Trading glossary

The words you meet on a chart, in one or two plain sentences each. Follow the links for a full guide or a free calculator.

Ask

The lowest price a seller is currently willing to accept. You buy at the ask.

Bearish

Expecting or showing falling prices. A bearish candle closes below its open.

Bid

The highest price a buyer is currently willing to pay. You sell at the bid.

Break even win rate

The share of trades that must reach the target, with the rest hitting the stop, for total profit to be zero before costs. It equals 1 / (1 + reward to risk ratio): 50% at 1 to 1, about 33% at 1 to 2. Risk reward calculator

Breakout

Price closing clearly beyond a support or resistance zone. A breakout that quickly falls back inside the zone is called a fakeout. Breakout vs fakeout guide

Bull flag

A continuation pattern: a fast move up (the pole), then a short, shallow pullback in a small channel (the flag). It is confirmed by a close above the flag. The mirror after a sharp drop is the bear flag. Bull flag and bear flag guide

Bullish

Expecting or showing rising prices. A bullish candle closes above its open.

Candlestick

One bar on a chart showing the open, high, low and close of a period. The body spans open to close; the wicks show the high and low. Candlestick guide

CME gap

A jump on the CME Bitcoin futures chart between Friday's close and Sunday evening's open, left because the futures pause on weekends while spot BTC keeps trading. Some traders watch it as a level; nothing guarantees it fills. Bitcoin weekend volatility guide

Consolidation

A pause where price moves sideways in a tighter area, often after a strong move. It can resolve in either direction.

Demand zone

A tight area where price paused before leaving fast to the upside. The first return to it is watched for buyers. The mirror above price is a supply zone; an order block is the last opposite candle before the move. Supply and demand zones guide

Divergence

When price and an indicator such as RSI disagree: price makes a lower low while RSI makes a higher low (bullish), or the mirror (bearish). It shows momentum fading, not a confirmed turn. RSI divergence guide

Doji

A candle whose open and close are almost equal. It shows indecision; its meaning depends on where it appears. Candlestick guide

Double bottom

A reversal pattern after a downtrend: two lows at about the same price with a neckline at the high between them. It is confirmed only by a close above the neckline. The mirror after an uptrend is the double top. Double top and double bottom guide

Drawdown

The fall from an account's peak to its lowest point before a new peak, in percent. A 50% drawdown needs a 100% gain to recover. Drawdown recovery calculator

EMA (Exponential moving average)

A moving average that gives more weight to the most recent closes, so it reacts faster than a simple average. MACD is built from the 12 and 26 period EMAs. MACD crossover guide

Entry

The price at which you open a trade. With a stop loss, it sets the risk per unit.

Fakeout

A move that pokes beyond a level and then reverses back inside it, trapping traders who acted on the first push. Breakout vs fakeout guide

Fibonacci retracement

Horizontal levels at 23.6%, 38.2%, 50%, 61.8% and 78.6% of a finished swing, used to plan where a pullback might stop. Strongest where a level lines up with old support or resistance. Fibonacci retracement guide

Funding rate

A periodic payment between long and short holders of a perpetual futures contract, often every 8 hours, that keeps its price close to spot. When it is positive, longs pay shorts; when negative, shorts pay longs. Bitcoin weekend volatility guide

Golden cross

The 50 day moving average crossing above the 200 day. It describes a long term trend turning up; the mirror is the death cross. A slow signal, better as context than as an entry. Moving average crossover guide

Head and shoulders

A reversal pattern after an uptrend: a peak, a higher peak (the head), then a lower peak, with a neckline through the two lows between them. It is confirmed only by a close below the neckline. The inverse version marks a possible bottom. Head and shoulders guide

Higher high, higher low

The structure of an uptrend: each rally peaks above the last peak and each pullback stops above the last low. Trend vs range guide

Isolated vs cross margin

Isolated margin risks only the margin put on one position. Cross margin uses the whole futures balance to keep positions open, so liquidation comes later but can take more of the account. Liquidation price calculator

Leverage

Trading a position larger than your account by borrowing. It changes how much margin you post, not how much you lose at the stop if the size is right. Position sizing guide

Limit order

An order to buy at or below, or sell at or above, a price you set. It may not fill if price never gets there.

Liquidation

A leveraged position closed by the broker or exchange because the margin is used up. The liquidation price should always be beyond your stop. Liquidation price calculator

Liquidity sweep

A quick move just beyond obvious equal highs or lows that triggers the stops resting there, then closes back inside. Also called a stop hunt. Without the close back inside, it is a breakout. Liquidity sweeps guide

Long

A trade that profits if price rises: you buy first and sell later.

