Used to spot breadth divergences with the S&P 500.

Algorithmic trading

Executing orders via pre-programmed rules — speed, size and timing — without manual clicks. Dominates short-timeframe FX flow.

All-Time High (ATH)

The highest price an instrument has ever traded. ATH breaks often spark FOMO momentum.

All-Time Low (ATL)

The lowest price ever recorded. ATL breaks can signal capitulation or a structural regime change.

Alpha

Return above a benchmark for the same risk. Positive alpha = genuine edge, not just market beta.

Anti-martingale (pyramid)

Increasing size during wins, reducing during losses. The healthier compounding approach.

Arbitrage

Simultaneously buying and selling the same asset across venues to lock in a risk-free price difference. Rare in retail FX after costs.

Ascending triangle

Flat resistance + rising support. Bullish continuation pattern; measured move = triangle height projected from breakout.

Ask (offer)

The price at which the market will sell to you. Always higher than the bid; the difference is the spread.

ATR (Average True Range)

Volatility indicator measuring the average range over N periods. Useful for sizing stops to current conditions.

Example: If 14-period ATR on EUR/USD H1 is 12 pips, a 1.5× ATR stop = 18 pips.

Auction market theory

View of markets as two-way auctions between buyers and sellers seeking fair value. Foundation of Market Profile.

Authorised participant

Large institution that creates/redeems ETF shares against the underlying basket, keeping ETF price near NAV.

Automatic Rally (AR)

First sharp bounce in a Wyckoff accumulation after the Selling Climax — defines the upper boundary of the trading range.

Average Directional Index (ADX)

Trend-strength indicator (0–100). >25 = trending market, <20 = chop. Direction comes from +DI/−DI, not ADX itself.

Backtest

Running a strategy against historical price data to estimate how it would have performed.

Balance of Trade

Exports minus imports. Persistent surplus tends to strengthen a currency over the long run.

Bar chart

OHLC chart drawn as vertical lines with left tick = open and right tick = close. Older sibling of the candlestick.

Base currency

First currency in a pair quote. In EUR/USD, EUR is the base; the price is how many USD it takes to buy 1 EUR.

Basis point (bps)

1/100 of a percent. A 25 bps rate hike = 0.25%. Standard unit for rate and yield changes.

Bear market

A sustained downtrend, conventionally a drop of 20%+ from a recent high.

Bear trap

A false breakdown that snaps back, trapping shorts. Often near major support after a long downtrend.

Beta

Sensitivity of an asset's return to a benchmark. Beta >1 = more volatile than the market; <1 = less.

Bid

Price at which the market will buy from you. Always lower than the ask.

Bid-ask spread

Gap between bid and ask. Your immediate entry cost.

Example: EUR/USD bid 1.0850 / ask 1.0851 = 1.0 pip spread.

Black swan

Rare, high-impact event outside normal expectations — 2015 CHF unpeg, March 2020 COVID crash. Position-size around possibility, not probability.

Block trade

Privately negotiated large order printed off the public order book. Often signals institutional positioning.

BoC (Bank of Canada)

Canadian central bank — meets eight times a year. CAD is closely tied to oil and BoC tone.

BoE (Bank of England)

UK central bank — sets Bank Rate, meets eight times a year. Drives GBP.

BoJ (Bank of Japan)

Japanese central bank — historically dovish with YCC and negative rates. Any tightening is a major JPY catalyst.

Bollinger Bands

20-period MA with ±2 standard deviation bands. Squeezes precede breakouts; outer-band touches signal stretched conditions.

Bond yield

Annual return on a bond if held to maturity. Rising 10y yields generally support the currency and pressure stocks.

Bracket order

An entry combined with both a stop loss and take profit, placed in one click. Standard for disciplined execution.

Breadth

How many stocks participate in a market move. Narrow breadth = move driven by a few names, often a warning.

Breakaway gap

Gap that starts a new trend by breaking out of a prior range, often on heavy volume. Rarely filled quickly.

Breakeven stop

Moving a stop loss to the entry price once a trade is comfortably in profit. Removes risk while leaving upside.

Breakout

Price decisively closing beyond a key level or range boundary. Strong volume confirms; weak volume hints at a fakeout.

Broker

Firm that gives you access to the market, executes orders, and either passes them to liquidity providers or warehouses risk in-house.

Bull market

A sustained uptrend, conventionally a 20%+ rise from a recent low.

Bull trap

A false breakout above resistance that immediately reverses, trapping breakout buyers.

Buy limit

Pending order to buy below current market price. Used to enter on a pullback to support.

Buy stop

Pending order to buy above current market price — fills when the trigger price is reached. Used for upside breakouts.

Buy-side

Institutions that buy securities for investment — funds, pensions, insurers. Counterpart to sell-side (dealers/banks).

Calmar ratio

Annualised return ÷ max drawdown. Quick read on return per unit of pain.

