Glossary of trading terms
A comprehensive glossary of trading terms and definitions, from forex and stocks to technical analysis, to help you understand the markets.
Letter
A
ADX
Short for Average Directional Index, a tool that measures how strong a trend is on a 0 to 100 scale, whichever way it's heading.
Full guideATR
Short for Average True Range, a measure of how much an asset typically moves over a given period.
Full guideAccumulation/Distribution
A volume-based indicator tracking whether money is flowing into or out of an asset.
Full guideAfter-Hours Trading
Trading that takes place after the regular market session closes.
Alpha
The extra return an investment earns above what the market alone would give, a sign it has outperformed.
Altcoin
Any cryptocurrency other than Bitcoin.
Arbitrage
Profiting from price differences of the same asset across different markets or exchanges simultaneously.
Full guideAsk Price
The price a seller is willing to accept, which is the price you pay when you buy.
Asset
Any tradeable financial instrument: stocks, currencies, commodities, bonds, or crypto.
Asset Class
A group of financial instruments with similar characteristics: equities, fixed income, commodities, forex, crypto.
Awesome Oscillator
A momentum indicator comparing recent and longer-term momentum via two moving averages.
Full guideLetter
B
Backtesting
Testing a trading strategy against historical data to see how it would have performed.
Full guideBalance
The total cash in your trading account, excluding unrealized profits or losses on open positions.
Bar Chart
A chart type showing open, high, low, and close as horizontal lines on a vertical bar for each period.
Base Currency
The first currency in a forex pair. In EUR/USD, the euro is the base currency.
Full guideBasis Point
One hundredth of one percent (0.01%). Used to measure interest rate changes.
Bear Market
A market in a sustained downtrend, typically defined as a decline of 20% or more from recent highs.
Full guideBear Trap
A false downside breakout that lures sellers in just before price turns back up.
Bearish Harami
A two-candle pattern where a small down candle sits inside a prior large up candle, hinting at a reversal.
Full guideBeta
How much a stock moves compared with the whole market. Above 1 = swings more than the market.
Bid Price
The price a buyer is willing to pay, which is the price you receive when you sell.
Bid-Ask Spread
The difference between the bid and ask price. A narrower spread means higher liquidity.
Full guideBlockchain
A shared digital ledger that records crypto transactions across many computers at once.
Blue Chip
A large, well-established, financially stable company with a history of reliable performance.
Full guideBollinger Bands
A technical indicator with a moving average and two bands set at standard deviations above and below it.
Full guideBond
A fixed-income instrument representing a loan from an investor to a borrower, typically a government or corporation.
Breakeven
The price at which a trade makes neither a profit nor a loss.
Breakout
When price moves above resistance or below support with increased volume, signaling a potential new trend.
Full guideBreakout Trading
Entering as price breaks beyond a defined support or resistance level.
Broadening Wedge
An expanding pattern of higher highs and lower lows reflecting rising volatility.
Full guideBroker
An intermediary that executes trades on your behalf, connecting you to the broader market.
Bull Trap
A false upside breakout that lures buyers in just before price turns back down.
Bullish Candlestick Patterns
Candlestick formations that signal potential upward reversals or continuation.
Full guideBullish Harami
A two-candle pattern where a small up candle sits inside a prior large down candle, hinting at a reversal.
Full guideBuy Order
An instruction to purchase an asset at the current market price or at a specified limit price.
Letter
C
CCI
Short for Commodity Channel Index, which measures how far price has strayed from its average to flag extremes.
Full guideCFD
Short for Contract for Difference, a product that lets you speculate on price moves without owning the asset.
Full guideCPI
Short for Consumer Price Index, which tracks changes in the prices consumers pay.
Candle Body
The thick part of a candlestick between the open and close prices.
Candle Wick
The thin line above or below a candlestick body marking the high and low. Also called the shadow.
Candlestick
A chart element showing the open, high, low, and close of a trading period in one visual bar.
Capital
The total funds available for trading or investing.
Carry Trade
Borrowing a low-interest currency to invest in a higher-yielding one for the rate difference.
Full guideCentral Bank
A national institution that manages a country's monetary policy, interest rates, and money supply.
Full guideCentral Bank Digital Currency
A digital form of a country's fiat money issued by its central bank.
