Trading Glossary

Absolute Return

Absolute return is the total percentage gain or loss on an investment over a period, without comparison to any benchmark or index.

Accumulation Phase

A sideways consolidation period where institutional traders quietly accumulate positions, characterized by balanced price action and low volatility before a directional displacement.

Accumulation/Distribution

Accumulation/Distribution is a volume-based indicator that measures cumulative money flow, using price position within the range and volume to gauge buying and selling pressure.

ADX

Average Directional Index (ADX) measures trend strength on a 0-100 scale regardless of direction, with readings above 25 indicating a strong trend.

Algorithmic Trading

Algorithmic trading is executing trades via automated rules encoded in software — removing manual intervention from entry, exit, and position sizing decisions.

Alpha

Alpha measures the excess return of an investment relative to its benchmark, representing the value added by active management or skill.

Anchoring Bias

Anchoring bias is the tendency to rely too heavily on the first piece of information encountered when making trading decisions.

Arbitrage

Arbitrage is a strategy that exploits price differences of the same asset across different markets or brokers.

Asian Range

The highest and lowest prices established during the Asian trading session (Tokyo focus), commonly used as support/resistance and breakout reference points for the London/US sessions.

At-the-Money (ATM)

An at-the-money option has a strike price equal (or very close) to the current underlying price, with zero intrinsic value and all premium as time value.

ATR

Average True Range (ATR) measures market volatility by calculating the average of true ranges over a specified period, typically 14 days.

Average Loss

Average loss is the mean loss amount across all losing trades, calculated by dividing total losses by the number of losing trades.

Average Win

Average win is the mean profit amount across all winning trades, calculated by dividing total profits by the number of winning trades.

Averaging Down

Averaging down is buying more of a losing position at progressively lower prices to reduce average entry cost, a high-risk tactic that compounds losses in trending forex markets.

B

Backtesting

The process of testing a trading strategy against historical price data to evaluate its profitability and risk before trading with real money.

Backtesting

Backtesting is testing a trading strategy against historical price data to evaluate its potential performance before risking real capital.

Base Currency

The first currency in a currency pair, quoted against the second currency. In EUR/USD, EUR is the base currency.

Batting Average

Batting average in trading is the percentage of winning trades out of total trades, equivalent to win rate, measuring consistency of profitable entries.

Bear Market

A bear market is a prolonged period of falling prices, typically defined as a 20% or more decline from recent highs, characterized by pessimism.

Beta

Beta measures a security's volatility relative to the overall market, where beta of 1 indicates movement in line with the market.

Bid-Ask Spread

Bid-ask spread is the difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask), representing transaction cost.

Blue Chip

Blue chip refers to large, financially stable, well-established companies with a history of reliable performance and dividend payments.

Bollinger Bands

Bollinger Bands are volatility bands placed above and below a moving average, typically set at 2 standard deviations from a 20-period SMA.

book-value

What remains if a company sold all assets and paid all debts. Also called shareholder equity or net worth.

Bracket Order

A bracket order automatically places a stop loss and take profit order around an entry.

Break of Structure

A decisive price movement that breaks through the previous swing high (in downtrends) or swing low (in uptrends), confirming a structural reversal or trend change.

Breaker Block

An order block that fails to hold, broken through by price and institutional momentum, which then flips to act as resistance on subsequent pullbacks.

Breakeven

Breakeven in trading refers to moving your stop loss to your entry price after a trade moves into profit, eliminating the risk of loss on that position.

Breakout

A breakout occurs when price moves above resistance or below support with increased volume, signaling the start of a new trend or momentum move.

Breakout Trading

Breakout trading is a strategy that enters positions when price breaks above resistance or below support, anticipating continuation of the move.

Broker

A financial intermediary that provides traders with a platform to buy and sell currency pairs, manages margin accounts, and executes orders.

BSE

BSE (Bombay Stock Exchange) is Asia's oldest stock exchange, established in 1875, home to the Sensex index and over 5,000 listed companies.

Bull Market

A bull market is a prolonged period of rising prices, typically defined as a 20% or more increase from recent lows, characterized by investor optimism.

C

CAGR

Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified time period longer than one year.

Call Option

A call option gives the holder the right, but not obligation, to buy an underlying asset at a specified strike price before expiration.

Calmar Ratio

Calmar ratio is a risk-adjusted performance metric calculated as CAGR divided by maximum drawdown, measuring return efficiency relative to risk.

Candlestick

A candlestick is a price chart element showing open, high, low, and close prices for a period, with the body showing open-to-close range.