Candlestick

Chart bar showing open, high, low, close. Body is open→close; wicks are the period's extremes.

Capital Efficiency

Return generated per unit of capital deployed. Leverage and portfolio margining both improve it.

Carry trade

Borrowing in a low-yielding currency and investing in a higher-yielding one to earn the rate differential.

Cash-and-carry

Buying spot and simultaneously selling the futures to lock in basis. A classic crypto arbitrage during contango.

CBOE

Chicago Board Options Exchange — largest US options venue and publisher of the VIX.

CFD (Contract for Difference)

Derivative that pays the price difference between open and close. Common retail forex and indices wrapper; banned in the US.

CFTC

US Commodity Futures Trading Commission — regulates futures, options and retail FX. Publishes the weekly COT report.

Channel

Two parallel trendlines containing price action. Ascending, descending or horizontal.

Chart pattern

Recurring price formations (flags, triangles, H&S) that hint at next direction. Probabilistic, not deterministic.

Chop

Sideways, low-conviction price action that whipsaws both directions. Stand aside or trade ranges, not trends.

Circuit breaker

Exchange-mandated trading halt when prices move sharply. Protects against cascading liquidations.

Clearing house

Intermediary that guarantees both sides of a futures/options trade and manages margin. Eliminates counterparty risk.

Close (C)

Final traded price of a period. The most-watched data point of any candle.

Closing range

Price range during the final minutes of a session — strong closes near highs/lows signal next-day continuation.

Commission

Per-lot or per-share fee charged in addition to or instead of a wider spread. Common on ECN/Raw accounts.

Commodities

Physical goods (oil, gold, wheat) or their futures. Often correlated with commodity currencies (AUD, CAD, NOK).

Confluence

When multiple independent signals (trend, structure, indicators, sentiment) align on the same idea.

Consolidation

Sideways price action after a directional move, as the market digests and decides next direction.

Contango

Futures price above spot. Roll yield is negative for long holders — bad for buy-and-hold commodity ETFs.

Continuation pattern

Formation (flag, pennant, triangle) that resolves in the direction of the prior trend.

Copy trading

Automatically mirroring a chosen leader's trades into your account, scaled by your risk preference.

Correction

A counter-trend pullback of typically 10–20%. Healthier than a crash; often a buying opportunity in uptrends.

Correlation

How two instruments move together. +1 = perfectly aligned, −1 = perfectly opposite, 0 = unrelated.

COT report

Commitments of Traders — weekly CFTC report showing positioning of commercials, large specs and small traders.

Counter currency (quote)

Second currency in a pair. In EUR/USD, USD is the quote; the price is denominated in it.

Counter-trend

Trading against the prevailing trend. Lower probability; reserve for extreme exhaustion at major levels.

CPI (Consumer Price Index)

Headline inflation measure. Hotter-than-expected CPI typically lifts the currency on rate-hike expectations.

Crack spread

Refining margin between crude oil and refined products. Tradable via futures spreads.

Cross pair (cross)

A pair that doesn't include USD — e.g. EUR/GBP, AUD/JPY. Pricing is implied from each leg's USD rate.

Currency futures

Exchange-listed standardised contracts to deliver currency on a set date. CME 6E, 6B, 6J are FX favourites.

Currency strength meter

Aggregates moves across all pairs of a currency to score its real-time strength vs the basket.

Cycle

Repeating high-low pattern in price or sentiment. Long-term FX cycles often track central-bank policy regimes.

Daily loss limit

Hard cap on losses per day (often 3–5%). Critical for prop-firm rules and discipline.

Daily range

High minus low of the trading day. Average daily range (ADR) sets realistic intraday targets.

Day trading

Opening and closing positions within the same trading day — no overnight exposure.

Dead cat bounce

Short-lived rally inside a strong downtrend. Often traps dip-buyers before the next leg lower.

Decentralized exchange (DEX)

On-chain crypto exchange where users trade peer-to-peer via smart contracts. Examples: Uniswap, dYdX.

Decoupling

When historically correlated assets stop moving together. Usually short-lived and creates pair-trading opportunities.

Delta

Options: sensitivity of option price to underlying ($/$1). Order flow: net difference between aggressive buys and sells.

Demand zone

Area on the chart where strong buying has previously emerged. Frequently revisited and bought again.

Demo account

Simulated trading environment with virtual money. Essential for testing a strategy before live capital.

Depth of market (DOM)

Live view of resting limit orders at each price. Used by tape readers to spot support/resistance and absorption.

Derivatives

Contracts whose value derives from an underlying asset — futures, options, swaps, CFDs, perpetuals.

Descending triangle

Flat support + falling resistance. Bearish continuation pattern; breakout target = triangle height.

Diamond pattern

Rare reversal pattern resembling a diamond — broadening top then narrowing. High failure rate; use confirmation.

Divergence

Price makes a new high/low but the indicator (RSI, MACD) doesn't. Warns that momentum is fading.

