Trading Glossary
Master the language of trading with clear, simple explanations of essential terms and concepts.
Core Market Basics
Tick
The smallest possible price movement of an asset.
Example: On the S&P 500 futures, one tick = 0.25 points.
Pip (Percentage in Point)
A standard unit of movement in Forex, usually the 4th decimal place (0.0001).
Example: If EUR/USD moves from 1.1000 to 1.1005, that's 5 pips.
Lot
A standardized contract size in Forex.
Example: 1 standard lot = 100,000 units of currency.
Contract Size
The amount of the underlying asset controlled by one futures or options contract.
Example: One crude oil futures contract = 1,000 barrels.
Leverage
Borrowed capital that allows traders to control a larger position with less money.
Example: With 10:1 leverage, $1,000 controls $10,000 worth of currency.
Margin
The money required to open a leveraged trade.
Example: A broker may require $500 margin to control a $50,000 Forex position.
Spread
The difference between the bid (sell) and ask (buy) price.
Example: If EUR/USD bid is 1.1000 and ask is 1.1002, the spread is 2 pips.
Order Flow & Execution
Order Flow
The real-time buying and selling activity in the market.
Example: A trader sees strong buy orders entering, suggesting upward momentum.
DOM (Depth of Market)
A tool that shows live buy/sell orders at different prices.
Example: The DOM may show large sell orders stacked at a resistance level.
Liquidity
How easily an asset can be bought/sold without affecting price.
Example: EUR/USD is highly liquid, but a small altcoin may not be.
Slippage
When your trade executes at a worse price than expected.
Example: You place a buy at 1.1000, but it fills at 1.1003 during volatility.
Stop Loss (SL)
A set price that automatically closes a losing trade.
Example: Buying EUR/USD at 1.1000 with SL at 1.0980 limits loss to 20 pips.
Take Profit (TP)
A set price that automatically closes a winning trade.
Example: You buy at 1.1000 and set TP at 1.1050 for 50 pips gain.
Limit Order
An order to buy/sell at a specific price or better.
Example: You set a buy limit at 1.0950, and the order only triggers if price drops there.
Market Order
An instant buy/sell at current price.
Example: Clicking "Buy Market" fills your order immediately at the best available price.
Market Structure & Analysis
Support
A price level where buying pressure tends to appear.
Example: Price bounces multiple times at 1.1000 → strong support.
Resistance
A price level where selling pressure tends to appear.
Example: Price struggles to break above 1.1200 → strong resistance.
Breakout
When price pushes beyond support/resistance with momentum.
Example: EUR/USD breaking above 1.1200 signals bullish momentum.
Liquidity Grab / Sweep
When price temporarily moves beyond a key level to trigger stops, then reverses.
Example: Price spikes below support, sweeps stop losses, then rallies upward.
Order Block (OB)
The last bullish/bearish candle before a big move.
Example: A bearish order block forms before price dumps downward.
Fair Value Gap (FVG)
An imbalance on the chart caused by aggressive buying/selling.
Example: A candle wicks up leaving empty space — that gap often gets filled later.
Smart Money Concepts (SMC)
A strategy focusing on liquidity, order blocks, and institutional activity.
Example: Instead of retail indicators, SMC traders watch for stop-hunts and market maker moves.
Supply Zone
A price area where heavy selling is expected.
Example: Price retraces into a supply zone before continuing down.
Demand Zone
A price area where heavy buying is expected.
Example: Price bounces off a demand zone and moves upward.
Key Levels
Previous Day's High and Low
The highest and lowest prices from the prior trading day, often acting as support or resistance.
Example: If yesterday's low was 15,900 and today's price bounces there, that level acted as support.
Opening Range Break (ORB)
The high and low of the first 15-minute candle after market open (6:00–6:15 PM EST). These boundaries often guide the early session's direction.
Example: If the ORB high is 16,050 and price breaks above, it may suggest bullish momentum.
Weekly Open
The price level where the market opened at the start of the week, often setting the weekly bias.
Example: If the weekly open is 16,000 and price stays above, the market may be bullish for the week.
Sessions
Distinct trading periods when global financial centers are active. Each session brings unique volatility and liquidity characteristics.
Sunday Futures Open: 6:00 PM EST (Globex) for futures / 5:00 PM EST for Forex — marks the true start of the trading week.
Asia/Tokyo Session: 8:00 PM – 4:00 AM EST
London Session: 3:00 AM – 11:00 AM EST
New York Session: 8:00 AM – 5:00 PM EST
Futures (Globex) Open: 6:00 PM EST daily, nearly 24-hour trading with short maintenance breaks.
Example: Volatility often spikes when the London and New York sessions overlap (8:00 AM – 11:00 AM EST).
Session Highs and Lows
The peaks and troughs made during key sessions, commonly used to spot liquidity and reversals.
Example: If London's session high is 16,120 and New York trades above it but fails to hold, it may indicate a false breakout.
Liquidity Pools
Clusters of stop orders above highs or below lows that attract price.
Example: If many stops sit above 16,300, price may spike there before reversing.
Supply Zone
A price area where heavy selling occurred before, often acting as resistance.
Example: If price fell from 16,200 previously, that level may resist future rallies.
Demand Zone
A price area where heavy buying occurred before, often acting as support.
Example: If price rallied sharply from 15,800, traders may look for support there again.
Risk & Performance
Risk-to-Reward Ratio (R:R)
Comparing potential profit vs. potential loss.
Example: Risking $100 for a $300 gain = 1:3 R:R.
Position Sizing
Determining trade size based on risk.
Example: With a $10,000 account risking 1%, you risk $100 per trade.
Drawdown
The percentage your account drops from its peak.
Example: A $10k account falls to $9k = 10% drawdown.
Win Rate
Percentage of trades that are profitable.
Example: 60% win rate means 6 out of 10 trades succeed.
Break-even Point
Where profits equal losses (no net gain/loss).
Example: At 50% win rate with 1:1 R:R, you break even long term.
Psychology & Behavior
Overtrading
Entering too many trades, often from lack of patience.
Example: Taking 8 trades in a day because of FOMO instead of 2 good setups.
FOMO (Fear of Missing Out)
Entering trades impulsively because you don't want to miss a move.
Example: Chasing a breakout after it already moved 100 pips.
Revenge Trading
Trying to recover losses quickly by over-leveraging.
Example: Losing a trade and doubling size on the next one out of frustration.
Discipline
Following your plan without emotional interference.
Example: Only taking setups that meet your rules, even if you're bored.
Patience
Waiting for high-probability setups.
Example: Watching charts for hours but not forcing trades until the right level hits.
Consistency
Repeating the same trading behaviors and strategies over time.
Example: Sticking to 1% risk per trade for months builds steady growth.