Within the financial markets, there is no shortage of complex phrases, trading lingo, and technical terms that traders need to understand in order to navigate the markets confidently.
As such, we’ve written an A-Z trading glossary for some of the top phrases that you might come across in your time as a trader.
A
The Average True Range indicator, commonly referred to as simply ‘the ATR,’ is a technical analysis tool typically used to measure the price volatility of a financial asset. In some applications, the ATR can be used to help manage risk.
Read more: How the Average True Range (ATR) indicator can improve your trading
B
A bear is a term used to describe someone who believes the price of a given asset will fall.
Typically used to describe stocks, a bear market is characterised by a continued period of falling prices. As prices fall, more are tempted to liquidate their positions, leading to a chain reaction.
Read more: Understanding the Difference Between Bull and Bear Markets
A bull is a term used to describe someone who believes the price of a given asset will rise.
Most often used to describe equity markets, a bull market is defined as a sustained period of rising prices. As prices continue to increase, this breeds market optimism, which can lead to a chain reaction.
Read more: Understanding the Difference Between Bull and Bear Markets
C
A candlestick is a graphical representation used to display price action, typically showing the open, high, low, and close values (OHLC).
Read more: Price charts & candlesticks
A sharp, short-term decline in price after a period of upside.
D
In technical analysis, divergence refers to a phenomenon where two different data sets are moving in opposite directions. Typically, this is between price action and a technical indicator, or between two individual indicators.
A drawdown refers to the decline in capital value of a trading account, drawing reference to the most recent peak and subsequent trough. This is not the same as loss. For example, if you were to grow your trading balance from $1,000 to $1,200, but then take a losing trade of $100, you would still be profitable, but would incur a $100 drawdown.
Read more: Bounce back and drawdown as common trading mistake
F
In trading, Fibonacci, or Fib, is a technical analysis principle that attempts to predict upcoming levels of support and resistance. Calculated using the Fibonacci sequence, which appears numerous times in nature, typical Fib levels are 23.6%, 38.2%, 61.8%, and 78.6%.
Read more: Discover how to apply Fibonacci retracements in your technical analysis
When screening for potential trade opportunities, fundamental analysis is a technique used to examine the macroeconomic themes currently affecting price. This can include, but is not limited to, economic data releases, political changes, or interest rate predictions.
I
An indicator is a generic term used to describe a range of technical analysis tools that attempt to measure and indicate current market conditions. Separate from price action, indicators can utilise a combination of price and volume data to calculate a specific outcome, with the reading being incorporated into a trading strategy.
Read more on: Indicators & oscillators
M
A short-hand for Moving Average Convergence/Divergence, the MACD is a popular indicator used as part of technical analysis. Created in the 1970s, MACD tracks the difference in value between two moving averages to identify market trends.
Read more: How to execute four short-term trading set-ups using the MACD indicator
Margin is the amount of equity a trader has in their brokerage account. This is not the same as the account balance, owing to the ability to trade with leverage.
Read more: What is margin in trading?
Moving averages are an indicator used as part of technical analysis, typically coming in three types: simple, exponential, and weighted. Popularised in the 1920s by Charles Dow, moving averages are designed to smooth price action and report the average price of a financial asset.
Read more: How to use moving averages in your trading
O
An oscillator is a type of technical indicator that displays a value fluctuating between two extremes, typically plotted below price action on a separate chart. For example, in the case of the Chaikin’s Money Flow indicator, buying pressure is compared to selling pressure, then a score is assigned between -100 and +100.
Read more on: Indicators & Oscillators
P
Put simply, price action refers to the movement of a given instrument's price over time. Sometimes referred to as the ‘language’ of the financial markets, the relative size of candlesticks, including their collective structure, all contribute to different forms of technical analysis.
Read more on: Price charts & candlesticks
R
A resistance, or resistance level, is a price point where selling pressure is expected to overcome buying pressure, limiting upside. As part of technical analysis, levels of resistance are usually identified by examining previous structure within price action.
Read more on: Technical analysis
S
A stop loss is an instruction to automatically close an open position when a specific price level is reached, typically used to limit account losses. With that said, stop losses can also be used to secure profits if a winning trade begins moving in the wrong direction.
Read more: How can you determine where to place your stop loss?
Among the most fundamental technical analysis principles, a support level is a price point where buying pressure is expected to overcome selling pressure, thereby offering bullish support to the current price action.
Read more on: Technical analysis
T
A take profit order is an instruction to close an open position when a specific price has been met, typically used to secure open profits on a winning trade.
Read more: Order types explained
When screening for potential trade opportunities, technical analysis is a technique that focuses exclusively on charting and indicators, as opposed to macroeconomic themes. This can include, but is not limited to, candlestick patterns, technical indicators, or simple price action analysis.
Read more on: Technical analysis
Draw a straight line on the chart; a trendline is a widely used form of technical analysis that is plotted at multiple recent highs or recent lows. Typically, trendlines are used to assess the general direction of the instrument price, either bullish or bearish.
Read more on: Price charts and candlesticks
V
In trading, volume is a measure of market activity, representing the total number of contracts traded on a single instrument. Functionally, markets can only trend when there is a sufficient amount of trading volume, which can help traders better select high-probability trading setups.
Volatility is the degree of variation in price over a set period. For example, we can expect prices to move more after a key economic data release, and therefore be more volatile.
Read more on: Volatility impact
This article and its contents are intended for educational purposes only and should not be considered trading advice.
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