Diversification

Spreading capital across uncorrelated assets to reduce portfolio variance without sacrificing expected return.

Dividend

Cash payment from a company to shareholders. CFD shorts pay it; longs receive it on the ex-date.

Doji

Candle where open ≈ close — signals indecision. Strongest at the end of an extended move.

Dollar Index (DXY)

Measures USD strength against EUR, JPY, GBP, CAD, SEK, CHF basket. Rising DXY = broad USD strength.

Dot plot

Fed chart showing each FOMC member's projected rate path. Quarterly release moves markets instantly.

Double bottom (W)

Two roughly equal lows separated by a swing high. Confirms on a close above the middle high — bullish reversal.

Double top (M)

Two roughly equal highs separated by a swing low. Confirms on a close below the middle low — bearish reversal.

Dovish

Central bank tone favouring lower rates/looser policy. Currency-negative.

Drawdown

Peak-to-trough decline in account equity, in %. Max drawdown is the worst your strategy has ever endured.

Earnings season

Four annual windows when listed companies report quarterly results. Drives single-stock volatility.

ECB (European Central Bank)

Sets monetary policy for the 20-country eurozone. Meets every 6 weeks; press conference moves EUR pairs.

ECN broker

Routes orders directly to the interbank market — tighter spreads, commission per lot, no dealing desk.

Edge

Statistical advantage that produces positive expectancy over many trades. Without an edge, you're gambling.

Elliott Wave

Theory that markets move in 5-wave impulses followed by 3-wave corrections, repeating across timeframes.

EMA (Exponential Moving Average)

Moving average that weights recent prices more heavily. Reacts faster than SMA.

Engulfing pattern

Candle whose body fully engulfs the prior candle's body in the opposite direction. Classic reversal at S/R.

Equity

Account balance plus or minus floating P&L of open positions. Real-time worth of your account.

Equity curve

Chart of cumulative P&L over time. Smooth upward = robust edge; jagged = high variance.

EUR (Euro)

Single currency of the eurozone. Second most traded after USD; EUR/USD is the world's most liquid pair.

Ex-dividend date

First day a stock trades without entitlement to the upcoming dividend. Price typically drops by ~the dividend amount.

Exchange rate

Price of one currency in terms of another. Set continuously by global supply and demand in the FX market.

Exit strategy

Pre-defined rules for closing winners and losers — fixed TP, trailing stop, time-based, or signal-based exits.

Exotic pair

A major currency paired with an emerging-market currency (USD/TRY, USD/ZAR). Wider spreads, sharper volatility.

Expectancy

Average expected profit per trade: (Win% × Avg Win) − (Loss% × Avg Loss). Positive + many trades = profit.

Expected move

Options-implied 1-standard-deviation range over a period. Useful for pricing strangles and gauging event risk.

Expert Advisor (EA)

Automated trading program for MT4/MT5 that executes trades according to coded rules.

Expiry (expiration)

Final day an options or futures contract is valid. After expiry, contracts settle in cash or physical delivery.

Fair value gap (FVG)

Three-candle imbalance where candle 1's wick and candle 3's wick don't overlap. Often filled before continuation.

Fakeout (false breakout)

Price breaks a level then reverses immediately. Traps breakout traders; key short-term reversal cue.

Falling wedge

Two down-sloping converging trendlines. Usually a bullish reversal or continuation pattern.

Fat finger

Trade entered with the wrong size or price by accident. Worth using order confirmations to avoid.

Fed (Federal Reserve)

US central bank. Drives USD through Fed Funds Rate decisions, QE/QT and FOMC tone.

Fed Funds Rate

Overnight rate at which US banks lend reserves to each other. The Fed's primary policy lever.

Fibonacci extension

Projections (127.2%, 161.8%, 261.8%) beyond a retracement. Common take-profit targets in trending markets.

Fibonacci retracement

Levels (23.6%, 38.2%, 50%, 61.8%, 78.6%) drawn between a swing high and low. Used to time pullback entries.

Fill

Confirmation that your order has been executed. Partial fill = only part of the requested size was matched.

Fill or Kill (FOK)

Order that must be fully filled instantly or cancelled. Used in low-liquidity venues.

First In, First Out (FIFO)

Rule (mandatory in the US) that earlier positions in the same instrument must be closed first.

Fiscal policy

Government spending and taxation decisions. Loose fiscal + tight monetary = strong currency; the reverse = weak.

Fixed spread

Broker spread that doesn't widen with volatility. Predictable cost but usually wider on average than variable.

Flag

Brief rectangular pullback after a strong impulse move. Bullish/bearish continuation pattern.

Flash crash

Sudden multi-% drop and recovery within minutes — often driven by algos hitting thin liquidity. GBP Oct-2016 is classic.

Floating P&L

Unrealised gain/loss on open positions. Becomes realised only when the trade closes.

FOMC

Federal Open Market Committee — Fed body that sets US interest rates. Meets 8 times a year.

