Trading Glossary
Key trading terms and Smart Money Concepts explained.
A
Accumulation
A phase where institutional participants quietly build positions within a consolidation range before an impulsive move. In the Wyckoff and ICT frameworks, accumulation precedes the markup phase and often appears as a tight range with a spring (false breakdown) before the real move begins.
Power of 3 (AMD) ExplainedATR (Average True Range)
A volatility indicator that measures the average range of price movement over a set number of periods, accounting for gaps. Traders use ATR to set dynamic stop losses, gauge whether current volatility is normal or extreme, and adjust position size based on market conditions.
B
Break of Structure (BOS)
When price breaks a previous swing high or low in the direction of the existing trend, confirming continuation. A bullish BOS breaks a swing high; a bearish BOS breaks a swing low.
BOS Trading GuideBreaker Block
A failed order block that gets broken and then acts as a zone in the opposite direction. When price breaks through an order block, the level flips from support to resistance (or vice versa), creating a high-probability re-entry zone for the new trend direction.
C
Candle Range Theory (CRT)
A price action concept that analyzes the range of individual candles to identify institutional activity. Large-range candles with strong closes indicate displacement, while small-range candles suggest consolidation before the next move.
CRT Trading StrategyChange of Character (CHoCH)
The first break of structure against the prevailing trend, signaling a potential reversal. Unlike BOS which confirms trend continuation, CHoCH suggests the trend may be shifting direction.
How to Trade CHoCHCISD (Change in State of Delivery)
A shift in how price is being delivered from one directional bias to the other. Unlike a simple Change of Character, CISD focuses on the underlying order flow narrative — when price transitions from aggressively delivering sell-side to buy-side (or vice versa), signaling a genuine change in institutional intent rather than a momentary retracement.
CISD ExplainedConfluence
When multiple independent technical factors align at the same price level or in the same direction, increasing the probability of a successful trade. Confluence stacking typically combines structure, location, timing, and a trigger signal before entering.
Why One Signal Is Never EnoughCumulative Volume Delta (CVD)
The running total of the difference between aggressive buying volume (orders lifting the ask) and aggressive selling volume (orders hitting the bid). CVD helps traders see whether buyers or sellers are more aggressive, even when price action alone is ambiguous.
CVD ExplainedD
Dealing Range
The price range between a significant swing high and swing low that defines the current area of institutional interest. The dealing range is divided into premium (upper half) and discount (lower half) zones, and contains the key levels — order blocks, FVGs, and liquidity pools — that drive price action within it.
Dealing Range ExplainedDealing Range Logic
The systematic process of identifying the active price range between a major swing high and low. This logic dictates that high-probability setups occur at the extremes (Premium/Discount) and that the equilibrium (50%) serves as a magnet or a no-trade pivot point.
Dealing Range ExplainedDisplacement
A strong, impulsive price move characterized by large-bodied candles with minimal wicks, indicating aggressive buying or selling. Displacement often creates fair value gaps and confirms the validity of nearby order blocks.
Distribution
A phase where institutional participants offload positions within a consolidation range before a markdown (downward move). Distribution often mirrors accumulation in structure but occurs at the top of a range, frequently featuring an upthrust (false breakout above the range) before the sell-off begins.
Power of 3 (AMD) ExplainedDrawdown
The peak-to-trough decline in account equity during a losing period, expressed as a percentage. A key risk management metric that measures the worst-case loss experienced before a new equity high is reached.
Can Your Strategy Survive 10 Losses?E
Engulfing Candle
A two-candle pattern where the second candle's body completely covers the body of the first. A bullish engulfing at a demand zone signals buyer strength; a bearish engulfing at a supply zone signals seller strength. Most useful when it occurs after a liquidity sweep at a key level.
Candlestick Patterns for Smart MoneyExpectancy
A formula that calculates the average amount you expect to win (or lose) per trade over time: (Win Rate x Average Win) - (Loss Rate x Average Loss). Positive expectancy means the system is profitable over a large sample of trades, regardless of individual outcomes.
F
Fair Value Gap (FVG)
A three-candle pattern where the wicks of the first and third candles don't overlap, creating a gap in price delivery. FVGs represent imbalances where price moved too fast, and often act as magnets for future price returns.
