Trading Glossary

A phase where institutional buyers quietly build positions over time, often seen as sideways price action with increasing volume.

A volume-based indicator that measures the cumulative flow of money into and out of a security.

An indicator that measures trend strength on a scale from 0 to 100, without indicating direction.

The lowest price at which a seller is willing to sell a security.

A volatility indicator that measures the average range of price movement over a specified period, accounting for gaps.

Testing a trading strategy against historical data to evaluate how it would have performed.

A market condition where prices are falling or expected to fall, typically defined as a decline of 20% or more from recent highs.

A market outlook expecting prices to decline.

The highest price a buyer is willing to pay for a security.

A volatility indicator consisting of a 20-period SMA with upper and lower bands at 2 standard deviations.

An order that simultaneously sets an entry, a profit target, and a stop-loss.

When price moves above a resistance level or below a support level with increased volume.

A market condition where prices are rising or expected to rise, typically defined as a gain of 20% or more from recent lows.

A market outlook expecting prices to rise.

A chart element showing the open, high, low, and close (OHLC) of a security for a specific time period.

The profit realized when selling an asset for more than its purchase price.

Two parallel trendlines that contain price action.

A systematic pattern of deviation from rational judgment that affects trading decisions.

When multiple independent technical signals align at the same price level or time, increasing the probability that a setup will work.

A period where price trades within a narrow range, indicating balance between buyers and sellers.

An options strategy where a trader sells a call option against shares they already own, collecting premium income in exchange for capping upside potential at the strike price.

A bullish continuation pattern where price forms a rounded bottom (cup) followed by a small downward drift (handle) before breaking out higher.

A chart pattern that signals the existing trend is likely to continue after a pause.

A trading style where all positions are opened and closed within the same trading day.

A bearish technical signal that occurs when the 50-day moving average crosses below the 200-day moving average.

An options strategy that involves buying one option and selling another at a different strike price for a net cost (debit).

A candlestick where the open and close are virtually equal, creating a very small body with wicks.

A bullish reversal pattern where price tests a support level twice before breaking higher.

A bearish reversal pattern where price tests a resistance level twice before falling.

A series of lower highs and lower lows in price.

The peak-to-trough decline in an account or portfolio value, typically expressed as a percentage.

When price makes a new high/low but an indicator (RSI, MACD, OBV) does not confirm it.

A phase where institutional sellers quietly unload positions, often appearing as sideways price action with declining volume quality.

A moving average that gives more weight to recent prices, making it more responsive to new information than the SMA.

A two-candle reversal pattern where the second candle completely engulfs the body of the first.

The price and moment at which a trader opens a position.

The total value of a trading account, including cash and the current value of all open positions.

A fund that tracks an index, sector, or basket of assets and trades on an exchange like a stock.

A three-candle bearish reversal pattern: a large bullish candle, a small-bodied candle that gaps up (the star), and a large bearish candle that closes below the midpoint of the first candle.

A gap that occurs near the end of a strong trend, signaling that the move is running out of steam.

The price and moment at which a trader closes a position.

A measure of the average amount you can expect to win or lose per trade: (Win Rate x Avg Win) - (Loss Rate x Avg Loss).

An emotion that causes traders to avoid entering valid setups, exit winning trades prematurely, or freeze during drawdowns.

Horizontal lines at key Fibonacci ratios (23.

A continuation pattern that looks like a small rectangle tilting against the prior trend.

A short consolidation that slopes against the direction of the prior trend.

When price briefly moves beyond a support or resistance level but quickly reverses back.

A price area on a chart where no trading occurred, visible as a space between one session's close and the next session's open.

When price retraces to fill the empty space left by a gap.

A bullish technical signal that occurs when the 50-day moving average crosses above the 200-day moving average.

An emotion that causes traders to hold positions past their profit targets, oversize positions, or chase extended moves.

A single-candle bullish reversal pattern with a small body at the top and a long lower wick (at least 2x the body).

A single-candle bearish reversal pattern identical in shape to the hammer but appearing at the top of an uptrend.

A two-candle pattern where the second candle's body is contained within the first candle's body.

A bearish reversal pattern with three peaks: a higher middle peak (head) flanked by two lower peaks (shoulders).

A mathematical calculation based on price, volume, or open interest data that traders overlay on charts or display in separate panels.

A mathematical formula for calculating the optimal fraction of capital to risk per trade based on win rate and payoff ratio.

An order to buy or sell at a specific price or better.

How easily a security can be bought or sold without significantly affecting its price.

Buying a security with the expectation that its price will rise.

A trend-following momentum indicator showing the relationship between two EMAs (typically 12 and 26 period).

Borrowed money from a broker to purchase securities.

The total value of a company's outstanding shares (share price x shares outstanding).

An order to buy or sell immediately at the best available price.

A candlestick with no wicks (or very short wicks), indicating strong buying (bullish marubozu) or selling (bearish marubozu) conviction throughout the entire session.

A trading philosophy based on the idea that prices tend to return to their average over time.

The rate of change in a security's price.

A volume-weighted version of RSI that incorporates both price and volume data.

A statistical method that runs thousands of randomized trade sequences to model the range of possible portfolio outcomes.