FOMO

Fear Of Missing Out — chasing an extended move. Wait for the next clean setup instead.

Forex (FX)

Global decentralised market for trading currencies — ~$7.5T daily turnover, the largest market on Earth.

Forward contract

Private OTC agreement to exchange currency at a set future date and price. Used by corporates to hedge FX exposure.

Forward test

Running a strategy live on demo or small live capital to validate backtest results in real conditions.

Free margin

Equity not currently locked as margin. Your buffer for new positions or adverse moves.

Front running

Trading ahead of a known incoming large order. Illegal between broker and client; legal as a pure speed game.

Fundamental analysis

Valuing an asset by underlying drivers — interest rates, growth, inflation for FX; earnings, cash flow for equities.

Funded account / Prop firm

Firms lending you capital after you pass an evaluation. Keep 70–90% of profits, risk only the evaluation fee.

Funding rate

On crypto perpetuals, periodic payment between longs and shorts to anchor the perp to spot. Positive = longs pay shorts.

Futures contract

Exchange-listed standardised contract to buy/sell an asset at a fixed price on a fixed date.

Gamma

Options: rate of change of delta as the underlying moves. Big gamma near-the-money causes fast P&L swings.

Gap

Price discontinuity where one period opens away from the prior close. Gaps often (but not always) fill.

GDP (Gross Domestic Product)

Broadest measure of an economy's output. Released quarterly; drives long-term currency trends.

Going long / short

Long = buying expecting price to rise. Short = selling expecting price to fall.

Golden cross

50-period MA crosses above 200-period MA. Long-term bullish signal popular with the financial media.

Good Till Cancelled (GTC)

Pending order stays active until you cancel it or it triggers. Default for most platforms.

Greeks

Options risk metrics: delta, gamma, theta, vega, rho. Each measures sensitivity to a different input.

Grid trading

Placing buy and sell orders at regular intervals around a price. Performs in ranges, blows up in trends.

Gross P&L

Trading profit before fees, swaps and commissions.

Halving

Bitcoin event roughly every 4 years cutting mining rewards in half. Historically followed by major bull cycles.

Hammer

Bullish pin bar at a swing low — small body, long lower wick. Signals rejection of lower prices.

Hanging man

Bearish hammer-shaped candle at the top of an uptrend. Warns of potential exhaustion.

Hard fork

Non-backwards-compatible blockchain upgrade that splits the chain — e.g. BTC/BCH, ETH/ETC.

Hawkish

Central bank tone favouring higher rates/tighter policy. Currency-positive.

Head & Shoulders

Three-peak reversal pattern (left shoulder, higher head, right shoulder). Confirms on neckline break.

Hedge

Offsetting an existing exposure with an opposite position to limit downside while preserving upside.

Hedge fund

Pooled-capital vehicle using leverage, shorts and derivatives to pursue absolute returns.

Heikin-Ashi

Modified candlesticks using averaged OHLC. Smoother trend visualisation but lags real price.

High-frequency trading (HFT)

Algorithmic trading on microsecond timescales — market making, arbitrage, latency races.

HODL

Crypto slang for buy-and-hold regardless of volatility. Originally a typo of 'hold'.

Hot wallet

Internet-connected crypto wallet. Convenient for trading; less secure than cold storage.

ICT (Inner Circle Trader)

Modern price-action framework focused on institutional order flow — order blocks, liquidity, FVGs, killzones.

Implied volatility (IV)

Volatility priced into options by the market. Rises before earnings/events; collapses after.

Inflation

Sustained rise in general price level. Determines real yields and central bank policy direction.

Initial margin

Collateral required to open a position. Distinct from maintenance margin (required to keep it open).

Inside bar

Candle entirely contained within the prior candle's range. Signals consolidation; breakouts often follow.

Institutional

Large players — banks, funds, central banks. Their flows define multi-week and multi-month trends.

Interest rate

Cost of borrowing money. Central-bank policy rates are the single biggest driver of currency value.

Intraday

Activity within a single trading day. Intraday traders close all positions before session end.

Inverse correlation

Two assets that tend to move in opposite directions. Classic FX example: DXY vs gold.

Inverse head & shoulders

Bullish mirror image of head & shoulders, forming at a bottom.

Invoice

Periodic billing summary from a broker for swaps, commissions and fees. Verify line items quarterly.

ISIN

International Securities Identification Number — 12-character global identifier for a security.

Journal (trade journal)

Detailed log of every trade — setup, R, screenshot, emotion. The single biggest improvement lever for any trader.

JPY (Japanese Yen)

Third most-traded currency; classic safe haven that strengthens during global risk-off.

Kelly criterion

Formula for optimal bet sizing given win rate and payoff. Most traders use fractional Kelly (¼–½) to reduce variance.

Key level

Major support/resistance with multiple historic touches or a round number. The only S/R worth marking.

Killzone

ICT term for high-volume trading windows — London open, NY open, NY close — where liquidity drives directional moves.

