Trading Glossary

Process by which large operators buy (or sell) available stock without the price moving significantly. In accumulation, they absorb supply from sellers; in distribution, they absorb demand from buyers.

Situation where one side of the market absorbs the aggression of the other without yielding ground. For example, large limit orders absorbing aggressive sales at support.

Lateral range that stops a bearish movement, during which institutional operators (smart money) buy stock from retail traders (weak hands). Precedes a bullish movement.

Price at which sellers are willing to sell (offer). Aggressive purchases (market orders) are executed at the Ask price.

Theory that explains markets as continuous auctions where buyers and sellers negotiate to find the fair price (fair value). Conceptual basis of Volume Profile.

Automatic bounce that occurs after the Selling Climax. It is produced by short covering and first value purchases. Establishes the upper limit of the accumulation range.

Automatic drop that occurs after the Buying Climax in distribution. It is produced by profit taking and first sales. Establishes the lower limit of the distribution range.

Pullback to the Creek zone (resistance) after a successful bullish breakout. It is a test of the breakout that offers a second opportunity to enter long.

Testing a trading strategy with historical data to evaluate its past performance. Useful but does not guarantee future results.

Market state where buyers and sellers are in equilibrium, creating a lateral range. The price oscillates around the POC and within the Value Area.

Price at which buyers are willing to buy (demand). Aggressive sales (market orders) are executed at the Bid price.

Difference between the best buy price (Bid) and the best sell price (Ask). Indicates liquidity: narrow spreads = high liquidity, wide spreads = low liquidity.

Observable pressure in the order book (DOM) from accumulation of limit orders on one side. Bullish book pressure = many Bid orders; bearish = many Ask orders. Indicates institutional intention.

Market structure breakout that indicates a change in control between buyers and sellers. In an uptrend, it breaks a previous high; in a downtrend, it breaks a previous low. Key concept in Smart Money Concepts.

Break of a significant support or resistance level. Valid breakouts are usually accompanied by increased volume and momentum.

Buyer climax event with high volume that marks the end of a bullish trend. It represents the last euphoric purchases from the public and the first sales from professionals. Initiates Phase A of distribution.

Strategy that takes advantage of interest rate differentials between currencies. Buy the currency with the higher rate and sell the one with the lower rate.

Contract for Difference. Derivative that allows speculation on price movement without owning the underlying asset. Allows going long or short with leverage.

Moment when the market's behavior changes significantly, indicating a possible trend change. It is identified by a structural breakout with volume.

Technical pattern formed by two parallel lines that contain price movement. Can be bullish, bearish or horizontal.

Grouping of significant volume at a specific price level within the Footprint. Clusters indicate zones of high institutional activity.

Fixed cost charged by the broker for each executed trade. Important factor in profitability calculation, especially in high-frequency trading.

Raw material such as gold, oil, wheat or coffee. Traded in futures markets and sensitive to macroeconomic and geopolitical factors.

Wyckoff's concept that represents all large institutional operators acting as a single entity. It facilitates analysis by visualizing the actions of smart money.

Volume profile that groups multiple sessions or periods to show a macro view of value zones. Useful for identifying long-term levels.

Period of lateral movement where price moves in a defined range. Can be accumulation, distribution, or simple pause in the trend.

Movement against the main trend, generally temporary. In an uptrend, it's a drop; in a downtrend, it's a bounce.

Resistance line within an accumulation range, generally drawn over the highs of the rallies. Its breakout (Jump Across the Creek) confirms the end of accumulation.

Cryptocurrency. Decentralized digital asset like Bitcoin or Ethereum. 24/7 markets with high volatility and unique characteristics.

Accumulation of Delta over time. Shows who has cumulative control: ascending CVD = buyers dominate, descending CVD = sellers dominate.

Quote of one currency in terms of another. EUR/USD shows how many dollars are needed to buy one euro.

Difference between aggressive buyer volume (executed at Ask) and aggressive seller volume (executed at Bid). Positive Delta = more aggressive buys, negative = more aggressive sells.

Divergence between Delta and price. If price rises but Delta is negative, it indicates bullish weakness. If price falls but Delta is positive, it indicates bearish weakness.

Also called Level 2 or Order Book. Shows pending limit orders at each price level, revealing available liquidity.