Carry Trade

A forex strategy where you buy a high-yielding currency and sell a low-yielding currency to profit from the interest rate differential over time.

CCI

Commodity Channel Index (CCI) is a momentum oscillator measuring price deviation from its statistical mean, with readings above +100 or below -100 signaling potential trades.

Central Bank

The government agency responsible for managing a nation's monetary policy, controlling interest rates, and regulating the money supply. Examples: ECB, Federal Reserve, Bank of Japan.

Chaikin Money Flow

Chaikin Money Flow (CMF) measures buying and selling pressure over a period by combining price and volume, with positive values indicating accumulation.

Change of Character

A break in the established price structure pattern (higher highs/lows or lower highs/lows) that signals potential reversal, institutional participation shift, or momentum change.

circuit-breaker

An automatic trading halt when price falls/rises too much too fast. Prevents flash crashes and gives the market time to breathe.

Confirmation Bias

Confirmation bias is the tendency to seek and favor evidence that confirms your existing belief while dismissing contradictory evidence, creating a trading blind spot.

Consistency Rule

Consistency Rule is a prop firm requirement that no single trading day's profit can exceed a set percentage (typically 30%) of total accumulated profits during the challenge or funded phase.

Consolidation

Consolidation is a period of sideways price movement within a defined range, representing a pause in the prevailing trend.

Correction

A correction is a 10-20% decline from a recent peak in price, typically a temporary pullback within a longer-term uptrend.

Correlation

Correlation measures how closely two assets move together, ranging from +1 to -1.

COT Report

COT Report is a weekly CFTC publication showing net futures positions of commercial hedgers, large speculators, and small speculators across all major currency pairs.

Cover Order

A cover order is a leveraged entry order that requires a simultaneous stop-loss at the time of entry, allowing traders to use higher margin while enforcing automatic risk caps.

Covered Call

A covered call is an options strategy where you sell call options against shares you already own, generating income from the premium received.

CPI (Consumer Price Index)

CPI is the primary inflation measure central banks use for rate decisions, tracking price changes across a basket of consumer goods — the most market-moving monthly release for forex traders.

Credit Spread

A credit spread is an options strategy that sells a higher-premium option and buys a lower-premium option, collecting net premium as profit.

Currency Pair

Two currencies quoted together in forex trading, where the first is the base currency and the second is the quote currency. Price shows how much quote currency buys one unit of base.

D

Daily Loss Limit

Daily loss limit is the maximum drawdown permitted in a single trading day — enforced by prop firms as a hard breach trigger or set as a personal discipline rule.

Dark Pool

A dark pool is a private exchange where large institutional orders are executed anonymously, without displaying order size to the public market.

Day Trading

Day trading is a strategy where all positions are opened and closed within the same trading day, avoiding overnight risk and margin requirements.

Death Cross

A death cross is a bearish signal when a shorter-term moving average crosses below a longer-term moving average, often the 50-day below the 200-day.

Debit Spread

A debit spread is an options strategy that buys a higher-premium option and sells a lower-premium option, paying net premium for limited risk.

debt-to-equity

Total debt divided by equity. Shows how leveraged the company is. High D/E means the company relies heavily on debt financing.

Delta

Delta measures an option's price sensitivity to changes in the underlying asset's price, ranging from 0 to 1 for calls and 0 to -1 for puts.

Demat Account

A demat account holds securities in electronic form, eliminating physical share certificates and enabling seamless digital trading in India.

Displacement

A strong, impulsive directional price move that signals institutional participation, typically following a consolidation and creating the framework for pullback entries.

Distribution Phase

The distribution phase is a sideways range where informed participants offload positions before a significant downward move.

Divergence

Divergence occurs when price moves in the opposite direction of an indicator, potentially signaling trend weakness or upcoming reversal.

Diversification

Diversification spreads investments across different assets, sectors, or strategies to reduce the impact of any single position's loss on the portfolio.

dividend-yield

How much cash a stock returns to you annually as a percentage of price. A 5% yield means you get 5% of stock price back in dividends yearly.

Doji

A doji is a candlestick pattern where the open and close prices are virtually equal, indicating market indecision.

Doji Candle

A candlestick pattern where open and close prices are nearly identical, creating a cross or plus sign shape. Signals indecision and potential reversal.

Donchian Channel

Donchian Channel plots the highest high and lowest low over a set period, used for breakout trading and trend identification.

Double Bottom

A double bottom is a bullish reversal pattern formed when price reaches a support level twice, bouncing up both times, resembling the letter W.

