Trading glossary.

Bid and ask

The bid is the highest price a buyer will pay; the ask (or offer) is the lowest price a seller will accept. You buy at the ask and sell at the bid.

Break of structure (BOS)

When price breaks a previous swing high or low, suggesting a change or continuation in trend.

Candlestick

A chart bar showing the open, high, low and close for a period of time.

Consensus

The average economists' forecast for an economic release. Markets react to the gap between the actual figure and the consensus.

CPI

Consumer price index: a measure of inflation. US CPI is one of the most market-moving releases of the month.

Daily loss limit

The maximum loss allowed in a single day, either by a prop firm rule or by a trader's own plan.

Demo account

A practice account using virtual money. Useful for learning rules, but fills and emotions differ from live trading.

Drawdown

The fall in an account from its peak to its lowest point before a new peak.

Evaluation (challenge or combine)

A test account used by prop firms, with a profit target and rules such as a daily loss limit and maximum drawdown.

Expectancy

The average result per trade in R: (win rate × average win) minus (loss rate × average loss).

Fair value gap (FVG)

A three-candle pattern where the wicks of the first and third candles do not overlap, leaving a price range the market moved through quickly.

FOMC

The Federal Open Market Committee, which sets US interest rates at eight scheduled meetings a year.

Initial balance

The range traded in the first hour of the main session.

Inversion fair value gap (IFVG)

A fair value gap that price closes through, after which traders treat it as a level from the other side.

Leverage

Using a small deposit to control a larger position. It magnifies losses as much as gains.

Liquidity

How easily a market can be bought or sold without moving the price. Liquid markets usually have tighter spreads.

Margin

The deposit a broker requires to open and hold a leveraged position.

Market profile

A way of charting a session by the time spent at each price, showing where the market found value.

Non-farm payrolls (NFP)

The monthly US jobs report, usually released on the first Friday of the month, covering jobs added, unemployment and wages.

Order block

As taught at GRIT: the last candle against a move, where the move away creates both a fair value gap and a break of structure. All three parts are required.

Pip

The standard unit of price movement in forex, usually the fourth decimal place (0.0001), or the second for pairs quoted in Japanese yen.

Point

A one-unit move in the price of an index or future. Each instrument has a set value per point, such as $2 for the Micro E-mini Nasdaq-100.

Point of control (POC)

The price in a profile where the most time (or volume) was traded.

Position size

How large a trade is, worked out from the money you are prepared to lose and the distance to your stop loss.

Prop firm

A proprietary trading firm. Many offer paid evaluations in which traders must meet a profit target without breaking risk rules.

R multiple

A result measured in units of the amount risked. Risk £100 and make £200 and the trade is +2R.

Risk per trade

The amount you would lose if a trade hits its stop, usually set as a fixed percentage of the account.

Risk-on and risk-off

Risk-on is when investors favour riskier assets such as stocks. Risk-off is when they move to perceived safe havens such as government bonds, the dollar, the yen or gold.

Slippage

The difference between the price you expected and the price you were filled at, common in fast or thin markets.

Spread

The difference between the bid and ask price. It is a cost paid on every trade, and it usually widens around major news releases and at quiet times of day.

Stop loss

An order that closes a trade at a set price to limit the loss. In fast markets or gaps, the fill can be worse than the stop price.

Support and resistance

Price areas where buying (support) or selling (resistance) has previously stepped in.

Take profit

An order that closes a trade at a set price to bank a profit.

TPO

Time price opportunity: one mark for each period, usually 30 minutes, in which a price traded.

Trading journal

A record of every trade, including the setup, entry, stop, result and whether the plan was followed.

Trailing drawdown

A prop firm loss limit that moves up as the account makes new highs, so profit given back reduces the remaining buffer.

Value area

The range containing roughly 70% of a session's activity, bounded by the value area high and value area low.

Volatility

How much and how quickly price moves. Higher volatility means wider ranges and larger potential losses.

Education only, not financial advice. Trading carries a high risk of losing money.