153 terms across 7 categories
Absorption
When large limit orders absorb aggressive market orders at a price level, preventing price from moving further despite heavy volume.
Ascending Triangle
Flat resistance with rising support (higher lows). Buyers are getting more aggressive. Usually breaks upward on volume. Measured move target: triangle height from breakout.
Asian Range
The price range established during the Asian session (roughly 8 PM – 12 AM EST), often used as a reference for London and New York sessions.
b-Shape
A volume profile with concentration in the lower portion, typically formed during long-liquidation selloffs or selling auctions.
Backtesting
Testing a trading strategy on historical data to evaluate its performance. Must use out-of-sample data and avoid curve-fitting to be valid.
Bear Flag
A sharp move down (pole) followed by a gentle rally in an upward channel on decreasing volume (flag). The breakdown below the flag confirms bearish continuation.
Bearish Engulfing
A two-candle pattern where a large red candle completely engulfs the prior green candle's body. Strong reversal signal at resistance or supply zones.
Bid/Ask Spread
The difference between the highest bid (buy) price and lowest ask (sell) price. Wider spreads indicate lower liquidity; tighter spreads indicate higher liquidity.
Break of Structure (BOS)
When price breaks a significant swing high or low, confirming continuation of the current trend direction.
Breaker Block
A failed order block — an OB that gets broken through, then acts as a support/resistance zone from the opposite side. Often more reliable than standard OBs.
Breakeven
Moving the stop loss to the entry price after a trade moves into profit, eliminating the possibility of a loss on that trade.
Bull Flag
A sharp move up (pole) followed by a gentle pullback in a downward channel on decreasing volume (flag). The breakout above the flag on volume confirms continuation.
Bullish Engulfing
A two-candle pattern where a large green candle completely engulfs the prior red candle's body. Strong reversal signal at support or demand zones.
Buy-Side Liquidity (BSL)
Stop-loss orders from short sellers resting above swing highs. Institutions drive price up to fill against these orders.
Change of Character (CHoCH)
The first break of structure against the prevailing trend, signaling a potential trend reversal.
Composite Profile
A volume profile built over multiple sessions, revealing the longer-term volume distribution and key structural levels.
Composite Profile
A Volume Profile built from multiple sessions combined. Shows where the 'big picture' value area sits. Useful for identifying major HVNs and LVNs that act as longer-term support/resistance.
Compounding
Reinvesting profits to grow the account exponentially. Risk per trade stays at a fixed percentage, so dollar risk grows as the account grows.
Confirmation Bias
Seeking only information that confirms your existing trade idea while ignoring contradicting evidence. Leads to entering trades where the setup isn't actually there.
Consolidation
A period of tight, low-volatility price action where the market is coiling before a significant move.
Consolidation
A period of tight, low-volatility price action where the market 'rests' before the next move. Often forms flags, pennants, or rectangles.
Cumulative Delta
A running total of delta over time, showing whether aggressive buyers or sellers are dominating on a cumulative basis.
Cumulative Delta
Running total of (aggressive buy volume - aggressive sell volume) over time. Rising cumulative delta = buyers dominating. Falling = sellers. Divergence between delta and price is a powerful reversal signal.
Curve Fitting
Over-optimizing a strategy to perfectly match historical data, making it useless on live markets. The #1 backtesting mistake. If results look too good, they probably are.
D-Shape
A balanced, bell-curve-shaped volume profile indicating a healthy two-way auction with price acceptance at the center.
Delta
The difference between aggressive buying volume and aggressive selling volume within a given price bar or time period.
Descending Triangle
Flat support with falling resistance (lower highs). Sellers are getting more aggressive. Usually breaks downward. The mirror of ascending triangle.
Developing Profile
A Volume Profile that updates in real-time as the session progresses. The POC and value area shift as new volume data comes in throughout the day.
Discount
Price trading below the 50% equilibrium of a range. Smart money looks to buy in discount zones.
Discount Zone
Price trading below the 50% (equilibrium) level of a range. Buy setups are found in discount zones where price is 'cheap.'
Displacement
A strong, impulsive price move with large-bodied candles and minimal wicks, indicating genuine institutional intent and commitment.
