Trading Glossary
Quick reference for trading terms used throughout this site.
A
Ask — The price a seller is willing to accept for an asset.
ATR (Average True Range) — A volatility indicator measuring average price range over a period.
B
Backtesting — Testing a trading strategy on historical data to see how it would have performed.
Bid — The price a buyer is willing to pay for an asset.
Bollinger Bands — A volatility indicator consisting of a moving average and two standard deviation bands.
Breakout — When price moves above resistance or below support with momentum.
C
Candlestick — A chart type showing open, high, low, and close prices for each period.
Candlestick Pattern — A recurring formation suggesting potential price movement.
Confirmation — Additional evidence supporting a trading signal.
Consolidation — Price moving within a bounded range.
D
Day Trading — Opening and closing positions within the same trading day.
Drawdown — The decline from peak to trough in account value.
E
Edge — A statistical advantage that gives a trader probability of success over time.
EMA (Exponential Moving Average) — A moving average that weights recent prices more heavily.
Entry — The price or condition at which a trade is initiated.
F
Fibonacci Retracement — Support/resistance levels based on Fibonacci ratios.
Forex — The foreign exchange market for trading currency pairs.
I
Indicator — A mathematical calculation plotted on charts to aid analysis.
K
Kelly Criterion — A position sizing formula based on win rate and risk-reward ratio.
L
Limit Order — An order to buy or sell at a specified price or better.
Liquidity — The ease with which an asset can be bought or sold.
Long Position — Buying an asset expecting the price to rise.
M
MACD (Moving Average Convergence Divergence) — A momentum indicator showing the relationship between two moving averages.
Market Order — An order to buy or sell immediately at the current market price.
Mean Reversion — The idea that prices tend to return to their average.
Momentum — The rate of change in price.
O
OHLC — Open, High, Low, Close — the four prices in a candlestick.
Oscillator — An indicator that fluctuates between bounds, showing overbought/oversold conditions.
Overbought — Conditions suggesting price may be due for a pullback.
Oversold — Conditions suggesting price may be due for a bounce.
P
Pivot Points — Calculated support and resistance levels based on previous period’s prices.
Position Sizing — Determining how much capital to risk on a single trade.
Price Action — The study of raw price movement on charts.
Psychology — The mental and emotional aspects of trading.
R
Range — Price moving between support and resistance without breaking out.
Resistance — A price level where selling pressure tends to exceed buying pressure.
Retracement — A temporary move against the trend before resuming.
Reward-to-Risk Ratio — The potential profit compared to potential loss on a trade.
Risk Management — The practice of protecting capital through position sizing and stop loss rules.
RSI (Relative Strength Index) — A momentum oscillator measuring speed and change of price movements.
S
Scalping — Making many quick trades for small profits.
Short Position — Selling an asset expecting the price to fall.
SMA (Simple Moving Average) — The average price over a specified number of periods.
Stop-Loss — An order to exit a position at a predetermined loss level.
Support — A price level where buying pressure tends to exceed selling pressure.
Swing Trading — Holding positions for days to weeks to capture price swings.
T
Timeframe — The period each candlestick represents (1 minute, 1 hour, 1 day, etc.).
Trend — The general direction of price movement.
Trendline — A line drawn connecting swing highs or lows to identify trend.
V
Volatility — The degree of variation in trading prices over time.
Volume — The number of shares or contracts traded during a period.
VWAP (Volume-Weighted Average Price) — The average price weighted by volume.
W
Win Rate — The percentage of profitable trades.
Common Timeframes
| Abbreviation | Timeframe |
|---|---|
| M1 | 1 minute |
| M5 | 5 minutes |
| M15 | 15 minutes |
| H1 | 1 hour |
| H4 | 4 hours |
| D1 | 1 day |
| W1 | 1 week |
| MN | 1 month |
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