What Is a Fair Value Gap?Fibonacci Retracement
A technical tool that plots horizontal levels at key Fibonacci ratios (23.6%, 38.2%, 50%, 61.8%, 78.6%) between a swing high and swing low. Traders use these levels to identify potential support, resistance, and optimal entry zones.
I
ICT (Inner Circle Trader)
A trading methodology and educational framework developed by Michael J. Huddleston that focuses on institutional order flow, liquidity mechanics, and market structure. ICT concepts include kill zones, order blocks, fair value gaps, the power of 3, and the market maker model.
What Is the ICT Methodology?Inducement
Liquidity resting at minor structural points that institutions target before reversing to their intended direction. Inducement levels lure retail traders into positions before the real move, and are commonly found at minor swing highs/lows within a larger structure.
Invalidation
When price closes decisively through a zone (order block, supply/demand, or FVG), breaking the level and rendering it no longer valid for future trades. Invalidation differs from mitigation: a mitigated zone was tested and reacted, while an invalidated zone was broken.
Mitigation vs InvalidationInversion Fair Value Gap (iFVG)
A fair value gap that has been broken by price and now acts as a zone in the opposite direction. A bullish FVG that gets broken to the downside becomes bearish resistance; a bearish FVG that gets broken to the upside becomes bullish support. Inversion FVGs are high-conviction continuation signals.
FVG Trading GuideK
Kill Zone
Specific time windows during the trading day when institutional volume peaks and high-probability setups are most likely. The main kill zones are the London Open (2:00-5:00 AM ET), New York Open (7:00-10:00 AM ET), and London Close (10:00 AM-12:00 PM ET).
Kill Zones ExplainedL
Leverage
The use of borrowed capital to increase position size beyond what your account balance would normally allow. While leverage amplifies potential profits, it equally amplifies losses and increases the risk of liquidation.
Liquidation
The forced closure of a leveraged position by an exchange when account equity falls below the maintenance margin requirement. Liquidation results in a total loss of the margin allocated to the position.
Liquidity Pool
A cluster of resting orders (stop losses, pending entries) at a visible price level such as equal highs/lows, previous day high/low, or round numbers. These pools attract price because large participants need the opposing orders at these levels to fill their positions.
Where Stop Losses ClusterLiquidity Sweep
A price move that briefly pushes past a key level to trigger stop-loss orders and pending orders, then reverses. Sweeps target liquidity pools at obvious levels and are often the catalyst for high-probability reversal setups.
How to Trade Liquidity SweepsM
Market Maker Model
An ICT concept describing the three-phase sequence institutions use to move price: accumulation (building positions in a range), manipulation (a false move to grab liquidity), and distribution (the real directional move). Also known as the AMD model.
Market Maker Model ExplainedMarket Structure
The pattern of swing highs and swing lows that defines the current trend. An uptrend is a series of higher highs and higher lows; a downtrend is lower lows and lower highs. Market structure shifts signal potential trend changes.
What Is Market Structure?Mitigation
When price returns to an order block and the orders at that level are absorbed by the market. A mitigated order block has served its purpose and is less likely to produce another significant reaction on subsequent retests.
Mitigation vs InvalidationO
Opening Range
The high and low established during a defined period after market open, typically the first 5, 15, or 30 minutes. The opening range captures the initial battle between buyers and sellers and creates key reference levels for the rest of the session.
Opening Range Breakout StrategyOptimal Trade Entry (OTE)
An ICT concept for entering trades at the 62%-79% Fibonacci retracement of an impulsive move (the deep discount zone). OTE entries provide favorable risk-to-reward because you're entering near the end of a retracement, where the probability of continuation is highest.
OTE ExplainedOrder Block
The last opposing candle before a significant impulsive move, representing the price level where large participants likely placed their orders. Bullish order blocks are the last bearish candle before an up move; bearish order blocks are the last bullish candle before a down move.
What Are Order Blocks?Order Flow
The aggregate of all buy and sell orders entering the market at various price levels. Order flow analysis focuses on identifying where significant orders are likely positioned based on price action patterns, volume, and structural context.
What Is Order Flow Trading?P
PD Array Matrix
An ICT framework for ranking and prioritizing zones where price is likely to react, including order blocks, fair value gaps, breaker blocks, and liquidity voids. The matrix helps traders identify which level to target for entries and exits by evaluating each zone's structural significance.
PD Array Matrix ExplainedPosition Sizing
The process of calculating how many units, lots, or contracts to trade based on your account size, risk percentage per trade, and stop-loss distance. Proper position sizing ensures that no single loss can significantly damage your account.