Full guideChaikin Money Flow
A volume-weighted indicator measuring buying and selling pressure over a period.
Full guideChart Pattern
A recognizable shape on a price chart that suggests a probable future price movement.
Full guideCircuit Breaker
An automatic trading halt that kicks in when prices fall too far, too fast.
Close Price
The last price at which an asset traded during a specific period or trading session.
Commission
A fee charged by a broker for executing a trade on your behalf.
Commodity
A raw material or primary agricultural product that can be traded: gold, oil, wheat, coffee.
Full guideCompounding
Earning returns on both your original money and the returns it has already made.
Consolidation
A period where price moves sideways within a range, showing indecision between buyers and sellers.
Correction
A temporary price decline of 10% to 20% within a larger uptrend.
Correlation
The statistical relationship between two assets. Positive correlation means they tend to move together.
Cross-Rate
An exchange rate between two currencies that doesn't involve the US dollar.
Cup and Handle
A bullish continuation pattern shaped like a cup followed by a short pullback.
Full guideCurrency Hedging
Protecting against unwanted currency-rate movements with offsetting positions.
Full guideCurrency Pair
Two currencies quoted against each other in forex trading, such as EUR/USD or GBP/JPY.
Letter
D
Day Trading
Buying and selling financial instruments within the same trading day, closing all positions before market close.
Full guideDemo Account
A practice trading account using virtual money, allowing you to learn without risking real capital.
Full guideDepth of Market
A real-time list of buy and sell orders at each price level for an asset.
Derivative
A financial contract whose value is derived from an underlying asset, such as options, futures, or CFDs.
Divergence
When price moves one way while an indicator moves the other, which often warns of a reversal.
Full guideDividend
A portion of a company's earnings distributed to shareholders, usually on a quarterly basis.
Full guideDividend Aristocrats
S&P 500 companies (US) that have raised their dividend for at least 25 consecutive years.
Full guideDoji
A candlestick pattern where the open and close are nearly equal, indicating market indecision.
Full guideDollar-Cost Averaging
Investing a fixed amount at regular intervals to smooth out entry price.
Full guideDonchian Channel
Bands drawn from the highest high and lowest low over a set period, used for breakouts.
Full guideDouble Bottom
A bullish reversal chart pattern shaped like a W, signaling a potential move upward after two lows.
Full guideDouble Top
A bearish reversal chart pattern shaped like an M, signaling a potential move downward after two highs.
Full guideDowntrend
A series of lower highs and lower lows, indicating a sustained decline in price.
Dragonfly Doji
A doji with a long lower wick and no upper wick, a possible bullish reversal signal.
Full guideDrawdown
The peak-to-trough decline in the value of a trading account before it recovers to a new high.
Full guideLetter
E
EBITDA
Earnings before interest, taxes, depreciation, and amortization, used as a quick proxy for profitability.
Full guideEMA
Short for Exponential Moving Average, a moving average that weights recent prices more so it reacts faster.
Full guideETF
Short for Exchange-Traded Fund, a basket of assets that trades on an exchange like a single stock.
Economic Indicator
A data point (GDP, inflation, employment) that reflects the health of an economy and influences markets.
Full guideElliott Wave Theory
A theory that markets move in repetitive five-wave and three-wave cycles driven by psychology.
Full guideEngulfing Candle
A reversal pattern where one candle's body fully engulfs the previous candle's body.
Full guideEntry Point
The price level at which a trader opens a position.
Equity
The total value of your trading account, including unrealized profits and losses on open positions.
Equity Curve
A line chart showing how your account balance grows or shrinks over time.
Exchange
A marketplace where securities, commodities, or currencies are traded. Examples: NYSE, NASDAQ, CME.
Exchange Rate
The price of one currency expressed in terms of another currency.
Execution
The completion of a buy or sell order in the market.
Exhaustion Gap
A gap near the end of a trend that signals the move is running out of steam.
Full guideExit Point
The price level at which a trader closes a position to take profit or cut a loss.
Expectancy
The average profit or loss you can expect per trade over many trades.
Letter
F
FOMO
Fear of missing out, the urge to jump into a trade because you feel the market is moving without you.
Full guideFear and Greed Index
A sentiment gauge scoring market emotion from extreme fear to extreme greed.