Losing streak

Several losing trades in a row. Even a strategy that wins half the time will usually see a run of 5 or more losses over 100 trades, so risk per trade should be sized to survive one. Risk rules guide

Lot

A standard size in forex. One standard lot is 100,000 units of the base currency; a mini lot is 10,000 and a micro lot 1,000. Pip value calculator

MACD

Moving Average Convergence Divergence: the 12 period EMA minus the 26 period EMA, with a 9 period signal line. A cross above the signal line shows momentum turning up, with a delay. MACD crossover guide

Maintenance margin

The minimum margin a leveraged position must keep. When losses push the margin below it, the exchange liquidates the position. It is why liquidation comes a little before the move that would wipe out all your margin. Liquidation price calculator

Market order

An order filled right away at the best available price. Fast, but the fill can differ from the last price you saw (slippage).

Market structure

The pattern of swing highs and lows that tells you whether a market is trending up, trending down or ranging. Trend vs range guide

Moving average

The average closing price over the last N periods, drawn as a line. Its slope helps tell a trend from a range. Moving average crossover guide

Pip

The usual smallest price step in forex: 0.0001 for most pairs and 0.01 for pairs quoted in yen. On one standard lot of EUR/USD, one pip is $10. Pip value calculator

Position size

How many units to buy or sell. Position size = (account x risk percent) / (entry - stop), so a wider stop means a smaller position. Position size calculator

Pullback

A short move against the trend before it continues, such as a dip in an uptrend. Many trend traders enter on pullbacks. Trend vs range guide

R multiple

A result measured in units of the risk taken. Losing the planned risk is -1R; making three times it is +3R. It lets you compare trades of any size. Risk reward guide

Range

A market moving sideways between a support floor and a resistance ceiling, with no new highs or lows. Trend vs range guide

Resistance

A price zone where selling has stopped rises before. Price often slows or turns there. Once broken, it can act as support. Support and resistance guide

Retest

Price coming back to a level it just broke, from the other side. A level that holds on the retest confirms the break. Support and resistance guide

Risk of ruin

The chance that losses, often a losing streak with too much risk per trade, shrink an account so far that it can no longer recover or keep trading. A small fixed risk per trade keeps it low. Risk rules guide

Risk per trade

The share of the account you accept to lose if the stop is hit. Many educators suggest 0.5% to 2%. Position sizing guide

Risk to reward ratio

What a trade could make divided by what it risks, measured from entry to target and entry to stop. Risking 4 to make 12 is 1 to 3. Risk reward guide

RSI (Relative Strength Index)

A momentum indicator from 0 to 100 that compares recent up moves with recent down moves, usually over 14 periods. Above 70 is often called overbought and below 30 oversold. RSI divergence guide

Short

A trade that profits if price falls: you sell first and buy back later.

Slippage

The difference between the price you expected and the price you got, common on market orders and stops in fast markets.

Spread

The gap between the bid and the ask. It is a cost you pay on every trade, and it often widens around news.

Stop loss

An order that closes a losing trade at a set price: the point where the trade idea is wrong. It belongs beyond structure, such as below a swing low with a buffer. Stop loss guide

Support

A price zone where buying has stopped drops before. Price often slows or bounces there. Once broken, it can act as resistance. Support and resistance guide

Swing high and swing low

A peak with lower highs on both sides, or a trough with higher lows on both sides. They mark structure and natural places for stops. Stop loss guide

Take profit

An order that closes a winning trade at a target price, often at the next support or resistance zone.

Timeframe

The period each candle covers, such as 15 minutes, 4 hours or 1 day. The same market can trend on one timeframe and range on another. Multiple timeframes guide

Trading journal

A record of every trade with the plan written before entry (setup, entry, stop, target, risk) and the result after exit in R, plus whether you followed the plan. Reviewed weekly, it shows which setups pay and which habits cost money. Trading journal guide

Trading session

The hours when one region is most active: Asia (about 00:00 to 08:00 UTC), London (07:00 to 16:00 UTC in winter), New York (13:00 to 22:00 UTC in winter). Ranges change by session, so one stop can be too tight in one and fine in another. Gold trading sessions guide

Trailing stop

A stop that you move in the direction of a winning trade, for example below each new higher low, to protect open profit.

Trend

A market making progress in one direction: higher highs and higher lows in an uptrend, lower highs and lower lows in a downtrend. Trend vs range guide

Volatility

How much and how fast price moves. Higher volatility usually needs wider stops and therefore smaller positions.

Wick

The thin line above or below a candle's body showing the high and low of the period. A long wick shows price was pushed back. Candlestick guide

Educational only, not financial advice.