KYC (Know Your Customer)

Regulatory identity verification required by regulated brokers. Expect ID and proof-of-address on signup.

Lagging indicator

Indicator that confirms a move after it begins — moving averages, MACD. Useful for trend filters.

Leading indicator

Indicator that signals before the move — RSI divergence, volume surges. Higher noise, earlier entries.

Lehman moment

Industry shorthand for a sudden, systemic credit shock — the 2008 Lehman Brothers collapse archetype.

Leverage

Borrowed capital that multiplies position size. 1:30 leverage lets a $1k account control $30k. Magnifies P&L both ways.

Limit order

Instruction to enter or exit at a specified price or better. Used to buy below or sell above market.

Liquidity

How easily a market absorbs orders without moving the price. EUR/USD = deepest; exotics = thin.

Liquidity pool

Cluster of resting orders (stops + entries) at obvious price levels. Institutions hunt these to fill size.

Liquidity sweep

Price briefly running stops above a high or below a low, then reversing. Smart-money fingerprint.

Long

A buy position that profits when price rises.

Long-legged doji

Doji with very long upper and lower wicks. Strong indecision after a sustained trend — heads-up for reversal.

Lot size

Volume of a forex trade. Standard = 100,000 units; Mini = 10,000; Micro = 1,000; Nano = 100.

Low-float stock

Stock with few publicly available shares. Highly volatile; small flows move price aggressively.

MACD

Moving Average Convergence Divergence — trend-momentum indicator. Crossovers and histogram divergence are key.

Maintenance margin

Minimum equity required to keep a position open. Falling below triggers margin call.

Maker (limit maker)

Order that adds liquidity to the book (rests until matched). Often charged lower fees than takers.

Margin

Collateral the broker holds while a leveraged trade is open.

Margin call

Broker warning that equity is too low to support open positions. Ignored calls trigger a stop-out.

Market depth

Volume of resting orders at each price beyond the best bid/ask. Deeper = harder to move.

Market maker

Firm/broker taking the opposite side of your trade. Earns the spread; potential conflict of interest.

Market order

Instruction to enter immediately at the best available price. Fast fill; vulnerable to slippage.

Market profile

Distribution of price-and-time, showing value area and point of control. Auction-theory tool.

Market structure shift (MSS)

Break of the most recent swing high in a downtrend (bullish MSS) or swing low in an uptrend (bearish MSS).

Martingale

Doubling size after each loss to recover. Mathematically blows accounts; never use in trading.

Maturity

The date a bond, swap or futures contract expires and final cash flows settle.

Maximum adverse excursion (MAE)

Worst unrealised loss reached during a trade. Compare to stop size — informs better stop placement.

Maximum favourable excursion (MFE)

Best unrealised profit reached during a trade. Compare to actual exit — reveals exit-strategy quality.

Mean reversion

Strategy expecting price to return to an average after extreme moves. Works in ranges, fails in strong trends.

Microstructure

The mechanics of how orders match and prices form — spreads, depth, fees, latency.

Momentum

Speed of recent price change. High-momentum entries seek continuation; reversal traders fade exhaustion.

Monetary policy

Central bank tools — policy rate, QE/QT, forward guidance — to influence inflation and growth.

Money management

Rules for sizing positions and managing capital. Covers risk per trade, max heat, daily loss caps.

Morning star

Three-candle bullish reversal: down candle, indecision candle, strong up candle. More reliable than single-candle signals.

Moving average (MA)

Average price over N periods. 200-period EMA = long-term bias filter; above = bullish, below = bearish.

MT4 / MT5

MetaTrader 4 and 5 — the dominant retail FX platforms. MT5 adds netting, futures, more timeframes.

NDD (Non-Dealing Desk)

Broker routing model passing orders to liquidity providers, not internalising them. ECN/STP fall under NDD.

Net P&L

Realised profit/loss after fees, commissions and swaps. The number that actually hits your account.

NFA

National Futures Association — self-regulatory body for US futures and retail FX brokers.

NFP (Non-Farm Payrolls)

US monthly employment report released the first Friday. Highest-volatility event for USD pairs.

No-Touch / One-Touch

Binary-option style payoffs based on whether price hits a barrier. Restricted/banned in most retail jurisdictions.

Node

A computer maintaining a copy of a blockchain. Larger node counts increase decentralisation and resilience.

Notional value

Total face value of a position. Notional = lot size × contract size × price.

OCO order

One-Cancels-the-Other — two pending orders linked so executing one auto-cancels the other.

Offer

Synonym for the ask price — the price at which the market will sell to you.

OHLC

Open, High, Low, Close — the four core data points of every candlestick or bar.

Open interest

Total outstanding futures or options contracts not yet closed. Rising OI + rising price = bullish.

Open position

Any trade currently active and exposed to market moves.

Opening range

High and low of the first N minutes of a session. Breakout strategies trade through this band.