Full guideFibonacci Retracement
A technical tool using horizontal lines at key Fibonacci levels to identify potential support and resistance.
Full guideFill
When a trade order is completed, meaning it has been executed at a set price.
Floating P/L
The unrealized profit or loss on your currently open positions.
Forex Hedging Strategy
Using offsetting currency positions to reduce exposure to adverse moves.
Full guideForex Trading Sessions
The Sydney, Tokyo, London, and New York windows that make up the 24-hour forex day.
Full guideFree Cash Flow to Equity
Cash available to shareholders after expenses, reinvestment, and debt.
Full guideFree Margin
The amount of equity in your account that is not being used as margin for open positions.
Fundamental Analysis
Evaluating an asset by studying economic data, financial statements, and industry conditions. Often shortened to fundamentals.
Full guideFunded Trading Account
An account financed by a prop firm after a trader passes an evaluation.
Full guideFutures
Standardized contracts to buy or sell an asset at a predetermined price on a specific future date.
Full guideLetter
G
GDP
Short for Gross Domestic Product, the total value of everything a country produces and a key economic gauge.
Full guideGap
A price area on a chart where no trading occurred, appearing as a jump between two candles.
Full guideGap Fill
When price moves back to close a gap left on the chart from an earlier jump.
Gartley Pattern
A harmonic pattern using Fibonacci ratios to spot potential reversal zones.
Full guideGoing Long
Opening a buy position, expecting the asset's price to rise.
Going Short
Opening a sell position, expecting the asset's price to fall.
Grid Trading
Placing staggered buy and sell orders above and below price to profit from swings.
Full guideLetter
H
Halving
A scheduled event that cuts the reward for mining new Bitcoin in half.
Hammer
A bullish candlestick pattern with a small body and long lower wick, suggesting a potential reversal upward.
Full guideHanging Man
A bearish reversal candle with a small body and long lower wick appearing after an uptrend.
Full guideHead and Shoulders
A bearish reversal pattern with three peaks, the middle one highest, that signals a trend change.
Hedge Fund
A pooled fund that uses advanced strategies to chase high returns, usually for wealthy investors.
Heikin Ashi
A modified candlestick that averages price to smooth noise and highlight trend.
Full guideHigh-Frequency Trading
Automated trading using algorithms to execute thousands of orders per second.
Letter
I
IPO
Short for Initial Public Offering, when a company sells shares to the public for the first time.
Full guideIchimoku Cloud
A multi-line Japanese indicator showing trend, momentum, and support/resistance at a glance.
Full guideIndex
A measurement of the value of a section of the market, such as the S&P 500 or FTSE 100.
Inflation
A sustained increase in the general price level of goods and services, reducing purchasing power over time.
Full guideInitial Margin
The minimum deposit required to open a new leveraged trading position.
Interest Rate
The cost of borrowing money, set by central banks, which influences currency values and asset prices.
Intrinsic Value
The in-the-money portion of an option's price, or an asset's underlying worth.
Full guideInverse Head and Shoulders
The bullish mirror of head and shoulders, signaling a bottom reversal.
Full guideInverted Cup and Handle
The bearish mirror of the cup and handle, signaling a possible downturn.
Full guideInverted Yield Curve
When short-term yields exceed long-term yields, often a recession warning.
Full guideLetter
J
Letter
K
Kelly Criterion
A formula for the optimal bet size given your edge and odds.
Keltner Channel
Volatility bands set around an EMA using ATR, used to spot trends and breakouts.
Full guideLetter
L
Leverage
Using borrowed capital to increase the size of a trade beyond what your own funds would allow.
Full guideLeverage Ratio
How many times bigger your position is than your own money, e.g. 10:1 means $1 controls $10.
Limit Order
An order to buy or sell at a set price or better, so it only fills at your price.
Full guideLimit Up / Limit Down
The most a price is allowed to rise or fall in one session before trading pauses.
Line Chart
The simplest chart type, connecting closing prices with a continuous line.
Liquidation
The forced closing of a leveraged position when losses eat up the required margin.
Liquidity
How easily an asset can be bought or sold without significantly affecting its price.
Full guideLong Position
Buying an asset with the expectation that its price will rise.
Loss Aversion
The tendency to feel losses more strongly than equivalent gains.
Lot
A standardized unit of measurement in trading. In forex, a standard lot equals 100,000 units of the base currency.