Position Size CalculatorPower of 3 (AMD)
An ICT model describing the three phases of every market cycle: Accumulation (range-building), Manipulation (false move to grab liquidity), and Distribution (the real directional move). This cycle repeats on every timeframe, from the daily candle down to the 1-minute chart.
Power of 3 ExplainedPremium / Discount
A framework that divides a price range into premium (above the 50% level) and discount (below the 50% level) zones. Smart money buys in discount zones and sells in premium zones, using the equilibrium as a reference point.
Premium & Discount ZonesProp Firm Math
The statistical framework used to align win rate, risk-to-reward ratio, and position sizing with specific prop firm constraints (e.g., 5% daily drawdown vs. 10% profit target). It treats passing a challenge as a probability density problem rather than purely a market analysis exercise.
Prop Firm SimulatorR
Reclaiming
When price sweeps through a key level (such as a swing high, swing low, or order block), trades beyond it briefly, and then closes back inside the prior range — effectively reclaiming the level. A reclaim signals that the breakout or breakdown was a liquidity grab rather than a genuine move, and often precedes a reversal in the opposite direction.
Repainting
When an indicator changes its historical signals after the fact — a buy arrow appears, then moves or disappears once the candle closes. Repainting indicators look perfect in backtests because they use future data, but fail in live trading because signals are unreliable in real time.
What Is Indicator Repainting?Risk-to-Reward Ratio (R:R)
The ratio between the potential loss (distance to stop loss) and the potential profit (distance to take profit) on a trade. A 1:2 R:R means the potential reward is twice the risk. Higher R:R allows profitability even with a win rate below 50%.
R:R CalculatorS
Session
A time window corresponding to a major financial center's active trading hours. The three primary sessions are Asia (Tokyo), London, and New York. Each session has distinct volume, volatility, and liquidity characteristics that influence which strategies and setups work best.
Session Liquidity GuideSilver Bullet
An ICT intraday model that targets specific time windows — 3:00-4:00 AM ET, 10:00-11:00 AM ET, and 2:00-3:00 PM ET — for high-probability FVG entries. During these windows, price often creates a displacement and fair value gap that can be traded on the retracement.
Silver Bullet StrategySmart Money Concepts (SMC)
A broad trading framework focused on understanding how institutional participants move markets. SMC encompasses concepts like order blocks, fair value gaps, liquidity sweeps, market structure, and multi-timeframe analysis to identify where large players are likely positioned.
Best SMC IndicatorsSMT Divergence
Smart Money Technique divergence — when two positively correlated assets fail to confirm each other's price action at key levels. If EUR/USD makes a new low but GBP/USD doesn't, the divergence suggests the selling pressure is not genuine and a reversal may follow.
SMT Divergence GuideStop Hunt
A price move engineered to trigger stop-loss orders clustered at an obvious level before reversing in the opposite direction. Stop hunts provide liquidity for large participants to fill orders and are often the starting point for high-probability reversal setups.
Stop Hunts vs Genuine BreakoutsSupply / Demand Zone
Price areas where significant buying (demand) or selling (supply) originated, identified by the base candles before a strong impulsive move. Unlike support/resistance, these zones weaken with each retest as orders get filled.
Supply & Demand Zones GuideSwing High / Swing Low
A swing high is a candle high surrounded by lower highs on both sides; a swing low is a candle low surrounded by higher lows on both sides. These points form the building blocks of market structure and are used to identify trends, draw Fibonacci levels, and locate liquidity.
How to Identify Swing PointsV
VWAP (Volume Weighted Average Price)
The average price of an asset weighted by volume over a specific period, typically anchored to the session open. VWAP represents the fair value for the session — price above VWAP suggests buyers are in control, while price below suggests sellers dominate. Widely used by institutional desks as an execution benchmark.
W
Wick
The thin line extending above or below a candle body, representing price levels that were reached but not sustained during that period. Long wicks into a level often indicate rejection and are used to identify liquidity grabs and supply/demand reactions.
Win Rate
The percentage of trades that are profitable out of the total number of trades taken. Win rate alone does not determine profitability — a 45% win rate can be highly profitable with a favorable risk-to-reward ratio, while a 70% win rate can lose money with poor R:R.
Risk-Reward Ratio ExplainedSee these concepts in action
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