A
Ask Price
The lowest price a seller is willing to accept. When you buy, you pay the ask price.
ATR
Average True Range - measures volatility by averaging the range of price movement.
ADX
Average Directional Index - measures trend strength regardless of direction.
B
Bid Price
The highest price a buyer is willing to pay. When you sell, you receive the bid price.
Bull Market
A market characterized by rising prices and optimism.
Bear Market
A market characterized by falling prices and pessimism.
Breakout
When price moves beyond a defined support or resistance level.
Bollinger Bands
Volatility indicator with bands that expand/contract based on price volatility.
Break Even
Moving your stop loss to entry price so the trade has no risk of loss.
Base Currency
The first currency in a forex pair - what you're buying or selling.
Example: In EUR/USD, EUR is the base currency
Bull Flag
Strong upward move followed by consolidation - signals continuation of uptrend.
Bear Flag
Strong downward move followed by consolidation - signals continuation of downtrend.
C
Candlestick
A chart type showing open, high, low, and close prices for a time period.
CFD
Contract for Difference - a derivative product that lets you trade price movements without owning the asset.
Cup and Handle
U-shaped recovery followed by small pullback - bullish continuation pattern.
Channel
Parallel trend lines containing price movement.
Consolidation
Period where price trades in a range without clear direction.
D
Doji
A candlestick where open and close are nearly equal, showing market indecision.
Divergence
When price and an indicator move in opposite directions, often signaling reversal.
Drawdown
The decline from a peak to a trough in your account balance.
Double Top
Price hits resistance twice at similar levels, forming an M shape. Bearish reversal.
Double Bottom
Price hits support twice at similar levels, forming a W shape. Bullish reversal.
E
Engulfing
A two-candle pattern where the second candle completely covers the first.
Evening Star
A three-candle bearish reversal pattern: green candle, small body, red candle.
Equity
Your account balance plus or minus any unrealized profits/losses from open positions.
EMA
Exponential Moving Average - gives more weight to recent prices than SMA.
F
Forex
Foreign Exchange - the market for trading currencies.
Free Margin
The amount of money available to open new positions.
Fibonacci
Mathematical ratios (23.6%, 38.2%, 61.8%) used to identify potential support/resistance.
H
Hammer
A bullish reversal pattern with a small body at top and long lower shadow.
Hedging
Taking an opposite position to reduce risk on an existing trade.
Head and Shoulders
Three peaks with middle one highest - classic bearish reversal pattern.
I
Ichimoku
A comprehensive indicator showing support, resistance, momentum, and trend direction.
L
Lot Size
A standardized unit of currency. Standard lot = 100,000 units, Mini = 10,000, Micro = 1,000.
Leverage
Using borrowed capital to increase potential returns. 10:1 leverage means $1,000 controls $10,000.
Long
Buying an asset expecting the price to rise.
Liquidity
How easily an asset can be bought or sold without affecting its price.
M
Margin
The amount required to open and maintain a leveraged position.
Morning Star
A three-candle bullish reversal pattern: red candle, small body, green candle.
Moving Average
An indicator that smooths price data by creating an average over a set period.
MACD
Moving Average Convergence Divergence - shows relationship between two moving averages.
Margin Call
A warning that your equity has fallen below the required margin level.
O
OBV
On-Balance Volume - measures buying and selling pressure using volume.
P
Pip
The smallest price movement in forex, typically the 4th decimal place for most pairs.
Example: EUR/USD moving from 1.1050 to 1.1051 is a 1 pip move
Pullback
A temporary reversal in the direction of the prevailing trend.
Position Sizing
Determining how much capital to risk on a single trade.
Pyramiding
Adding to a winning position as it moves in your favor.
Paper Trading
Practicing trading with simulated money instead of real capital.
Pennant
Small symmetrical triangle that forms after a strong move - continuation pattern.
Pivot Points
Calculated levels used to identify potential support and resistance.
Q
Quote Currency
The second currency in a forex pair - what you're measuring the base currency in.
Example: In EUR/USD, USD is the quote currency
R
Resistance
A price level where selling pressure is expected to prevent further rise.
RSI
Relative Strength Index - measures speed and change of price movements (0-100 scale).
Example: RSI above 70 = overbought, below 30 = oversold
Risk/Reward Ratio
The potential profit compared to potential loss on a trade.
Example: Risking $100 for potential $300 gain = 1:3 R:R
S
Spread
The difference between the bid and ask price. This is essentially a cost of trading.
Example: If bid is $100 and ask is $100.50, the spread is $0.50
Short
Selling an asset expecting the price to fall, with the intent to buy back cheaper.
Support
A price level where buying pressure is expected to prevent further decline.
Stop Loss
An order to automatically close a position at a specified price to limit losses.
Slippage
The difference between expected price and the actual execution price.
Scaling In
Adding to a position gradually rather than all at once.
Scaling Out
Closing portions of a winning trade at different price targets.
Stop Out
When the broker automatically closes your positions because margin is too low.
Swap
The interest paid or earned for holding a position overnight.
SMA
Simple Moving Average - the average price over a set number of periods.
Stochastic
Momentum indicator comparing closing price to price range over time (0-100).
T
Take Profit
An order to automatically close a position at a target price to lock in gains.
Trailing Stop
A stop loss that moves with the price to lock in profits as the trade moves in your favor.
Tick
The minimum price movement of an instrument.
Triangle
Price consolidation between converging trendlines - can break either direction.
Trend Line
A line connecting swing highs or lows to identify the direction of trend.
V
Volume
The number of shares or contracts traded in a given period.
Volatility
The degree of price variation over time. High volatility = larger price swings.
VWAP
Volume Weighted Average Price - average price weighted by trading volume.
W
Wedge
Converging trendlines that slope in the same direction - typically reversal pattern.