Letter
M
MACD
Short for Moving Average Convergence Divergence, a momentum tool that compares two moving averages.
Full guideMargin
The amount of money required in your account to open and maintain a leveraged position.
Full guideMargin Account
A brokerage account that lets you trade with borrowed funds against posted collateral.
Full guideMargin Call
A broker's demand to deposit additional funds when your account equity falls below the required margin level.
Full guideMargin Level
Your equity as a percentage of used margin. When it drops too low, you face a margin call.
Margin Requirement
The minimum deposit a broker needs before you can open a leveraged position.
Market Cap
The total value of a company's outstanding shares, calculated as share price × number of shares.
Full guideMarket Depth
The market's ability to absorb large orders without a big price move, shown by resting order volume.
Full guideMarket Maker
A firm or individual that provides liquidity by continuously quoting buy and sell prices for an asset.
Full guideMarket Structure
The pattern of highs and lows that defines whether a market is trending or ranging.
Full guideMean Reversion
A strategy betting that price will return to its average after an extreme move.
Full guideMetaTrader
A popular trading platform (MT4/MT5) for forex and CFDs with charting and automation.
Full guideMomentum
How fast price is moving, so strong momentum means price is running hard in one direction.
Money Flow Index
A volume-weighted RSI that gauges buying and selling pressure to flag overbought/oversold.
Full guideMorning Star
A three-candle bullish reversal pattern appearing at the bottom of a downtrend.
Full guideMoving Average
A calculation that averages price data over a set number of periods to smooth out short-term fluctuations.
Full guideMoving Average Crossover
A signal generated when a faster moving average crosses a slower one.
Full guideMunicipal Bond
A bond issued by a US state or local government, often with tax advantages for US investors.
Full guideLetter
N
NFP
Short for Non-Farm Payrolls, a monthly US jobs report that moves both forex and stock markets.
Full guideLetter
O
OCO Order
One-Cancels-the-Other: a pair of orders where filling one automatically cancels the other.
Full guideOTC
Short for Over-the-Counter, trading done directly between two parties instead of on an exchange.
On-Balance Volume
A running total of volume that adds on up days and subtracts on down days to confirm trends.
Full guideOpen Interest
The total number of outstanding derivative contracts (futures or options) that haven't been settled.
Full guideOpen Price
The first price at which an asset trades when the market opens for a given period.
Options
Contracts giving the buyer the right, but not the obligation, to buy or sell an asset at a set price before expiry.
Full guideOptions Greeks
Risk measures (delta, gamma, theta, vega, rho) describing how an option's price reacts.
Full guideOrder Block
A zone where institutions placed large orders, often acting as future support or resistance.
Full guideOrder Book
A real-time list of all buy and sell orders for an asset, showing price levels and quantities.
Full guideOrder Flow
The stream of buy and sell orders hitting the market, read to gauge short-term pressure.
Oscillator
An indicator that swings between fixed values, such as 0 to 100, to flag overbought or oversold conditions.
Overbought
A condition where price has risen too far, too fast, suggesting a potential pullback. RSI above 70 is a common signal.
Oversold
A condition where price has fallen too far, too fast, suggesting a potential bounce. RSI below 30 is a common signal.
Letter
P
P/E Ratio
Short for Price-to-Earnings, a share price divided by earnings per share, used to gauge how expensive a stock is.
Full guidePaper Trading
Practicing trading with virtual money to test strategies without risking real capital.
Full guideParabolic SAR
A trailing indicator plotting dots that flag potential trend reversals and stop levels.
Full guidePattern Day Trader
Formerly, a US trader flagged for four or more day trades within five business days in a margin account. FINRA retired this designation on 4 June 2026, replacing it with proportional intraday margin rules.
Pattern Day Trading Rule
A former US rule requiring $25,000 minimum equity for pattern day traders. FINRA removed it on 4 June 2026, replacing the fixed minimum with proportional intraday margin requirements.
Full guidePayment for Order Flow
Compensation a broker receives for routing client orders to a particular market maker.
Full guidePennant Pattern
A small symmetrical triangle forming after a sharp move, signaling continuation.
Full guidePiercing Line
A two-candle bullish reversal where an up candle closes above the midpoint of a prior down candle.
