The Trading Glossary Every Beginner Trader Should Know

A Stop Loss is an order used to automatically close a trade at a predefined price if the market moves against you.
Its primary purpose is to limit potential loss.
You can place it with your broker or exchange, so the position can be closed even when you are not watching the market.
A Stop Loss does not guarantee the exact execution price during extreme volatility or gaps.

Take Profit is an order used to automatically close a trade when price reaches a predefined profit target.
Traders can use multiple targets, such as:
TP1 → TP2 → TP3
This allows part of a position to be closed while the remaining position stays open.

The Entry is the price or area where you plan to open a trade.
An entry can be based on a specific price, a zone, or confirmation from price action.

Break Even means moving the Stop Loss to the entry price.
If price reaches the entry again, the trade may close around zero profit or loss, excluding fees and execution costs.

• For example:
• Risk = $100
• Potential Reward = $300
• That is approximately:
• 1:3 RR
• RR does not predict whether a trade will win. It simply describes the relationship between potential risk and potential reward.

Risk is the amount of capital you are willing to lose if your trade reaches its invalidation or Stop Loss.
Professional traders define risk before entering the trade.
Position Size
Position size is the amount of an asset you trade.
It should be calculated based on your account size, risk percentage, entry price and Stop Loss distance.

Leverage allows traders to control a larger position with less initial capital.
It can increase potential returns, but it also increases the speed and magnitude of potential losses.
Leverage does not make a trade safer.

Margin is the capital required to open and maintain a leveraged position.
If available margin becomes insufficient, a position may be liquidated.

Liquidation occurs when an exchange automatically closes a leveraged position because the trader no longer has enough margin to maintain it.

The Spread is the difference between the Bid and Ask price.
A wider spread increases the cost of entering and exiting a trade.

Drawdown measures the decline in an account from a previous equity high to a subsequent low.
It is an important measurement of trading risk and performance.

• 02 — TIME & MARKET SESSIONS

• 1M → 1 minute
• 5M → 5 minutes
• 15M → 15 minutes
• 1H → 1 hour
• 4H → 4 hours
• 1D → Daily
• 1W → Weekly

A Higher Time Frame is a larger chart interval used to understand the broader market structure.
Examples:
4H, Daily, Weekly

A Lower Time Frame provides more detailed price action.
Examples:
1M, 5M, 15M

• Traders often use HTF for context and LTF for execution.

AS — Asian Session
The Asian Session is one of the major global trading sessions.
Market liquidity and volatility can differ significantly from the European and US sessions.
LO — London Open
London Open refers to the opening period of the London trading session.
It is often watched because liquidity and volatility can increase around this time.
NYO — New York Open
New York Open refers to the opening period of the New York trading session.
It is particularly important for Forex, Gold and US-related markets.

A Trading Session refers to a specific period of market activity, such as Asia, London or New York.
Time does not tell you where price will go.
It helps you understand the environment in which price is moving.

• 03 — MARKET STRUCTURE

Change of Character describes a potential shift in market behavior or structure.
For example, a market that has been creating lower highs and lower lows may show a CHoCH when it breaks an important lower high.

Market Structure Shift refers to a meaningful change in the sequence of highs and lows.
It is commonly used to identify a potential transition from bullish to bearish conditions, or vice versa.

• 04 — LIQUIDITY & PRICE ACTION

A Liquidity Sweep occurs when price temporarily moves through an important high or low, triggering orders, and then reverses or returns back into the previous range.

A Stop Hunt is a commonly used term for a move through an obvious level that triggers clustered Stop Loss orders before price reverses.
It should not automatically be assumed that every wick is a Stop Hunt.

A Wick is the portion of a candlestick extending beyond the candle's body.
It represents prices that were reached but not maintained at the candle's close.

A Rejection occurs when price reaches an area but fails to maintain acceptance there and moves away.

A False Breakout occurs when price breaks an important level but fails to continue and returns back through the level.

• 05 — ENTRY CONCEPTS

A Fair Value Gap is an imbalance created by a strong price movement where trading activity leaves a relatively inefficient area between candles.
Traders may watch FVGs as potential reaction or retracement zones.

An Inverse Fair Value Gap refers to an FVG that has been violated and subsequently changes its potential role.
For example, an area that previously acted as support may later become resistance after a decisive break.

An Order Block is a price area that traders identify as the origin of a significant impulsive move.
Different trading methodologies define Order Blocks differently, so the term should not be treated as a universally standardized concept.

A Breaker Block is generally an Order Block or structure zone that fails and later acts from the opposite side.

Mitigation generally describes price returning to a previously identified zone to rebalance or react before continuing.

In market-structure methodologies, the Premium area refers to the upper portion of a defined range.

The Discount area refers to the lower portion of a defined range.
Traders may use these concepts to evaluate whether price is relatively expensive or cheap within a specific range, not in absolute terms.

• 06 — TECHNICAL ANALYSIS

An SMA calculates the average price over a specified number of periods.
VWAP — Volume Weighted Average Price
VWAP calculates the average traded price weighted by volume.
It is widely used to evaluate the average price at which trading activity occurred during a specific period.

RSI is a momentum indicator used to measure the strength and speed of price movements.
MACD — Moving Average Convergence Divergence
MACD is a momentum and trend-following indicator based on moving averages.

ATR — Average True Range
ATR measures market volatility.
It does not predict direction; it helps traders understand how much an asset is typically moving.

• Common levels include:

0.382
0.500
0.618
0.786
1.000
1.618

• 07 — TRADING PLATFORMS

• 08 — ORDER TYPES

A general term for an order waiting to be triggered in the future.
The Most Important Lesson
Learning these abbreviations is useful.
But knowing the vocabulary does not make someone a trader.
Understanding risk, market structure, execution, probability and psychology is far more important.

You don't need to trade every BOS.
You don't need to enter every FVG.
You don't need to chase every breakout.
And you certainly don't need to understand every indicator on TradingView.
The goal is not to find more reasons to trade.
The goal is to understand when there is a reason to trade — and when there isn't.
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