Double Top

A double top is a bearish reversal pattern formed when price reaches a resistance level twice, failing to break through, resembling the letter M.

Drawdown

Drawdown is the peak-to-trough decline in a trading account's equity, expressed as a percentage. A 10% drawdown means the account fell 10% from its highest point.

E

ECN

Electronic Communication Network. A trading system connecting traders directly to multiple liquidity providers (banks, hedge funds), enabling transparent price discovery without broker dealing...

Economic Calendar

Economic Calendar is a schedule of upcoming macroeconomic data releases, central bank decisions, and events that move currency pairs — organized by impact level and release time.

Edge

An edge is a statistical advantage that gives a trader a higher probability of profit over a large sample of trades.

EMA

Exponential Moving Average (EMA) is a weighted moving average that gives more importance to recent prices, making it more responsive to new information.

Engulfing Pattern

An engulfing pattern is a two-candle reversal pattern where the second candle's body completely engulfs the first.

EPS

Earnings Per Share (EPS) is a company's net profit divided by outstanding shares, measuring profitability on a per-share basis.

Equal Highs/Lows

Price levels where consecutive swing highs or swing lows occur at nearly identical prices, creating a zone of institutional liquidity and resistance/support.

Equity

Equity is the current value of a trading account calculated as balance plus or minus the unrealized profit or loss from all open positions.

Equity Curve

Equity curve is a line chart of account balance over time, showing cumulative P&L across all trades — the single most honest report of a trader's edge and discipline.

Exchange Rate

The price at which two currencies exchange for each other. Shows how much of one currency you need to buy a unit of another. Example: EUR/USD 1.0850 means 1 euro costs 1.0850 dollars.

Expectancy

Expectancy is the average amount a trader expects to win or lose per trade, calculated from win rate, average win size, and average loss size.

F

Fair Value Gap

A pricing imbalance formed when price moves sharply, leaving unfilled space (gap) between the wicks of two consecutive candles, which price tends to return to and fill.

Fear & Greed Index

The Fear and Greed Index measures market sentiment on a 0-100 scale, where extreme fear signals buying opportunities and extreme greed signals caution.

Fibonacci Extension

Fibonacci extension is a price projection tool that identifies potential take-profit targets beyond a prior swing move using levels at 127.2%, 161.8%, and 261.8%.

Fibonacci Retracement

Fibonacci retracement uses horizontal lines at key Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%) to identify potential support and resistance levels.

Fill

The execution of a buy or sell order at a specific price. When you place an order to buy EUR/USD at 1.0850 and the broker matches you with a seller at that price, you have a fill.

Flag Pattern

A flag pattern is a continuation pattern where price consolidates in a narrow channel against the prior trend before resuming its original direction.

FOMO

Fear Of Missing Out (FOMO) is an emotional state that drives traders to enter positions impulsively when seeing others profit, often at unfavorable prices.

Free Cash Flow

Free cash flow is the cash a company generates after accounting for capital expenditures, indicating financial health and ability to pay dividends or reduce debt.

Trading approach that analyzes economic data (GDP, inflation, interest rates, employment) and central bank policy to forecast currency movements.

Funded Trading Account

Funded trading account is capital provided by a prop firm to a trader who passes a paid evaluation, letting them trade firm money and keep 70–90% of profits.

Futures Contract

A futures contract is a standardized agreement to buy or sell an asset at a predetermined price on a specific future date, traded on exchanges.

G

Gamma

Gamma is the rate of change of delta. It measures how much an option's delta (directional sensitivity) will shift as the underlying price moves by one pip or dollar.

Gap

A gap is a price discontinuity where a security opens significantly higher or lower than its previous close.

Gap Trading

Gap trading is a strategy that takes positions based on price gaps, either trading the gap fill or continuation.

Golden Cross

A golden cross is a bullish signal when a shorter-term moving average crosses above a longer-term moving average, often the 50-day above the 200-day.

GTT Order

A Good-Till-Triggered (GTT) order stays inactive until a specific trigger price is reached, at which point it converts to a live order. Used for entry strategies without constant monitoring.

H

Hammer

A hammer is a bullish candlestick pattern with a small body and long lower wick, appearing at the end of downtrends.

Hawkish

Hawkish is a monetary policy stance where a central bank favors higher interest rates and tighter credit conditions to combat inflation over stimulating growth.

Head and Shoulders

Head and shoulders is a reversal chart pattern with three peaks where the middle peak (head) is higher than the two surrounding peaks (shoulders).