Option

Contract giving the right (not the obligation) to buy (call) or sell (put) at a strike price by an expiry date.

Order block

Last opposite-colour candle before a strong directional move. Often acts as future support/resistance.

Order book

Live record of resting buy and sell limit orders at every price level.

Order flow

Real-time view of market orders crossing the spread. Used by tape readers to anticipate direction.

Oscillator

Indicator that swings between bounded extremes (RSI 0–100, Stoch 0–100). Used to spot overbought/oversold.

OTC (Over-the-Counter)

Trading off-exchange directly between two parties. Forex is the largest OTC market.

Overbought / Oversold

Conditions where price has moved too far too fast in one direction — high reversal probability, often defined by RSI.

Overnight position

A trade held past the daily 22:00 GMT broker rollover. Incurs swap/funding cost.

Pair

Two currencies quoted against each other — EUR/USD, GBP/JPY. Every forex trade is one pair.

Paper trading

Simulating trades without real money. Useful for testing strategy mechanics, weaker for emotional preparation.

Parabolic move

Acceleration where price curls vertically upward (or downward). Usually marks the final stages of a trend.

Pegged currency

Currency fixed at a set rate vs another (e.g. HKD-USD). Pegs occasionally break, producing instant violent moves.

Pennant

Small symmetrical triangle after a sharp impulse. Continuation pattern; breakout target = flagpole length.

Perpetual swap (perp)

Crypto derivative with no expiry, anchored to spot via the funding rate. Dominant venue for crypto leverage.

PIN bar

Pinocchio bar — long wick, small body. Signals rejection of a price level; powerful at key S/R.

Pip

Percentage in point — smallest standard price move. 0.0001 for most pairs; 0.01 for JPY pairs.

Example: EUR/USD 1.0850 → 1.0855 = 5 pips.

Pip value

Monetary worth of one pip for a given lot size and account currency. Bridges price-distance to dollars.

Pipette

Fractional pip — one tenth of a pip, the fifth decimal (third on JPY). Used by brokers for tighter spreads.

Pivot point

Calculated daily/weekly support and resistance based on prior period's H/L/C. Heavily watched intraday.

PMI

Purchasing Managers' Index. Above 50 = expansion; below 50 = contraction. Released monthly.

Position

An active long or short trade in a specific instrument.

Position sizing

Calculating lot size so a stop loss equals a fixed % of equity. The cornerstone of risk management.

Position trading

Holding trades for weeks to months based on macro fundamentals and weekly charts.

Power of three (PO3)

ICT framework — accumulation, manipulation, distribution. Defines how each session unfolds intraday.

PPI (Producer Price Index)

Wholesale-level inflation gauge. Leading indicator for CPI.

Pre-market

Equity trading session before the regular open. Thinner liquidity, wider spreads, sharper moves on news.

Premium

Options: the price paid for the option contract. ICT: price trading above 'equilibrium' (50% of a range).

Price action

Reading the market from raw price (candles, structure) without relying on indicators.

Price discovery

Process by which the market converges on a price through continuous bid/ask interaction.

Profit factor

Gross profit ÷ gross loss. >1.5 is solid; >2 is excellent over a large sample.

Profit target

Pre-planned exit price where a trade is closed for profit. Synonymous with take profit.

Pullback

Temporary counter-trend move within a larger trend. Best place to enter with the trend at favourable R:R.

Put option

Right to sell the underlying at the strike by expiry. Long puts profit if price falls.

Quantitative easing (QE)

Central bank asset purchases expanding the money supply. Generally weakens the currency, supports risk assets.

Quantitative tightening (QT)

Reverse of QE — central bank shrinks its balance sheet. Typically supports the currency.

Quote currency

Second currency in a pair, used to price the base. In EUR/USD, USD is the quote.

R multiple

Trade outcome as a multiple of initial risk. +2R = profit equal to twice the risk; -1R = a full stop.

Ranging market

Sideways price action between defined support and resistance. Trade the boundaries; avoid the middle.

Realised P&L

Profit or loss locked in after a trade is closed. Distinct from floating P&L on open trades.

Rebate

Cashback per traded lot paid by some brokers, often via an introducing broker. Effectively reduces transaction cost.

Regulation (FCA, ASIC, CySEC, NFA)

Financial regulators license and supervise brokers. Always trade with a regulated firm.

Relative Strength Index (RSI)

Momentum oscillator (0–100). >70 = overbought, <30 = oversold. Divergence is its strongest signal.

Relative Vigor Index (RVI)

Compares close-to-open vs the range. Crossovers signal momentum shifts.

Renko

Chart type built from fixed-size price bricks rather than time. Filters noise but loses time-of-day context.

Resistance

Price zone where sellers have historically capped advances. Often flips to support if decisively broken.

Retracement

Counter-trend move that gives back a portion of a prior swing. Common Fibonacci levels: 38.2%, 50%, 61.8%.

