Every term, in plain language

63 of 63 terms

ADXIndicators

Average Directional Index — measures trend strength, not direction. Readings above 20–25 suggest a trend.

AskPricing

The price at which you can buy. It is the higher of the two quoted prices.

ATRIndicators

Average True Range — the average size of recent price ranges, used for volatility-scaled stops and targets.

BacktestResearch

Applying fully specified rules to historical data. Never proof of future performance.

Base currencyPricing

The first currency in a pair. The quote shows how much of the second currency buys one unit of it.

BidPricing

The price at which you can sell. It is the lower of the two quoted prices.

Bollinger BandsIndicators

A moving average with bands set a number of standard deviations above and below it.

Break of structureStrategy

Price breaking the most recent higher low (or lower high) without making a new extreme, ending the trend definition.

CommissionCosts

A per-lot fee charged by some brokers in addition to, or instead of, a wider spread.

Cross pairMarkets

A pair that does not contain the US dollar, such as EUR/GBP. Also called a minor.

Demo accountPractice

A simulated account. Useful for rehearsing process; optimistic on fills and free of emotional pressure.

DivergenceIndicators

Price making a new extreme while a momentum indicator does not. Evidence of weakening, not a signal on its own.

DrawdownRisk

The decline in equity from a previous peak, usually expressed as a percentage.

EquitySizing

Account balance plus or minus unrealised profit and loss on open positions.

Exotic pairMarkets

A major currency paired with a smaller economy's currency. Wide spreads and high volatility.

ExpectancyRisk

Average result per trade: (win rate × average win) − (loss rate × average loss), usually expressed in R.

ExpiryStrategy

The point at which an untriggered setup or signal is cancelled because conditions have gone stale.

Free marginSizing

Equity minus used margin — the buffer available to absorb adverse movement.

InvalidationStrategy

The condition under which the reason for a trade has failed, often triggering an exit before the stop.

LeverageSizing

The ratio between position size and the margin required to hold it. A ceiling on size, not a risk decision.

Limit orderOrders

An order to trade at a specified price or better. Guarantees price, not execution.

Liquidity sweepStrategy

A brief move beyond a level that triggers resting orders before price closes back inside.

Look-ahead biasResearch

Using information in a test that would not have been available at the decision moment.

LotSizing

A standard position unit. One standard lot is 100,000 units of the base currency.

MACDIndicators

Moving Average Convergence Divergence — the difference between two EMAs, with a signal line and histogram.

Major pairMarkets

A highly traded pair containing the US dollar, such as EUR/USD or USD/JPY. Tightest spreads and deepest liquidity.

MarginSizing

The deposit locked against an open position.

Margin callSizing

A broker warning that margin level has fallen to a defined threshold.

Margin levelSizing

Equity divided by used margin, as a percentage. Falling levels trigger margin calls and stop-outs.

Market orderOrders

An instruction to trade immediately at the best available price. Guarantees execution, not price.

Market structureStrategy

The sequence of swing highs and lows that defines a trend or a range.

Micro lotSizing

1,000 units of the base currency.

Mini lotSizing

10,000 units of the base currency.

Multiple-timeframe analysisStrategy

Using a context timeframe for direction, a setup timeframe for location and an execution timeframe for timing.

Out-of-sampleResearch

Data reserved from development and used once to test whether rules generalise.

OverfittingResearch

Tuning rules so closely to past data that they describe its noise and fail on new data.

PipPricing

The standard smallest price increment: the fourth decimal for most pairs, the second decimal for JPY pairs.

Pip valueSizing

The cash value of a one-pip move for a given position size, expressed in the account currency.

PipettePricing

A fractional pip — one tenth of a pip, shown as an extra decimal digit.

Position sizingRisk

Calculating trade size so that the stop distance equals a fixed monetary risk budget.

PullbackStrategy

A temporary counter-trend move within an ongoing trend.

Quote currencyPricing

The second currency in a pair, in which the exchange rate is expressed.

RRisk

One unit of risk — the amount lost if the stop is hit. Results expressed in R are comparable across position sizes.

RangeStrategy

A period where price rotates between two boundaries without making sustained new extremes.

ResistanceStrategy

A zone where selling previously halted an advance.

RetestStrategy

Price returning to a broken level, which often flips role from resistance to support or vice versa.

Reward-to-riskRisk

Distance from entry to target divided by distance from entry to stop.

RolloverCosts

The daily point at which positions are rolled to the next value date, usually 5pm New York time.

RSIIndicators

Relative Strength Index — a momentum oscillator comparing average gains to average losses over a period.

Rule alignment scoreResearch

A disclosed 0–100 measure of how many of a strategy's conditions a candidate setup satisfies. Not a probability of profit.

SlippageOrders

The difference between the expected and actual fill price, common in fast or thin conditions.

SpreadPricing

The difference between bid and ask. It is the first cost paid on every trade.

Stop orderOrders

An order that becomes a market order when a trigger price trades.

Stop-limit orderOrders

A stop that becomes a limit order. Unsuitable as a protective stop because it may never fill.

Stop-outSizing

Automatic closure of positions by the broker when margin level falls below its minimum.

SupportStrategy

A zone where buying previously halted a decline.

SwapCosts

The financing charge or credit applied to positions held past the daily rollover.

Tick volumeIndicators

The number of price changes in a period. In forex this is a proxy for activity, not actual traded volume.

Trading journalPractice

A record of every trade capturing both outcome data and process data such as rule adherence.

Trading planPractice

A written document stating markets, setups, risk limits, event policy, records and review schedule.

VWAPIndicators

Volume Weighted Average Price — the average price weighted by volume over a session or anchored period.

Walk-forward testingResearch

Repeatedly developing on one window and testing on the next, producing many out-of-sample results.

Win rateRisk

The proportion of trades that end in profit. Meaningless without the average win and loss.