Hedging

Hedging is a risk management strategy that takes offsetting positions to protect against adverse price movements in existing holdings.

Heikin-Ashi

Heikin-Ashi is a modified candlestick chart type that recalculates OHLC values using price averages to filter noise and reveal trend direction more clearly.

High-Frequency Trading

High-Frequency Trading is algorithmic trading that executes millions of orders per second using co-located servers and ultra-low-latency infrastructure to exploit microscopic price inefficiencies.

Hindsight Bias

Hindsight bias is the tendency to believe past events were predictable after they occurred, distorting a trader's self-assessment.

I

Iceberg Order

An iceberg order is a large order split into smaller visible portions, hiding the total size from the market to minimize price impact.

Ichimoku Cloud

Ichimoku Cloud is a comprehensive indicator showing support, resistance, momentum, and trend direction in a single view.

Implied Volatility

Implied volatility (IV) is the market's expectation of future price movement derived from option prices, key for determining option premiums.

In The Money

In the money (ITM) describes an option with intrinsic value—calls when market price exceeds strike, puts when strike exceeds market price.

Inducement

A shallow price movement to a minor liquidity zone that lures retail traders into positioning before institutions reverse and move in the true direction.

Inflation

Inflation is the sustained rise in the general price level over time, eroding purchasing power and driving central bank rate decisions that are the primary force behind major currency moves.

Information Ratio

Information ratio measures risk-adjusted excess return relative to a benchmark, calculated as active return divided by tracking error.

Institutional Candle

A price candle with a large body (high open-to-close range), minimal wicks, and strong directional bias, indicating institutional participation and market conviction in one direction.

Interest Rate

The percentage rate charged for borrowing money or paid for lending it. Central banks set benchmark rates; currency pairs offer different interest rates based on their economy's rates.

Interest Rate Decision

Interest Rate Decision is a central bank's scheduled announcement of its benchmark rate, the most powerful driver of currency valuations over the medium term.

Intraday

Intraday refers to activity occurring within a single trading day, including all trades opened and closed before the market session ends.

Intrinsic Value

Intrinsic value is the amount by which an option is in-the-money, representing the immediate profit if the option were exercised at the current moment.

Iron Condor

An iron condor is a four-legged options strategy that sells an OTM call spread and an OTM put spread, creating a defined risk window that profits if price stays within a range at expiration.

IV Crush

IV crush is the rapid decline in implied volatility after a major event like earnings, causing option premiums to drop sharply.

J

Judas Swing

A false directional move that occurs at session open (usually London or New York), designed to trigger stop losses and trap traders before the true directional move in the opposite direction begins.

K

Kelly Criterion

Kelly criterion is a mathematical formula that determines the optimal position size to maximize long-term growth while managing risk of ruin.

Keltner Channel

Keltner Channel is a volatility-based indicator using EMA and ATR to create upper and lower bands, identifying trend direction and overbought/oversold conditions.

Killzone

A specific time window (usually London open or London-US overlap) when institutional trading volume peaks and volatility spikes, creating high-probability trading setups.

L

Leverage

Leverage is borrowed capital from your broker that lets you control a larger position than your account balance — 1:100 leverage means $1,000 controls $100,000.

Limit Order

A limit order executes only at a specified price or better, guaranteeing price but not execution if the market doesn't reach that level.

Liquidity

Liquidity measures how easily an asset can be bought or sold without significantly affecting its price, with high liquidity meaning tighter spreads and faster execution.

Liquidity Grab

A price sweep beyond a key support or resistance level that triggers clustered stop losses, before price reverses back through the level in its intended direction.

London Session

London Session is the largest forex trading window (8:00 AM–4:30 PM GMT), generating 34–38% of daily volume with peak volatility in the first 90 minutes.

Long Position

A long position is buying a security with the expectation that its price will rise, profiting from the difference when sold at a higher price.

loss-aversion

Feeling losses twice as hard as gains, causing you to hold losers too long and miss profits. A discipline killer.

Lot

A lot is the standardized unit of trade size in forex, with a standard lot equaling 100,000 units of base currency and producing approximately $10 per pip on EUR/USD.

Lot Size

Lot size is the number of currency units in a forex trade — a standard lot is 100,000 units, a mini lot is 10,000, and a micro lot is 1,000.

Lower Circuit

Lower circuit is the minimum price limit a stock can fall to in a single trading session, set by the exchange to prevent panic selling.

M

MACD

Moving Average Convergence Divergence (MACD) is a momentum indicator showing the relationship between two exponential moving averages (12 and 26 period).

