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Trading Terminology Guide

The document outlines essential trading terminology, including basic terms like bid, ask, and spread, as well as various order types such as market and limit orders. It also covers trade direction, market participants, technical terms, chart indicators, trading styles, risk management, and market conditions. This comprehensive guide serves as a reference for understanding key concepts in trading.

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bharath90033
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29 views3 pages

Trading Terminology Guide

The document outlines essential trading terminology, including basic terms like bid, ask, and spread, as well as various order types such as market and limit orders. It also covers trade direction, market participants, technical terms, chart indicators, trading styles, risk management, and market conditions. This comprehensive guide serves as a reference for understanding key concepts in trading.

Uploaded by

bharath90033
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Trading Terminology Used in the Market

1. Basic Terms

- Bid: The price a buyer is willing to pay.

- Ask (Offer): The price a seller is asking for.

- Spread: Difference between the bid and ask price.

- Lot: A standard unit of trading (e.g., 1 lot = 100,000 units in Forex).

- Pip: The smallest price move (e.g., 0.0001 in Forex pairs).

- Leverage: Borrowed capital to increase trade size.

- Margin: The deposit required to open/maintain a leveraged position.

2. Order Types

- Market Order: Buy/Sell at the current market price.

- Limit Order: Set price to buy below market or sell above market.

- Stop Loss (SL): Order to limit losses.

- Take Profit (TP): Order to lock in profits.

- Stop Order: Becomes a market order once a price is hit.

3. Trade Direction

- Long: Buying in expectation of price increase.

- Short: Selling in expectation of price decrease.

4. Market Participants

- Retail Traders: Individual investors.

- Institutional Traders: Banks, hedge funds, etc.

- Market Makers: Firms that provide liquidity by quoting both buy/sell.

5. Technical Terms
Trading Terminology Used in the Market

- Support: A price level where demand is strong enough to stop fall.

- Resistance: A price level where supply is strong enough to stop rise.

- Breakout: Price moves beyond support/resistance with momentum.

- Pullback: Temporary move opposite to the trend before continuation.

- Trend: General direction of market (uptrend, downtrend, sideways).

6. Chart & Indicator Terms

- Candlestick: Price bar showing open, high, low, close.

- Moving Average (MA): Average price over a period.

- RSI (Relative Strength Index): Measures overbought/oversold.

- MACD: Momentum indicator using EMAs.

- VWAP: Volume Weighted Average Price, key for intraday traders.

7. Trading Styles

- Scalping: Very short-term trades, holding for seconds to minutes.

- Day Trading: Buy/sell within same day.

- Swing Trading: Holding trades for days/weeks.

- Position Trading: Long-term trading based on trends.

8. Risk Management

- Risk-to-Reward Ratio (R:R): Ratio between potential loss and gain.

- Drawdown: Reduction from peak in your capital.

- Win Rate: Percentage of profitable trades.

9. Market Conditions
Trading Terminology Used in the Market

- Volatility: The speed and range of price movement.

- Liquidity: How easily a position can be entered/exited.

- Slippage: Difference between expected and actual trade price.

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