114 definitions across 8 categories — from fair value gaps and killzones to expectancy, slippage and Sharpe ratios — each with why it matters and where to learn more.
Wilder’s average of the true range — the largest of high minus low, high minus the previous close, and the previous close minus low — usually over 14 bars.
Running a strategy’s rules over historical data to estimate how it would have performed.
The bid is the best price buyers will pay and the ask is the best price sellers will accept. The spread is the gap between them.
John Bollinger’s bands: a 20-period simple moving average with lines two standard deviations above and below it.
An entry with an attached stop-loss and take-profit, where filling one exit cancels the other — “one cancels other”.
A close beyond the most recent swing in the direction of the trend: a new higher high in an uptrend, a new lower low in a downtrend.
An order block that failed: price traded through it and broke structure the other way. The old block is then expected to act as support or resistance from the opposite side.
A move — ideally a close — beyond support, resistance or a pattern boundary.
Buy stops resting above swing highs and equal highs: the stop-losses of short sellers plus breakout buy orders.
Compound annual growth rate: the constant yearly return that turns the starting balance into the ending balance.
A bar showing four prices for a period: open, high, low and close. The body spans open to close; the wicks mark the extremes.
The first break of structure against the prevailing trend — for example, an uptrend closing below its last higher low.
The 50% midpoint of a fair value gap or of a long wick.
The US Bureau of Labor Statistics’ monthly measure of consumer inflation, released at 08:30 ET.
The range between a significant swing low and swing high that price is currently trading within.
A large, decisive candle or run of candles — often more than one ATR — that moves price aggressively in one direction and usually leaves a fair value gap.
Price makes a new high or low but an oscillator such as RSI or MACD does not.
A candle whose open and close are nearly equal, signalling indecision.
Richard Donchian’s channel of the highest high and lowest low over the last N bars.
Two failed attempts at the same high (a top) or the same low (a bottom), confirmed by a break of the trough or peak between them.
The pool of liquidity — an old high, an old low or an unfilled gap — that price is most likely heading toward next.
The decline from an equity peak to a later trough, in currency or percent. Maximum drawdown is the largest such decline.
The weeks after each quarter ends, when most listed companies report results.
A two-candle pattern in which the second body completely covers the first body, in the opposite direction.
Two or more swing highs or lows at almost the same price. Many traders read them as double tops and bottoms, so stops cluster just beyond them.
The average result per trade: win rate × average win − loss rate × average loss, often expressed in R.
A three-candle imbalance where the wicks of candle 1 and candle 3 do not overlap, leaving a range that traded in only one direction during candle 2.
A break beyond a level that quickly fails and closes back inside the range.
The target range for overnight lending between US banks, set by the FOMC.
Horizontal levels at 23.6%, 38.2%, 50%, 61.8% and 78.6% of a swing, used to estimate how far a pullback may travel.
Brief, tight consolidations after a sharp move (the pole). A flag slopes against the move; a pennant converges.
The Federal Open Market Committee, which sets US monetary policy at eight scheduled meetings a year. Its statement is released at 14:00 ET, followed by the Chair’s press conference.
Fear of missing out: chasing a move because it is running without you, usually at a poor price and without a plan.
A standardised, exchange-traded agreement to buy or sell an asset at a set price on a future date. Most traders close or roll positions before expiry.
A golden cross is the 50-day moving average crossing above the 200-day; a death cross is the reverse.
The zone between the 61.8% and 65% Fibonacci retracement levels.
A reversal pattern of three peaks — the middle one highest — with a neckline joining the troughs between them. The inverse version marks bottoms.
An uptrend makes higher highs and higher lows; a downtrend makes lower highs and lower lows (LH / LL).
Futures on stock indices, such as the E-mini S&P 500 (ES, $50 per point) and the E-mini Nasdaq-100 (NQ, $20 per point).
A fair value gap that price closes straight through. The same zone is then treated as support or resistance from the other side.
A false move early in a session — typically at the London or New York open — that runs one side of the prior range before price reverses.
A time window when liquidity and volatility are reliably high — for example the London open (02:00–05:00 ET) and the New York morning (07:00–10:00 ET).
Controlling a position larger than your capital, expressed as a ratio such as 10:1.
An order to buy at or below, or sell at or above, a specified price.
In Smart Money terms, clusters of resting orders — mostly stop-losses and breakout entries — above highs and below lows. More broadly, how easily size can trade without moving price.
A move that trades beyond a high or low, triggers the stops resting there, then closes back inside the prior range. Also called a stop hunt or raid.
Using information in a backtest that was not available when the decision was made — such as acting at a bar’s open on that bar’s close.
Moving Average Convergence Divergence: the 12-period EMA minus the 26-period EMA, plotted with a 9-period EMA signal line and a histogram of the difference.
The collateral a broker requires to open and hold a leveraged position.
An order to buy or sell immediately at the best available price.
The sequence of swing highs and swing lows that shows whether a market is trending up, trending down or ranging.
ICT’s term for a change of character confirmed by displacement, usually right after a liquidity sweep.
A target projected by adding a pattern’s height, or a prior leg’s length, to its breakout point.
One-tenth-size versions of popular futures, such as MES (Micro E-mini S&P 500) and MNQ (Micro E-mini Nasdaq-100).
The return of price to an order block or imbalance, where the original participants are thought to close or add to positions.
Resampling a strategy’s trades thousands of times to see the range of possible equity paths and drawdowns.