Margin

Margin is borrowed money from a broker used to increase buying power, requiring traders to maintain a minimum equity percentage in their account.

Margin Call

A margin call is a broker's demand to deposit more funds when your account equity drops below the required margin level, typically triggered at 50-100% margin level.

Market Capitalization

Market capitalization is the total market value of a company's outstanding shares, calculated as share price multiplied by total shares outstanding.

Market Maker

A broker that acts as your counterparty in trades, providing liquidity by quoting prices and profiting from the spread and your losses.

Market Maker Model

The institutional mechanism for providing liquidity through false price moves, stop hunting, and induced counterparty participation, designed to match buyers and sellers efficiently.

Market Order

A market order executes immediately at the best available price, guaranteeing execution but not the exact price in fast-moving markets.

Max Daily Drawdown

Max daily drawdown is the maximum permitted intraday equity decline allowed by a prop firm before automatic account breach — typically 4–5% of the starting balance.

Maximum Adverse Excursion (MAE)

Maximum Adverse Excursion (MAE) is the furthest price moved against an open position at any point before the trade closes, measuring peak intra-trade unrealized loss in pips or account currency.

Maximum Drawdown

Maximum drawdown (MDD) is the largest peak-to-trough decline in a trading account's equity over a specific period, representing the worst-case loss scenario.

Maximum Favorable Excursion (MFE)

Maximum Favorable Excursion (MFE) is the highest unrealized profit a trade reaches at any point during its lifetime, used to measure exit quality and profit-taking efficiency.

Mean Reversion

Mean reversion is a strategy based on the theory that prices tend to return to their average over time, buying oversold and selling overbought conditions.

MFI

Money Flow Index (MFI) is a volume-weighted RSI that measures buying and selling pressure using both price and volume data on a 0-100 scale.

Mitigation Block

A consolidation or order block zone that price has left behind after a displacement move, where unfilled institutional orders still reside and attract price on pullbacks.

Momentum Trading

Momentum trading is a strategy that buys securities showing upward price trends and sells those showing downward trends, riding the market momentum.

Moving Average

A moving average smooths price data by calculating the average price over a specified period, used to identify trends and support/resistance levels.

N

New York Session

New York Session is the second-largest forex trading window (8 AM–5 PM EST / 13:00–22:00 UTC), driving peak USD liquidity during its London overlap from 8–12 AM EST.

News Trading

News trading is a strategy that takes positions based on market-moving news events.

NFP

Non-Farm Payrolls. The monthly US employment report released on the first Friday, showing how many jobs were added/lost. Highest impact economic indicator for USD movement.

Nifty 50

Nifty 50 is India's benchmark stock market index comprising 50 of the largest and most liquid companies listed on the National Stock Exchange (NSE).

Non-Farm Payroll (NFP)

Non-Farm Payroll (NFP) is the monthly US jobs report released the first Friday of each month at 8:30 AM ET, measuring new jobs added excluding farm workers — the most market-moving scheduled event.

NSE

NSE (National Stock Exchange) is India's largest stock exchange by trading volume, home to the Nifty 50 index and electronic trading.

O

OBV

On-Balance Volume (OBV) is a momentum indicator that uses volume flow to predict price changes, adding volume on up days and subtracting on down days.

OCO Order

An OCO order pairs two orders where filling one automatically cancels the other, letting traders set profit targets and stop losses simultaneously.

Open Interest

Open interest is the total number of outstanding derivative contracts that have not been settled, indicating market activity and liquidity.

Optimal Trade Entry

An entry point positioned at the 62-79% Fibonacci retracement level of a displacement move, offering balanced risk/reward before continuation of the primary trend.

Option Expiration

Option expiration is the date after which an option contract becomes worthless and can no longer be exercised, typically the last Thursday of the month in India.

Option Greeks

Option Greeks are risk measures (Delta, Gamma, Theta, Vega, Rho) that quantify an option's sensitivity to various factors affecting its price.

Option Premium

Option premium is the price paid by the buyer to the seller for an option contract, comprising intrinsic value and time value.

Order Block

A consolidation or range area where institutional traders accumulated positions before an impulsive directional move, leaving a structural footprint that attracts price on pullbacks.

order-book

The queue of buy orders (bids) and sell orders (asks) at each price level. Shows where money is waiting.

Out of The Money

Out of the money (OTM) describes an option with no intrinsic value—calls when strike exceeds market price, puts when market price exceeds strike.