Lateral range that stops a bullish movement, during which institutional operators sell their stock to retail traders. Precedes a bearish movement.

Discrepancy between price and an indicator (volume, oscillator, Delta). Divergences can indicate weakness in the trend and possible reversal.

Strategy of distributing capital among different assets to reduce risk. Don't put 'all your eggs in one basket'.

Distribution of a company's profits to its shareholders. Can affect the stock price on the ex-dividend date.

Bullish reversal pattern formed by two lows at approximately the same level. Confirmation comes with the breakout of the intermediate high.

Bearish reversal pattern formed by two highs at approximately the same level. Confirmation comes with the breakout of the intermediate low.

Drop from an equity high to a subsequent low. Measures the maximum loss experienced during a period. Key risk metric.

Wyckoff principle that compares volume (effort) with price movement (result). Divergences between both suggest potential changes in market direction.

Total capital of the trading account including open positions valued at current price. Equity = Balance + Unrealized P&L.

Exchange Traded Fund. Fund that trades on an exchange and replicates an index, sector or asset. Combines diversification with stock liquidity.

Profile tail that shows extreme prices with little volume, indicating rejection. Excesses at highs and lows mark the limits of balance.

Fair or equilibrium price determined by the market. Generally coincides with the POC or the center of the Value Area where there is greater acceptance.

Inefficiency gap in price where there is little or no trading. It is formed by aggressive institutional movements. The price tends to return to fill these gaps. Also called Imbalance in Smart Money Concepts.

False break of a support or resistance level that quickly reverses. Also known as bull/bear trap or false breakout.

Order Flow pattern where aggressive volume exhausts at an extreme, indicating possible reversal. The aggression fails to move the price further.

Volume profile calculated over a specific manually selected price range. Useful for analyzing specific structures such as accumulations or distributions.

Chart that shows the volume traded at each price level of each candle, divided between Bid and Ask. Main tool for Order Flow analysis.

Foreign Exchange. Currency market, the most liquid in the world with more than 6 trillion dollars daily. Open 24/5.

Testing a strategy in real-time with current data, usually in a demo account. More reliable than backtesting for validating strategies.

Contract to buy or sell an asset at a fixed price on a future date. Futures have expiration and are traded in regulated markets.

Price hole where there was no trading. Occurs when the opening price is different from the previous close. Gaps tend to 'fill'.

Reversal pattern with three peaks where the center (head) is higher than the sides (shoulders). The breakout of the neckline confirms the pattern.

Coverage. Position that protects against losses in another position. Reduces risk but also limits potential profit.

High volume node in the profile, representing equilibrium and acceptance zones. Acts as a magnet for price and potential congestion zone. Useful for targets.

Support line within a distribution range, generally drawn over the lows of the reactions. Its breakout confirms the end of distribution.

Large institutional order that executes in small parts to hide its total size. Only a fraction is visible in the DOM.

Significant imbalance between Bid and Ask volume at a price level (typically 3:1 or more). Bullish imbalances show buyer dominance, bearish show seller dominance.

Market state where buyers or sellers dominate, causing directional movement. The price moves away from the Value Area looking for new acceptance zones.

Strong directional movement in favor of the trend. Impulses show momentum, increasing volume and wide candles in the direction of movement.

Statistical measure of the performance of a group of assets. Examples: S&P 500, NASDAQ, DAX. Can be traded through futures, ETFs or CFDs.

Price range established during the first hour of the session. Important reference for intraday trading that defines the day's expectations.

Activity of traders who initiate new positions, moving price to new zones. Contrast with Responsive Activity that operates in reversal.

Bullish breakout of the Creek line with volume and momentum. Indicates that accumulation has ended and markup (bullish trend) begins.

Mathematical formula to calculate optimal position size based on win rate and risk/reward. Kelly% = (Win% × Avg Win - Loss% × Avg Loss) / Avg Win. Maximizes long-term capital growth.

Last bounce to the broken resistance/support zone after a Sign of Weakness. Offers the last opportunity for a short entry before the bearish trend.

Last pullback to the broken support/resistance zone after a Sign of Strength. Offers the last opportunity for a low-risk entry before the trend.

