Forex Trading Glossary

The smallest standardized unit price movement in a currency pair.

Example: If EUR/USD moves from 1.1000 to 1.1001, that is a 1-pip move. For JPY pairs, 1 pip = 0.01.

A fractional pip equal to 1/10th of a standard pip, shown as the 5th decimal place (3rd for JPY).

Example: A move from 1.10000 to 1.10005 represents a price movement of 5 pipettes (0.5 pips).

Unit volume sizes: Standard (100k units), Mini (10k units), Micro (1k units), and Nano (100 units).

Example: Trading 0.1 lots equals a Mini lot, where 1 pip move is worth approximately $1 USD on EUR/USD.

The cost gap between the bid (sell) price and the ask (buy) price quoted by your broker.

Example: If EUR/USD Ask is 1.0852 and Bid is 1.0850, your broker spread is 2 pips.

Capital borrowed from a broker allowing you to control larger positions with a smaller deposit.

Example: At 1:100 leverage, a $1,000 margin deposit lets you control a $100,000 trade position.

The required deposit collateral locked by your broker to keep leveraged positions open.

Example: Opening a $100,000 position at 1:100 leverage locks $1,000 of your account balance as required margin.

Bid is the highest price a buyer offers; Ask is the lowest price a seller accepts.

Example: Long trades enter at the Ask price (1.2652) and exit or short at the Bid price (1.2650).

Market orders execute immediately. Limit orders buy low or sell high. Stop orders execute when price passes a level.

Example: Setting a Buy Limit at 1.0800 waits for price to drop to 1.0800 before buying.

Automated safety orders designed to exit positions at defined max loss or max profit targets.

Example: Entering at 1.2500 with a Stop Loss at 1.2470 and Take Profit at 1.2600 risks 30 pips to gain 100 pips.

The rate and intensity at which an asset's price fluctuates over a given timeframe.

Example: Major economic news events cause market volatility to surge, creating fast 50-100 pip price spikes.

The final down/up candle prior to an aggressive institutional expansion move that leaves unfulfilled orders behind.

Example: Traders place limit orders at a bullish Order Block anticipating price to retest and bounce upward.

A 3-candle price inefficiency gap where body movement was so aggressive that buyers or sellers dominated exclusively.

Example: Price often returns back to fill an FVG gap before continuing its core institutional trend.

When market makers push price past key highs/lows to trigger retail stop losses and engineer liquidity for opposing moves.

Example: Price wicks briefly above equal highs to trigger buy stops before aggressively reversing downward.

A candle body closure beyond a previous major swing high or swing low confirming trend continuation.

Example: In an uptrend, breaking and closing above the previous swing high marks a bullish BOS.

The first structural break of a recent swing high/low signaling an early trend reversal.

Example: Price breaking below the previous higher low in an uptrend marks a bearish CHOCH signal.

A failed order block that was violated by a liquidity sweep and now flips role to act as opposite support/resistance.

Example: A failed bullish order block broken downwards becomes a bearish Breaker Block on a pullback entry.

An order block level that failed to take out previous liquidity before reversing, used by institutions to close losing trades at breakeven.

Example: Price retests a mitigation zone allowing institutions to mitigate risk on unfulfilled positions.

Price ranges divided into Premium (above 50% = expensive/sell zone) and Discount (below 50% = cheap/buy zone).

Example: Smart money traders only look for long setups when price retraces deep into the Discount zone.

Specific time windows during London, New York, or Asian session open periods offering peak institutional volume and volatility.

Example: The London Kill Zone (2:00 AM - 5:00 AM EST) frequently establishes the high or low of the daily candle.

An ICT trading strategy focusing on a specific 1-hour window (e.g., 10-11 AM EST) targeting FVG setups and liquidity pools.

Example: Executing an FVG retest during the 10:00 AM NY Silver Bullet window targeting previous session highs.

Mathematical calculations based on price and volume data used to forecast market direction (EMA, RSI, MACD, Bollinger Bands).

Example: Combining a 200 EMA trend filter with an RSI oversold confirmation signal.

Visual price formations like Head & Shoulders, Flags, and Trendlines signaling structural breakouts or reversals.

Example: A Bull Flag breakout confirms trend continuation following a strong initial rally.

Reading raw price behavior through Candlesticks (OHLC), Volume metrics, and Overbought/Oversold extreme states.

Example: A long wick rejection candlestick at resistance combined with high volume indicates heavy selling pressure.

Trading strategy centered around major economic news events like NFP, CPI inflation data, and FOMC interest rate reports.

Example: Entering trades after an NFP release confirms actual job creation numbers higher than forecast.

Macroeconomic metrics (GDP, CPI) dictating Central Bank monetary policy (Hawkish rate hikes vs Dovish rate cuts).

Example: Hawkish interest rate hikes by the Federal Reserve lead to sustained long-term US Dollar strength.

A strategy of borrowing in a low interest rate currency to purchase a currency yielding higher interest rates.

Example: Buying AUD/JPY allows traders to collect daily interest payout differences between Australia and Japan.

Simultaneously buying and selling the same asset across different exchanges to profit from minute price discrepancies.

Example: Exploiting a 0.5 pip price discrepancy on EUR/USD between two different liquidity providers.

Backtesting validates strategies using historical chart data; Forward testing evaluates strategies in live market conditions.

Example: Backtesting 100 historical trades on EUR/USD to verify if a strategy maintains a positive win rate.

Demo accounts use simulated virtual money for practice; Live accounts trade real capital subject to real market emotions.

Example: Perfecting execution on a Demo account before depositing real capital to trade live.

A dedicated cloud server running 24/7 with zero latency to host automated trading bots (EAs) continuously.

Example: Hosting an automated trading robot on a London VPS to ensure sub-millisecond execution times.

An automated service allowing traders to directly mirror positions executed by experienced master traders.

Example: Linking your account to automatically copy proportional trades executed by a professional fund manager.

Controlling risk through proper Position Sizing, managing Drawdowns, tracking Currency Correlations, and Hedging.

Example: Never risking more than 1% of total account capital per individual trade entry.

The global forex market operates 24/5 across major financial hubs: Tokyo (Asian), London (European), and New York.

Example: The London / New York session overlap (8:00 AM - 12:00 PM EST) experiences the highest daily trade volume.

Forex market architecture covering ECN/STP execution, Market Maker liquidity, Slippage gaps, and Swap interest rates.

Example: ECN brokers route orders directly to institutional liquidity providers with zero dealing desk conflict.

Classification of currency quotes across Base and Quote currencies categorized into Majors, Minors, and Exotics.

Example: Major pairs include USD; Minor cross pairs exclude USD (EUR/GBP); Exotics pair emerging market currencies.

Maintaining psychological detachment, overcoming FOMO, and avoiding impulsive Revenge Trading after losses.

Example: Sticking to your defined risk plan after 3 consecutive losses without making revenge entries.

Managing psychological biases (Greed, Fear, Confirmation Bias) by maintaining a disciplined Trading Journal.

Example: Logging all emotional triggers in a journal to systematically fix bad execution habits.