Displacement
A strong, aggressive price move (usually 2-3 large-bodied candles with small wicks) that signals institutional intent. Creates FVGs and often follows liquidity sweeps.
Doji
A candle where open and close are nearly equal, forming a cross shape. Signals indecision and potential reversal, especially after a strong move.
Double Bottom
Price tests support twice and bounces both times, forming a 'W' shape. Confirms when price breaks above the peak between the two troughs. Volume usually lighter on the second bottom.
Double Top
Price tests resistance twice and gets rejected both times, forming an 'M' shape. Confirms when price breaks below the trough between the two peaks (neckline).
Drawdown
The peak-to-trough decline in account equity. A 20% drawdown from $50K means equity dropped to $40K. Key metric for both risk management and psychological resilience.
Edge
A statistical advantage in the market that, when applied consistently, produces positive expectancy over a large sample of trades.
EOD Drawdown
End-of-day drawdown — calculated only at session close, not during the session. More forgiving than trailing drawdown as intraday dips don't count against you.
Equity Curve
A chart of your account balance over time. Smooth upward = consistent edge. Jagged = inconsistent execution. Flat = no edge. Every trader should know what their equity curve looks like.
Evening Star
A three-candle bearish reversal: large green candle, small-bodied candle (indecision), then large red candle that closes below the midpoint of the first.
Excess
Long tails (wicks) at the extremes of a Volume Profile distribution. Shows strong rejection at those prices and confirms the value area boundary.
Exhaustion
When aggressive buying or selling volume increases but price fails to extend, indicating the move is running out of fuel.
Expectancy
The average amount expected to win or lose per trade: (Win Rate × Avg Win) − (Loss Rate × Avg Loss). Positive expectancy means profitable long-term.
Expectancy
The average amount you expect to make (or lose) per trade: (Win% × Avg Win) - (Loss% × Avg Loss). Positive expectancy = profitable strategy over time. This is the single most important number in your trading.
Fair Value Gap (FVG)
A three-candle pattern where the wicks of the first and third candles don't overlap, creating an imbalance that price tends to return to fill.
Falling Wedge
Both support and resistance lines slope downward with compressing range. Despite looking bearish, this is bullish — breaks upward ~65% of the time.
Fill
When an order is executed and a position is opened or closed. 'Filled at 24950' means the order executed at that price.
FOMO
Fear Of Missing Out — the emotional urge to enter a trade because price is moving, often leading to poor entries and impulsive decisions.
Footprint Chart
A specialised chart showing volume traded at each price level within a bar, broken into bid and ask, revealing the auction process.
Hammer
A bullish reversal candle with a small body at the top and a long lower wick (2x+ body). Shows buyers rejected lower prices. Most powerful at support levels.
Head & Shoulders
Three-peak reversal pattern: left shoulder, head (highest), right shoulder. The neckline connects the troughs. A break below the neckline confirms bearish reversal. Inverse H&S is the bullish mirror.
High Volume Node (HVN)
A price zone with significantly high traded volume, often acting as a magnet for price and an area of acceptance.
High Volume Node (HVN)
A price area where significantly more volume traded than surrounding areas. Acts as a magnet and support/resistance zone. Price tends to consolidate and spend time at HVNs. Think of them as 'fair value' areas.
Higher High (HH)
A swing high that exceeds the previous swing high, indicating bullish momentum and uptrend continuation.
Higher Low (HL)
A swing low that forms above the previous swing low, confirming buyers are stepping in at higher prices.
Iceberg Order
A large institutional order that only shows a small portion on the order book. The hidden size refills as the visible portion is filled, masking the true order size.
Imbalance
A significant difference between bid and ask volume at a specific price, indicating one-sided aggression and potential directional intent.
Inducement
Obvious liquidity (like minor swing highs/lows) that smart money deliberately targets to trigger retail stops before the real move begins.
Initial Balance
The price range established during the first hour of the trading session. Used in Volume Profile analysis as a reference for the day's potential range.
Initial Balance
The price range established in the first hour of trading (or first 30 minutes for some traders). Contains the day's early value area. Breakout above or below the initial balance often sets the day's direction.
Inside Bar
A candle whose high and low are contained within the previous candle's range. Signals consolidation and often precedes a breakout in either direction.