The average closing price over a set number of bars. A simple moving average (SMA) weights every bar equally; an exponential moving average (EMA) weights recent bars more.
Reading a higher timeframe for bias and key levels, then a lower timeframe for precise entries. Also called top-down analysis.
The monthly US jobs report, usually released on the first Friday of the month at 08:30 ET.
An ICT entry zone between the 62% and 79% retracement of a swing, with 70.5% as the reference level.
The last opposing candle before a displacement that breaks structure: the last down-close candle before a strong rally, or the last up-close candle before a strong decline.
The live list of resting limit orders at each price above and below the market.
Holding back data the strategy was not developed on, then testing it there. Walk-forward analysis repeats this on rolling windows.
Tuning a strategy so closely to past data that it captures noise rather than a repeatable edge.
A candle with a small body and a long wick — at least twice the body — on one side. A hammer has the long wick below; a shooting star has it above.
The standard unit of movement in forex: 0.0001 for most pairs and 0.01 for yen pairs.
Choosing trade size so that the loss at your stop equals a fixed fraction of the account — commonly 0.5–1%.
The idea that a candle or session unfolds in three phases: accumulation (a range), manipulation (a false move beyond it) and distribution (the true move). Also called AMD.
The upper half (premium) and lower half (discount) of a dealing range, split at its 50% equilibrium.
Empty space between one bar’s close and the next bar’s open — most common between sessions or after news.
Gross profit divided by gross loss.
A paid challenge in which a trader must reach a profit target without breaching daily-loss and maximum-drawdown limits in order to trade the firm’s capital.
A trade’s profit or loss expressed in units of its initial risk (R). Risk $100 and make $250, and the trade is +2.5R.
A period in which price oscillates between a clear high and low without trending.
For US equity-index futures, regular trading hours are the 09:30–16:00 ET cash session; extended hours are the overnight Globex session that opens at 18:00 ET.
J. Welles Wilder’s momentum oscillator (1978), scaled 0–100 and usually set to 14 periods. Readings above 70 are called overbought and below 30 oversold.
Taking impulsive, often oversized trades to win back a loss.
The probability that a strategy loses a defined share of the account — for example 50% — given its win rate, payoff and risk per trade.
Market regimes in which investors favour growth assets such as stocks and high-yield bonds (risk-on), or safe havens such as Treasuries, the dollar and gold (risk-off).
The distance to the target divided by the distance to the stop.
The number of trades in a test.
Capital moving between sectors — for example from technology into energy or utilities — as the economic outlook changes.
Sell stops resting below swing lows and equal lows: the stop-losses of long holders plus breakdown sell orders.
Re-running a backtest across a grid of nearby parameter values to see whether the results hold up.
Annualised excess return divided by the standard deviation of returns.
An ICT model that trades only fair value gaps forming inside specific one-hour windows: 03:00–04:00, 10:00–11:00 and 14:00–15:00 ET.
The difference between the price you expected and the price you were filled at.
A price-action framework built around how large participants are thought to operate: liquidity, imbalances, order blocks and market structure. Much of its vocabulary comes from the Inner Circle Trader (ICT).
Like the Sharpe ratio, but divided by downside deviation only, so upside volatility is not penalised.
How unlikely a result would be if the strategy had no real edge, usually measured with a t-test on trade returns (a t-statistic and p-value).
George Lane’s oscillator, which compares the close with the high–low range of the last N bars on a 0–100 scale.
An order that becomes a market order once price trades at the stop price. It is used for stop-losses and breakout entries.
A stop that becomes a limit order, rather than a market order, when triggered.
A predetermined exit that closes a losing trade at the point where the trade idea is invalid.
Price zones where buying (support) or selling (resistance) has repeatedly stopped a move.
Testing only on assets that still exist today, ignoring the ones that were delisted or failed.
A swing high is a peak with lower highs on both sides; a swing low is a trough with higher lows on both sides.
Van Tharp’s metric: the mean R-multiple divided by its standard deviation, multiplied by the square root of the number of trades.
A tick is a contract’s minimum price increment; the tick value is the profit or loss for a one-tick move on one contract.
A record of every trade — setup, entry, exit, size and R-multiple — with notes on execution and emotion.
A written set of rules covering what you trade, when you trade it, your setups, entries, exits, risk per trade and daily loss limit.
The Asian, London and New York sessions. Liquidity peaks when London and New York overlap, roughly 08:00–11:30 ET.
The annual return implied by a US government bond’s price. Yields rise when bond prices fall.
A persistent directional move, defined by structure (higher highs and lows, or lower highs and lows) or by price relative to a moving average.
A line connecting two or more swing lows in an uptrend (or swing highs in a downtrend), extended to the right.
The value of the US dollar against a basket of six major currencies, weighted most heavily toward the euro.
Cboe’s Volatility Index: the market’s expectation of 30-day S&P 500 volatility, derived from option prices.
The number of shares or contracts traded in a period.
A histogram of the volume traded at each price over a period. The point of control (POC) is the price with the most volume.
The session’s average price weighted by volume, usually anchored at the open and reset each day.
A pattern with two converging trendlines sloping in the same direction. Rising wedges tend to break down; falling wedges tend to break up.
The thin line above or below a candle’s body, marking prices that traded but were rejected before the close.
The percentage of trades that are profitable.
Treasury yields plotted across maturities. An inverted curve — short-term rates above long-term rates — has preceded most modern US recessions.