Glossary
Tap a dotted term inside any chapter to see its meaning.
- 1R
- One unit of planned initial risk: the distance (or cash) from entry to the protective stop.
- Ask
- The price at which you generally buy.
- Bid
- The price at which you generally sell.
- Breakout
- Price moving beyond a planned level, such as an inside-bar high or low.
- Buy stop
- A pending order to buy if the ask rises to a level above the current price.
- D1
- The daily timeframe: each candle covers one trading day.
- Drawdown
- A decline from an equity peak to a later trough.
- Expectancy
- The average outcome per trade after relevant costs.
- Gap
- A jump in price between two quotes, which can skip an entry or fill a stop beyond its level.
- H1
- The hourly timeframe: each candle covers one hour.
- Inside bar
- A completed candle with a strictly lower high and strictly higher low than the candle before it.
- Leverage
- Borrowed exposure that lets a small deposit control a large position; it enlarges losses as well as gains.
- Margin
- The deposit needed to hold a position. It is not the amount you are risking.
- Mother bar
- The completed candle immediately before an inside-bar candidate.
- One-cancels-other
- Two linked pending orders where a fill of one is meant to cancel the other. An instruction, not a guarantee.
- Overfitting
- Tuning rules to past data so closely that they fail elsewhere.
- Pip
- The standard unit of price movement. For EUR/USD one pip = 0.0001; JPY pairs usually use 0.01.
- Point
- A tenth of a pip on five-decimal platforms. 10 points = 1 pip.
- Protective stop
- An exit instruction intended to limit loss, subject to execution risk.
- R-multiple
- A result expressed in units of planned initial risk.
- Sell stop
- A pending order to sell if the bid falls to a level below the current price.
- Slippage
- The difference between an expected price and the actual fill.
- SMA50
- Simple moving average of the last 50 closing prices. A lagging summary that cannot forecast.
- Spread
- The difference between ask and bid; a cost paid on every trade.
- Stop entry
- An order triggered at a specified level; the execution price can differ.
- Whipsaw
- A breakout that triggers an order and then quickly reverses through the stop.