Institutional Order Flow
The buying and selling activity of banks, hedge funds, and other large participants. They can't enter positions all at once (too much size), so they engineer liquidity events — sweeps, stop hunts, and traps — to fill their orders.
Inverse FVG (iFVG)
A filled Fair Value Gap that has been respected and now acts as a zone of support or resistance in the opposite direction.
Judas Swing
A false move at the beginning of a session designed to trap retail traders on the wrong side. London often starts with a Judas swing — a fake breakout in one direction before the real move starts in the opposite direction.
Kelly Criterion
A mathematical formula for optimal position sizing: f* = (bp - q) / b, where b = R:R, p = win rate, q = loss rate. Tells you the maximum % to risk per trade.
Killzone
Specific high-probability trading windows aligned with institutional activity — typically London Open, New York Open, and New York PM session.
Leverage
Using borrowed capital to increase position size. 10:1 leverage means $1 controls $10. Amplifies both profits AND losses equally.
Limit Orders
Orders placed at a specific price to buy or sell, providing liquidity. They rest in the order book until filled or cancelled.
Liquidity
Clusters of stop-loss orders and pending orders resting at predictable price levels, targeted by institutional traders.
Liquidity Sweep
When price moves beyond a key level to trigger resting orders (stops), then reverses sharply. A hallmark of smart money manipulation.
Liquidity Void
An area on the chart where very little trading occurred, often visible as large candles with minimal wicks. Price tends to travel quickly through these zones.
London Session
The trading session from roughly 2 AM – 5 AM EST, known for high volatility and often setting the daily directional bias.
Loss Aversion
The psychological tendency to feel losses 2-3x more intensely than equivalent gains. Leads to holding losers too long and cutting winners too short.
Low Volume Node (LVN)
A price zone with significantly low traded volume, often acting as a barrier that price moves through quickly.
Low Volume Node (LVN)
A price area with very little volume — a thin zone. Price moves quickly through LVNs because there's no agreement at these prices. LVNs act as rejection points: price either bounces off or slices through.
Lower High (LH)
A swing high that fails to reach the previous swing high, indicating weakening bullish momentum.
Lower Low (LL)
A swing low that drops below the previous swing low, confirming bearish momentum and downtrend continuation.
Margin
The collateral required to hold a leveraged position. If account equity falls below maintenance margin, the broker issues a margin call.
Margin Call
A broker demand to deposit more funds or close positions because account equity has fallen below the required maintenance margin level.
Market Maker Model
The theory that large institutions (market makers) engineer price action to fill their own orders. They create the sweep → displacement → retracement pattern repeatedly. Understanding this helps you stop being the liquidity and start trading alongside it.
Market Orders
Orders executed immediately at the current best available price. They cross the spread and show as aggressive volume in order flow.
Marubozu
A candle with no wicks (or very small wicks) — the open is the low and close is the high (bullish) or vice versa. Indicates strong conviction from one side.
Marubozu
A candle with a full body and no wicks (or very small ones). Shows complete dominance by buyers (bullish marubozu) or sellers (bearish marubozu). The strongest possible single-candle signal.
Max Daily Loss
A predefined limit on the maximum amount that can be lost in a single trading day, after which trading stops to prevent emotional decisions.
Max Drawdown
The largest peak-to-trough decline in your account equity. A 20% max drawdown means at your worst point, your account was 20% below its highest value. Critical for prop firm challenges.
Mitigation Block
A zone where previously trapped traders' orders are mitigated as price returns to the level. Price reacts here as those traders exit their positions.
Morning Star
A three-candle bullish reversal: large red candle, small-bodied candle (indecision), then large green candle that closes above the midpoint of the first.
Naked POC
A Point of Control from a prior session that has not yet been revisited by price, acting as a high-probability magnet.
New York Session
The trading session from roughly 7 AM – 10 AM EST, where significant volume enters the market and continuation or reversal of London's move occurs.
Optimal Trade Entry (OTE)
An entry technique using the 62–79% Fibonacci retracement zone of an impulsive leg, offering favorable risk-to-reward.
Optimal Trade Entry (OTE)
The 62-79% Fibonacci retracement zone of an impulse move. ICT considers this the highest-probability entry area for continuation trades.