Revenge trading

Doubling down after a loss to 'get it back'. Number one account killer; force a break after losses.

Reversal

Change in trend direction. Highest-quality reversals form at major S/R with clear MSS and divergence.

Rho

Options Greek measuring sensitivity to interest rates. Matters most for long-dated options.

Rising wedge

Two up-sloping converging trendlines. Usually a bearish reversal pattern.

Risk per trade

Fixed % of equity (commonly 0.5–1%) lost if the stop is hit. The single most important risk control.

Risk-on / Risk-off

Risk-on = traders favour equities, AUD, NZD. Risk-off = traders favour USD, JPY, CHF, gold and bonds.

Risk-reward ratio (R:R)

Potential profit divided by potential loss. Pros refuse setups under 1:2.

Rollover

Daily 22:00 GMT broker process applying overnight interest (swaps) to open positions.

Round number

Whole-figure price (1.1000, 1.2000) that attracts heavy resting orders. Magnet for liquidity sweeps.

Safe haven

Assets that strengthen during global stress — USD, JPY, CHF and gold are the classic FX safe havens.

Scaling in/out

Adding to or reducing a position in tranches rather than all at once. Smooths P&L variance.

Scalping

Very short-term trading capturing small moves with high frequency. Demands ultra-tight spreads and discipline.

Sell limit

Pending order to sell above current market price. Used to enter shorts at resistance.

Sell stop

Pending order to sell below current market price. Used for downside breakouts.

Sell-side

Banks, dealers and brokers that create and distribute securities. Counterpart to the buy-side.

Sentiment

Aggregate mood of traders — bullish, bearish or neutral. Derived from news, order flow, COT or AI text analysis.

Settlement

Final transfer of cash or securities post-trade. T+2 standard for equities, T+1 in the US from 2024.

Sharpe ratio

Risk-adjusted return: excess return / standard deviation. >1 good, >2 great, >3 elite.

Short

A sell position that profits when price falls.

Short squeeze

Sharp rally forcing shorts to buy back, fuelling further upside. GME 2021 is the textbook case.

Sideways market

Synonym for ranging — no clear trend, price oscillating within a band.

Slippage

Difference between expected and actual fill price. Common around news and in thin liquidity.

Slippage tolerance

Maximum price deviation accepted on a market order. Set tight during news to avoid catastrophic fills.

SMA (Simple Moving Average)

Equal-weighted average of N closes. Smoother than EMA but slower to react.

Smart money concepts (SMC)

Framework focused on institutional order flow — order blocks, liquidity, FVGs, market structure.

SNB (Swiss National Bank)

Switzerland's central bank — famous for the 2015 EUR/CHF floor removal. Drives CHF.

Sortino ratio

Like Sharpe but only penalises downside volatility. Better measure for asymmetric strategies.

Spike

Sharp, isolated move quickly reversed. Often caused by stop hunts, news or thin overnight liquidity.

Spot market

Market for immediate delivery (T+2 in FX). Where most retail trading occurs.

Spread

Difference between bid and ask. Your immediate entry cost.

Example: EUR/USD 1.0850 / 1.0851 = 1.0 pip spread.

Spread betting

UK/IE tax-advantaged wrapper for speculating on price moves. Treated as gambling, not investment.

Standard deviation

Statistical measure of dispersion around a mean. Foundation of Bollinger Bands and volatility models.

Stochastic oscillator

Compares closing price to its range over N periods. Crossovers in overbought/oversold zones signal turns.

Stop hunt

Brief spike past an obvious swing point that triggers retail stops then reverses. Liquidity engineering by big players.

Stop loss

Pre-set order that closes a losing trade at a defined level. The single most important risk tool.

Stop order

Order that becomes a market order once a trigger price is hit. Used for breakouts.

Stop-out

Automatic forced liquidation by the broker when margin level falls below threshold (often 50%).

STP broker

Straight-Through Processing — orders passed to liquidity providers without dealer intervention.

Strangle

Long call + long put at different strikes. Profits from large moves in either direction; loses from low vol.

Strike price

Price at which an option holder can exercise their right to buy (call) or sell (put).

Supply zone

Area where strong selling has previously emerged. Frequently revisited and faded by institutions.

Support

Price zone where buyers have historically halted declines. Often flips to resistance if decisively broken.

Swap (rollover)

Overnight interest credited or debited on positions held past 22:00 GMT.

Swing high / Swing low

Local pivot points — a high with lower highs on each side (swing high) or low with higher lows on each side (swing low).

Swing trading

Holding trades for several days to weeks to capture multi-leg swings. H4/D1 timeframes typical.

Symmetrical triangle

Converging trendlines (rising support + falling resistance). Breakout direction unknown until confirmed.

Tail risk

Probability of rare extreme moves in the distribution tails. Hedged with options or strict stop discipline.

Take profit

Pre-set order closing a trade at a defined profit target.