Full guidePip Value
How much money one pip of movement is worth for your trade size.
Pivot Points
Calculated support and resistance levels derived from the prior period's high, low, and close.
Full guidePnL
Short for Profit and Loss, the result of your trading worked out as total gains minus total losses.
Poor Man's Covered Call
A covered call variant using a long-dated call instead of owning the stock.
Full guidePortfolio
A collection of financial assets (stocks, bonds, currencies) held by a trader or investor.
Full guidePosition
An open trade in an instrument, either long (bought) or short (sold).
Position Sizing
Determining how much capital to allocate to a single trade based on risk tolerance and account size. Also called position size.
Full guidePre-Market Trading
Trading that takes place before the regular market session opens.
Preferred Stock
A share class with fixed dividends and priority over common stock, but usually no voting.
Full guidePrice Action
Reading raw price on the chart without indicators, focusing on candles, patterns, and structure.
Full guidePrice Channel
Two parallel trendlines containing price, used to trade the range or breakout.
Full guidePsychological Level
A round price (like 100 or 1.2000) where orders pile up, often acting as support or resistance. Also called a round number.
Pullback
A temporary reversal within a trend, where price retraces before continuing in the original direction.
Letter
Q
Qualified Dividend
A dividend taxed at the lower long-term capital-gains rate under US tax rules.
Full guideQuote Currency
The second currency in a forex pair. In EUR/USD, the US dollar is the quote currency.
Letter
R
REIT
Short for Real Estate Investment Trust, a company that owns income-producing property and trades like a stock.
ROI
Short for Return on Investment, your profit or loss shown as a percentage of what you put in.
RSI
Short for Relative Strength Index, a momentum tool that measures the speed of price moves on a 0 to 100 scale.
Full guideRSI Trading Strategy
A strategy that uses RSI overbought/oversold and divergence signals for entries.
Rally
A sustained increase in the price of an asset or market.
Range
A trading range where price oscillates between a defined support and resistance level.
Relative Strength
How an asset performs compared with a benchmark or another asset over time.
Resistance
A price level where selling pressure historically prevents price from rising further.
Revenge Trading
Impulsive trading driven by the desire to recover losses quickly, often leading to larger losses.
Full guideReversal Candlestick Patterns
Candlestick formations that warn a prevailing trend may be turning.
Full guideRisk Appetite
A trader's willingness to take on risk in pursuit of potential returns.
Risk Management
The practice of limiting potential losses through sizing, stops, and diversification.
Full guideRisk Tolerance
How much loss or ups-and-downs a trader is comfortable living with.
Risk-Off
A market mood where investors sell risky assets and move to safe havens like bonds or gold.
Risk-On
A market mood where investors buy risky assets like stocks and crypto, expecting growth.
Risk-Reward Ratio
The potential profit of a trade divided by its potential loss. A 1:2 ratio means risking $1 to gain $2.
Full guideRollover
The process of extending the settlement date of an open position to the next trading day, often incurring a swap fee.
Letter
S
SMA
Short for Simple Moving Average, the average of closing prices over a set number of periods, weighted equally.
Scalping
A trading style that targets small profits from many rapid trades, holding positions for seconds to minutes.
Full guideSell Order
An instruction to sell an asset at the current market price or at a specified limit price.
Sentiment
The overall mood of traders toward a market, either bullish (optimistic) or bearish (pessimistic). Also called market sentiment.
Session
A period during which a specific market is open for trading. Major sessions: London, New York, Tokyo, Sydney.
Settlement
The process of transferring ownership and payment after a trade is executed.
Shooting Star
A bearish reversal candle with a small body and long upper wick after an uptrend.
Full guideShort Interest
The total number of shares currently sold short, a gauge of how bearish traders are.
Short Position
Selling an asset you don't own, expecting to buy it back at a lower price for a profit.
Short Squeeze
A rapid price rise forcing short sellers to buy back, pushing price higher still.
Full guideSlippage
The difference between the expected price of a trade and the actual price at which it was executed.
Full guideSmart Money
Institutional investors, banks, and hedge funds whose trading activity often drives market trends.
Smart Money Concept
A framework that trades in line with institutional 'smart money' footprints.
Full guideSpike
A sudden, sharp price movement in either direction, often caused by news or unexpected events.