Optimal Trade Entry (OTE)
The 62-79% retracement zone of a displacement move. ICT considers this the sweet spot for entries — deep enough for good R:R but not so deep that the setup is invalidated.
Order Block (OB)
The last opposing candle before an impulsive move. Represents institutional entry zones where large orders were placed.
P-Shape
A volume profile with concentration in the upper portion, typically formed during short-covering rallies or buying auctions.
Paper Trading
Trading with simulated money to practice strategies without financial risk. Essential before going live, but doesn't replicate the emotional pressure of real capital.
Passive vs Aggressive Orders
Passive orders sit on the book (limit orders) waiting to be filled. Aggressive orders hit the book (market orders) and execute immediately. Absorption happens when passive orders absorb aggressive ones without price moving.
PD Array
Premium/Discount Array — a collection of ICT tools (order blocks, FVGs, breakers) used to identify high-probability entry zones.
Pin Bar
A candle with a long wick (tail) on one side and a small body on the other. Bullish pin bars have long lower wicks, bearish pin bars have long upper wicks.
Point of Control (POC)
The price level with the highest traded volume in a given profile period. Acts as a magnet for price and key reference point.
Position Sizing
Determining how large a trade to take based on account size, risk tolerance, and distance to stop loss.
Premium
Price trading above the 50% equilibrium of a range. Smart money looks to sell in premium zones.
Premium Zone
Price trading above the 50% (equilibrium) level of a range. In ICT methodology, sell setups are found in premium zones where price is 'expensive.'
Profit Factor
Gross wins divided by gross losses. Above 1.0 is profitable. Above 1.5 is solid. Above 2.0 is excellent. Used to evaluate strategy quality.
Pullback
A temporary move against the prevailing trend direction before price resumes in the original direction.
R-Multiple
A trade's profit or loss expressed as a multiple of the initial risk. If you risked 20 pts and made 60 pts, that's a 3R trade. Normalizes results across different position sizes and instruments.
Range
A period where price oscillates between defined support and resistance levels without establishing a clear trend.
Range
A horizontal price zone where the market trades sideways between defined support and resistance levels. Eventually resolves with a breakout in one direction.
Recency Bias
The tendency to weigh recent events more heavily than historical data. After 3 wins, you feel invincible; after 3 losses, you feel your strategy is broken.
Resistance
A price level where selling pressure historically prevents further advance. Acts as a ceiling that price rejects from repeatedly.
Revenge Trading
Taking impulsive trades after a loss in an attempt to recover money quickly, typically resulting in larger losses.
Rising Wedge
Both support and resistance lines slope upward with compressing range. Despite looking bullish, this is bearish — volume typically decreases through the pattern and it breaks down ~65% of the time.
Risk of Ruin
The statistical probability of losing enough capital to be unable to continue trading, determined by win rate, R:R, and risk per trade.
Risk of Ruin
The probability of losing enough of your account that you can't recover. Depends on win rate, R:R, and position size. Below 2% = safe. Above 10% = danger. Above 25% = gambling.
Risk Per Trade
The percentage of total account equity risked on a single trade, typically 0.5–2% for responsible risk management.
Risk:Reward (R:R)
The ratio comparing potential loss (risk) to potential profit (reward) on a trade. A 1:3 R:R means risking $1 to make $3.
Scaling In
Adding to a position incrementally as price confirms the trade thesis, rather than entering the full size at once.
Scaling Out
Closing portions of a position at different price levels to lock in partial profits while letting the remainder run.
Sell-Side Liquidity (SSL)
Stop-loss orders from long traders resting below swing lows. Institutions drive price down to fill against these orders.
Sharpe Ratio
A measure of risk-adjusted returns: (average return - risk-free rate) / standard deviation. Higher Sharpe = better returns relative to the risk taken.
Shooting Star
A bearish reversal candle with a small body at the bottom and a long upper wick. The mirror image of a hammer. Most powerful at resistance levels.
Single Print
A price level in the Volume Profile with minimal volume — price passed through quickly without two-way trading. Often acts as support/resistance on a retest.
Slippage
The difference between the expected price of a trade and the actual execution price. Common during high volatility, news events, and in illiquid markets.
