Glossary
Forex trading glossary
Every term used in our lessons and guides, in plain English, with an example and where it fits in the strategy.
- Asia range (Asia box)
- The Asia range is the high and low price made during the Asia session, 00:00 to 06:00 UK time.
- Break of structure (BOS)
- A break of structure (BOS) is when price breaks a swing high or low in the same direction as the trend, confirming it continues.
- Change of character (CHoCH)
- A change of character (CHoCH) is the first break of market structure against the trend: proof a move may have turned.
- Displacement
- Displacement is a strong, decisive candle (or run of candles) with large bodies and small wicks, showing real intent.
- Drawdown
- Drawdown is how far an account has fallen from its highest point, in money or percent.
- Fair value gap (FVG)
- A fair value gap is a gap between three candles where price moved so fast that buying and selling were one sided.
- Leverage
- Leverage lets you control a large position with a small deposit, which magnifies both profits and losses.
- Liquidity
- In trading, liquidity is the pool of resting orders (mostly stop losses) sitting at obvious highs and lows.
- Liquidity sweep
- A liquidity sweep is a quick move through an obvious high or low that takes the stops there and then reverses.
- London session
- The London session is the forex trading day in London, roughly 08:00 to 17:00 UK time, the busiest for the pound.
- Lot size
- Lot size is how big a forex position is: a standard lot is 100,000 units, a mini lot 10,000 and a micro lot 1,000.
- Margin
- Margin is the deposit your broker holds while a leveraged trade is open.
- Market structure
- Market structure is the pattern of swing highs and lows that shows whether price is trending up, down or ranging.
- Order block
- An order block is the last opposite candle before a strong move, often treated as a zone where price may react again.
- Pip
- A pip is the standard unit a currency price moves in: 0.0001 on most pairs and 0.01 on yen pairs.
- Prop firm (funded account)
- A prop firm lets you trade its capital for a share of the profits, usually after you pass a paid evaluation.
- R (R multiple)
- R is the amount you risk on a trade. Results in R (+3R, -1R) compare trades fairly whatever the size.
- Retracement (pullback)
- A retracement, or pullback, is a temporary move against the direction price has just moved.
- Risk to reward ratio
- The risk to reward ratio compares what a trade risks with what it aims to make, for example 1:3.
- Smart money concepts (SMC)
- Smart money concepts is a price action approach built on liquidity, market structure and how large players fill orders.
- Spread
- The spread is the gap between the buy (ask) and sell (bid) price: the built in cost of every trade.
- Stop hunt
- A stop hunt is another name for a liquidity sweep: price running obvious stop losses before turning.
- Stop loss
- A stop loss is an order that closes a trade at a set price if it goes against you, capping the loss.
- Swing high and swing low
- A swing high is a peak with lower highs either side; a swing low is a trough with higher lows either side.
- Take profit
- A take profit is an order that closes a trade automatically when price reaches your target.