Spot Market
A market where assets are bought and sold for immediate delivery at today's price.
Spread
The gap between the bid and ask price of an asset, and one of the main costs of trading.
Full guideSpread Betting
A leveraged derivative bet on price direction, free of capital-gains tax and stamp duty in the UK and Ireland.
Full guideStablecoin
A cryptocurrency pegged to a steady asset like the US dollar to keep its value stable.
Staking
Locking up crypto to help run a blockchain in return for rewards.
Stochastic Oscillator
A momentum indicator comparing a closing price to its price range over a period, used to identify reversals.
Full guideStochastic RSI
An oscillator applying the stochastic formula to RSI for more sensitive overbought/oversold signals.
Full guideStop Hunt
A sharp move that triggers a cluster of stop-loss orders before price reverses.
Stop Limit Order
A combination order that triggers a limit order once a specified stop price is reached.
Full guideStop Loss
An order that automatically closes your trade at a set price to limit your potential loss.
Full guideStop-Loss Order
An order that automatically closes a position at a set price to cap a loss.
Supertrend
A trend-following indicator using ATR to mark trend direction and trailing stops.
Full guideSupport
A price level where buying pressure historically prevents price from falling further.
Swap
The interest fee charged or earned for holding a leveraged position overnight. Also called a rollover fee.
Swing Trading
A trading style that holds positions for several days to weeks, aiming to capture medium-term price swings.
Full guideLetter
T
Take Profit
An order that automatically closes your trade at a set price to lock in your profit.
Full guideTechnical Analysis
Analyzing price charts, patterns, and indicators to predict future price movements based on historical data.
Full guideTechnical Indicators
Math-based tools plotted on price charts to help read trend, momentum, and volatility.
Full guideThree White Soldiers
Three consecutive long bullish candles signaling a strong reversal upward.
Full guideTick Chart
A chart that prints a new bar after a set number of trades rather than a time interval.
Full guideTicker Symbol
A unique abbreviation used to identify a publicly traded asset, such as AAPL for Apple or EURUSD for the euro/dollar pair. Also called a ticker.
Timeframe
The duration of each candle or bar on a chart: 1-minute, 5-minute, 1-hour, daily, weekly, etc.
Trading Plan
A written document outlining your trading strategy, rules, risk management, and goals.
Full guideTrading Session
The hours during which a particular financial market is open. Forex has four major sessions.
Trading Tools
Resources such as calculators, screeners, and charts that support trading decisions.
Full guideTrailing Stop Limit
A trailing stop that triggers a limit order rather than a market order once hit.
Full guideTrailing Stop Loss
A stop loss that automatically moves in your favor as the trade becomes profitable, locking in gains.
Full guideTrend
The general direction of price: an uptrend (higher highs), a downtrend (lower lows), or sideways.
Trend Following
A strategy that enters in the direction of the prevailing trend and rides it.
Full guideTrend Line
A straight line connecting two or more price points on a chart, showing the direction of the trend.
Full guideTriangle Pattern
A converging price pattern (ascending, descending, or symmetrical) preceding a breakout.
Full guideLetter
U
Unrealized P/L
The profit or loss on open positions that isn't locked in yet, so it moves as price moves.
Uptrend
A series of higher highs and higher lows, indicating sustained upward price movement.
Letter
V
VWAP
Short for Volume-Weighted Average Price, the average price weighted by volume over the session.
Full guideVolatility
The degree of price variation over time. High volatility means large price swings; low volatility means stability.
Volume
The number of shares or contracts traded in a period, a measure of activity and interest.
Full guideVolume Indicators
Indicators that use traded volume to confirm price moves and spot pressure.
Full guideVolume Profile
A histogram showing traded volume at each price level rather than over time.
Full guideVolume Spread Analysis
Reading the relationship between price spread and volume to spot smart-money activity.
Full guideLetter
W
Wallet
Software or a device that stores the keys used to hold and send crypto.
Wash Sale Rule
A US tax rule that disallows a loss if you rebuy the same security within 30 days.
Full guideWhipsaw
A sharp price reversal where a trader gets stopped out before the market moves back in their original direction.
Wyckoff Method
A framework reading accumulation and distribution phases to follow smart money.
Full guideLetter
Y
Yield
The income return on an investment, expressed as a percentage of the investment's cost or current value.