Slippage
The difference between expected fill price and actual fill price. Occurs in fast-moving markets or with large orders. Always accounts for slippage in your risk calculations.
Smart Money
Institutional traders and market makers who have the capital to move markets and often trade against retail participants.
Smart Money Trap
A price move designed to trigger retail stop losses or entries before reversing. Examples: false breakouts, stop hunts below obvious support, and spikes above resistance that immediately reverse.
Spoofing
Placing large orders with intent to cancel before execution, creating a false impression of supply/demand. Illegal but important to recognize in the order book.
Spread
The difference between the bid (buy) and ask (sell) price. Wider spreads mean higher trading costs. Spreads widen during news events and low-liquidity sessions.
Stacked Imbalance
Three or more consecutive price levels showing the same directional imbalance, indicating strong institutional aggression.
Stop Loss
A predetermined price level where a losing trade is automatically closed to limit the loss and protect capital.
Stop Order
An order that becomes a market order when price reaches a specified level. Buy stops are above price, sell stops are below. Used for breakout entries and stop losses.
Stop-Limit Order
A stop order that becomes a limit order instead of a market order. Prevents slippage but risks not being filled in fast markets.
Support
A price level where buying pressure historically prevents further decline. Acts as a floor that price bounces off of repeatedly.
Swing Failure Pattern
Price sweeps a swing high/low, takes out stops, then immediately reverses. A liquidity sweep + rejection combined into one candle or sequence.
Swing High
A local price peak formed when a candle's high is higher than the highs of the candles on either side of it.
Swing Low
A local price trough formed when a candle's low is lower than the lows of the candles on either side of it.
Symmetrical Triangle
Converging support and resistance lines with lower highs and higher lows. Can break either direction — wait for the breakout with volume confirmation before entering.
Take Profit
A predetermined price level where a winning trade is automatically closed to lock in gains.
Tape Reading
Analysing the time and sales data (the tape) to observe real-time order flow and detect institutional activity.
Three White Soldiers
Three consecutive large green candles, each opening within the previous body and closing higher. Strong bullish continuation signal.
Tilt
An emotional state where frustration or anger from recent losses impairs decision-making and leads to deviation from the trading plan.
Tilt
An emotional state where frustration or anger overrides rational decision-making. Common after unexpected losses. The correct response is to stop trading immediately.
Trailing Drawdown
A drawdown limit that follows your equity high watermark. Common in prop firm evaluations — your max loss threshold rises as your account peaks, making it progressively tighter.
Trailing Drawdown
A drawdown threshold that moves UP with your account high-water mark but never moves down. Used by most prop firms. If your account peaks at $52,000 with a $2,500 trailing drawdown, your new floor is $49,500.
Trailing Stop
A dynamic stop loss that moves in the direction of profit as price advances, locking in gains while allowing the trade to run.
Trend
The overall directional bias of price movement — uptrend (HH/HL), downtrend (LH/LL), or sideways.
Tweezer Top / Bottom
Two consecutive candles with matching highs (top) or lows (bottom). Shows that a level was tested twice and rejected both times. Stronger than a single-candle pattern because two separate tests confirmed the rejection.
Tweezer Tops/Bottoms
Two consecutive candles with matching highs (tops) or matching lows (bottoms). The rejection of the same level twice indicates a strong reversal zone.
Value Area High (VAH)
The upper boundary of the value area, representing the top of the zone where ~70% of volume was traded.
Value Area Low (VAL)
The lower boundary of the value area, representing the bottom of the zone where ~70% of volume was traded.
Volume Climax
An extreme spike in volume that often marks exhaustion of the current move. When paired with a reversal candle, it signals capitulation and potential trend change.
Volume Climax
An extreme volume spike — typically 3-5x the average — often marking the exhaustion of a move. When paired with a long wick (rejection), it signals that one side has run out of inventory.
VWAP
Volume Weighted Average Price — the average price weighted by volume throughout the session. Institutional benchmark for fair value. Above VWAP = bullish bias, below = bearish.
Win Rate
The percentage of trades that are profitable. Must be evaluated alongside risk-to-reward to determine overall expectancy.
Use this glossary whenever you encounter a term you don't remember. Search by name or browse by category. Every concept from every module is defined here in plain language.