Overbought

Overbought is a condition where a security's price has risen too quickly, indicated by RSI above 70 or stochastic above 80.

overconfidence

Overestimating your skill and underestimating risk, often after a winning streak. A major cause of blowups.

Overnight Position

An overnight position is a trade held past the market close into the next trading day, exposing the trader to gap risk and swap charges.

Oversold

Oversold is a condition where a security's price has fallen too quickly, indicated by RSI below 30 or stochastic below 20.

Overtrading

Overtrading is taking excessive trades beyond your strategy rules, often driven by boredom, revenge, or the urge to recover losses quickly.

P

P/E Ratio

Price-to-Earnings (P/E) ratio compares a company's stock price to its earnings per share, indicating how much investors pay for each rupee of earnings.

Pairs Trading

Pairs trading is a market-neutral strategy that goes long one security and short on a correlated security.

Paper Trading

Paper trading is simulated trading using virtual money to practice strategies and learn platforms without risking real capital.

Parabolic SAR

Parabolic SAR is a trend-following indicator that places dots above or below price to signal potential reversals and trailing stop levels.

Payoff Ratio

Payoff ratio is the average winning trade divided by the average losing trade, measuring the relative size of wins to losses.

pb-ratio

Stock price divided by book value per share. Shows if a company is expensive or cheap compared to its balance sheet assets.

Penny Stock

Penny stocks are low-priced shares typically trading below $5 per share, often on OTC markets, characterized by high volatility and risk.

Pip

A pip is the smallest standard price movement in forex, equal to 0.0001 for most currency pairs and 0.01 for JPY pairs.

Pip Value

Pip value is the dollar amount one pip of movement represents in a trade, determined by lot size, currency pair, and account currency.

Pivot Point

A technical level calculated from the previous period's high, low, and close prices. Serves as support and resistance for the current period. Used by day traders and scalpers.

Pivot Points

Pivot points are calculated support and resistance levels based on the previous period's high, low, and close.

Position Sizing

Position sizing is the process of determining how many units (lots) to trade on each position based on your account size, risk tolerance, and stop loss distance.

Position Trading

Position trading is a long-term strategy where traders hold positions for weeks to months, focusing on major trends rather than short-term fluctuations.

Power of Three

Power of three is an ICT concept describing three institutional phases: accumulation, manipulation, and distribution within each session.

Price Action Trading

Price action trading is a methodology where traders make all decisions based on raw price movement alone — no indicators, oscillators, or moving averages — using candlestick patterns, market.

Profit Factor

Profit factor is the ratio of gross profits to gross losses, calculated by dividing total winning trade profits by total losing trade losses.

Prop Firm

Prop firm is a company that funds traders with $10K–$400K accounts after a paid evaluation challenge, splitting profits 70–90% in the trader's favor.

Protective Put

A protective put is an options strategy where you buy a put option to insure an existing long position against downside risk.

Pullback

A temporary reversal of price in the opposite direction of the prevailing trend. Allows traders to enter the trend at a better price instead of chasing at extremes.

Pullback Trading

Pullback trading involves entering a trend after a temporary price reversal, buying dips in uptrends or selling rallies in downtrends.

Put Option

A put option gives the holder the right, but not obligation, to sell an underlying asset at a specified strike price before expiration.

Pyramiding

Pyramiding is the practice of adding to a winning position as price moves in your favor, scaling into profits while managing risk.

Q

Quote Currency

The second currency in a forex pair. In EUR/USD, USD is the quote currency. Price shows how much quote currency is needed to buy one unit of base currency.

R

R-Multiple

R-multiple expresses a trade's profit or loss as a multiple of the initial risk (R), where 1R equals the amount risked on the trade.

Rally

A rally is a sustained upward movement in price, often driven by improved sentiment, strong economic data, or short covering.

Range Trading

Range trading is a strategy that buys at support and sells at resistance within a defined price range.

recency-bias

Judging your entire edge based on the last 5-10 trades instead of a statistically meaningful sample. A strategy killer.

Recovery Factor

Recovery factor measures how quickly a trading strategy recovers from drawdowns, calculated as net profit divided by maximum drawdown.

Resistance

Resistance is a price level where selling pressure is strong enough to prevent further advance, acting as a ceiling that prices struggle to break above.

Retracement

A temporary reversal of price that retraces (pulls back) a measured percentage of a prior trend move. Based on Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%).

Revenge Trading

Revenge trading is impulsive trading after a loss, attempting to recover money quickly through larger positions or more trades, usually resulting in bigger losses.