A three-candle bullish reversal pattern: a large bearish candle, a small-bodied candle that gaps down (the star), and a large bullish candle that closes above the midpoint of the first candle.

A smoothed line that calculates the average price over a specified number of periods.

The support or resistance line connecting the troughs (head and shoulders) or peaks (inverse H&S) of a reversal pattern.

A cumulative volume indicator that adds volume on up days and subtracts on down days.

A pair of linked orders where executing one automatically cancels the other.

Abbreviation for Open, High, Low, Close -- the four key data points for each period on a price chart.

Contracts that give the right (but not the obligation) to buy (call) or sell (put) a security at a specified price before a certain date.

A type of technical indicator that fluctuates between a fixed upper and lower boundary (e.

A condition where a security's price has risen rapidly and may be due for a pullback.

A condition where a security's price has fallen rapidly and may be due for a bounce.

Simulated trading with virtual money to practice strategies without financial risk.

A continuation pattern similar to a flag but with converging trendlines forming a small symmetrical triangle.

The total percentage of trading capital at risk across all open positions simultaneously.

Determining how many shares or contracts to trade based on account size and risk per trade.

A systematic list of criteria that must be satisfied before entering any trade.

The study of raw price movement without relying on indicators.

The likelihood of an outcome occurring, expressed as a percentage.

The ratio of gross profits to gross losses.

An options strategy where a trader buys a put option on shares they already own, creating a price floor that limits downside risk while preserving unlimited upside potential.

A temporary reversal in price within a larger trend.

A predetermined price level at which a trader closes a winning position.

A trade result expressed as a multiple of the initial risk (R).

The difference between the high and low price over a period, or a market condition where price oscillates between a support floor and resistance ceiling without establishing a trend.

A comparison of one security's performance against another (typically a benchmark or sector).

A price level where selling pressure tends to overcome buying pressure, causing the price to stall or reverse downward.

A specific price where historical selling pressure has repeatedly prevented further advance.

A temporary price move against the prevailing trend, typically measured in percentage terms.

A change in the direction of price trend.

The ratio of potential loss to potential gain on a trade.

The overall framework for limiting losses and protecting trading capital.

The probability of losing enough trading capital to make recovery practically impossible.

A momentum oscillator ranging from 0 to 100 that measures the speed and magnitude of recent price changes.

Using stock screeners to filter the market for securities matching specific technical or fundamental criteria.

The movement of investment capital from one industry sector to another as economic conditions change.

Selling a borrowed security with the expectation its price will fall, then buying it back at a lower price.

The difference between the expected execution price and the actual fill price.

A moving average calculated by adding closing prices over a period and dividing by the number of periods.

A candlestick with a small body and relatively long upper and lower wicks, indicating indecision.

The difference between the bid and ask price.

A momentum oscillator comparing a closing price to its price range over a set period (usually 14).

An organized marketplace where buyers and sellers trade shares of publicly listed companies during fixed hours.

An order to exit a position when the price moves against you to a predetermined level.

The destructive habit of switching trading strategies after a few losses instead of allowing the statistical edge to play out over a meaningful sample size.

The predetermined price at which an options contract can be exercised to buy (call) or sell (put) the underlying security.

The fundamental economic force behind all price movement.

A price level where buying pressure tends to overcome selling pressure, causing the price to stall or bounce upward.

A specific price where historical buying pressure has repeatedly prevented further decline.

A local price peak where the high is higher than the highs of surrounding bars.

A local price trough where the low is lower than the lows of surrounding bars.

A trading style that aims to capture price swings over 2 to 30 days.

A bearish reversal candle with a small body at the bottom and a long upper wick (at least 2x the body).

A bearish reversal pattern of three consecutive long-bodied red candles, each opening within the prior body and closing near their lows.

A bullish reversal pattern of three consecutive long-bodied green candles, each opening within the prior body and closing near their highs.

A detailed record of every trade including entries, exits, position sizes, reasoning, emotional state, and outcomes.

A statistically validated advantage that produces positive expected returns when applied consistently over many trades.

A documented set of rules defining how to find setups, enter positions, manage risk, and exit trades.

A complete framework that combines a trading strategy with risk management rules, position sizing, portfolio-level controls, and execution procedures.

A dynamic stop-loss that moves in the direction of the trade as price moves favorably, locking in profits while allowing the trade to continue.

A diagonal line connecting two or more swing highs (downtrend) or swing lows (uptrend).

A continuation pattern where converging trendlines form a triangle.

A two-candle reversal pattern where both candles share almost the same high (tweezer top, bearish) or low (tweezer bottom, bullish).

The general direction of price movement.

A strategy style that enters trades in the direction of the established trend, aiming to capture the middle portion of major price moves.

A series of higher highs and higher lows in price.

The number of shares or contracts traded in a security during a given period.

The average price of a security weighted by the volume traded at each price level throughout the day.

The degree of variation in a security's price over time.

A curated list of securities that meet your scanning criteria and are being monitored for potential trade entries.

A pattern with converging trendlines that both slope in the same direction.

The thin lines above and below a candlestick body showing the high and low prices of the period.

The percentage of trades that are profitable.