Plain-English explanations for terms you will hear in trading lessons. Definitions do not replace the contract specifications and terms of your broker.
14 terms
- BOS
- Break of Structure: a break of a previously identified swing level in the direction of the existing structure. The timeframe and your confirmation rule matter.
- CHoCH
- Change of Character: a break against the current sequence of structure that can signal a change in behaviour. It is an observation, not a guaranteed reversal.
- Drawdown
- A decline from a previous equity peak to a subsequent lower equity level.
- Entry
- The price at which a position is opened. Actual fills can differ from the requested price.
- Higher high / higher low
- A sequence where a new swing high and a new swing low are above their previous comparable swings.
- Leverage
- Exposure that can be larger than the capital set aside for a position. It can magnify losses as well as gains.
- Lot
- A trading volume unit defined by the broker and instrument. Check the contract specification rather than assuming all instruments use the same size.
- Margin
- Capital required to open or maintain a leveraged position. It is different from the planned stop-loss risk.
- Pip
- A unit used to describe a price movement. Gold and different broker quoting conventions can use different definitions.
- Risk-to-reward
- A comparison of the distance to the stop with the distance to a proposed target. It is not a probability or guarantee.
- Spread
- The difference between the quoted bid and ask prices.
- Stop loss
- An order intended to close a position at a specified level. The execution price is not guaranteed during gaps or fast markets.
- Timeframe
- The period represented by each candle or bar on a chart.
- Trading journal
- A record of setups, decisions, risk, outcomes and review notes.
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