Risk of Ruin

Risk of ruin is the statistical probability that a trader will lose enough capital to be unable to continue trading, based on win rate, R:R, and risk per trade.

Risk Per Trade

Risk per trade is the maximum amount of capital a trader is willing to lose on any single trade, typically 1-2% of total account value.

Risk-Reward Ratio

Risk-reward ratio (R:R) compares the potential profit of a trade to its potential loss, expressed as a ratio like 1:2 meaning you risk 1 unit to gain 2.

Risk-Reward Setup

A risk-reward setup defines the entry, stop loss, and target levels of a trade.

ROC

Rate of Change (ROC) is a momentum oscillator measuring the percentage change in price between the current period and a past period.

roce

Profit generated divided by capital invested. Shows if the business is earning a good return on its invested dollars. 15%+ is excellent.

ROE

Return on Equity (ROE) measures how efficiently a company generates profits from shareholders' equity, calculated as net income divided by shareholder equity.

ROI

Return on Investment (ROI) measures the gain or loss generated on an investment relative to its cost, expressed as a percentage.

Rollover

Rollover in forex is the interest paid or earned for holding a position overnight, based on the interest rate differential between the two currencies.

RSI

Relative Strength Index (RSI) is a momentum oscillator measuring price change velocity on a 0-100 scale, with above 70 overbought and below 30 oversold.

S

Scaling In

Scaling in is gradually building a position by entering multiple partial orders at different prices rather than one full entry.

Scaling In/Out

Scaling is the practice of entering or exiting a trade in multiple stages rather than at a single price, allowing traders to manage risk and optimize fills.

Scaling Out

Scaling out is gradually reducing a position by taking partial profits at predetermined levels as the trade moves in your favor.

Scalping

Scalping is an ultra-short-term trading strategy that aims to profit from small price movements, often holding positions for seconds to minutes.

SEBI

SEBI (Securities and Exchange Board of India) is India's securities market regulator, protecting investors and ensuring fair, transparent markets.

Sensex

Sensex is India's oldest stock market index tracking 30 of the largest and most actively traded companies on the Bombay Stock Exchange (BSE).

Session High/Low

The highest and lowest prices reached during a defined trading session (Asian, London, US, or combined 24h), used as key structural levels for breakouts and support/resistance.

settlement

The date when your money actually moves and your shares/currency officially become yours. Usually 1-2 business days after you trade.

Setup

A setup is a specific combination of market conditions and technical signals that a trader identifies as a potential trade entry opportunity.

Sharpe Ratio

The Sharpe ratio measures risk-adjusted return by dividing the excess return of a strategy by its standard deviation, showing return per unit of risk.

Short Position

A short position involves selling borrowed securities with the expectation of buying them back at a lower price, profiting from price declines.

Short Squeeze

A short squeeze occurs when heavily shorted assets rise sharply, forcing short sellers to buy back shares and driving prices even higher.

Slippage

Slippage is the difference between the price you expected to receive on a trade and the price you actually received, caused by market movement during order execution.

SMA

Simple Moving Average (SMA) calculates the arithmetic mean of prices over a specified period, giving equal weight to all data points.

Smart Money Trap

A false price signal (fake breakout, fake reversal, or inducement) strategically designed by institutions to trigger retail stops or attract FOMO entries before the true institutional move.

Sortino Ratio

Sortino ratio is a risk-adjusted return metric that only penalizes downside volatility, calculated as excess return divided by downside deviation.

Spread

The spread is the difference between the bid (sell) and ask (buy) price of a currency pair, representing the broker's primary cost to the trader.

Stochastic Oscillator

Stochastic oscillator is a momentum indicator comparing closing price to the price range over a period.

Stop Hunting

A deliberate institutional price sweep through a key level to trigger retail stop orders, providing liquidity before the true institutional move begins.

Stop Loss

A stop loss is an order that automatically closes a trade when the price reaches a specified level, limiting the maximum loss on that position.

Stop Order

A stop order becomes a market order when price reaches a specified trigger level, used for entering breakouts or exiting losing positions.

Stop-Limit Order

A stop-limit order combines stop and limit features, triggering a limit order when the stop price is reached, offering price control but risking non-execution.

Straddle

A straddle is an options strategy where you buy (or sell) both a call and a put at the same strike price and expiration, betting on (or against) large volatility.

Strangle

A strangle is an options strategy where you buy (or sell) an out-of-the-money call and out-of-the-money put at different strikes, betting on large volatility moves at a lower cost than a straddle.