Wyckoff principle that establishes that for there to be an effect (trend movement) there must first be a cause (lateral range). The greater the cause, the greater the potential effect.

Third Wyckoff law that compares volume (effort) with price movement (result). Harmony or divergence between both indicates continuation or reversal.

Fundamental Wyckoff principle: when demand exceeds supply, prices rise; when supply exceeds demand, prices fall. Volume helps identify these imbalances.

Manipulation technique where fake orders are placed in the DOM to create the illusion of demand/supply. Illegal but detectable in order flow.

Use of borrowed capital to increase position size. Multiplies both gains and losses. Requires strict risk management.

Buy or sell order at a specific price or better. It does not execute immediately, waits in the order book until the price arrives.

Ease of buying or selling an asset without significantly affecting its price. High liquidity = narrow spreads and fast execution.

Liquidity sweep where the price briefly penetrates stops and limit orders to capture liquidity before turning in the opposite direction. Similar to the concept of Spring/UTAD but with a focus on liquidity.

Standard unit of measurement in trading. In Forex, a standard lot = 100,000 units of the base currency. There are mini-lots (0.1) and micro-lots (0.01).

Low volume node in the profile, representing rejection and imbalance zones. The price tends to pass through them quickly. Useful for identifying support/resistance.

Maximum Adverse Excursion (MAE): maximum excursion against. Maximum Favorable Excursion (MFE): maximum excursion in favor. Metrics to optimize stops and targets by analyzing how far price goes for/against before closing.

Capital required as collateral to maintain leveraged positions. Available margin determines how many positions you can open.

Broker notice when available margin falls below the required level. May result in automatic position closure.

Entity that provides liquidity to the market by placing limit orders on both sides (Bid and Ask). Earns from the spread. Their order patterns are detectable in the DOM.

Order that executes immediately at the best available price. Aggressive buys hit the Ask, aggressive sells hit the Bid.

Tool developed by J. Peter Steidlmayer that organizes price by time using letters (TPO). Precursor of modern Volume Profile.

Market structure formed by the sequence of highs and lows. Bullish structure: higher highs and higher lows (HH/HL). Bearish structure: lower highs and lower lows (LH/LL). Its breakout indicates a trend change.

Expected average result per trade considering probability of success, average profit and average loss. Must be positive to be profitable long-term.

Minor strength signal within the range that indicates buyer control but without being the definitive breakout event. Precedes the main Sign of Strength.

Minor weakness signal within the range that indicates seller control but without being the definitive breakout event. Precedes the main Sign of Weakness.

Speed or strength of price movement. High momentum indicates fast, directional movements; low momentum indicates consolidation or exhaustion.

Impulse exhaustion identified by reduction of Delta and volume while price continues in the same direction. Precedes reversals.

Also called Capital Management. Set of rules to determine position size and risk per trade to preserve capital.

Indicator that smooths price by calculating the average of a specific period. The most used are SMA (simple) and EMA (exponential).

POC from a previous session that has not been tested by price. Acts as a pending magnetic level to be visited.

Gaussian bell statistical shape that describes how volume is distributed by price. 68.2% of volume is concentrated in the first standard deviation (Value Area).

Derivative that gives the right (not obligation) to buy (Call) or sell (Put) an asset at a specific price before an expiration date.

Price zone where institutions placed significant orders that caused a strong movement. Bullish order blocks are zones of institutional demand, bearish ones are supply zones. Key concept in Smart Money Concepts.

Softer version of the Shakeout that occurs in Phase B, without reaching the absolute lows of the range. It has the same function of capturing liquidity but with less depth.

Simulated trading without real money to practice strategies. Useful for learning but does not replicate the psychological pressure of real trading.

Futures contract without expiration date, typical in cryptocurrencies. Uses funding rates to keep the price close to spot. Allows leverage and 24/7 trading.

First phase of Wyckoff structures. It marks the stop of the previous trend with events such as the Climax (SC/BC), Automatic Rally/Reaction (AR) and Secondary Test (ST).

Second phase where the cause is built. Professionals absorb stock through multiple tests of the extremes. It is the longest phase where most of the stock is accumulated/distributed.

Phase of the definitive test. Includes the Spring/Shakeout in accumulation or the UTAD in distribution. It is the most important event and the best zone to look for entries.