Taker

Order that removes liquidity from the book by matching against resting orders. Usually higher fees than makers.

Tape reading

Inferring intent from the time-and-sales feed and order book — fastest data source for short-term traders.

Taper

Gradual reduction in central bank asset purchases. First step on the path from QE toward tightening.

Tax lot

A specific batch of shares bought together. Tracked individually for capital-gains accounting (FIFO/LIFO).

Technical analysis

Analysing markets via price action, patterns and indicators — independent of fundamentals.

Tenor

Time to maturity of a bond, swap or option. Shorter tenor = lower duration risk.

Theta

Options Greek measuring time decay. Long options lose value daily; short options earn it.

Tick

Smallest possible price movement of an instrument. On most FX brokers, 1 tick = 1 pipette.

Tick chart

Chart that prints a new candle every N trades rather than every N seconds. Adapts to activity.

Tick volume

Number of price changes per period — a free proxy for true volume in OTC forex.

Tier 1 liquidity

Top-of-book pricing from the largest banks. ECN brokers aggregate Tier-1 quotes into the spread you see.

Tilt

Emotional state where logic collapses after losses. Walk away — trades taken on tilt lose on average.

Time and Sales

Live feed of every executed trade — price, size, side. Core tool for tape readers.

Time decay

Erosion of an option's extrinsic value as expiry approaches. Quantified by theta.

Time in force

How long an order stays live — DAY, GTC, IOC, FOK. Default depends on platform.

Timeframe

Chart period — M1, M5, H1, H4, D1, W1. Each candle covers exactly that interval.

Token

Crypto asset issued on an existing blockchain (e.g. ERC-20 on Ethereum). Distinct from native coins like BTC, ETH.

Top-down analysis

Starting on a higher timeframe for bias, then drilling down to lower timeframes for entry timing.

Trailing stop

Stop loss that follows price by a fixed distance, locking in profit as the trade runs.

Trend

General price direction. Uptrend = HH/HL; downtrend = LH/LL.

Trendline

Line connecting at least two swing lows (uptrend) or swing highs (downtrend). Acts as dynamic support/resistance.

Triangle (sym/asc/desc)

Converging-trendline patterns — symmetrical, ascending or descending. Breakout direction often follows prior trend.

TWAP

Time-Weighted Average Price — institutional execution slicing an order across a window to minimise impact.

Underlying

Asset that a derivative is priced from — e.g. EUR/USD spot underlies EUR/USD options.

Unrealised P&L

Floating gain or loss on open positions, marked to current price.

Uptick

A trade printed at a price higher than the prior trade. Uptick rules historically restrict shorting after a downtick.

Value area

Price range containing ~70% of a session's volume in Market Profile. Trading inside = balance; outside = imbalance.

Vega

Options Greek measuring sensitivity to implied volatility. Long options benefit from rising IV.

Volatility

Size and speed of price moves. High vol = bigger range and bigger risk.

Volatility skew

Difference in implied volatility across option strikes. Persistent put skew = market demands crash protection.

Volume

Number of contracts or units traded over a period. Confirms breakouts; thin volume warns of fakeouts.

Volume Profile

Horizontal histogram of volume traded at each price. Reveals high-volume nodes (acceptance) and low-volume nodes (rejection).

VWAP

Volume-Weighted Average Price — institutional benchmark for execution quality.

Wash trade

Buying and selling the same instrument with no change in beneficial ownership. Illegal market manipulation.

Wedge

Converging trendlines sloping in the same direction. Rising wedge = bearish; falling wedge = bullish.

Weekend gap

Price discontinuity between Friday close and Sunday open. Often closes during the Asian session.

Whale

Crypto/markets slang for an account large enough to move price with a single order.

Whipsaw

Rapid back-and-forth moves stopping traders out repeatedly. Typical of low-conviction chop or post-news noise.

Win rate

% of trades that closed profitable. Meaningless without R:R — 30% win rate at 1:3 is profitable.

Wyckoff method

Classic price-action framework describing accumulation, markup, distribution and markdown phases.

XAG/USD (Silver)

Silver priced in US dollars. More volatile than gold; sensitive to industrial demand.

XAU/USD (Gold)

Gold priced in US dollars. Classic safe haven; inversely correlated with real yields and DXY.

XBT

ISO 4217 ticker for Bitcoin used by some exchanges (ICE, Bloomberg). Equivalent to BTC.

Yield

Income return on an investment expressed as a percentage. For bonds: coupon / price + capital change.

Yield curve

Plot of bond yields across maturities. Inverted curve (short > long) historically precedes recessions.

Yield Curve Control (YCC)

Central bank policy capping a specific bond yield. BoJ's main tool through the 2010s and early 2020s.

Zero-Day option (0DTE)

Option expiring the same day. Extreme gamma exposure; popular for SPX gamma-driven intraday plays.

Zigzag indicator

Filter that connects significant swing highs and lows, ignoring noise. Useful for spotting clean structure.