Strike Price

Strike price is the fixed price at which an option holder can buy (call) or sell (put) the underlying asset when exercising the option.

sunk-cost-fallacy

Throwing good money after bad by holding losses you've already incurred, hoping to break even instead of moving forward.

Supertrend

Supertrend is a trend-following indicator based on ATR that plots above or below price, flipping direction when the trend changes.

Supply and Demand Zones

Supply and demand zones are price areas where institutional buy or sell orders remain unfilled, creating imbalances that pull price back to those levels.

Support

Support is a price level where buying pressure is strong enough to prevent further decline, acting as a floor that prices tend to bounce from.

Swap

A swap is the interest rate differential charged or credited to a forex trader for holding a position overnight, also called a rollover fee.

Swing Trading

Swing trading is a strategy that holds positions for days to weeks, aiming to capture price swings within a larger trend.

T

Take Profit

A take profit is an order that automatically closes a trade when the price reaches a specified profit target, securing gains without manual intervention.

Method of analyzing markets by studying historical price patterns, support/resistance levels, and technical indicators to forecast future price direction.

Theta

Theta measures an option's time decay, representing how much value the option loses each day as it approaches expiration, expressed as a negative number.

Tilt

Tilt is an emotional state of frustration or anger after a loss, causing a trader to abandon their strategy and take excessive, reckless risks to recover losses quickly.

Time Value

Time value is the portion of an option's premium above its intrinsic value, representing the market's assessment of the probability that the option will become more profitable before expiration.

Timeframe

The duration represented by each candle on a chart. Common timeframes: 1M (1-minute), 5M, 15M, 1H, 4H, Daily, Weekly. Different timeframes show different trends.

Trade Frequency

Trade frequency is the number of trades executed over a specific time period, a key metric for identifying overtrading and optimizing strategy efficiency.

Trade Review

Trade review is a structured post-trade analysis process that evaluates entry, exit, and decision quality independently from P&L to identify execution errors and behavioral patterns.

Trading Discipline

Trading discipline is the ability to consistently follow a trading plan and rules, managing emotions and avoiding impulsive decisions.

Trading Journal

A trading journal is a detailed record of all trades including entries, exits, rationale, emotions, and outcomes for performance analysis and improvement.

Trading Plan

A trading plan is a written document outlining entry/exit rules, risk management, and position sizing to guide consistent trading decisions.

Trading Psychology

Trading psychology encompasses the mental and emotional factors that influence trading decisions, including fear, greed, discipline, and cognitive biases.

Trailing Stop

A trailing stop is a stop loss order that automatically moves in the direction of profit by a specified distance, locking in gains as the price moves favorably.

Trend Following

Trend following is a strategy that identifies and trades in the direction of established market trends using technical indicators and price action.

Trendline

A trendline is a diagonal line connecting two or more price points used to identify and confirm trend direction in technical analysis.

Triangle Pattern

A triangle pattern forms when price converges between tightening support and resistance lines, signaling a potential breakout in either direction.

Turtle Soup

A counter-trend trading strategy that fades (enters opposite) false breakouts from consolidation zones, expecting the breakout to fail and reverse back into the range.

U

Unrealized PnL

Unrealized PnL is the floating profit or loss on an open position that changes with every tick and becomes realized only when the trade is closed.

Upper Circuit

Upper circuit is the maximum price limit a stock can reach in a single trading session, set by the exchange to prevent excessive volatility.

V

Vega

Vega is the rate of change of an option's premium relative to a 1% change in implied volatility. It measures how sensitive an option is to volatility shifts.

Volatility

Volatility measures the degree of price variation over time, with higher volatility indicating larger and more frequent price swings.

Volume

Volume is the total number of shares or contracts traded during a specific period, used to confirm price movements and trend strength.

Volume Profile

Volume Profile is a charting indicator that plots horizontal volume bars at each price level traded during a set period, showing where volume occurred rather than when.

VWAP

Volume Weighted Average Price (VWAP) calculates the average price weighted by volume, used as a benchmark for intraday trading execution quality.

W

Wick

A wick (or shadow) is the thin line extending from a candlestick body showing the high-to-close or low-to-close range, indicating rejection at price levels.

Williams %R

Williams %R is a momentum oscillator measuring overbought and oversold levels on a 0 to -100 scale, similar to stochastic but inverted.

Win Rate

Win rate is the percentage of closed trades that result in a net profit, calculated as winning trades divided by total trades multiplied by 100.

Wyckoff Method

The Wyckoff method studies supply and demand through price action, volume, and four market phases to identify institutional activity.

Z