Trend phase within the range. Includes the Sign of Strength/Weakness and the Last Point of Support/Supply. Confirms the direction of the imminent breakout.

Trend phase outside the range. The price has left the structure and develops the trend in the anticipated direction.

Minimum price movement unit in Forex, generally the fourth decimal (0.0001). In JPY pairs, it's the second decimal (0.01).

Significant turning point in price. Maximum and minimum pivots define market structure and support/resistance zones.

Price level with the highest volume traded in a profile. Represents the most accepted price by the market, where the highest activity is concentrated.

Profile high that lacks a defined excess, indicating that buyers were not forcefully rejected. Level vulnerable to being exceeded.

Profile low that lacks a defined excess, indicating that sellers were not forcefully rejected. Level vulnerable to being broken.

Market commitment, long (buy) or short (sell). Position size should be calculated according to maximum allowed risk.

Calculation of optimal size for each position based on available capital, risk per trade and distance to stop loss. Fundamental to preserve capital and avoid ruin.

First significant supply signal that appears after a prolonged bullish trend. Indicates that sellers are beginning to appear, but it is still not enough to stop the rise.

First significant demand signal that appears after a prolonged bearish trend. Indicates that buyers are beginning to be interested, but it is still not enough to stop the fall.

Ratio that divides total gross profit by total gross loss. A profit factor of 2.0 means you win twice what you lose. Values >1.5 are good, >2.0 excellent.

Minor retracement within an established trend that offers an entry opportunity in favor of the trend. Shallower than a correction.

Zone delimited by support and resistance where price oscillates laterally. Ranges precede trend movements.

Pause within a bullish trend where large operators re-accumulate stock before continuing the movement. Identical to accumulation but within an established trend.

Pause within a bearish trend where large operators re-sell stock before continuing the movement. Identical to distribution but within an established bearish trend.

Price level where supply exceeds demand, stopping or reversing rises. A broken resistance becomes support.

Activity of traders who respond to extreme prices by trading against the recent direction. Typically at value zones or range extremes.

Movement against the main trend. The most common Fibonacci retracements are 38.2%, 50% and 61.8% of the previous movement.

Change in trend direction. A bullish reversal changes from bearish to bullish; a bearish reversal changes from bullish to bearish.

Relationship between potential profit and potential loss of a trade. An R:R of 2:1 means you can win twice what you risk.

Very short-term trading style that seeks small profits on multiple trades. Requires high concentration and low transaction costs.

Test that verifies the previous Climax (SC or BC). It should show less volume than the Climax, indicating decreased pressure. Confirms the stop of the trend.

Seller climax event with high volume that marks the end of a bearish trend. It represents the last panic sales from the public and the first purchases from professionals. Initiates Phase A of accumulation.

Volume profile of an individual trading session. Shows the POC, Value Area and volume distribution of the specific day.

Also called Terminal Shakeout. Violent bearish shake that breaks the support of an accumulation with deep penetration and prolonged time at lows before recovering.

Metric that measures risk-adjusted return. Calculated as (Return - Risk-free rate) / Standard deviation. Values >1 are good, >2 very good, >3 excellent.

Progressive shortening of bullish impulses within a range, indicating demand exhaustion. Each rally reaches less distance than the previous one. Typical signal of distribution before the fall.

Price movement without clear direction, oscillating between support and resistance. Synonym for range, consolidation or balance.

Bullish movement with increasing volume and momentum that indicates buyers have taken control. Confirms the end of accumulation and anticipates the bullish breakout.

Bearish movement with increasing volume and momentum that indicates sellers have taken control. Confirms the end of distribution and anticipates the bearish breakout.

Price level with very little volume that the market passed through quickly without acceptance. Zone of potential rejection on future revisits.

Difference between expected price and actual execution price. Common in volatile markets or with low liquidity.

Illegal practice of placing large orders without intention of executing them to manipulate price. Detected by observing rapid cancellations in the DOM.

Difference between buy price (Ask) and sell price (Bid). It is an implicit cost of trading. Narrower spreads = lower costs.

Bearish shake that temporarily breaks the support of an accumulation to capture liquidity (long stops and short entries) before turning upward. Key event of Phase C.

Series of consecutive imbalances in the same direction (bullish or bearish). Indicates strong dominance from one side and possible continuation of the movement.

Title that represents a fraction of ownership of a company. Its price fluctuates according to supply/demand and expectations about the company.

Order to automatically close a losing position at a predetermined price. Essential risk management tool.

Automatic position closure by the broker when margin falls to a critical level. Protects the trader from larger debts.

Well-informed institutional operators with the financial capacity to hold positions long-term. They buy during drops and sell during rises, accumulating at lows and distributing at highs.

Price level where demand exceeds supply, stopping or reversing drops. A broken support becomes resistance.

Interest charged or paid for holding positions overnight. Positive or negative depending on the interest rate differential between currencies.

Liquidity sweeps where price quickly passes through DOM levels, eliminating limit orders. Indicates institutional aggressiveness.

Local price maximum with lower highs on both sides. Defines resistance points and structure in higher timeframes.

Local price minimum with higher lows on both sides. Defines support points and structure in higher timeframes.

Trading style that holds positions for days or weeks, seeking to capture larger movements than day trading.

Order to automatically close a winning position at a predetermined target price. Secures profits when price reaches the goal.

Analysis of Time & Sales (tape) to identify individual trades, detect institutional activity and anticipate price movements.

Analysis methodology that studies historical price and volume to predict future movements. Based on the idea that all information is reflected in price.

More aggressive version of the Shakeout with greater penetration and more time at lows. Captures more liquidity but is more difficult to trade due to its violence.

Pullback to a previously significant zone to verify the strength or weakness of that zone. Successful tests show low volume (lack of contrary interest).

Price return to a recently broken resistance level, now acting as support. Offers entry opportunity after a breakout.

Minimum price movement in futures or stocks. Also used to refer to each individual trade in Time & Sales.

Chronological record of all executed trades, showing price, size and time. Also called 'the tape'.

Market Profile unit of measurement that represents a time period at a specific price level. Each letter typically represents 30 minutes.

Dynamic Stop Loss that moves in favor of the position, protecting accumulated profits while allowing the trade to continue running.

Traders trapped in losing positions who will eventually have to close, feeding the opposite movement. Order Flow helps identify these situations.

Predominant direction of price movement. Uptrend: higher highs and higher lows. Downtrend: lower highs and lower lows.

Diagonal line that connects successive lows (uptrend) or successive highs (downtrend). Its breakout can indicate a trend change.

Consolidation pattern with descending highs and ascending lows (symmetrical), only descending highs (descending) or only ascending lows (ascending).

Time Weighted Average Price. Time-weighted average price. Unlike VWAP which weights by volume, TWAP gives equal weight to each time period. Useful for algorithmic executions.

Minor bullish shake that temporarily exceeds a resistance but fails to hold. Indicates weakness and possible distribution. Minor version of UTAD.

Bullish shake that temporarily breaks the resistance of a distribution to capture liquidity (short stops and long entries) before turning downward. Distribution equivalent of the Spring.

Zone between VAH and VAL that contains 68.2% of the traded volume (first standard deviation). Represents the area of greatest price acceptance.

Upper limit of the Value Area. Above this level, price is considered 'expensive' according to volume distribution.

Lower limit of the Value Area. Below this level, price is considered 'cheap' according to volume distribution.

Historical POC that has never been revisited by price since its formation. Level of high importance with strong magnetic attraction.

Quantity of contracts or shares traded in a period. Volume confirms price movements: movements with volume are more significant.

Profile that shows the accumulation of Delta by price levels. Reveals where there has been more buyer vs seller aggression historically.

How volume is distributed across different price levels. A bell-shaped (normal) distribution indicates balance; asymmetric distributions indicate imbalance and possible continuation.

Synonym for POC. The specific price level with the highest volume traded in a given profile.

Volume Weighted Average Price. Volume-weighted average price. Key reference for institutional traders: buying below VWAP is 'cheap', selling above VWAP is 'expensive'.

VWAP calculated from a specific anchor point (event, date, high/low) instead of the session start. Allows customized analysis of value zones.

Poorly informed retail traders who buy out of euphoria at highs and sell out of panic at lows. They are vulnerable to market manipulations and provide counterparty to professionals.

Percentage of winning trades over total. A 60% win rate means 6 out of 10 trades are profitable.